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

Good morning to everybody. A warm welcome to all of those attending the presentation of ROVI's first 9 months 2024 financial results, which will start in a moment. I'm Javier Lopez-Belmonte, ROVI's Deputy Chairman and Chief Financial Officer. Joining me on today's call are Juan Lopez-Belmonte, ROVI's Chairman and CEO; and Marta Campos, our Head of Finance. The presentation will be followed by a Q&A session. And therefore, if you want to ask any questions during the presentation please do not hesitate to send them on the question platform. Before we begin, let me remind you that information presented in this call contains forward-looking statements based on our current beliefs and expectations. Actual results could materially differ due to the known and unknown risks, uncertainties and other factors, and we undertake no obligation to update or revise any of these statements. With that, I thank you for your presence here today, and we will now hand the presentation over to Juan Lopez-Belmonte. Please go ahead.

Since the pandemic, we have been in a transition period, crucial for establishing the basis for ROVI's future. In this context, our operating revenue decreased 5% to EUR 564.6 million as a result of lower revenues from the manufacture of the COVID-19 vaccine in comparison to the first 9 months of 2023 when ROVI had booked higher income related to the production of the pandemic COVID-19 vaccine. And secondly, lower revenues related to the activities carried out to prepare the plant for the production of the vaccine and the agreement with Moderna. Okedi, Risperidone ISM continues to grow in a robust way. Sales increased 126% compared to the first 9 months of 2023, totaling EUR 20.3 million. The slowdown in sales of our heparin franchise division in the first 9 months of 2024 was mainly due to lower orders from enoxaparin partners. However, Bemiparin sales increased by 6%, and we forecast full year sales of Bemiparin to increase by a low single-digit percentage in 2024 compared to 2023. We also expect the fourth quarter of 2024 to be the strongest quarter of the year in terms of enoxaparin sales as a higher volume of orders from partners is expected. We remain excited in the continued sustained performance of this division and aspire to become a benchmark player in this field worldwide. Our gross margin for the first 9 months of 2024 improved by 470 basis points to 63.6% versus the first 9 months of 2023. Our EBITDA margin for the first 9 months of 2024 improved by 80 basis points to 29.6%. Based on the first 9 months performance and the visibility that we currently have, we reiterate our 2024 full year guidance. We expect operating revenue to decrease by a mid-single-digit percentage in comparison with 2023. In October 2024, after the assessment of strategic alternatives for the company's assets, including a potential corporate transaction relating to the third-party contract development and manufacturing business, ROVI's Board of Directors concluded that given the strength, momentum and prospects of this business, the best way to maximize value for shareholders at this time is to continue executing the company's stand-alone strategy plan with the interest of the CDMO business best served under the current ROVI Group structure with no entry of third-party investors. After the completion of the share buyback program, we informed that the canceled shares have been delisted from the stock exchange interconnection system ad the Madrid, Barcelona, Bilbao and Valencia Stock Exchange effective September 13, 2024. As a result, the share capital of the company is now an amount of EUR 3,074,145.72 divided into 51,245,762 ordinary shares with a nominal value of EUR 0.06 each with a grant of a total of 51,235,762 voting rights, 1 per share. By redeeming these shares, the shareholders automatically increased their percentage interest in the share capital. Let me continue by sharing an update on Risvan. After assessing the uncertainties and opportunities associated with launching Risvan in the United States, we have decided not to proceed. The main factors that have contributed to these decisions are the prioritization of the company's investments in the CDMO business and the clinical development of a new quarterly formulation of Letrozole. The absence of a partner that furnishes the company with the capacities and structure necessary to ensure adequate continuous distribution of Risvan in the United States market in order to thus maximize the benefits of this innovative prolonged release long-acting injectable drug therapy for the patients and take advantage of all the potential for expansion and commercial development that the schizophrenia field offers. The delay in the launch coincides with a forecast price reduction in the area of