Uniphar plc (UPR) Earnings Call Transcript & Summary

Thank you all for standing by. Welcome to Uniphar Full-Year 2022 Earnings Call. My name is Brica, and I'll be your event specialist running today's call. [Operator Instructions] I will now turn the conference over to your host, Allan Smylie. Sir, please go ahead when you're ready.

Good morning, everyone, and welcome to Uniphar plc's full-year results presentation, which covers the period from the 1st of January '22 to the 31st of December '22. I'm Allan Smylie, and I look after Investor Relations at Uniphar plc. Presenting our results today is Ger Rabbette, our CEO; and Tim Dolphin, our CFO. We're also joined on the call today by Dermot Ryan, our COO, and Managing Director of Supply Chain and Retail; Brian O'Shaughnessy, our CCO and Commercial Lead for C&C Pharma and Product Access; and Seamus Egan, who heads our Corporate Development. Before we begin, I would like to remind everyone that you can access the presentation either on our website under our latest results and presentations, or via the link sent to you when you registered for the conference call. The results presentation will last approximately 20 minutes and will be followed by Q&A. Please note the full-year results presentation may contain certain forward-looking statements, beliefs or opinions, which are based on current expectations and projections about future events. Actual results may differ materially from those expressed or implied in such forward-looking statements. I would now like to hand you over to our CEO, Ger Rabbette.

Thanks, Allan. We're going to start on Slide 5, which presents an overview of the group. As you know, Uniphar operates across 3 divisions, serving over 200 of the world's leading pharma and med-tech manufacturers. We serve over 160 countries worldwide and now have operations across Europe, North America, APAC and MENA. And I'm really pleased with the group's performance in '22 against another challenging market backdrop, and we delivered gross profit growth of almost 12%, with strong organic growth across all of our divisions. Our gross profit has increased by almost 30% over the last 3 years, which is a great achievement by the team, and we remain ambitious for the group's further growth potential going forward. If you move to Slide 6, we discuss our financial highlights. At a group level, EPS increased by 13%, with EBITDA growing to EUR 98 million. Return on capital employed was once again ahead of our range at 17.3%. Normalized free cash flow was 78%, and we faced a period with modest leverage of just 1. We've also continued to build on our excellent EBITDA track record, announcing 4 deals. Orspec and BModesto expands our Product Access capability into Continental Europe and APAC. Inspired has a great team with a great insight and consulting capability into our Commercial & Clinical Division, and McCauley enhances our market-leading retail capabilities. During the year, we also announced a EUR 60 million investment in a new world-class distribution facility in Dublin, which will future-proof this division for 15-plus years, creating a serious competitive moat for this highly cash-generative business. On Slide 7, we outline the continued progress we're making on initiatives across our 5 sustainability pillars. Our people represent our first pillar. And we're proud to have launched a number of initiatives last year to promote equity, diversity inclusion right across the group, including the Women's Alliance and the Rainbow Alliance. We continue to make strong progress, completing our first Scope 3 carbon footprint exercise. And we remain committed to reducing our Scope 1 and Scope 2 emissions by 50% by 2030. And from a governance perspective, the group adopted the UK governance code in early '22. Moving on, I will bring you through a review of each division's progress during the year. So on Slide 9, we highlight our divisional objectives. In Commercial & Clinical, we are focused on continuing to build out our pan-European platform. In Product Access, we are focused on providing patient-centric solutions with ambition to becoming a truly global leader in the delivery of unlicensed medicines. And in Supply Chain & Retail, we continue to grow our market leadership position through continued investment in our infrastructure and our digital and business solutions. If you turn to Slide 10, Commercial & Clinical, this division provides sales, marketing and distribution solutions to both pharma and med-tech manufacturers. The business is specialty focused. In pharma, we're insight-driven and leverage our fully integrated omnichannel model for our clients. In MedTech, we deliver an integrated C&C model, managing the entire sales, marketing and distribution value chain on behalf of our partners. Europe, as you know, is a very fragmented marketplace and poses considerable challenges for specialty manufacturers who wish to enter. We remain committed to building out our pan-European platform to offer our clients a one-stop shop for Europe. This strategy has been well received by our partners, and we now represent 77 clients across 2 or more geographies, an increase of 10 over the year. We've also recently added med affairs expertise across 9 European geographies and have plans to add more capability and geographies in the medium term. Our bespoke service offering in the US continues to build scale, and we continue to evaluate capital deployment opportunities in the world's largest health care markets. On Slide 11, you will note that distributions grew strongly, with revenue for the year coming at EUR 307 million and gross profit increasing by 13% to almost EUR 118 million. On Slide 12, Product Access. You can see that we're building out a global capability to source and supply medicines, which are unlicensed, are in short supply and to manage the release of specialty medicines to specific patients on behalf of the manufacturers. We worked on more than 70 exclusive patient access programs today and delivered medicines to over 150 countries across the globe. If you turn to Slide 13, you can see that the revenue for this division was EUR 207 million, with a 21% increase in gross profit. Organic gross profit was 7%, which was in line with the revised guidance we gave last year. And as we look forward, we continue to see a very significant opportunity for both our on-demand and our EAP business due to the huge growth in specialty pharma and the challenges governments and patients face in accessing these treatments, both pre and post-commercialization. We expect this division to return to double-digit organic growth in the second half of this year. On Slide 14, we talk about the great market position we have in Supply Chain & Retail. We are the market leader in the 2-player market, servicing over 2,000 hospitals and retail pharmacies. This strong backlog position is supported by a network of over 420 owned and franchised pharmacies. As you move to Slide 15, you can see that this division has once again outperformed its medium-term guidance, with revenues of EUR 1.6 billion, with gross profit coming at EUR 139 million. And we reported gross profit growth of 8%, and we continue to grow share and outperform the markets. The gross profit margin of this division is now close to 9%, which is up from 5.5% at the time of IPO. This is now roughly evenly split between Supply Chain & Retail. Both our gross margin and retail mix will be enhanced this year by the addition of the McCauley Group. I'll now hand over to Tim to provide you with some more color on our financial performance.

