Almirall, S.A. (ALM) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the 2026 First Half Earnings Call of Almirall. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Pablo Divasson, Head of Investor Relations. Please go ahead.

Thank you very much, Sharon, and good morning, everyone. Thank you for joining us for today's quarterly earnings update and review of Almirall first half year financial results of 2026. As always, the slides we are using today are shared in the Investors section on our website at almirall.com. Please move to Slide #2. Let me remind you that the information presented in this call contains forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to materially differ from what we are serving today. Please move to Slide 3. Presenting today are Carlos Gallardo, Chairman and Chief Executive Officer; Jon Garay, Chief Financial Officer; and Karl Ziegelbauer, Chief Scientific Official. Carl will start with the business highlights of the first half of 2026, followed by an update on biologics and the key growth levers of our medical dermatology portfolio. Karl will provide you with an update on the pipeline and R&D programs. And then Jon will go through the financials before Carlos concludes the presentation, and we open for questions. I will hand over to Carlos Gallardo, our Chairman and CEO. Please move to Slide #5.

Thank you, Pablo, and good morning to everyone in the call. Almirall delivered a steady first half of 2026, broadly in line with our expectations and the trajectory set out at the beginning of the year, with performance expected to build progressively through the remainder of the year. Net sales reached EUR 603 million, with European dermatology once again, acting as a primary growth engine. The results remain broadly consistent with recent trends and our full year guidance. This is why we are reiterating our full year 2026 guidance with growth expected to pick up towards the second half of the year. Turning to products. Ilumetri delivered steady double-digit growth around EUR 125 million in the first half and remains fairly on track towards peak sales of over EUR 300 million. Ebglyss iterated EUR 84.5 million in the first half, close to doubling year-on-year. I will provide a bit more context and ablation in the following slides. Among other products, Wynzora continues to lead market share across key regions, while Klisyri delivered stable growth overall. We remain closely connected to the dermatology community, strengthening our partnerships with physicians through ongoing engagement at key platforms such as the 2026 American Academy, Skin Academy and European Academy of Dermatology and Venereology Symposium. On the innovation side, we continue to make progress. We have several proof of concept and Phase II programs advancing, most of which are first or potentially best in class. The initiation of Phase I of our anti-IL-21 monoclonal antibody marks a key step in our [indiscernible] supportive strategy. Combined with the IL-1RAP, now we have 2 differentiated assets targeting a disease with significant unmet need. We also signed a strategic research collaboration and licensing agreement with Certest Biotec, adding further depth to our innovation efforts. Karl will revisit our pioneer updates in greater detail. Please move on to the next slide for an update on our biologics portfolio. Ilumetri net sales reached EUR 125 million in the first half of the year, marking a steady 10.5% year-on-year increase. Ilumetri continued to demonstrate a solid position in the stress market, maintaining its share within the leading anti-IL-23 class, supported by real-world evidence such as the positive study data presented at the latest AAD and EADV congresses, which continue to highlight meaningful long-term benefits in patients well-being and disease control. Moreover, we see additional opportunity to further strengthened profile for Ilumetri. For that reason, we plan to initiate the EVOLVE study in psoriasis to study the effect of the 200-milligram dose in biologic-naive patients diagnosed for less than 2 years, further reinforcing Ilumetri's strong and growing long-term clinical evidence base. Karl will provide additional details on the EVOLVE study. Performance remains consistent, and we, therefore, continue to be fairly on track to deliver over EUR 300 million in peak net sales, even as both the product and the class enter a more material phase of the growth cycle. Please move to the next slide for Ebglyss highlights. Since it's approved in Germany in December 2023, Ebglyss has roughly displayed to become our second largest product underscoring one of the most successful atopic dermatitis launches increasing years. Second quarter sales reached EUR 43 million, up from around EUR 26 million a year earlier, bringing first half sales to approximately EUR 85 million, close to double the level of the first half of 2025. Despite the positive trajectory of the launch, the performance in the second quarter reflects 2 factors: First, we have must recall that we had a strong performance in the first quarter, which had a higher base for comparison. Secondly, we experienced a softness in the countries like Germany, relatively modest pricing adjustment created a short-term uncertainty, and we may have resulted in some sales shifting from June to July. In addition, we also experienced temporary minor volatility in certain other countries. Overall, we have not changed our mid- and long-term view of Ebglyss, and we expect the strong clinical profile and continued healthy growth in the AD market to support Ebglyss. While we do not typically like to comment on newer product sales for the year, we are aware that we are a consensus for Ebglyss, and we remain comfortable around that figure. On the clinical side, our collaboration with Lilly continues to support Ebglyss's positioning with extensive lebrikizumab data, including the long 4-year results and the available on periodic data presented at recent scientific meetings. This week, EMA admitted the submission of the pediatric indication of Ebglyss. In June, the FDA approved the every 8-week maintenance dosing regimen for Ebglyss in the U.S. This approval further strengthens Ebglyss profile atopic dermatitis and supports its long-term competitiveness in the market. We are also conducting the ADHope 2 trial in Europe, which has the potential to support an extension of the dosing interval to every 12 weeks. I will now hand over to Karl to walk you through our pilot developments in more detail.