long-acting injectables for the treatment of schizophrenia in the United States and potential amendments to the United States legislation or policy regarding the pharmaceutical industry jeopardizing the expected profitability of Risvan. As well, the United States market lacks regulatory differentiation or specification on the clinical data sheet of prolonged release long-acting injectables that share the indication, treatment of schizophrenia in adult patients, which does not favor the positioning of Risvan in a market with strong competitors. To this, it would be necessary to add the time and cost of the pharmacokinetics study required to evaluate exposure to Risvan similar to the daily administration of 6 milligram of oral risperidone. ROVI has therefore chosen to focus on the European development of Okedi, where there are less uncertainties and expect this product to reach potential global sales of between EUR 100 million and EUR 200 million in upcoming years. And now let me give a quick overview of the first 9 months 2024 financials. Total operating revenues fell by 5% to EUR 564.6 million versus last year. As you know, our business was impacted by a drop in contribution of the CDMO business since sales of this division fell to EUR 253.2 million. We continue to see a strong performance within our Specialty Pharma business. Its sales were up 1% to EUR 311.4 million in the first 9 months of 2024, positively impacted by Okedi, Neparvis, Bemiparin, and the contrast agents and other hospital products division. I will touch upon their performance later on in the presentation. In the first 9 months of 2024, profitability negatively impacted by an increase in SG&A and research and development expenses. EBITDA stood at EUR 167.2 million in the first 9 months, a decrease of 2% compared to the same period of last year, reflecting a 0.8 percentage point increase in the EBITDA margin, which was up to 24.6% in the first 9 months of 2024. Likewise, net profit decreased by 4% in the first 9 months of 2024. Moving on to one of our main pillars of growth, our specialty pharma area. Sales of prescription-based pharmaceutical products remained stable in the first 9 months of 2024. Sales of the heparin franchise, low molecular weight heparin and other heparins decreased by 2% in the first 9 months of 2024, mainly due to lower orders from enoxaparin partners. Bemiparin had another strong quarter in terms of revenue performance. In the first 9 months of 2024, sales were up 6%. Bemiparin international sales grew 28% with a strong contribution from China, Turkey and Greece. We continue to see momentum for the product. Thus, we expect full year sales of Bemiparin to increase by a low single-digit percentage in 2024 compared to 2023. We aspire to become a global leader in this field with Bemiparin and enoxaparin biosimilar. In this context, we are investing not only increase our capacities for the production of heparins, but also to become self-sufficient in obtaining crude heparin and thus becoming a vertically integrated company in all the low molecular weight heparin manufacturing phases. ROVI continues with its internalization plan. Sales outside Spain represented 62% of operating revenue in the first 9 months of 2024 versus 66% in the same period of 2023. Regarding the enoxaparin biosimilar, it is already present in 40 countries, and we continue to sign out license agreements to distribute the product in more countries. In the first 9 months of 2024, enoxaparin biosimilars sales decreased by 6%, mainly due to lower orders for enoxaparin partners. However, ROVI expects the fourth quarter to be the strongest quarter of the year in terms of sales as a higher volume of orders from partners is anticipated. The growth drivers of the Specialty Pharmaceutical business were Okedi, Neparvis and the contrast agents and other hospital products. Now taking each one of the brands in turn step by step. Sales of Okedi, the first ROVI product based on its leading-edge drug delivery technology, ISM for the treatment of schizophrenia in adults for whom tolerability and effectiveness has been established with Risperidone reached EUR 20.3 million in the first 9 months of 2024. Okedi sales increased by 126% in the first 9 months of 2024 compared to the first 9 months of 2023. In 2024, the product was approved in the United States under the brand name Risvan Canada and Australia. Sales of Neparvis, a specialty product from Novartis launched in December 2016, indicated for the treatment of adult patients with symptomatic chronic heart failure and reduced ejection fraction increased 13% in the first 9 months of the year. Sales of Orvatez specialty products from Organon indicated as an adjunctive therapy to diet in patients with hypercholesterolemia, decreased 4% in the first 9 months of 2024. This decrease was mostly