Thanks, Ger. I would now like to take you through the financial highlights for 2022. I'm pleased to say that the group has delivered a strong performance during the period, with gross profit growth across all 3 divisions. At an overall group level, we generated gross profit of EUR 306.7 million, up 11.7% from FY 2021. The group delivered strong organic gross profit growth of 5.7%. Our gross margin percentage has increased from 14.1% to 14.8%, reflecting our continued growth into higher-margin opportunities. EBITDA has increased by 13.4% to EUR 98 million, and EBITDA margins have increased from 4.5% to 4.7%, despite the backdrop of ongoing inflationary pressures. This has resulted in a very strong return on capital employed of 17.3%, above our medium-term guidance of 12% to 15%. Adjusted earnings per share increased by 14.3% on a like-for-like basis to EUR 0.184. Just moving on then to the next slide to have a look at gross profit. Gross profit and gross margin percentage are the key financial metrics we use to track profitability at a divisional level. Commercial & Clinical delivered a strong out-turn in FY '22. The division delivered reported gross profit growth of 12.6%, with both C&C, MedTech and C&C Pharma delivering double-digit gross profit growth. Organic gross profit growth of 7.1% was at the top end of our mid-single-digit growth guidance range. This performance reflects the strength of our business, the deep expertise of our teams and the diversity across our service offerings. This division contributed 38% of the group's gross profit for the period and its gross profit margin increased during the period from 34.8% to 38.3%. Product Access delivered reported growth of 21.4% and organic growth of 7%, at the upper end of the revised guidance we gave you at the time of the interims last year. We invested heavily in our on-demand business to expand this platform. It's now extremely well positioned across Europe, APAC and MENA to deal with the increasing challenges patients and HCPs face in getting access to medicines. Our EAP business continues to rebuild its business development pipeline following disruption through COVID-19. We are now guiding to return to double-digit organic growth in the second half of this year, and remain confident we will deliver double-digit organic growth in this division into the medium term. Product Access represents 17% of group gross profit. The divisional gross profit margin decreased from 26.3% to 24.3%, following the BModesto acquisition, which adds significantly to divisional profit but has a lower margin profile. Supply Chain & Retail once again outperformed its divisional guidance with reported growth of 7.9% and organic growth of 4.1%. This division has strong recurring revenues, plus a stable and robust gross profit profile. In terms of volume, we once again outperformed the market. This division represented 45% of group gross profit for the period. Its gross profit margin increased during the period from 8.7% to 8.9%, and we expect this to increase further in 2023 as we consolidate McCauley. Moving on then to have a look at the balance sheet and have a look at net debt. At a high level, we finished the period with a net bank debt position of EUR 91.2 million, driven by an [ op ] net debt position of EUR 48.3 million, strong EBITDA of EUR 98 million, offset by working capital investment of EUR 5.4 million, CapEx inclusive of a strategic CapEx of EUR 19.9 million, acquisition and deferred consideration payments of EUR 89 million and other items of EUR 26.6 million, which included exceptional costs, tax, dividends, finance cost and lease payments. Our reported free cash flow for the period was EUR 80.9 million, and I'll take you through the details of that on the next slide. Free cash flow. Here, we outline our free cash flow generation and our free cash flow conversion for the year. As you know, we define free cash flow as EBITDA, less investment in working capital, less maintenance CapEx. And our medium-term guidance for free cash flow conversion is 60% to 70%. This translated into reported free cash flow conversion of 82.5%. And when you adjust for a minor timing differences of EUR 4 million, our normalized free cash flow conversion came in at 78.4%. Then just moving on to have a look at liquidity. From a liquidity perspective, the group is in an excellent position, finishing the period with 1x leverage. The group has a strong capital structure in place with significant cash resources available. At the end of December 2022, we had a net bank debt position of EUR 91.2 million, made up of EUR 103.7 million of cash and cash equivalents and EUR 194.9 million of bank debt. As said previously, we also completed a planned refinance agreement last year, which doubled our facility and brings in new international banking partners. In summary, our capital structure remains well positioned to support the execution of our growth strategy. I'll now hand you back to Ger.

