Lonza Group AG (LONN) Earnings Call Transcript & Summary

Welcome to the Lonza presentation at the 42nd JPMorgan Healthcare Conference. I'm Richard Vosser, European pharma analyst at JPMorgan. It's my great pleasure to introduce the CFO of Lonza, Philippe Deecke, who will give the presentation. After that, there will be a Q&A period. [Operator Instructions]. Philippe, welcome to the conference.

Thank you very much, Richard. Good afternoon, everyone. Great to see so many people joining us for the Lonza session, and great to be back at JPM to kickstart the year. So we have about 40 minutes. I need to get that to work. So we have about 40 minutes together. So I will start by sharing an overview of our business and some insight into our unique position within the CDMO industry and why we believe we are well set up to capture the growth and value of this industry. We'll follow this by a closer look at our key priorities and divisional strategies and the attractive portfolio of organic opportunities that we are working on. We have plenty of time for Q&A at the end of the session. I'm looking forward to take your questions. I'm here with our President of the Biologics Division, Jean-Christophe Hyvert. Jean-Christophe will Join us at the end to answer your questions. So we'll be 2 of us on stage, which will allow you to ask a more deeper question on our Biologics business. But let's start with a quick overview of our business to serve as a refresher or as an introduction to Lonza for the people that know us less. We work with about 1,000 molecules, serving a large and diverse space of around 800 CDMO customers, and we generated over CHF 6 billion of sales in 2022. We're investing in our future growth through an attractive portfolio of organic growth projects. And while we work across the entire molecule life cycle, our CDMO revenue is heavily based on commercial production. Here you can see a snapshot of how our service offerings is spread across our 4 divisions, Biologics, Small Molecules, Cell & Gene and Consumer -- Capsules & Health Ingredients. Our broad offering allows us to serve customers in -- the customer needs in preclinical, clinical and commercial phase across the range of highly complex modalities, including drug product. We also leverage synergies across our divisions. While we provide our customers with a full life cycle offering, 70% of our CDMO sales are generated from long-term contracts for the commercial manufacture of products that are approved and on the market. As you can see on the chart on the right, around -- only around 10% to 15% of our business is generated with preclinical and Phase I molecules, a business that we know is more volatile. However, it's an important part of our business because we learn about the molecules early, which means that we build stronger relationships with our customers and feed our pipeline for future commercial production. I will share a little more about the strategic importance of early stage later on in the presentation. Let's take a look at our past growth. Over the last 4 years, our business has demonstrated strong and consistent level of sales growth. Between 2019 and 2022, we delivered 16% sales in CAGR in constant currency, and the growth was driven by a combination of a healthy base business with steady growth and good margins, alongside the ramp-up of new assets. Looking at our divisions, all of them grew ahead of their respective markets. Part of our growth during this period also came from our pandemic-related mRNA sales, which reached around CHF 0.5 billion sales in 2022. It's important to note, however, that even without the COVID-related mRNA sales, our growth was between 11% and 13% during the same period. We grew core EBITDA 1.5x in that period, improving margin by 1 percentage point, despite dilution from new asset ramp-up and the recent inflationary impacts. We achieved this with an improved product mix, a focus on continuous improvement and operational excellence. We continue to grow dynamically in 2023, driven by good momentum in Biologics and Small Molecules. We will publish our 2023 full year numbers in a couple of weeks. But as we shared during our Capital Markets Day in October, we expect sales growth to reach the upper end of our guidance of mid- to high single digits. Now let's take a look at our strategic priorities. The first, of course, is innovation. We spend a lot of time understanding the needs -- the future needs of our customers, and we anticipate where customers will need us next. We build IP and build protected capabilities. The second priority is collaboration. Partnering with our customers early in the drug development cycle allows us to participate along the full path to commercialization with tailored solutions. This enables us to become a mission-critical part of our customers' value chain. The third is service. We understand that customers' retention depend on consistent and high quality. We have been in the CDMO business for around 40 years, and so we have the benefit of longstanding experience and a strong quality and regulatory track record. Fourth is performance. Our commitment to continuous improvement is key to operational excellence, which enables us to deliver speed and value for our customers. The fifth is value creation, which is about maintaining a disciplined approach to capital allocation, while depending -- while delivering for our shareholders and stakeholders and society. Finally, of course, ESG is an integral part of our business strategy and is supported by clear delivery targets in all of our remuneration policies. In 2023, we continue to make progress toward our sustainability goals. This included signing a letter of commitment and submitting an action plan to the Science Based Targets initiative, SBTi, as well as