caused by the entry of generics into the market, which resulted in a price reduction by competitors. ROVI consequently dropped the price of Orvatez by 40% in October 2024. Sales of Volutsa from Astellas Pharma launched in Spain in February 2015 decreased by 30%, mainly due to a product price reduction of 47% in the second quarter of 2023. Finally, sales of contrast imaging agents and other hospital products increased by 14% in the first 9 months of 2024. Regarding CDMO, sales declined 12% to EUR 153.2 million as a result of lower revenues from the manufacturer of the COVID-19 vaccine in comparison for the first 9 months of 2023, when ROVI had booked higher income related to the production of the pandemic COVID-19 vaccine. And secondly, lower revenues related to the activities carried out to prepare the plant for the production of the vaccine and the agreement with Moderna. However, I would like to point out that CDMO sales increased by 16% to EUR 134.4 million in the third quarter of 2024 as a result of higher revenue from existing customers, excluding Moderna; secondly, higher revenue related to production of the COVID-19 vaccine due to a more concentrated seasonality in the third quarter. We remain excited about the near- and long-term potential of our globally leading CDMO business, given the attractive market dynamics. ROVI has invested substantial capital to build global leadership in sterile fill and finish capacity and technology services. With such investments and with current expansions underway, ROVI expects to significantly increase its current sterile capacity at its FDA and EMEA GMP and S1 compliant facilities in Spain and to become one of the largest and most experienced pharmaceutical groups in Spain with 8 fully integrated plants, 3 of which are fully engaged in contract development manufacturing operations. Moving to research and development. We are making very good progress with our 2 Phase I clinical trials. In July 2023, we began the Phase I clinical trial of the new 3 monthly formulation of Letrozole, letetrozoleleve in Europe to evaluate the pharmacokinetics, safety and tolerability of single ascending doses of letetrozolele at different strengths in voluntary healthy post-menopausal women, the LEILA-1 study. In September of 2023, we began the Phase I clinical trial of the 3 monthly risperidone injection, which would complement the current 4-weekly formulation of Risperidone SN for the maintenance treatment of other patients with clinically stable schizophrenia. The clinical trial will evaluate the safety, tolerability and pharmacokinetics of various candidate formulations at different dose strengths and injection sites. And finally, moving on to our guidance. Our outlook for the remainder of this year remains unchanged, and we expect operating revenue to decrease by a mid-single-digit percentage in comparison with 2023. For 2025, we expect operating revenue to decrease by a mid-single-digit percentage in comparison with 2024. Notwithstanding this guidance is calculated using certain factors that could be relevant to the estimates and that are difficult to specify at the present time. They include, among others, the following: First, the 2024 vaccination campaigns for flu and COVID-19 are still in progress. And as of today's date, the company is unable to forecast how the demand and production might evolve for the vaccination campaigns that will take place in 2025. Second, it is hope that the expansion of the compounding asective inspection, labeling and packaging capacities at the ROVI facilities in Madrid and the current high market demand for contract manufacturing services will favor obtaining new customers with the resulting sales impact. This would have to be considered, but it's impossible to estimate at this time. Overall, we are satisfied with the performance of the company in the first 9 months of 2024. 2024 and 2025 are clearly transition years. The company is making significant investments that will lay the foundation of ROVI's future growth. We are at an inflection point with a multiyear growth opportunity driven by, first, we believe we have a bright future with our established European footprint, which will continue delivering growth with our low molecular weight hep platform and the successful launch of Okedi and the future avenues of growth that will come from our CDMO business and the investments efforts made in research and development with the development of the quarterly injection of Letrozole, which is close to finalized Phase I study. These growth levers are firmly underpinned by a very solid ongoing business that has delivered year after year based on our leading specialty pharma franchise and our high value-added CDMO services. And with that, I would like to turn it back 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 meeting.