Thanks, Tim. We're now on Slide 23. Capital allocation has remained a key focus for the group as we adopt a very disciplined and balanced investment approach. As we've always said, we will invest in organic and inorganic opportunities across each of our 3 divisions, which support our strategic objectives and deliver the return on capital employed at or above our hurdle rate. Our capital structure is strong with leverage of 1x, and our new banking facility and larger banking facility gives us the financial facility and support we need to continue to invest across all our platforms. If you go to Slide 24, we discuss M&A. In August, we completed the acquisition of Orspec Pharma, marking our entry into the strategically important APAC market. APAC is a very significant market for unlicensed medicines and EAPs, and Orspec will be a key enabler for us to grow our service offering in the region. In September, we announced the acquisition of McCauley's, a leading independent pharmacy chain in Ireland. McCauley's is widely recognized as a leading brand across health and wellbeing. And this acquisition will complement our fast-growing consumer business. McCauley's was followed by the acquisition of Inspired Health, a US headquartered insights and intelligence consultancy. Inspired adds another vital component to our high-value commercialization offering and further increases our scale in the world's largest health care markets. And finally, in November, we acquired the BModesto Group, a significant addition to our Product Access capabilities in Europe and beyond. BModesto adds strategic distribution capabilities in Central Europe, as well as sophisticated sourcing into regulatory capabilities related to key pharmacy and wholesale channels. We're confident that the successful track record of value-accretive EBITDA will continue into the future. If you look at us over the last 10 years, we've developed the ability to identify assets with strong cultural and strategic fit for Uniphar that we deliver a return on capital employed above our hurdle rates. We work hard on M&A, and continue to manage an active pipeline of opportunities in order to add further scale and breadth to our existing platforms. If you move to Slide 25, our medium-term guidance remains unchanged, double-digit organic growth, gross profit growth for Product Access, mid-single digits for Commercial & Clinical and low single digits for Supply Chain. We remain confident that we will deliver in excess of 60% free cash flow in the medium term, keep return on capital employed between 12% and 15% or above, and adopt a disciplined approach to capital deployment. We are mindful of the very challenging macro environment that we currently operate in. However, we will continue to mitigate the significant challenges by leveraging our scale and our ability to innovate in order to deliver value for our partners. If you move to Slide 26, we outlined our investment case. As we see it, we are a well-diversified quality health care service business positioned to win in growth markets. There's no doubt that we have a compelling market opportunity, driven by increased demand across the globe for specialty products and a growing trend by pharma and MedTech manufacturers to outsource to specialist providers who are well invested and have a proven infrastructure. In response to this, we've designed a vertically integrated model, providing end-to-end solutions moving across the value chain and throughout the product lifecycle. The platform for growth is in place, and we believe that we have a distinct competitive edge through our high-tech distribution facilities, our deep relationships with global manufacturers, our scalable tech, our highly skilled people and our strong M&A track record. We have a strong balance sheet, a great ability to generate cash and a highly experienced industry team. At the time of IPO, we committed to double our EBITDA within 5 years, and I'm pleased to say that we're on track to meet this commitment. But we also remain ambitious for the future of our business, and we will continue to invest both organically and through M&A to scale our platforms. I expect to update you on our new growth targets later on this year. So in summary, we remain confident that we have the strategy, the market opportunity, the platforms, the competitive edge and the team in place to deliver on our future growth plans. Thanks for listening.