Thank you, Carlos, and good morning to everyone on the call. On this slide, I would like to focus on the early and mid-stage pipeline as a source of future value creation and upcoming clinical inflection points. Today, we have 4 proof of concept or Phase II studies ongoing with 2 additional studies planned to start towards the end of this year. During 2025, we advanced 2 important programs into Phase II. Our anti-IL-1RAP antibody in hidradenitis suppurativa and the IL-2 mutant FC in alopecia areata. In addition, our partner Simcere initiated a Phase II study of IL-2 mutant Fc in atopic dermatitis. We also recently started a proof-of-concept study for our anti-IL-21 antibody in hidradenitis suppurativa. Looking ahead, we plan to initiate 2 further proof-of-concept studies. IL-2 mutant Fc in SLE with cutaneous manifestation anti-IL-1RAP inflammatory skin diseases. Taken together, this gives us sixth proof of concept or Phase II studies with data readouts expected over the next couple of years, beginning at the end of 2026. These programs remain early, but they are anchored in verifying biology and give us a diversified set of potential first or best-in-class opportunities in area of high unmet need. Next slide. While we advance the clinical pipeline, we're also building the next wave of innovation in dermatology. Our approach is to focus Almirall's internal capabilities on deep disease understanding and to partner selectively where external technology can provide the most appropriate modality for another therapeutic hypothesis. A recent example is our strategic research collaboration with Certest Biotec, a Spanish biotechnology company with mRNA and lipid nanoparticle discovery and development expertise. Together, we aim to discover novel treatments for rare dermatological diseases and recurrent cutaneous conditions. Important point is that this is a partner-enabled model. We access differentiator -- Almirall retains global rights and meet future development and commercialization. This allows us to broaden our innovation reach while maintaining strategic control or asset that fits our dermatology focus. Next slide. This slide summarizes our life cycle management activity for products already at the market. The objective is to support the long-term relevance of our key brands through label expansion, additional clinical evidence and disciplined prioritization of investment. For tirbanibulin, the regulatory process for the larger 100 square centimeter treatment areas ongoing, and we now expect the European approval towards the end of this year. Together with our partners, Sun Pharma and Eli Lilly, we continue to advance label expansion opportunities and generate additional clinical data for Ilumetri and Ebglyss, respectively. For lebrikizumab, we have filed with the EMA for pediatric label extension to include children from 6 months to 70 years of age and weighting below 40-kilo with moderate to severe atopic dermatitis, with approval expected around mid-2027. We are also running a Phase III of lebrikizumab in nummular eczema with readout expected in 2029. additional ongoing clinical studies are summarized in the appendix. Turning to tildrakizumab, the entire 1 in 2 studies showed benefit in psoriatic arthritis. Both trials met the primary endpoint at week 24 and continue to show benefits through week 52. After evaluating the excess dynamics and investment required, we have decided not to pursue commercialization of tildrakizumab in psoriatic arthritis in Europe. We believe that further investment in generating additional daytime psoriasis can generate more value for tildrakizumab tildrakizumab, and we, therefore, plan to study tildrakizumab in psoriasis patients with short disease duration and high disease burden. Details are shown on the next slide. Evolve-PsO is decided to explore the potential benefit of tildrakizumab 200-milligram in biologic-naive dice with moderate-to-severe up psoriasis and short disease duration defined as less than 2 years. In addition, the study will evaluate the potential to maintain high levels of disease control using the dose spacing approach. We plan to initiate the sat around year-end with first readouts are expected in 2021. Strategically, Evolve-PsO is intended to support a more flexible and patient-centric treatment paradigm. If successful, it could help reinforce the value proposition of tildrakizumab in psoriasis by maintaining outcomes while potentially reducing treatment burden. With that, I will hand over to Jon for the financial review.