Sorry, I was on mute. I was saying that I was -- as you were previously mentioned, since the pandemic, we have been in a transition period in which value is being created for the future. In this context, in the first 9 months of the year, operating revenue was EUR 564.6 million, 5% decrease on the first 9 months of '23, mainly due to the performance of the CDMO business. It should likewise be noted that the third quarter of '24 is expected to be the strongest of the year in terms of the CDMO sales performance. However, sales from the Specialty Pharmaceutical business increased 1% to EUR 311.4 million compared to EUR 307 million in the first 9 months of last year. Sales of low molecular weight heparins decreased by 2% to EUR 172.6 million in the first 9 months of 2024, mostly due to the -- to mainly -- mostly due to mainly lower orders from enoxaparin partners. We, however, expect the fourth quarter of this year to be the strongest quarter of the year in terms of enoxaparin sales as a higher volume of orders from partners is expected. Bemiparin sales increased 6% to EUR 71.1 million in the first 9 months of '24. ROVI expects full year sales of Bemiparin to increase by a low single-digit percentage in '24 compared to '23. Gross profit increased 2% to EUR 359 million in the first 9 months of 2024 compared to the same period last year. Gross margin was up 4.7 percentage points to 59.4% in the first 9 months of 2024. This increase was mainly due to the decrease in the contribution to the manufacturing business of CDMO of revenue relating to activities to prepare the plant to produce medicines under the agreement with Moderna, which contributed lower margins to group sales. Second, the increased contribution to the CDMO business by existing customers, excluding in this case, Moderna, which contributed higher margins and the increased contribution of sales of Okedi, which again contributed higher margins. In the first 9 months of the year, raw material prices for low molecular weight heparins fell 55% compared to the first 9 months of 2023. ROVI expects this decrease in heparin raw material prices to be confirmed during 2024. Not with understanding, in spite of the decrease in heparin raw material prices, the impact on the gross margin was negative in the first months of 2024. However, a positive impact on the gross margin is expected from '25 onwards. ROVI continues to be committed to innovation. R&D expenses moderately increased by 5% in the first 9 months of 2024 due to, first, the development of the Phase 1 of Letrozole LEBE, which began in July '23. And second, the development of the Phase I of a new formulation of Risperidone ISM for a 3-monthly injection, which began in September last year. Selling, general and administrative expenses, SG&A increased 5% in the first 9 months of '24 compared to the same period of the previous year. This increase was a consequence of a higher employee benefit expenses, excluding R&D expenses, which increased 7% in the first 9 months of this year versus the first 9 months of '23, mainly due to a 10.3% wage increase and the general collective agreement for the chemical industry. And the second cost for this increase in SG&A is an increase in other operating expenses, excluding R&D due to the Okedis launch in Europe and the expenses related to the strategic assessment project. Nevertheless, if we exclude R&D and strategic assessment expenses, other operating expenses would have slightly increased only by 2% to EUR 8.7 million due to an efficient cost containment policy. EBITDA totaled EUR 167.2 million in the first 9 months of 2024, reflecting a 0.8 percentage point increase in the EBITDA margin to 29.6% in the first 9 months of 2024. EBIT decreased by 4% in the first 9 months of the year, reflecting a 0 percentage point increase in the EBIT margin to 26% in the first 9 months of '24. Net profit decreased by 4% to EUR 113.5 million in the first 9 months of 2024. EBITDA pre-R&D calculated excluding R&D expenses in the first 9 months of 2024 decreased by 2%, reflecting a 1.1 percentage point increase in the EBITDA margin to 32.7% in the first 9 months of this year. EBIT pre-R&D decreased by 3%, reflecting a 0.5 percentage point decrease