[Operator Instructions] The first question we have comes from Colin Grant of Davy.

I've got 3 questions. I'll just run through them one at a time, if I can. Maybe just to start with the first one, Ger. Just follows on a point you just made during your closing remarks about targets. So you mentioned you'd update guidance maybe later this year in terms of targets, having kind of pretty much done your doubling of EBITDA within 5 years. Is there any details you can give us at this stage in terms of what we might expect in terms of new targets going forward?

So I think if you look at us, we've more than doubled -- I should say even more than doubled our investor share, and we're now -- we have a clear line of sight of doubling our EBITDA in H2. So as we look at us, I think the timing at that point, it would be right to give further guidance in H2. But I would say it's an ambitious business with strong growth targets. We need to continue to invest in our platform. So when we come back to our shareholders in H2, we'll be giving guidance on our -- the next chapter of our progress will be [ from a perspective of investors ] need to make sure those investors, that growth comes through. As a business, as you know, Colin, we'd like to invest strongly in our platforms and make sure that we're building on a very strong foundation. So I think H2, we'll come back to the shareholders to give them more guidance on the next stage of our development.

Okay. And then second question really just relates to organic investments you're making in Europe and the US in the C&C division. Are there any further details you can give us on those organic investments you're making?

Yes. Brian, if you would like -- I'll ask Brian to answer that question, Colin, please.

Yes. No problem. Thanks, Ger. So we'll start with the first part of the question, Colin, on regarding Europe. So Europe, although is the second most lucrative market after the US, it's a challenge for pharma and biotech to commercialize due to the complexity brought out by commercializing across over 40 individual countries. So our strategy is to build a pan-European commercial solution for pharma and biotech clients in Europe and these organic investments in building our medical affairs capabilities, key components to interact with local bodies, HCPs, KOLs and patients. So we're now active in Ireland, UK, Germany, Austria, Switzerland, France, Belgium, Luxembourg and Italy, with near-term plans to add Spain and Portugal. So this is another example of Uniphar investing in our platform today with a view to creating future value. We still see ourselves very much in a building growth phase in our C&C Pharma and Product Access divisions. So if we move to the second part of the question with regard to the US. So this new 65,000 square foot facility located in The Research Triangle of North Carolina will support both our pharma and med-tech clients. As you know, we have existing distribution capability in the US. This investment will complement that infrastructure and provide a hope in a strategically important location on the Eastern Seaboard, where Uniphar's M&A activity is concentrated to date. Strategically, The Research Triangle is a home for 500 pharma and biotech companies, such as Pfizer, Novartis, Amgen Merck, Lilly, amongst other. A key part of our MedTech strategy is helping the US MedTech to commercialize across Europe, and we've invested in BD resources in the US. As these relationships have grown, our US-based team have been asked to support our partners in the US. So this facility will enable us to offer that support, grow our relationships and then attract new business across the group.

Okay. Very good. Thanks to you both. I suppose a final question for me, and then I can hand it over to others will be on the Product Access division where around 60% -- just under 60% of gross profit is coming from on-demand and you've made the BModesto acquisition. So I'm wondering if you could just give us a flavor or a sense as to where you see in fiscal '23 the share of earnings and gross profits coming from on-demand with the full integration of BModesto.

