Laboratorios Farmaceuticos Rovi, S.A. (ROVI) Earnings Call Transcript & Summary

Good morning, and welcome everybody to this 2022 Results Virtual Meeting, which will start in a moment. This is Javier Lopez-Belmonte, ROVI's Deputy Chairman and Chief Financial Officer. Please let me first introduce ROVI's attendees today. Mr. Juan Lopez-Belmonte, Chairman and CEO, Ms. Marta Campos, Head of Investor Relations, and myself. At the end of the presentation, a question-and-answer session will commence. If you want to ask any questions during the presentation, please do not hesitate to send them through the question button on the platform. Thank you for your presence here today, and let's now start with the presentation. I give Mr. Juan Lopez-Belmonte the floor.

Thank you, Javier, and welcome to everybody. I'm happy to present our 2022 results. In this exceptional times, ROVI's performance during the year was above our expectations. 2022 was an extraordinary year for the strategic, operational and financial points of view. In a difficult economic environment, we're capable of taking advantage of new opportunities, starting new projects such as the launch of Okedi in Europe, strengthening the collaboration agreement with Moderna and achieving record results. At the end of 2022, ROVI exceeded the higher end of its operating revenue guidance range, 15% to 20% standing at 26%. These operating revenue growth was driven by the strength of the CMO business which grew by 52% and by the specialty pharmaceutical business which grew by 8%. According to IQVIA, Spanish innovative product market increased by 4% in 2022 compared to 2021. Nevertheless ROVI prescription-based pharmaceutical product sales increased 7% last year, outperforming the market by 3 percentage points. In 2022, ROVI announced 4 very important milestones for the company. First, we announced the creation of the Glicopepton Biotech, a joint venture with Carniques Celra and Grupo Empresarial Costa that involves the creation of one of the first national structures for self-sufficiency in heparins. The project includes the construction of a facility, which will produce compounds of high biological value from intestinal mucosa of pigs. The project will allow us to take another step in the vertical integration of our heparin manufacturing. Second, the European Commission authorized the marketing of Okedi for the treatment of schizophrenia in adults for whom tolerability and effectiveness has been established with oral Risperidone. The product was launched in Germany in April, in U.K. in July, and in Spain in September. Third, we expanded our long-term collaboration with Moderna for the manufacture of mRNA medicines over the next 10 years. This new agreement includes a series of investments expected to allow the manufacturing capacity to increase across ROVI's facilities in Madrid. And fourth, ROVI obtained the best rating in the pharmaceutical industry in terms of ESG. ROVI's ESG aspects were evaluated by Sustainalytics, having achieved an ESG risk rating of 17.3 points in 2022, which placed the company in a low-risk position between 10 and 20 points and this rating improved by 1.1 points, the one achieved in 2021, 18.4 points. In this classification, ROVI obtained the first position out of 458 companies evaluated in the sub-industry, pharmaceuticals. Moving to operating results. To comment on the results regarding the top line of the P&L, operating revenue increased by 26% to EUR 817.7 million in 2022, exceeding the higher end of our operating revenue guidance range, which was between 15% to 20%. The main contributors to this growth were the enoxaparin biosimilar, which grew 22% to EUR 152.9 million, Neparvis where sales rose 2% to EUR 39.1 million, Volutsa sales of which grew by 9%, Vytorin, Absorcol and Orvatez sales of which grew by 13%, and Okedi, where sales reached an amount of EUR 2 million and the CMO business, where sales increased 52%. The extraordinary increase in sales pushed profitability up by 2.8 percentage points to 34.1% in 2022. EBITDA increased by 37% to EUR 178.9 million. Likewise, net profit increased by 30% from EUR 153.1 million in 2021 to EUR 199.7 million in 2022. Moving to our first pillar of growth, which is our specialty pharma area. Prescription-based pharmaceutical specialties grew by 7% in 2022. They are high strategic value products and contribute to give ROVI a wider scope for the coming years. ROVI considers its heparin franchise as one of its driving forces. Sales of the heparin franchise increased by 9% to EUR 264 million in 2022. Heparin sales represented 32% of operating revenue in 2022 compared to 37% in 2021. We aim to become one of the leaders in the Low Molecular Weight Heparin worldwide with our 2 molecules, Bemiparin and enoxaparin biosimilar. Bemiparin show a negative performance in 2022 with sales down 6% to EUR 103.8 million and enoxaparin sales increased 22% to EUR 152.9 million last year. ROVI will continue with our internalization plan. Sales outside the Spain increased by 41% to EUR 553.4 million in 2022, EUR 82.6 million or 15% of which related to international subsidiaries mainly due to the increase in Low Molecular Weight Heparin international sales and the increase in the contract manufacturing organization business. Sales outside the Spain represented 68% of operating revenue in 2022 compared to 60% in 2021. Regarding the enoxaparin biosimilar, Becat, it is already present in 38 countries and we have signed out license agreements to distribute the product in more than 90 countries. We started the commercialization in Q4 2017 with sales amounted to EUR 1.5 