in the EBIT margin to 29.1% in the first 9 months of 2024. Net profit pre-R&D decreased by 3% in the first 9 months of '24. Moving on to the evolution of CapEx and cash flows. Let me say that ROVI invested EUR 33.8 million in the first 9 months of 2024. Of this amount, EUR 27.4 million relates to investment CapEx regarding our facilities, including important projects such as the ISM industrialization, the [indiscernible] joint venture for the construction of a plant dedicated to the production of compounds of high-value biological value from the intestinal mucosa of pigs. And third, the new filling lines and operations expansion. In addition to all of that investment, we also invested EUR 6.4 million relates to maintenance and other CapEx. Cash flow from operating activities increased to EUR 65.2 million in the first 9 months of 2024, mainly due to the decrease of EUR 4.3 million in the inventory item in the first 9 months of the year compared to a decrease of EUR 53.3 million in the same period of '23. The decrease of EUR 36.4 million in the trade and other payables items in the first 9 months of '24 compared to a decrease of EUR 52.1 million in the same period of '23. And finally, the booking of minus EUR 24.4 million under the cash flow from contract manufacturing services caption in the first 9 months of the year, mainly due to the allocation of more revenue to the income payment than payments received compared to minus EUR 39.4 million recognized in the same period of 2023. Regarding our debt, as of the first 9 months of the year, ROVI total debt increased to EUR 128.3 million, EUR 101.7 million is debt with banks, representing 79% of total debt, while EUR 16.1 million correspond to financial liabilities for leases representing 13% of total debt. And finally, EUR 10.5 million correspond to debt with public administration related to the development of R&D projects, which is 0 interest rate debt, representing 8% of total debt. As of September 30, ' 24, ROVI had a gross cash position of EUR 19.5 million compared to EUR 26.8 million as of December 31, '23, and net debt of EUR 108.8 million compared to EUR 38.6 million as at the end of last year. Regarding the dividend, ROVI's General Shareholders Meeting held on the 24th of June '24 approved the payment of a gross dividend of EUR 1.1037 per share and this represents approximately 35% of the 2023 consolidated net profit attributed to the parent company. This dividend was already paid on the 10 of July this year. Considering the group's cash generation profile and the market situation, ROVI decided to launch a buyback program for the company's shares effective as of 26 July 2023. On the 11 of June '24, ROVI informed on the completion of this buyback program under the framework of this program, a total of 2,233,466 shares were acquired for an amount of EUR 130 million, which represents approximately 4.13% of the share capital. As notified when the buyback program commenced, the purpose of the program was to cancel shares of ROVI through a reduction of capital and at the same time, to contribute to ROVI's shareholder remuneration by increasing the profit per share. On the 12 of September '24, ROVI informed that the canceled shares have been delisted from the stock exchange effective 13 September this year. Regarding news flow for '24 and '25, we will continue to monitor the evolution of the manufacturing of the Moderna products. We also expect to announce Okedi's launch in more countries. As you know, the product has already been launched in Germany, U.K., Spain, Portugal, Italy, Austria, Greece and Serbia. We also expect to market Risperidone ISM in Canada and Australia very soon. In addition, we expect to inform our new national marketing approvals for the enoxaparin biosimilar outside Europe. And regarding our R&D, we are making good progress with the first clinical trial of Letrozole ISM, the new formulation of Risperidone for a 3-monthly injection. That's all regarding our financial results for the first 9 months of 2024. Therefore, we can now start the Q&A session. Let me remind all of you that if you want to ask any questions, please do not hesitate to send them through the question button on the platform.