signing a virtual power purchasing agreement in Europe. Lonza is uniquely positioned in the CDMO market. And as you can see here, we are a global leader in the industry, offering both development and commercialization services to address the complex needs of customers in the pharmaceutical and biotech industries. We benefit from strong customer relationships, which are often underpinned by long-term contracts. In 2023 alone, we worked for 48 of the top 50 pharma companies by sales and more than 90% of the top 100. We provide customers with a global tailored offering based on our Western-focused manufacturing footprint. So now let's move to see how we're winning in the CDMO market. We operate in an industry with strong market growth, which is focused on innovation, and this is driven by the development of new technologies and the constant discovery of new molecules. Our CDMO end business -- end markets grow anywhere between mid- to high single digit for small molecules to about 10% for Biologics and about 15% in the more novel Cell & Gene technologies modality. As both large pharma and small biotech companies focus increasingly on discovery, CDMO partnerships are becoming an integrated part of the health care business model, driving the outsourcing share higher up to over 50% by 2028. The model is attractive to our customers, as it enables capital preservation, direct access to leading expertise, derisk supply chains and regulatory support. In Biologics, we see capacity utilization high at roughly 70% today, and more capacity will be needed as demand is expected to continue to outpace supply, particularly for large-scale mammalian manufacturing. As demonstrated by multiple market surveys, the CDMO market primarily competes based on quality, expertise and reputation. And while price is less important for the -- and price remains less important for the selection of a trusted long-term CDMO partner. Finally, new market entries carry multiple risks and are therefore rare. They include capital intensity and technological capabilities, the requirements for long-term customer relationship and strict regulatory requirements. In summary, we operate in a very attractive and growing end markets, with a broad range of services across modalities, technologies and life cycle phases. We are well positioned to remain an industry leader and partner of choice for pharma and biotech companies. Having looked at the markets more broadly, let's take a look at the core component of Lonza's business model and how we create value. We have a powerful combination of attractive divisional strategies, focusing on a broad portfolio of technologies offering end-to-end solutions. We pursue an organic investment strategy to enable our divisions to deliver on the current and future customer needs. And our investments and strategy is supported by a solid balance sheet. Lonza has a track record of strong project execution, best-in-class regulatory and quality track records. Combined with our continuous improvement programs, this leads to an attractive midterm growth outlook and margin improvement, creating value for our customers and shareholders. Let's take these building blocks in turn, starting with our divisional strategies. Taking a look at our Biologics division first, our ambition is to strengthen our position as a CDMO partner of choice. Our strategy is based on 3 pillars. Number one, by focusing on the life cycle management, we acquire the customers and molecule early. We then retain them through the path to commercialization. In fact, 70% of our customers come to us for additional follow-on work. Number two, turning to our end-to-end offering. An increasing portion of our business is integrated across modalities. An integrated offering is also a key need for biotech companies that don't have the expertise or the resources to cover these varied requirements internally. And third, our global network enables us to produce close to the end markets of our customers, thereby lowering supply chain risks. As you can see on the graph in the middle, we signed a number of significant long-term contracts in 2023, around double the average annual signed business in the division in the last 3 years. Looking to the right-hand side, you can see that many of the customer deals signed in 2023 cover multiple modalities, which illustrates the benefit to our customers of our integrated service offering. Here you can see our global biologics manufacturing network. The map includes both existing capacity and announced growth projects. We have an established and balanced global network across modalities, scales and geographies. Our global network allows us to stay close to our customers, which gives them the advantage of a derisked supply chain. Our centers of excellence at key sites offer deep specialized capabilities and world-leading expertise across these modalities. There is no other operator today that can offer customers such breadth, depth and expertise for complex customer needs. Let's move on to our Small Molecules division, and to create and capture value, we play in strategically selected areas that are aligned with industry trends and where we have proven capabilities. Our strategy, again, focused on 3 priorities. The first is to be a strong development partner driven by science. We act as a consultant to our customers, leveraging our 40 years of experience to help resolve problems and support molecule progression through clinical stages. The second is again to be present throughout the product life cycle, supporting customers on their commercialization journey. Points of entry vary from early clinical development engagements to drop in, in late phase or commercial supply. We expect over 30 products currently in late clinical stages to commercialize over the