million and sales increased quarter-by-quarter to reach the amount of EUR 152.9 million sales last year, a 23% rise compared with the previous year. So let me just summarize the opportunity here. This is a EUR 2 billion market, EUR 1.3 billion and EUR 0.7 billion in emerging countries with high entry barriers, where biosimilars are likely to reach between 50% to 70% of market share and with only 3 other players in the market. Likewise, Neparvis, Volutsa and the hypercholesterolemia franchise led the growth of the pharmaceutical specialty products. Sales of Neparvis a specialty product from Novartis launched in December 2016 indicated for the treatment of all the patients with symptomatic chronic heart failure and reduced ejection fraction increased 2% to EUR 39.1 million in 2022 compared to EUR 38.5 million in 2021. Sales of Volutsa from Astellas Pharma increased by 9% to EUR 17.8 million last year. Sales of Vytorin, Orvatez and Absorcol, specialty products from Merck Sharp & Dohme indicated as adjunctive therapy to diet in patients with hypercholesterolemia, increased 13% to EUR 32.1 million in 2022. ROVI ceased to distribute Absorcol as of 31st of December 2022 and Vytorin as of the 31st January 2023. Sales of Absorcol and Vytorin represented 24% of the total hypercholesterolemia product sales in 2022. Sales of Okedi, the first ROVI product based on its leading-edge drug delivery technology, ISM for the treatment of schizophrenia in adults of whom tolerability and effectiveness has been established with oral Risperidone reached an amount of EUR 2 million in 2022. It was launched in Germany in April, in U.K. in July and in Spain in September 2022. And this launch has consolidated our internationalization strategy as one of our pillars for future growth. First, launch feedback has been very positive. In Germany, access to doctors was accelerated in the fourth quarter of 2022 where sales multiplied by 2.1 compared to the previous quarter of the same year. In United Kingdom, the priorities in the introduction phase in the trust, entities that manage the health areas and in Spain, the product is already available in the 100% of the different autonomous communities. Finally, sales of contrast imaging agents and other hospital products increased by 13% to EUR 40.1 million in 2022. This increase shows the strong recovery of the Spanish and Portuguese hospital activity in 2022 after the effects of lockdowns during the pandemic, and ROVI continues to be the market leader in this segment. As I commented before, ROVI has enforced its long-term collaboration with Moderna by signing a new 10-year agreement, which will allow to increase capacities for the compounding, aseptic filling, inspection, labelling and packaging of ROVI's facilities in Madrid and in addition to producing Moderna's COVID-19 vaccine, ROVI's platform could also be utilized to service future Moderna mRNA vaccine candidates. To this end, further industrial investments are being made in the ROVI's Group facilities in Madrid. Regarding CMO, sales increased by 52% to EUR 403.5 million in 2022 as a result of the booking of the income-related to the production of COVID-19 vaccine, the booking of the income related to the activities to prepare the plan for the COVID-19 vaccine production under the agreement with Moderna. And finally, the reorientation of our contract manufacturing activities strategy towards high-value-added products. The growth achieved in 2022 surpassed by 12 percentage points the higher end of the range of between 30% and 40% published when the company released its 2021 results. Regarding our research and development strategy, Okedi is the first ROVI's product base in its leading-edge drug delivery technology, ISM. It's a novel investigational antipsychotic for the treatment of schizophrenia with once monthly every 28 days injections, which has been developed and patented by ROVI and which, as of the first injection, provides immediate and sustained plasmatic drug levels and does not require loading doses or supplementation with oral Risperidone. In January 2020, ROVI announced the commencement of the centralized procedure for registration of Okedi with the European Medicines Agency. On December 16, 2021, the CHMP adopted a positive opinion, recommending the granting of our marketing authorization for the medicinal product, Okedi. Finally, on February 15th last year, the European Commission authorized the marketing of Okedi for the treatment of schizophrenia in adults for whom tolerability and effectiveness has been established with all oral Risperidone and it was launched in Germany in April last year, in U.K. in July last year and in Spain in 2022. Likewise at its Capital Markets Day held on November 24, 2020, ROVI announced the filing of an NDA, a registration dossier to obtain marketing authorization in the U.S. with the FDA. ROVI was informed of the delay in the decision on granting marketing authorization for as recession for Risvan, which is a trademark for Risperidone ISM by the U.S. FDA. Furthermore, on September 24, 2021, ROVI received a complete response letter from the FDA with outstanding questions on the Risvan dossier, which were answered in January 2022. In the third quarter of 2022, the FDA issued a second complete response letter with some outstanding questions for ROVI and also with questions for one of its manufacturers. Both ROVI and the manufacturer provided answers to the FDA. The FDA has notified ROVI that the user fee goal date is now July 27, 2023. The grant of the marketing authorization for Risvan by the FDA is also subject to the closure of the observations issued