Thank you very much, Javier. Good morning, everyone, and thank you for your participation. The first question comes from De Renteria from Kepler. One, can you please elaborate further on the reasons behind not marketing Risvan in the U.S.

Yes, of course. Please let me begin by mentioning that it has not been an easy decision. Probably it is one of the most difficult decisions given the efforts and resources dedicated to get the product approved. But -- and also let me reiterate that we still strongly believe in the differentiation of our tech and our technological drug delivery system and the medical benefits for patients with Risvan and Okedi. However, we have spent a lot of time and resources analyzing the commercial footprint to market Rispan in the U.S.A. We have been negotiating with several potential partners with different scenarios and different partnering models. And the feedback obtained from those conversations, especially during the course of 2024 and the information as well received with third-party experts in the field, I mean, has unanimously led us to conclude that the remaining options for partnering were not reliable enough in the long term nor were projects solid enough really to guarantee a financially viable launch. And all the feedback, all the input that we have managed to gather from all the different conversations that we have had during the last 2 years has forced us to take these hard decisions. Among the factors, if let me be a little bit more specific, obviously, everything circles around the delay in Risvan's approval, I mean, which basically has enabled competitors to launch well ahead of Risvan. As well, the current U.S. dynamics, which are expected or at least we do believe that they are going to end up in a deterioration in prices in the midterm as well potentially, but we strongly believe it will intensify the payer management of Rispana-like products, the famous Part D of Medicare. And also, we have to take into account that there were certain commitments that we had to fulfill in regards to the Risvan approval, such as the post-marketing pharmacokinetic study that was required by the FDA to evaluate exposure to Risvan, similar to the daily administration of 6-milligram dose of oral risperidone, which added a cost that it was going to be in line around EUR 8 million. So that's why we were forced to take in this decision. We do believe that is the best interest for the company and for shareholders to prioritize funding other strategic areas of the company that we believe that it will better drive our long-term strategic growth. And as we have both Javier and myself exposed to you in our presentation, we are talking about the CDMO activities and the development of the Letrozole LEBE. But again, just let me reiterate again, which I think is extremely important, that we believe in the differentiation of Okedi, Risvan, the goodness of our technological platform and its attractive therapeutic profile. The most important thing is really the European launch success that I mean we are in the first 9 months of this year, getting a revenue line over EUR 20 million. And we do strongly believe that ROVI is going to deliver according -- Okedi is going to deliver according to our expectations in line with the guidance provided today. It's only been 2 years since we got the approval of Okedi in Europe. We successfully went through the reimbursement process. We have successfully going through to the market access, which is extremely difficult and time consuming for this sort of chronic therapeutic areas like schizophrenia. And we do believe that it is the best for the interest of shareholders to really -- to focus and to prioritize the CDMO and the letrozole LEBE development and as well to really focus and push harder on the European Okedis opportunity, which we believe is going to deliver real good as the data that we have shared with you today is already demonstrated.