next 5 years. Finally, we drive for great customer experience. We all know that happy customers lead to repeat business, and this is what we're aiming for. Over the recent years, we have actively managed our portfolio mix and capital investment, in line with market trends and major growth areas. On this page, you can see the positive contribution to sales growth of product benefiting from our highly potent API manufacturing capabilities used for ADCs, which now represent around 30% of total sales. Our capital investment supports our strategy, and here are 2 examples on the right of investments that support the commercialization of blockbuster oncology products. For the first investment, we were actively involved in the late-stage development of the product currently manufactured in this asset. Additional capacity was needed to support projected commercial demand, which resulted in a capital investment in Visp, our site in Switzerland, supported by a long-term take-or-pay contract. Below, the new manufacturing complex currently under construction was announced in 2021 and represents a CHF 200 million investment. This new complex houses a dedicated suite for an ADC product also under a long-term take-or-pay contract as part of an integrated supply chain across our Small Molecules and Biologics divisions. This new complex also creates the infrastructure for future drug substance capacity expansions. Next, a short overview of our Cell & Gene division. You may recall, our Cell & Gene division combines our Cell & Gene Technology CDMO business unit; our Bioscience business unit with specialty products like cell culture and endotoxin testing; and finally, the Personalized Medicine business unit for our Cocoon technology. The Cell & Gene market saw a high level of investment in the early days before slowing towards more sustainable growth today. The slowdown in the last 2 years has been mostly seen in preclinical and early clinical phases, while product from the initial funding cycle of Cell & Gene are now reaching commercialization. This is the area where Lonza focuses its business. Looking at our strategic priorities. First, it's clear that manufacturing matters in Cell & Gene, even more so than in other modalities. We have a track record of efficient manufacturing of complex emerging therapies for our customers. Second, we have shown very strong capabilities to support our customers in bringing their product to the market. Our site in Houston is, in fact, the only CDMO site with 3 commercially available cell and gene therapies in its portfolio. Third, we are focused on innovation, and the Cell & Gene market is dynamic, and new modalities and technologies are gaining traction. And finally, we continue to focus on key customer relationships, and one recent example includes the collaboration with Vertex to build a manufacturing facility at our Portsmouth site, which is designed to support the Vertex type 1 diabetes cell therapy portfolio. Looking ahead, our Cell & Gene portfolio is shifting towards increased commercialization. As the market matures, we are working to facilitate the commercialization of more therapies. We expect to add 4 more commercial products from our existing pipeline in the next 18 months. With more commercial products coming to our pipeline, our revenue share from commercial projects will increase from 25% today to 70% by 2028. This increasingly commercial focus provides an opportunity for longer-term contracts, higher revenue visibility and higher margins. To support this increasing demand, we will have a total of 3 commercially licensed Cell & Gene sites. Finally, moving to our Capsules & Health Ingredients division. Our 7,000 customers value our broad product portfolio and service offering. Our market-leading quality standards, our customer centricity and our commitment to science-backed innovation. Let's explore our innovation commitments in a little more detail. On process innovation, we drive continuous improvement with a focus on productivity and optimization. We are currently installing our new proprietary hard capsule manufacturing technology that will increase line output by approximately 15%, reducing carbon footprint and set a new standard for product quality. On product innovation, we focus on meeting urgent market needs with product solutions. The launch of our proprietary Enprotect capsule, for example, is particularly exciting. This capsule withstands degradation in the stomach to support targeted intestinal delivery. This means it can support multiple applications such as live biotherapeutics, complex, targeted release or sensitive therapies. We are already exploring more than 200 opportunities with our customers using this technology. This page summarize Lonza's financial expectations for each of the divisions, and each division has clearly defined business strategies, as we just saw in the page before, and expect growth across divisions to meet or exceed their related end markets. Moving to our second value creation block. Let's take a look at the composition of our business and our growth project portfolio. While our current and future growth is generated by attractive growth projects, the majority of our current revenue is generated by the base business. The base is a mix of more mature CDMO assets running at very high utilization and -- as well as our product business and new smaller sized investments. This business is characterized by stable, higher visibility revenue streams with above-average margin and cash generation. Let's take a look at our gross project portfolio. We currently have 21 large growth projects, each with investments of CHF 50 million or more, and our growth projects cover 9 modalities, including the mammalian, HP, API, fill and finish. Given that our increased investment