by the FDA after the pre-approval inspection of the plant where the product is manufactured in Madrid in Spain that was conducted on the second half of June 2022. Responses to these observations were provided to the FDA and ROVI's awaiting the FDA's review of these responses and notification from the FDA as to whether or not a secondary inspection to ROVI's manufacturing plant is required to close the pending observations. In addition, in January 2023, the FDA conducted the pending inspection of a supplier to close deficiencies funded by the FDA in a process not related to Risperidone ISM. As a result of this inspection, the FDA has issued new observations and the manufacturer is currently estimating a time frame to provide their responses. In addition, the company is continuing with the clinical development of Letrozole ISM, which represents the second candidate using ROVI's ISM technology platform. This new investigational medicine is to the best of ROVI's knowledge the first long-acting injectable aromatase inhibitor intended for the treatment of hormone-dependent breast cancer. ROVI has obtained positive results in Phase I that confirm that this ISM formulation provides a prolonged release of Letrozole, which produces a sustained suppression of estrogenic hormones. These outstanding results allow ROVI to predict a superior estrogen suppression compared to daily doses of oral Femara, which is a daily 2.1 milligram doses when Letrozole ISM treatment starts with 100 milligram doses at day 1 and week 8, followed by maintenance doses of 100 milligram of Letrozole ISM every 52 weeks. After several official interactions with the FDA, the company has been requested to perform a Phase II clinical study in adult patients with HER+/HER-, locally advanced or metastatic breast cancer comparing Letrozole ISM versus Femara. Lastly, ROVI's research and development team is progressing in the development of a new formulation of Risperidone for a 3-monthly injection which would complement the current 4-weekly formulation of Risperidone ISM for the maintenance treatment of patients with clinically-stable schizophrenia. The regulatory toxicity studies needed to start the clinical development in humans have already been complete. The company is currently initiating all arrangements to conduct a Phase I clinical trial to evaluate the safety, tolerability, and pharmacokinetics of various candidate formulations at different dose strengths and injection sites. This study is planned to begin in the first half of 2023. And finally, we end this part with our guidance for 2023. For 2023, ROVI expects its operating revenue to show low double-digit negative growth in 2022, although a positive growth of between 5% and 10% is expected in comparison with the 2021 figure. For 2023, ROVI is assuming a new post-pandemic scenario in which COVID-19 would forcibly be a seasonal disease and, in principle, the vaccine would be administered once a year. For this reason, ROVI expects a stronger second half of the year compared to the first half regarding the CMO business. The first quarter of 2023 is expected to include revenues linked to the production of vaccines in the fourth quarter of 2022, but the second quarter of 2023 is expected to be the lowest quarter in terms of CMO assets. Nevertheless, the uncertainty related to the evolution of the disease is very high. It is now therefore possible to make a precise assessment of the impact that this new scenario could have on its CMO business. Likewise, under the terms of the agreement signed with Moderna in February last year, ROVI is still investing in increasing the compounding, aseptic filling, inspection, labelling and packaging capacities at its facilities and expects them to be fully installed at the end of 2024. Taking account the aforementioned guidance on a decrease in operating revenue in 2023 as well as the fact that ROVI will continue with investment policy as stated is reasonable to expect that the company's profits may also see a downward adjustment in 2023. We have to stay on the path of sustained growth in 2022. We increased sales by 26% outperforming the market. We have expanded our heparin franchise through the launch of our enoxaparin biosimilar in 5 new countries in 2022 and the increase of our presence in countries where we have already launched the product. We consolidated our pharmaceutical specialties area, thanks to the strength of our leading products such as Neparvis, Volutsa and the hypercholesterolemia franchise. We launched Okedi in Germany, United Kingdom and Spain and we achieved growth of 52% in our CMO business mainly thanks to the agreement with Moderna. Likewise, we're making an investment effort in R&D, focus on our ISM technology, which we see a new avenue for ROVI's future growth. To conclude, we believe we are at a growth inflection point with a strong growth opportunity driven by the launch of Okedi our first candidate validating our leading-edge drug delivery technology, ISM, our enoxaparin biosimilar, which is allowing us to transform our European footprint and finally, the agreement with Moderna, which is helping, stressing our manufacturing area and is providing us with a significant growth opportunity in this area. These growth levers are firmly underpinned by our solid ongoing business that has delivered year-after-year based on our leading specialty pharma franchise and our high value-added CMO services. And now, I hand you over to Javier, who will run you through the financials in more detail. Thank you very much for your attention and for taking the time to participate in this virtual meeting.