The next question is from [Technical Difficulty] [indiscernible] Global Income. Are you currently engaged in conversations to obtain new relevant clients in CDMO? When could we have news at this front?

Definitely, I mean, the CDMO business is going to become probably one of the best news flow in the next coming years. Having said that, signing contracts and making the required regulatory approvals takes time so back in getting new customers, but as well is a very interesting entry barrier for potential new competitors. We are extremely positive and optimistic. We are holding really interesting conversations with main pharmaceutical companies to try to get them on board in our CDMO operations. Really, the momentum is great. And actually, we do believe that the news flow is going to be extremely rich in the next coming months and more specifically in 2025.

Thanks, Juan. Joaquin Garcia from [indiscernible] asks, can you explain how long is the period between the moment you signed a contract to fill capacity in the CDMO business and its impact in terms of revenue generation?

I mean it varies from customer to customer because obviously, depending on how agile the tech transfer proceeds. But we can say that in general, and again, it's not something like a standard timing, but something between 12 to 18 months, that could be a timing that we could take it as a standard.

Thanks, Juan. Javier JJoaquin Garcia-Quiros from HB Capital asks a couple of questions. The first one is gross profit margin this quarter reached 69%. Can we assume similar margins in the future with similar levels of CDMO sales?

Yes. I think that's -- I think from my point of view, one of the most important facts of today's financial presentation is the gross margin. As Joaquin is highlighting, we've been able to achieve a tremendous gross margin in the period. And this, as commented during the call, I think it's driven by 2 main or 2 or 3 main factors, potentially 2. First one is that he's right. If the CDMO business contributes so much in the quarterly results or in the yearly results, we can expect an important increase in the gross margin figure. And also -- and this is also very relevant for the future, if Okedis sales keep adding to the company, Okedis will also add further gross margin to the company. So I think that's important because the company's main pillars of growth right now are those drivers and potentially, those will help us to increase the gross margin in the future.

Thanks, Javier. Joaquin also asked, working capital has increased EUR 40 million this quarter. Should we expect a reversal in Q4? What levels of working capital can we expect for 2024 and 2025?

We don't expect that many changes in working capital in the future. This quarter also has been affected by by the famous works for the CDMO and the caps that has this continuous work for -- continuous improvement and investments on the CDMO front. And this is going to end very soon, and we don't expect that much coming from the next years onwards. So for next year '25 onwards, we don't expect that many changes on the working capital and the company profile will be very similar.

Thanks, Javier. Jose Maria Canovas from Global Income asks Javier, 2025 guidance seems overly conservative. What are the main assumptions behind this guidance? Are you including any potential growth from new clients in CDMO?

As Juan explained before, we have a tremendous momentum on the CDMO business, and we have important contracts, and we are opening new avenues of getting new customers. However, these conversations takes time. And we know that even from the main agreement that we announced back in April that the main revenues will come in the future years. So it's still, as we say, '25 is still a transitional period for us because the main bulk of revenues from these new contracts will start on the following year. In addition to that, I think it's important to highlight that we have still an important impact in '24 from the revenue that we are getting from adaptation works in the CDMO business. Still in that front, this year, those revenues will be in a range, I guess, between EUR 65 million to EUR 70 million. And those revenues probably will not be repeated next year. So part of this improvement works, it will be ended this year. And I think everybody will remember or would remember that we had this impressive investment plan during the last 4 years. And on '25, potentially revenues from improvement of works of CDMO will be much lower than the previous year than '24. So this will be one of the main reasons for the decrease of the guidance. And also, we want to be conservative, as we said, from the CDMO front as we don't know still very clear how much revenue we will add from new customers.

Thanks, Javier. The next question comes from Ãlvaro Lenze. Javier, can you please comment on how much revenue do you expect in 2024 from the adaptation works in CDMO? And how much do you expect for 2025?

Yes. As I was saying, that's one of the main reasons also to decrease to the guidance outlook for '25. On '24, as I said, we expect a figure around between EUR 65 million to EUR 70 million revenues from the adaptation -- let's say, adaptation works for the CDMO business. And it's going to be a big decrease in that caption next year, which, again, if everybody remember, that's also, I would say, even positive because the margin and the profitability of that caption is very low or much lower than the company's group. So on '25, I don't have that figure in my mind, but it's going to be much lower. And this is a big impact on the revenue front line.

Okay. Thanks, Javier. Javier Guilherme [indiscernible] from ScotiaBank has some questions. The first one is, how do you see SG&A evolution in 2025?

Yes. There are a couple of things there. First of all, as we have published on the press release, we have -- I mean, our -- it seems to be an agreement in the bargaining collective agreement for the coming -- for the next 3 years, and that would imply a 3% increase on the salary front for next year. And I guess that still the Okedi launch in Europe will have an important contribution to the SG&A as the same as this year. Also, potentially on the R&D front, we will be potentially starting new clinical trials. And overall, I would see that all in all, the SG&A will grow less than this year. And we'll try to be as strict from an expenditure way of managing the company as we are doing. So a single digit -- small single-digit increase as a summary.

Thanks, Javier. He also asked what kind of CapEx should we expect related to the additional investments in CDMO area?

As we have tried to explain several times since the last days or weeks, we see a tremendous potential on the business, on the CDMO business. And we have been able to keep investing on the expansion of not only capacity, but also different new capabilities for the company also in order to offer more services to our current customers and our new potential clients. So therefore, we will maintain a similar CapEx figure than this year. And I guess that '25 and potentially '26 will be similar CapEx.