phase started in 2021, most are still in construction, meaning they do not yet contribute to our revenue. Taken together, the growth projects so far already in operations have delivered CHF 1.8 billion in sales over the last 5 years. This does not include our COVID mRNA revenues, as the pandemic-related assets were not expected to generate long-term sales. Most of our growth capital, which represents more than 70% of our total CapEx, is invested in commercial or mixed commercial and late-stage clinical assets based in Europe and in the U.S. While we invest the majority of our CapEx in commercial assets, small-scale assets for early development stages are also a critical part of our business. Let's take a look at how and why we made targeted investments in early-stage capacity and capabilities to support our commercial pipeline. While only about 1/4 of our sales in Biologics and Small Molecules are from early clinical stage business, capturing these opportunities early in the life cycles provide solid leads for the future. In fact, around 50% of today's commercial sales were captured in clinical Phases II or before. This approach also improves our investment visibility, as customers usually stay with the same CDMO for future development stages and commercial production. This page summarizes our organic investment journey, which has -- which was shared in more details at our Capital Markets Day back in October. We are currently reaching the end of wave 2 of investments, which saw the highest capital investment intensity. This was part of our strategy to reinvest the proceeds from the sale of our former Specialty Ingredients business into organic growth opportunities. These investments focused on multiscale mammalian assets, additional ADC capacity in both Small Molecules and Biologics and our commercial fill and finish offering. The third wave is more focused on growth opportunity in the commercial space. Across investment waves, we are maintaining our return threshold of 15% IRR, roughly 2x our cost of capital and 30% ROIC at peak utilization. The peak sales to CapEx rule of thumb of projects is between 1.0 and 1.1x CapEx. However, this ratio highly depends on the type of assets and if we're building greenfield or brownfield. Our large project portfolio translate into attractive revenue growth over time, and the chart shows on top our growth CapEx and at the bottom, the resulting revenues. Again, we have excluded COVID mRNA growth investments and revenue to better reflect the power of our growth project portfolio without distortion from the temporary nature of the pandemic business. The chart highlights that revenue are sequenced to come in around 3 to 4 years after investment starts. This is the average time it takes to finish construction and commence the ramp-up of operation. Peak sales are usually reached 7 years after construction commences. And today, we're enjoying the revenue growth from wave 1, and we'll see the revenue from wave 2 over the years to come. As I mentioned, we convert our organic growth investments into high-return technologies and customer opportunities. This is reflected in our capital allocation strategy, which prioritize organic growth. We remain strategic and selective in funding growth projects and always look for returns well above our cost of capital. Regarding more direct returns to shareholders, we maintain our progressive dividend policy and are currently halfway through executing our CHF 2 billion share buyback started in April 2023. Given our complete end-to-end value chain offering, we do not see a significant need for large inorganic investments. However, we continue to consider strategically relevant bolt-on acquisitions if they are of high-quality and of clear technological or commercial benefits. Let me finish with a word about our different building blocks -- about how the different building blocks create value for the future. Our midterm guidance shared at the Capital Market Day in October is supported by our ambitious divisional strategies and continued focus on capital allocation to growth. Over the next 4 years, growth projects ramp-up and focus on high-value offering will continue to support double-digit growth. Our sales CAGR from '24 to '28 is anticipated at between 11% and 13%. Our core EBITDA margin will improve continually to reach a range of 32% to 34% in 2028. This will be supported by the ramp-up of our growth projects, the maturing of our Cell & Gene business and our continued focus on operational excellence. Let me give you some concluding remarks before inviting Jean-Christophe to the stage for the Q&A. Lonza is optimally set up to capture growth and value in the CDMO market. The market remains highly attractive, an increasingly rewards player that offers services across the molecule life cycle for a broad range of technologies and modalities. Our organic investment in growing modalities are supporting our ability to capture value in this attractive market with our end-to-end offering. As an industry front runner, we look back on 4 decades of experience, and our proven capabilities and track records in quality and regulatory filings are also a key decision factor for our customers. Our decision -- our divisions have solid and ambitious strategies to remain at the forefront of the industry. Our customers rely on us and on our teams to deliver their most complex and highest value needs. As such, we remain very confident in delivering our guidance for 2024 to 2028. We look forward to provide you with an updated financial update in 2 weeks at our full year 2023 results conference on January 26. More details can be found on our Investors website. And with that, I thank you for your attention. I would welcome JC to come on stage, and we're happy to take your questions.