Thanks, Juan. We are extremely happy with this historic results of 2022. Our operating revenue increased by 26% in '22 in a very difficult environment. This growth is driven by the good performance of our CMO business, our enoxaparin biosimilar and our leading products such as Neparvis, Volutsa and the hypercholesterolemia franchise with which we intend to achieve a better position in the current competitive environment. Sales of prescription-based products increased by 7% outperforming the innovative product market by 3 percentage points. Regarding our heparin franchise, we achieved a 9% growth. Sales of the heparin decreased by 6% and enoxaparin biosimilar sales increased 23% to EUR 152.9 million in 2022. Gross profit increased by 34% to EUR 518.9 million in 2022. Gross margin showing an increase of 3.9 percentage points from 59.5% in 2021 to 63.5% in 2022, mainly because the increase in the CMO business contributed higher margins to group sales. This positive impact on the gross margin, offset the increase in the heparin cost of goods sold in 2022 compared to the year 2021. ROVI continues to be committed to innovation. R&D expenses amounted to EUR 23.9 million in 2022 and this figure is mainly the result of a focused investment in the ISM projects, preparing the development of that Phase II of Letrozole ISM and the development of a new formulation of Risperidone ISM for a 3-month injection. Selling, general and administrative expenses, SG&A, increased 39% to EUR 216.3 million last year, mainly due to an increase in expenses related to the manufacture of the Moderna vaccine, an increase of EUR 5.4 million in the energy costs and an increase in expenses due to the Okedi launch in Europe. EBITDA increased to EUR 278.9 million in 2022, a rise of 37% compared to 2021, reflecting a 2.8 percentage point increase in EBITDA margin, which was up to 34.1% in 2022 from 31.3% in 2021. EBIT increased by 41% to EUR 256 million last year, reflecting a 3.3 percentage point rise in the EBIT margin, which was up to 31.3% in 2022 from 28% in 2021. The effective tax rate was 22.6% in 2022 compared to the 16.2% in 2021 mainly due to the increase of the profit before income tax. Net profit increased by 30% from EUR 153.1 million in 2021 to EUR 199.7 million last year. EBITDA, pre-R&D calculated excluding R&D expenses in 2022 and in 2021 increased by 31% from EUR 230.4 million in 2021 to EUR 302.8 million in 2022, reflecting a 1.5 percentage point rise in the EBITDA margin to 37% in 2022. EBIT pre-R&D increased by 34% from EUR 209 million in 2021 to EUR 279.9 million in 2022, reflecting a 2.0 percentage point increase in the EBIT margin to 34.2% in 2022. Net profit pre-R&D increased by 24% from EUR 176.1 million in 2021 to EUR 218.1 million in 2022. ROVI invested EUR 51.4 million in 2022 compared to EUR 40.9 million in 2021. Of this amount, EUR 39.6 million relates to investment CapEx regarding our facilities, including important projects such as the ISM industrialization with 2 new lines to be added, the building of a second Low Molecular Weight Heparin API facility in Escuzar, Granada, Spain. The building of a second line to transform crude heparin into sodium heparin in Escuzar, Granada, [ same place ]. The Glicopepton joint venture for the construction of our plant dedicated to the production of heparin from the intestinal mucosa of pigs and the new filling lines and operations expansion. EUR 11.8 million relates to maintenance and other CapEx. Cash flow from operating activities increased to EUR 237.6 million in 2022 from EUR 149.4 million in 2021. This increase was mainly due to the increase of EUR 75.3 million in profit before income tax, the booking of EUR 57.1 million under the proceeds from CMO services caption in 2022, relating to payments received, but not yet allocated to the income statement compared to EUR 34.4 million recognized under the same caption in 2021, the decrease of EUR 26.8 million in the trade and other receivables captioned in 2022 compared to a decrease of EUR 74.2 million in 2021 and the increase of EUR 41.7 million in the trade and other payables item in 2022 compared to an increase of EUR 35.4 million in 2021. Regarding our debt as of 31st December, 2022, ROVI total debt decreased to EUR 72.2 million from EUR 73.2 million as of December the previous year. EUR 44.1 million is debt with banks, representing 61% of total debt while EUR 10.2 million correspond to debt with public administration related to the development of R&D projects, which is 0 interest rate debt, representing 14% of total debt and finally, EUR 17.9 million correspond to financial liabilities for leases, representing 25% of total debt. In July 2022, ROVI announced that the European Investment Bank have granted a loan to support its investment in research, development and innovation. The loan is for EUR 50 million with a repayment period of 10 years, has a 3 year grace period and maybe drawn down over a term of 2 years. As of December 31, 2022, ROVI had a gross cash position of EUR 126.4 million compared to EUR 100.5 million as of December 31, 2021 and therefore, a net cash of EUR 54.2 million compared to EUR 27.4 million as of December 31, 2021. Regarding the dividend ROVI General Shareholders' Meeting on 14th June 2022 approve the payment of a gross dividend of EUR 0.9556 per share on 2021 earnings. It means an increase of 151% compared to the dividend on 2020 earnings and represents a 35% payout. This dividend was fully paid on 7th of July 2022. ROVI will propose to the General Shareholders' Meeting a dividend of EUR 1.2938 per share charged to the 2022 profit and retained earnings. This proposed dividend would mean an increase of 35% on the dividend charge to the 2021 profit and represents the same 35% of the net profit for 2022 attributed to the parent company. Regarding news flow for 2023, we will monitor the evolution of the manufacturing of the Moderna vaccine. We expect to announce Okedi's launch in some important European countries. That product has already been launched in Germany, U.K. and in Spain and is expected to be launched in Portugal in first quarter of the year, Italy and France in second quarter of 2023 and in other European countries during this year. In addition, we expect to inform on new national marketing approvals for the enoxaparin biosimilar outside Europe. With regards to R&D, we expect to obtain marketing authorization for Risperidone ISM hopefully in the United States in 2023. Likewise, we expected to conduct a Phase I clinical trial of Risperidone for a quarterly injection of Risperidone and it is planned to begin in the first half of 2023. That's all regarding our financial results for the year. We can now start the Q&A session. Please remember, if you want to ask any questions, do not hesitate to send them through the question button on the platform. Thank you.