Thanks, Javier. Juan Guilherme also asks to what extent do you expect the competitive dynamics in ex U.S. schizophrenia market to strengthen to an extent that could pose risks to the new EUR 100 million to EUR 200 million peak sales target for risperidone ISM, sorry. Does this figure include only the monthly formulation?

Yes. I mean, thank you for the question. I mean we feel much more comfortable with the dynamics ex U.S.A. I mean the dynamics are evolving constantly since the publication of the IRA and the potential, as I mentioned before, intensifying of the payers' part. Part D of the Medicare, they are going to suffer substantial changes. And that -- I mean, and we imply there's going to be in the future a great deterioration of prices in the U.S. Ex the U.S. and mainly Europe, Canada and Australia, I mean, the process is completely different. You follow reimbursement process. We've gone through that process in Australia. We've gone to that in Europe, and we feel extremely comfortable. As well, something that is from a commercial point of view is I think it's good to point it out is that in Europe and in those countries, we are still the only monthly injection of Risperidone. While in the U.S., we had before the potential competition of [indiscernible] and as well in the ex U.S. countries, we have very strong SMPC medical differentiation with the acute patients. So we are strongly convinced that we can achieve that range of sales of Okedi. And again, yes, so far, we are only giving a guidance of the monthly injection of risperidone. So I mean, having marketed the product already for 1.5 years or a year in most of the countries, the feedback that we are receiving from the medical community, patients, the pharmaco are extremely positive. And we -- I mean, we feel confident that we will be achieving those revenue figures in the next coming years.

Thanks Juan. The next question comes from James Vane-Tempest from Jefferies. Juan, given the potential cash flow from royalties that could have been received from Risvan, how does this impact your ability to invest in capacity for the CDMO business given your conservative approach to leverage and cash needs from -- for R&D?

I mean, thank you for the question. I mean, the major decision that has triggered the noncommercialization of Risvan in the U.S. has been financially. I mean we -- I mean, obviously, we would manage to obtain certain royalty stream from a potential partner. Believe me that we have looked intensively into different partnering models, virtual JVs, a pure standard license agreement. But our fear is that all these ongoing changes provoked by the IRA legislation, we didn't feel that whatever model we could sign, it could be sustainable in the midterm. So we could end up with some potential royalty streams in the short term, but we thought that in the midterm, the launch could eventually become a liability, a financial liability for the company. Having said that, on the other hand, the resources that we were going to devote to the Risvan commercialization in the U.S. I mean, as we have stated in our presentation, they are going to be diverted to the CDMO business and to the development of Letrozole. So we do feel that we are going to have the required financial resources to really take the CDMO opportunity to their maximum extent. I mean we don't have any doubt. On the other hand, we do believe that this focus on these specific growth levers, financially speaking, is going to prove very beneficial for the company and for investors. I mean this has been a decision that has not been taken lightly. Again, I don't have to share with you the timing, resources, efforts. And if I may say so as well the dilution and the dream of getting a product marketed in the U.S. I mean it has been a tough decision. But we believe we have taken a decision that probably in a couple of years' time is going to pay much more benefit for the company and its investors if we focus on CMDO research and development development. I think financially speaking, it was a clear decision. It has been tough, but we don't have any doubts whatsoever that this will allow us to be even more focused from a time perspective, but as well from a financially speaking to divert all these resources, financial resources to the CDMO and to the research and development of Letrozole.

Thank you very much. We are out of time. Thank you very much for your high participation. The ROVI IR team will answer the pending questions as soon as possible. Let me now turn the floor over to our Vice President and CFO, Mr. Javier Lopez-Belmonte for the closure of the presentation.

Thanks, Marta. I mean just I would like to thank you once again for joining all of you with us today in this financial call. And as Marta was saying, we ended the call right now. Thank you. Have a nice day, and that's all. Thank you.