Colin, I'll just ask Dermot Ryan to answer that question, please.

Thanks, Colin. I suppose I think we said at the time of acquisition that BModesto would contribute about EUR 18 million to EUR 20 million in gross profit. It's certainly sort of 10% gross profit business today. I suppose it's a fantastic asset for us because it's got that strategic located infrastructure, I suppose, in Mainland Europe. And then they're very strong on the sourcing, their sourcing capabilities. I suppose they've built a very fast-growing business today, but it's focused on the specialty wholesale in the in-licensed space. And in certain instance, they'll also in-license product as well. But I suppose for us, whilst the core business will continue to grow, we see this asset as being a huge support to our unlicensed on-demand business, where we focus on the higher value, more complex, higher-margin opportunities. And I suppose in time it will also support our EAP programs in Mainland Europe as well.

Our next question comes from Christian Glennie of Stifel.

A couple, please, then. First one, can you just drill a bit more into the specifics on gross profit, organic gross profit outlook for Supply Chain & Retail products. So in Supply Chain & Retail, you continue to deliver higher than the low single digit sort of midterm. So what should we be expecting for 2023 in terms of that organic Supply Chain & Retail? And then on the Product Access, obviously, you targeted the second half return to the double-digit organic. But if you could just remind us what we should -- what we saw in the second half of '22 and therefore, what we should expect in terms of the first half performance for organic Product Access?

Tim, will you take this?

Yes. Yes. Christian, thanks for the question. I'll take you back to our medium-term guidance on organic gross profit growth. As we've all said, Supply Chain & Retail would be in the low single-digit range, and we will be projecting that for 2023 as well. As you would have said earlier, in Product Access, our target there is -- in the medium term is to have double-digit organic gross profit growth there, and we will return to that in the second half of this year. So for the first half of this year, low double digit. Second half will be above double digit. So at the higher end of the single-digit range and for the full year, we're confident that in the medium term, as we look forward into the future, we will deliver double-digit organic gross profit growth in the Product Access division. And then just to round off for Commercial & Clinical, we've consistently said it will be mid-single digits, and we continue to forecast that for '23 and into the medium term.

That's good. And then just if you can touch on the sort of potential regrowth drivers on Product Access. I assume there's a reasonable amount of that from winning more of these expanded access programs. So what's in the mix there? And then on the expanded access program, is there anything particularly to update us there in terms of the demand, the availability of those programs that you can go after and maybe some of the competitive tensions there, whether it's from other outsources like yourselves or maybe other companies actually doing it more in-house?

And Brian, would you take that question, please?

Yes, of course. So on the first point around the -- I suppose the number of programs. So we would have flagged previously, it is a long sales cycle and macro factors such as slowdown in investment and biotechs and COVID did have an impact, of course. As Tim indicated, we do see a return of our growth. In terms of the actual market, we haven't seen a fundamental shift in the competitive landscape [indiscernible] is taken private. The market is effectively split from our perspective between outsourced providers and then pharma companies running programs in-house, and we target both segments. So a good example of us successfully working with a company that traditionally runs programs in-house is Novartis. So we run the ex-US expanded access program for gene therapy on behalf of Novartis. We initially won the program when it was owned by AveXis, which was subsequently acquired by Novartis. So not only did we continue to work on this program, but it opened up other opportunities and other programs within Novartis. So from -- the way we see it is, as therapies become more complex, such as cell and gene therapies, so does the complexity of the solutions which our clients require. And this tends to lead to a greater need for outsourcing experts, service providers such as Uniphar.

Our next question comes from Charles Weston of RBC.

My first is on the Commercial & Clinical business. Obviously, organic growth was delivered at the higher end of both expectations for 2022. And I just wondered if you could touch on the key drivers for that. What drove that? Could we expect those drivers to be sustained into 2023? Or was it to do with -- something to do with the comps as well?