The first question comes from Alvaro Lenze from Alantra Equities. Javier, cost of sales fell quarter-on-quarter by EUR 10 million despite the fact that sales in all business units increased quarter-on-quarter. This led to pricing 72% gross margin. What explains the reduction in cost of sales, despite the increase in activity?

Thank you, Marta. Thank you, Alvaro for your first question. As everybody knows we always insisted on the idea that our CMO business is highly added value-driven and therefore the increase of these services during last year has been the main reason to increase by the way -- in the same way, the gross margin of the group. And as Alvaro was mentioning, we have had a fantastic 72% gross margin in the last quarter of the year and I think the same reason for the increase, but the increase of the CMO services business on the last quarter of 2022.

Javier, Alvaro also asks if you can give some guidance of the sales ramp up of Okedi in Europe for the coming quarters?

Well, as Juan and myself, we were explaining during the call, and in many times before this call Okedi, it's a product for chronic disease, which is schizophrenia. We have already launched the product in Germany, Spain and U.K. and we have seen an evolution of sales during this year. Next year, hopefully, we are going to launch in another group of countries, important countries in Europe, such as Portugal in the first quarter and broadly France and Italy in the following quarters and therefore, we expect to keep our booking sales of Okedi, and increasing sales in a gradual way during this year. Anyhow, we always wanted to remind everybody that this is a chronic disease and the uptake and the penetration of the product is going to be slow. But we are very, very excited about the feedback of all the doctor community and the feedback after the launch of the product in -- especially in Germany and in Spain, where we already marketed the product from several months ago. It's difficult to guide the launch of Okedi, but we will try to keep publishing the sales of Okedi quarter-by-quarter and we will try to well to talk and explain the evolution in the next following quarters.