Thanks, Philippe. So we're opening the questions. Hey, JC. [Operator Instructions] Maybe I'll go first, it seems. One of the things I think the business has been seeing some headwinds -- short-term headwinds around biotech funding. So maybe you could talk about what you're seeing in that early stage. It does give the growth in the future, but there's been some overcapacity we've seen in the industry and also maybe in Lonza as well. So how is the early stage going?

That's a perfect question for you, JC.

So I think in the last few months, we have seen a stabilization of the early-stage funding. I think the strategy that we took -- that we decided upon to start working with customers early is paying off. So to answer your question is we see a stabilization. I think going forward, we are not expecting -- our financial guidance is not expecting a recovery. So we have a solid base on which we'll build, but we are not assuming in the guidance of recovery of that space.

And thinking about Biologics more, there's been -- obviously, you've got a few ramp-up growth projects that are ramping up through '24 and '25. How should we think about that ramp-up? Is -- are things on track? How should we think about that?

So I think I feel good about the ramp-up. We have, for instance, a major initiative starting -- coming online later this year with a 20,000 expansion, large scale expansion in Switzerland in Visp. The asset is very nicely contracted. We are working right now with the ramp-up. So I feel -- I mean, to answer your question in short, is I feel good about where we are with our growth initiatives, both on the contracting side as well as the profile of the ramp-up.

And maybe we talked about COVID and -- or you talked about COVID and ex-COVID. Obviously, at the Capital Markets Day, we discussed the need to replace the Moderna facilities. How should we think about that in terms of a time frame and CapEx that's required?

So I'm very happy to have JC because I think this is all about his assets. So JC, you can take that one as well.

So the replacement of Moderna is part of the business model of what we call Ibex, where we are building a shell. And within the shell, we can have different assets coming online. So we are in the process of decommissioning what we have built for Moderna, in line with what we discussed back at Capital Markets Day. Now we are deciding what will go in. I think it's a process, I would say, of 18 months to 2 years. Until something else comes online, we have active leads of what will go inside.

Question here?

Could you tell me about the global CDMO capacity expansion and your view on that? And what do you think it's going to do to pricing and your customer as a partner strategy?

Sure. So first, our -- sorry, I just jumped in.

That's why you're here.

Like Philippe shared, we feel that there will still be imbalance between supply and demand in the coming 3 to 5 years. Why do we come to that conclusion? We are modeling both the pipeline of molecule and the supply that comes online, and we see that converting the pipeline into actual capacity. The demand is higher than the supply. So we feel -- from a theoretical standpoint, we feel good about it. I think from a much more practical standpoint, if I look at the request for quote we are getting today, I also see a strong demand for commercial demand in these assets. So both theoretically and very practically with what we have as request, there is strength in that market.

I think I'd maybe just add, and you can add to this as well. I think if we have to look at commercial large-scale capacity versus probably small-scale capacity, which will be more in the 1k or 2k type of reactors where there's probably more capacity today than the market ultimately needs at this point in time. I think JC was talking about large-scale facility, which clearly have a very constrained supply-demand situation.

I think -- and then to the second point you asked, I think, about pricing, we see the pricing today as stable today. Now what would it be in 12 months' time? I have a view, but I thought there's a time to discuss. I -- the way we want to compete at Lonza is not on price alone. It's on the value that we create, and I think Philippe referred to that earlier in the presentation. There is demand for our services because we are doing something differently. We are looking at end-to-end solutions. We are looking at integrated offer. And I think we are not competing on price.

Question at the back?

To the extent you can comment on that, how has your choice of customers changed mixing between large pharma, mid-cap biopharma? How is that impacting your decisions to take on which projects to choose to prioritize?

So we have made a choice a few years ago to diversify our customer base, both on the large pharma side as well as the biotech side. So we have built capacity in clinical. I think we shared at Capital Market Day the buildup of the clinical pipeline, which is much more diverse today than it used to be, both in terms of customers and capabilities. So I think here, we have diversified strongly our biotech customer base. If I look at the larger customer, a larger pharma, like Philippe said before, we are active with most of them. So the way, in short, to think about it today is we were heavily large pharma oriented with smaller biotech. It's much more balanced today. And we are really building that pipeline of earlier work that drive the funnel and give us good visibility, back to the question of demand, of what will happen on the commercial side a few years later.

Yes. There's a question here at the front, please.

Can you please talk about your efforts and capabilities in continuous manufacturing? And any potential kind of cost advantages that, that could provide to you in the future?