Thanks, Charles. So I think the standout performance in Commercial & Clinical this year has been our MedTech division. It's a business, as you know, we've invested heavily. It's quite a mature business at this stage, and it's had a really good year as we build out our European platform. On the pharma side, we've had some headwinds took cover. But that, again, as Brian outlined, the huge opportunities going forward for us as we build out the capability. So it's been -- I think MedTech has been a standout. As we look forward, Charles, I think we're confident we're going to have another good year again in '23, as you know. And ultimately, as we build out the platform, the opportunities become bigger and bigger for this division.

Just to clarify, so on the MedTech side, were there any particularly big wins that contributed to that? Or was it more diversified growth across all the MedTech?

Right across the companies, right across the geographies, all had a really strong year, Charles, which gives us great confidence as we look forward. This division will continue to drive our market. But it's not any one particular sector to characterize it. It's right across the division.

My second question, I guess, complements Christian's, which is focused on more on the EAPs. And I just wondered if we could focus -- look at the on-demand business and whether you could give us some color on the market at the moment. Whether there -- obviously, there was a step-up in medicine shortages last year. What does that look like for '23, '24? Is supply chain normalizing at all there?

Before I hand over to Dermot, Charles, this is an area that -- we've grown this business pretty much organically. 10 years ago, when we joined, today it's growing very strongly for us. So we see a continued opportunity for us to develop and grow this business. So Dermot?

Yes. I think, look, in the on-demand space, the focus is really around helping patients to get access to drugs, which are either unlicensed, difficult to source or in short supply. So given the ongoing disruption to global supply chains, we expect this to continue. So the business performed really well during the period, but we've continued to invest in that, in building out that global platform through BModesto in Europe, Orspec in APAC and Devonshire in MENA. So the exciting piece for us is just -- is integrating those businesses and building out our service offering and our sourcing capability on a global scale. And that's really what it's about in on-demand.

Okay. And just one last one, please, on the M&A side and your balance sheet. You talked about your current gearing, your potential gearing of up to sort of 2x, 2.5x. And in the past, you've provided the math in terms of what that means from a firepower perspective over the next year or 2. I'm just wondering if you can give us an update in terms of how much you'd be comfortable spending on new deals.

I think, Charles, as you see, we're building out 3 very strong platforms. We've always been very conservative with how we deploy capital. We want to keep leverage maybe around 2x to 2.5x within. We've got very strong free cash flow with a very strong ability to generate cash. So I think if we go back to our guidance in H2, when we come back to you guys about what the next stage of our -- next chapter of development is, so we can give up more color. But I think, as a business, we're very comfortable because we generate so much cash and with leverage in sub 2.5x, Charles. Obviously, we've tried to keep it at around 1%, 1.5%, but ultimately, we were very comfortable getting up to 2.5x on the base and we can get it down very quickly. Tim?

Yes. And Charles, if you take that capital structure into account, our firepower when you calculate it through, it will be somewhere between EUR 50 million and EUR 100 million of capacity to do these under capital structure and taking those leverage up into consideration.

We now have Paul Cuddon of Numis Securities.

I have 2 questions focusing on Supply Chain & Retail. So just, firstly, on the market growth, it was pretty subdued in 2020 kind of pandemic restrictions. 2021 saw a big recovery, and it seems to have accelerated in 2022. So I just wonder what your thoughts are for market growth into '23 and whether it can continue to be so strong? And then, secondly, as you're thinking of Supply Chain & Retail outside of Ireland, I mean, are you thinking organic acquisition? I mean, what would your strategy be? In which countries would you be most interested in?

So I'll just hand over. Dermot, you will answer the first part of the question, will you?

Yes. I mean, what we saw this year was a very strong cold and flu season in the second half of the year, which probably helps the growth in the market. But long term, we're looking at sort of 2% to 2.5% growth would be where we expect the market to be over time.

I'd say, I think, basically, we love our Supply Chain & Retail business. It's a key piece of infrastructure [ hanging off ] Europe's fastest-growing economy. It's a duopoly, and we've built significant competitive moats around this business. So when we look at other geographies, we'd love to do it in another geography. But I think it has to be -- it has to hit those -- we have to build a competitive moat in our thresholds. And it would be a challenge to build a stronger business outside of Ireland. But we will keep looking at that. There is opportunities for us to do maybe more bespoke in some of the solutions that we see and then we compare to different geographies within our Supply Chain & Retail business. But I think there's still opportunity for us to grow that business, and we're still actually looking at other markets and think that we can do some in other markets.