Thank you, Javier. James Vane-Tempest from Jefferies asks when considering your guidance given the strong Q4 performance as you've kept the same percentage range differences, is it reasonable to assume in absolute terms, you're expecting more in 2023 compared to when you gave the guidance at 9 months?

Well, actually, we haven't modified the guidance because the information we have is very similar to the one that we had when we set up the guidance. The incredible performance, the last quarter of last year I think, doesn't change the outlook for 2023, the last quarter of the year and some vaccine sales that we're going to record that this first quarter of the year are linked to the pandemic scenario until 2022 sales. We haven't modified the guidance because we still believe that we are in the same range. Again, this is a transitional year as we have explained several times COVID-19 disease is clearly moving for a pandemic scenario to an endemic seasonal scenario and we are also adding new capacity that will not be finished until 2024. So again, the outlook for the year doesn't change from the information that we had since the third quarter last year.

Okay, Javier. James also asks, how much do you plan to spend on R&D in 2023? And can you outline timelines and expected costs for Letrozole?

Well, this is a key aspect for the company. Letrozole for us is our main project in the pipeline and as we tried to explain in our thorough detailed way in the Capital Market Day, we are holding and having conversations with the FDA and we are still assessing the best option for the company on how to proceed with these important and challenging development, which is Letrozole ISM for the company. So right now what we believe is that in 2023, we are going to strengthen, probably more money on R&D than on 2022. We are still as I said before, drafting what we have to do in the following months and probably sooner than later, we will update the market what is the final resolution of the Letrozole development plans that the company has. According to these new potential development we will inform how the R&D cost will developed but again, the main assumption is that the R&D cost for this 2023 year will be higher than the previous year.

Okay, Javier. And James also asks does your 2023 guidance include any expectations for Risvan in the U.S.?

Actually what we've observed is the potential goal date. Right now, honestly, we don't have any sales recorded in our budget but that's because we are a conservative company and we prefer to wait and see the evolution of the approval process in the U.S. But again if the goal date is confirmed and the product is approved we should be launching the product in the last part of the year. But our guidance right now doesn't have any contribution of Risvan.

The next question comes from Francisco Ruiz from Exane. ROVI commented that the ramp up cost of Okedi should be around EUR 30 million. How much of these are already included in 2022 figures? And how we should understand the evolution of SG&A in 2023, including the impact of Okedi lunch? And the deceleration of the vaccine?

That's clear. That Okedi launch is going to be one of our major goals for this year. Last year, as we already commented, we launched in Germany in April, U.K. in June and Spain in September, which mean that the cost of the launch has been just for a few months in several countries. Hopefully, we are very sure about this that Okedi will be launched by us in Portugal and, probably, France and Italy very soon. So that means that we will be -- that we'll need to spend more money on Okedi this year than the previous one. But hopefully, we believe that this will pay off in the long term as we are always saying that this is an important market, an important disease and we believe that Okedi could eventually have an important or a decent market share in a huge market worldwide. SG&A has been increasing the previous year. It's I think reasonable. The company has been expanding too. We are adding new capabilities also from an industrial perspective and that's for sure means more people that has joined the company the last 2 years. And probably will need to hire more people in the coming quarters in order to have all these lines, these new lines implemented. Please remember that all the new capabilities will not be implemented until the end of 2024. So that means that we'll probably have an expansion of SG&A on 2023 and this is why we're always underlying that probably 2023 will be a transitional year for us where we are adding new capacity and new capabilities and eventually we will need to manufacture more output and more products and provide more services to customers to make these lines efficient.

And Javier, Francisco also asks dividend increased significantly, thanks to the strong jump in results. How we should think on 2023 onwards as a growing dividend or a fixed payout?

Well this year or last year, profit -- performance of the company in 2022 was extraordinary. And we wanted to pay back our shareholders in the same way. So that's why we decided to increase in the same way the dividend in an absolute terms. However, we have always stated that ROVI is a growing company and dividend policy is important for us, but it is not the most important item. So we rather focus on making the company grow and making a bigger company rather to maintain stable dividend. So I would think that this 35% payout is more reasonable to think on the future years, the coming years rather than the dividend on absolute terms.

Okay. Thanks, Javier. Alvaro Lenze from Alantra Equities asks how much is still pending to invest in the new filling lines and operations expansion going into 2023?