Sorry. Continuous manufacturing, so on the new assets we are building are n-minus-one enabled. So we have a higher density type of asset today. We have technical capabilities to do full perfusion. We have not folded it out of the commercial offer because, today, the demand for that specific is low, but we have the capabilities to do so whenever required. So what to think about it is we work on process intensification for high [ titer ] that's ongoing and in the works. I feel we are doing it. On full perfusion, we have the technical capabilities ready to roll out as soon as the demand confirms.

One other parts of the business, moving just away from Biologics for a second. In Capsules & Health Ingredients, we've seen some softness as we've come out of the pandemic with destocking. Maybe how is that progressing? Are we going to be through that now -- through that -- through the first half of '24? How should we think about that?

Yes. So thank you for the question on Capsules. So I think we've seen destocking from the customers of the nutraceutical space in Capsules. This is mostly over now, and we've seen a normalization of the ordering pattern towards the end of '23. So we believe that this is now back to normal, and customers have actually destocked.

Question here at the front.

In your Investor Day, you had a slide deck where you're talking about kind of your payback period from when you do your CapEx to maybe year 5 to 7 is kind of the ramp-up period. So would you say that has been extended after kind of your experiences with COVID or just kind of the nuances of how you suspect that to unfold? Is that just kind of the near-term headwinds? Or is that what you just expect going forward on the payback period?

So if you're talking about the curves that we showed on [indiscernible] projects, I think this is not pandemic dependent. I think this was -- these were examples of actual project time lines and how -- when do we invest and when do we start ramping up and it showed as well the margin dilution at the beginning of a ramp-up. So this is not depending on the pandemic. I think during the pandemic, some of the material that you need to build had longer lead times. But due to the fact that we had multiple assets, we were able to kind of manage this without too much delay due to the pandemic.

Will there be anything you will do to shorten the payback period from 7 years to maybe 5 years? Or is there anything you're looking at from a construction perspective and different geographies to get the facilities up and running quicker? Or anything you're looking at there? Just because I think, in the past, you've commented that it's like for every $1 you're spending CapEx, it's like $1.10 in sales. But now it's -- you guys have said it's now $1 to $1.10. So I'm just trying to parse through that.

Yes. So look, I think we're always looking at times to obviously shorten the construction time and the ramp-up time. I think the more you build assets that are very similar, the more you can optimize this if we are, of course, building across modalities, we're building across geographies. So I think we have less repetitive construction, if you want. So we're still looking for ways, but there's nothing that is kind of trend breaking.

Well, I think, we want to optimize it, no question. So we are looking at how we can build faster. That's one dimension. The more we copy-paste asset, and now we start to have a certain set of standards of assets that we want to build, for instance, in bioconjugation that speed up the time and the returns. And we're also looking at commercial terms to speed up that return. So I think it's a combination of time to build. It's a combination of having more replication in what we build in terms of assets and specific customer terms, depending on what we build.

Got it. Sorry. I just had one last question on -- you had a slide in there with the Cell & Gene assets, and you said that there's 3 commercial products already approved, but you have 4 more coming in the next 18 months. I thought that was really encouraging. What gives you that visibility? Because I would assume there still needs to be an approval component in there from FDA or whatever. So what gives you that visibility?

Yes. So I think we have several products today that are in late stage of Phase II and III. And so we're taking a portion of that we expect to come through and become commercial over that time frame.

It's part of the modeling I was saying, right? We know the portfolio of products we have by clinical stage, and we take an approach of how many should convert. And we think over the next coming years, so many products will become commercial. So it's the way we look at the business and the way we are planning for the future.

Maybe one final question. At the Capital Markets Day, you've reiterated today midterm outlook, which looks really strong. How about the short-term outlook? It sounds like things are the same as you expected at the Capital Markets Day, but how should we think about that?

Yes. Obviously, we're not going to give you much more detail today on how '23 and '24 shape up. We're in a quiet period as well. But I think we haven't changed our view. I think the momentum of the company is still there. We will grow, and I'm going to use the word underlying. We're going to continue to grow underlying very strongly and nicely in 2024. This will be masked by the overhang of COVID business that is going away. And so we've communicated in October that sales would be a flat growth versus '23. But underlying, the business will still grow high single digits. So I think, still a very healthy growth for 2024.

Excellent. We're out of time. Thanks very much, Philippe, JC. Good to see you.

Thank you very much. Thank you Richard.