We now have Sam England of Berenberg.

The first one, just on Product Access. Can you discuss the key factors as you see them involved in returning that business to double-digit organic growth in the second half of 2023. How much of it is just sort of easing kind of the headwinds that you've talked about in the past versus sort of internally generated initiatives?

I think as we flagged previously, access is around [indiscernible]. It's definitely taken -- has a disruption from COVID. But I think we're very confident. We have a clear line of sight that by H2 that we will get that business back to double-digit growth here. So it's just basically -- it's disruption really down to COVID is what's challenging in that business.

Okay. Great. And then just on the Supply Chain & Retail side, you obviously called out market share gains during 2022. Is that something you expect to continue as you move into 2023? Or should we expect more normalized conditions from a market share perspective?

Well, we've always focused on building a profitable business in that space. So we've -- every year-on-year, we've grown our market share. So we would expect that to continue. But in another very big way, we keep growing share year-on-year because of the value or the service offering we give to our customers. Dermot?

Yes. We're always focused on innovation. We're focused on our retail symbol group offering to help us drive market share and our consumer business had another very, very strong year as well. So that's a big focus for us, and we think there's a little bit more in that as well as we grow our market share.

Okay. Great. And then lastly, just on Commercial & Clinical. You obviously called out a number of manufacturers that you're working within 2 or more geographies. So could you give a bit more color around that? And how many of those are progressing from working together in 2 geographies to sort of multiple geographies beyond that? And how many are just where you've gone from working with them in one geography to 2?

I think it's a key area for us to grow that, and we see a very, very significant opportunity. So it's an area that, again, probably had been impacted by COVID, is that basically face-to-face are much easier to do this, but ultimately, we think we can really drive our business going forward by expanding out our footprint, working with existing manufacturers. So at this point, I think we'll come back, I think, in H2 to give more guidance on this, but it's an area we see a significant opportunity for us in both our Commercial & Clinical, pharma and MedTech business group.

Your next question comes from Seb Jantet of Liberum.

I'm actually deputizing for Ed today, who's on the slope sunning himself, but he has sent through a couple of questions. So both in the C&C division. First, he wanted to understand a little bit more how many of the clients are now full service and how that's evolved during the year? And then second one was more around the changes in the MedTech sales force. So how are you coping with the kind of shift towards ASC and a shift towards less face-to-face selling within MedTech?

Brian, you might take that question?

Yes. On the full service points, it's only in the Q4 that we invested in the medical capability. So that's an organic investment. We'll take time to embed that in. But if we look back then to the key reason for the investment in the acquisition of E4H was around that omnichannel solutions. So we have a number of clients cutting across both the -- where we were operating in multichannel, which is essentially a people solution driven by insights, combined now with digital solutions. And one cornerstone client where we have fully integrated omnichannel where we're providing both the web-enabled omnichannel sites, analysis over all digital interactions with HCPs, combine that with the in-person. So the omnichannel piece is performing well. And the investment is proven, I suppose, strong and with the MedTech capability is a key step in terms of the connectivity between Product Access and Commercial & Clinical, but that medical team will take time to embed in..

And then on the MedTech sales force changes?

Brian, you want to take that?

Okay. Could you repeat that first part of that question?

Yes. So it's just kind of -- I'm wondering how shift towards ASCs away from hospitals and shift towards -- or away from face-to-face selling, how that's impacted your business?

So the -- I suppose, the structure of selling between MedTech and pharma are fundamentally different, specifically down to where we've concentrated on the growth of our MedTech business is what we describe as specialists, consultant-led products. So these are highly specialists, a lot of home being implanted into the human body, such as interventional cardiology and orthopedics. So it's the consultant who is making that decision around the product. And our field forces have really [indiscernible] sales teams would be underwriting them. They're clinically trained. They spend half the time side by side with the consultant actually in the surgeries guiding them on any questions they have with the product. So we wouldn't have seen an impact, I suppose, in the initial stages when, I suppose, non-urgent surgeries were being handled for COVID that has a separate impact. It wasn't about our sales teams not getting access. So on our MedTech side, just given the sophistication of the products that we're actually representing, we haven't seen an impact in terms of access houses.