Whereas everybody also knows and we've been trying to be very transparent on this part of the investment or big part of the investment is also financed by Moderna. So it's not paid directly by ROVI. We still have and we are also contributing to this expansion of capacity. Probably that means that the CapEx figure in 2023 will be similar to '22 caption or even bigger. Also because of the different projects that we have within the company, like [ OpEx ] on JV, yield or the expansion of the ISM lines and also, this expansion of the fill and finish new lines. So still a lot of work to be done and money to be invested.

Nicolas Schmidlin from ProfitlichSchmidlin asks how do you think about share buybacks given the lower share price and comfortable net debt situation?

I mean, we've been active in share buybacks last year because we had a strong net cash positive position and we didn't find opportunities to invest at our regional or multi products. Currently, we would like to invest this cash in organic growth and selective M&A activities. We are working on this and we expect to be able to invest the cash in the business. As we always mentioned before, if we don't succeed on M&A activity always with our very clear rationale and very selective M&A activities, we do not rule out another share buyback program. At the end of the day, we don't want to buy the cash on our balance and if we don't find a right way to use on the business, with the same productivity and efficiency from a capital perspective, we will always be willing to get their money back to our shareholders from one way to another.

Your next question comes from [ Emmanuel Codron ] from [indiscernible]. Could you split -- Sorry. Thank you for sharing the revenue from Okedi. Could you split this per country? Will sales grow faster in U.K., thanks to the trusts system?

Juan, you maybe comment on this, if you want.

Sure, I mean. Thank you [ Emmanuel ] for your question. We expect that sales probably will go faster in Spain. Spain is the largest market in the schizophrenia long-acting injectable fill. So for volume, probably Spain would be the one taking probably the highest percentage of growth in Okedi sales this year. Probably, the second country will see a better performance would be Germany, basically because we launched the product earlier than in any other place. U.K. usually by definition usually slow, a slow market to develop. First, you need to get into their formularies in the different chores. And once you have managed to include the product in the formularies, you have to develop the internal consumptions within the hospital. So, probably, we won't see that mainly sales booked in the U.K. this year, but definitely it's going to be one of the major drivers of Okedi in the mid-term unless Javier has mentioned and we have pointed out several times in our presentation, we expect to launch in all the major countries in Europe within 2023, France, Italy, Portugal, the Nordic countries, Holland, Austria, and probably as well Greece before the year end. Again this is a chronic market where patients are stabilized and the dynamic market is the one that is going to try far or increase of sales. So this is going to be a major driver for the company, while we have to look at in a perspective that is chronic market where we are hitting the dynamic market, those patients unfortunately they suffer [indiscernible] or they have problems with their medication. So it's going to be a slow uptake in terms of sales. That is going to be continuous and definitely is going to be a major growth driver for the company for the next 5 years.

Thank you, Juan. [ Emmanuel Codron ] also asks could you say something about potential M&A targets? And how many potential deals ROVI has looked at already?

Well, in the last few years, we can tell you that we have participated and have looked in more than 10 or 15 M&A activities or tenders or process as you could name it and unfortunately the multiples and the offers that all the companies and private equities offer, it has always been above and then sometimes even in a substantial way above any of our offers. Hopefully, and thanks to the change in the macroeconomic scenario on the rise of the interest rate and it seems that there are less money on the markets right now probably companies with a stronger cash position, we could be more effective and that's what we were saying that we try to be optimistic and try to remain looking at opportunities always that could bring synergies and could add added value to the company. We are not looking projects that will only increase the size of the company or increase the revenue line. But it will not change the profitability of ROVI. We will try always to look to projects that could -- that we can leverage and that we can add and bring added value, and we will push this year to look forward to having these opportunities.

Thanks, Javier. Ignacio Ortiz de Mendivil from EDM asks should we expect a further buildup in inventories in 2023?

Well, always when companies are increasing their sales, I think inventories are rising, because we need to make sure that we don't have out of stock situations. We have faced especially since you know, since the war and even before big issues on the supply chain as everybody knows and lead times for materials has expanded in a substantial way. So, we have tried again to bet on the growing position of the company and not to risk any out of stock situation. So again, inventories will depend on the growth of the company, on the situation of the global markets and how lead times varies, but again companies has always been very, very safe on inventories and probably same trend on working capital will be maintained.

[ Javier Pinedo ] from [indiscernible] asks, you have signed an agreement with Teva for the distribution of paliperidone injectable. Can you give us some more details on the agreement? Do you think it can expand to other schizophrenia product from Teva? What contribution can we assume in terms of revenue from this and the other distribution agreements signed in Q4 2022?

Thank you. Thank you, Javier. I mean we launched this product, which as you know, it's a generic of Xeplion, paliperidone in January. Teva is giving us a license. They are also going to launch their own brand and again, really the goal that we are targeting with the launch of Baceq is to offer entire therapeutic arsenal of long-acting injectables to treat schizophrenia. Again we are going to be one of the very few companies that we are promoting our long-acting injectable products in Spain, and we thought that it could be quite a good synergy. I mean psychiatrists at the end of the day, they are working in 2 settings, on one hand in the hospitals with acute products and with outpatients. Initially we are positioning Okedi in the acute patients setting in the hospital wards and Baceq is going to be mainly targeted for the outpatient market. And really again, it's going to be as well as lower -- we believe is going to have quite an impact on the market and although we don't -- it's very difficult with this sort of compounds to really share what would be a potential sales objective for this year. We really hope to obtain at least 10% of the molecules shared in the next 5 years. That means ROVI wants to become a major player in the schizophrenia, long-acting injectable market and we saw Baceq has a great opportunity to really stress and to send a signal to the market that ROVI is really going to pay down, is really going to invest to become one of the major players. Regarding other licenses, we are continuously discussing with other companies for Spain, potential distribution or promotion or even license agreements of different compounds. We are one of -- we're probably, I mean the best-selling company in the specialty pharma setting and we expect that before the year end, we will be able to announce new agreements. We do have right now free capacity in certain therapeutic areas, in terms of our promotional and detailing. And we are currently having advanced discussions with several companies. Hopefully, in the next quarter, we'll be able to announce some new distribution agreements that will further enhance our position in the specialty pharma marketing spend.

Thanks, Juan. Javier [indiscernible] also asks if regarding your agreement with Teva, can we assume that Teva is one of the companies with which you are speaking with to potentially distribute Risvan than in the USA?

Again I mean probably you are aware that Teva is also developing a long-acting injectable before Risperidone. So in this case for competition issues, I mean Teva is not one of the partners of choice that we are having or we are currently having conversations regarding Risvan in the U.S. Javier has mentioned in the presentation Risvan we are having a conversation with different companies what we have is really too to try to keep them. There is no harm in the knowledge and start getting some insight of how the dynamics of the U.S. market works out. Again Risperidone is first candidate coming out for ISM technology. The ISM technology platform is a core business of the company and we are betting that is going to be the platform that is going to sustain the future growth of the company and the U.S. market is definitely is a market that we as a company, we need to get access, and we need to start gaining a good insight of how the market works and the dynamics. But definitely Teva is not one of the companies we're holding conversations with.

Thanks, Juan. And the last question comes from Leopold Arminjon, Lazard. Juan, if Moderna has lower capacity needs, do you have a plan to fill the CMO capacity with other clients? How fast could you onboard new clients?

I mean again, I mean regarding Moderna, I think Moderna has given ROVI many, many medical centers in these last 2 years. On one hand, it has put ROVI on the worldwide market of CMO activities. On the other hand, we have managed to combine with Moderna to increase very substantially our capacity. I mean we're talking that we're going to have a capacity by the end of 2024 as Javier has mentioned of close to, or even more than 100 million buyers and close to 100 million prefilled syringes. That's going to position ROVI as one of the major CMO players worldwide on the injectable setting. And definitely, I mean ROVI was one, I mean CMO was a core business for ROVI before Moderna and we probably, I may be able to say that we have -- we haven't had so many contacts, so many request for information, so many request for quotation than ever since we started being a major player on the COVID-19 vaccines. So, definitely we see a major growth on CMO activities. 2023 and probably 2023 will be a transition period. The COVID-19 is moving from pandemic to an endemic scenario. Obviously, this will, for sure, and then an adjustment to the revenue and also the profit to the company. But, definitely we see that injectables on general within a CMO our perspective is going to be one of the major drivers in this market and ROVI is going to be on a privileged position with the different technologies, routes, aseptic filling, [indiscernible] terminal sterilization our synergies, plastic biologics, glass. I mean we're going to have really a whole board of different alternatives that we can offer to companies and, I'm extremely optimistic that this is going to be one of our major shining drivers of growth in the next coming years.

Thanks, Juan. Thank you very much for your high participation. Let me now turn the floor over to our CFO, Mr. Javier Lopez-Belmonte for the closure of the presentation.

Thank you, Marta. We are out of time. That was the last question. So if you have any further questions please do not hesitate to contact our Investor Relation team. Now, therefore we can conclude these results virtual call. Thank you for being with us today and have a nice day. Bye-bye.