We now have Max Herrmann of Stifel.

Great. Congratulations on another strong year performance. 3 questions, if I may, just more a little bit of detail. I would like to understand a little bit more about the North Carolina facility and what that actually is entailing in terms of maybe square foot and people. And then, again, in the medical affairs build-out in Europe, is that just been adding single heads in different regions? Or what have you been actually doing then in the fourth quarter last year? And then, finally, just an update on elective surgeries. Obviously, that's been a big area of impact during COVID. We've seen a recovery in elective surgeries. Obviously, that will be a major beneficiary. You will be a major beneficiary of that in the Commercial & Clinical in the MedTech area. I wondered whether you think surgeries are now up to sort of pre-pandemic levels or there's further to go? And then obviously, there's a backlog as well. How you see that playing out?

So I'll take the third question, Max, and maybe I will hand over to Brian for the first -- sorry, Brian, for the second one, and Dermot, you might take the first question. But elective definitely fell off during COVID and that was a huge backlog to catch up on. I think what we'd say is that we are seeing a shift from the public to private, where there is less activity in the public and the private sector has taken it up. But I think they're struggling to get back to pre-COVID levels of volumes. I think when you look at our MedTech business, we went through COVID very well because it is a diverse business. So critical care did well in COVID. It's now gone back to normalized levels and electives are struggling to get back up again. So it's the beauty about having a very diversified portfolio of business and we've got through COVID pretty well. And as we go forward, we continue to grow the business headroom. So Dermot, question number one?

Yes. In terms of North Carolina, obviously, it's located in The Research Triangle there. So strategically located beside pharma and MedTech clients. I think it's to give us additional capacity and distribution capability to complement our existing businesses there. As you know, we do have our Durbin business in the US, and it would support that. And it's to look at other opportunities, maybe within MedTech as well and how we build out that from a US point of view.

So it's 6,000 square foot?

5,000 square foot. Yes.

Basically. And Brian?

So as you mentioned, Europe in theory should be the second most lucrative market after the US for pharma and biotech. So in theory, it should be 20% of the value of our products. But the complexities puts enormous barrier to actually unlocking that. And the key to unlock is, it starts with the design. So having that medical capability is fundamentally important if we want to be attracting new clients to providing commercial solutions. So an example of pitfall [ with ] science falling into is they would concentrate all of their clinical studies, regulatory documentation, preparation, all focused towards US approval, which is understandable because in theory, should be 50% present of the value of the product. But with some tweaks to somewhat of those clinical development plans, they could accelerate their launch to Europe. Because what tends to happen is when they come to Europe, they realize that there's some clinical data points that, be it regulatory or payers within Europe require and then that [indiscernible] in another 3 to 5 years, whereby had they actually captured this upfront when designing the initial clinical study that would have actually saved in that 3 years to 5 years. And that takes a medical input, which is why we've invested in this. So in terms of creating that accelerated pathway in terms of unlocking the value of Europe, this is a really key component, as well as then understanding the local payers, the HCPs, the patients, KOLs. And so far, we've invested in that team. We're now covering UK, Germany, Ireland, Austria, Switzerland, France, Belgium, Luxembourg, Italy, with short-term plans to add in Spain and Portugal. And so there's further capabilities that we see to add to that in order to build out that full solution and we'll invest in that, be it organically or inorganically.

And is that just people, is that what you're bringing in a consultancy, different individual consultants in each of those geographies? Or what are you doing?

Yes. So it's people with medical background, so be it pharmacy, pharma toxicology, so a specific background in pharmaceutical products but with experience of bringing products through launch. So they've a very strong understanding of the pathways [ model ] in terms of the regulatory landscape, the payer landscape, the KOL landscape and those access points. So these are fundamental resources in terms of unlocking those countries that are harder to find, but it is having the right individuals with that broad set of capabilities with the right science background in countries.

Thank you. We have no further questions in the room. I'll hand it back to the management team.

Okay. Just wanted to thank, everybody, this morning for all your continued support and hope to see you in the medium term. Thank you very much.

Thank you for joining the call. You may now disconnect your lines, and have a lovely day.