Thank you, Karl, for the pipeline updates, and good morning, everyone. Net sales for the first half reached EUR 603 million, a 7.5% growth year-on-year and a 10% growth in the last 12 months, which is in line with provided net sales guidance range. Please note that the second quarter of 2026 included the recently announced divestment of Actithiol, comprising of EUR 13 million upfront and an additional EUR 1 million revenue recognition out of the remaining payments. As noted, the year is progressing positively with increasing performance expected during the remaining part of the year as indicated in February earnings call. European dermatology keeps delivering solid double-digit growth, reinforcing Almirall's part towards leadership in medical dermatology. We will review the details in the coming slides. EBITDA for the first half came in at EUR 151 million, resulting in a ratio of 25% of our net sales versus 21.7% prior year, representing an improvement by 330 basis points. Gross margin benefited from already mentioned divestment and is expected to normalize in upcoming quarters and with ongoing pressure from higher royalty tiers associated with Ilumetri net sales growth. Regarding SG&A, investment reflects the timing of our promotional activities during the year, and there will be some pickup in the coming quarters. On R&D expenses, our half year phasing reflects the progress of our trials through Phase II with 4 already ongoing and another 2 set to start shortly. We closed the first half with a net cash-to-EBITDA ratio of around 0.1 with a strong cash generation in the first half of the year, leading us with significant financial flexibility. Overall, these results lead us to reiterate our 2026 guidance. Let's move to the details of our sales breakdown on the next slide. European dermatology continued to perform positively in the first 6 months with double-digit year-on-year net sales growth. We will go into more details on the next slide. In General Medicine & OTC, European assets reflected divestment of article completed in the second quarter. Excluding this portfolio moves, the segment remained broadly stable with lower sales in some legacy products largely offset by contributions to products such as Ebastel and Airtal. In the United States, performance declined year-on-year, reflecting continued pressure on the legacy portfolio, which we will discuss on the next slide. In the rest of the world, overall sales grew strongly, driven by solid dermatology demand. Let me talk you through the dermatology performance in more detail on the next slide. Our European Dermatology business continued to perform well in the first half. Ilumetri delivered robust double-digit growth versus prior year, reaching EUR 125 million. Ebglyss further increased its contribution to approximately EUR 85 million in the first 6 months of the year. We remain focused on unlocking the full value of the franchise from both the commercial and the R&D side. Wynzora continued to build market share across core European countries and Klisyri demonstrated a stable growth in Europe year-on-year. In the United States, overall performance declined, reflecting continued pressure on the legacy portfolio. Dollar/Euro FX evolution represented a negative impact of minus 6% in our performance year-to-date. Seysara and Klisyri improved the price volume dynamics in the second quarter, while still declining, and Acton remain impacted by generic competition. In the rest of the world, dermatology sales were driven primarily by demand in China. Overall, our dermatology franchise continues to show solid underlying performance. Let's briefly review the remaining elements of the P&L in the next slide. Gross margin reached 54.6% in the first half with the second quarter divestment offsetting royalty impact associated with the metrics growth. SG&A in the second quarter following incremental quarter-on-quarter trend, as previously announced. We expect that trend to continue in the remaining quarters of 2026 while supporting margin expansion on an annual basis. Percentage of net sales was somewhat lower than our target of 12.5%. Our half year phasing reflects the progress of our trials into Phase II with 4 already ongoing and another 2 set to start shortly. A full year ratio of approximately 12.5% remains a good proxy subject to the normal quarterly variability. EBITDA margin reached 25% of net sales, 11 aligned with our 2020 ambition, but approximately 2.5 as ahead of schedule. While this performance benefited from the divestment of non-derma products, portfolio optimization is an integral part of our ongoing business strategy and value creation. This milestone demonstrates the strong position we are building. Financial expenses continued to reflect the valuation impact of the equity swap in line with the share price evolution during the period. Our effective tax rate continues to normalize, and we continue delivering on this positive trend, driven by the strong increase in the group's overall profitability, which materially reduces the related impact of our U.S. business at consolidated level. Please move to the next slide to take a look at the balance sheet. Our balance sheet remained stable throughout the first half of the year. Intangible assets reflect Ebglyss related R&D capitalization, the development market since for advancing 2 multi-infusion protein into Phase II and the access fee linked to the Hota collaboration, broadly offset by higher amortization. Our net cash to EBITDA ratio stood at around 0.1, providing us with a strong financial flexibility for leasing opportunities and selective bolt-on acquisitions. During the quarter, Moody's upgraded our credit rating to Ba1 the strength of our balance sheet and financial performance. Let now turn to the cash flow statement. Company generated EUR 17 million cash in the first 6 months of the year compared to a dilution of minus EUR 54 million in the same period last year, representing an improvement by EUR 71 million. Free cash flow raised to EUR 33 million compared to minus EUR 20 million in the first half of 2025. Let's now go through the different components of our cash flow. Cash flow from operating activities raised to EUR 132 million, representing more than 2x improvement versus prior year driven by working capital management alongside higher profitability levels. Cash flow from investing activities reflects the 2025 Ilumetri's milestone paid in the first quarter, the highest most unexpected this year with the remaining investment related payments for the GRB marginal and the total outflow within the usual limits in absence of new acquisitions. As from financing activities reflects the change in the bond interest payment schedule following the recent issuance and cancellation of the previous one as well as the dividend paid in the period. With that, thank you very much for your attention, and I hand it over to Carlos for his closing remarks.

Thank you, Jon. To summarize, the first half of 2026 confirms that the business remains solid and on track. We know where the consensus sits today, and we are comfortable with these figures. Turning to the key drivers. First, our biologics portfolio continues to give us real momentum in our dermatology market that keeps expanding, with Ebglyss scaling across Europe and Ilumetri still growing steadily as it moves through a more mature phase of growth. In parallel, we continue to generate robust life cycle management data that further support the strong profile of our biologics. Second, our growing and exciting pipeline now expands immune-mediated skin diseases, rare dermatology and non-melanoma skin cancer with 6 proof-of-concept Phase II programs going forward and most assets being with potential for best or first-in-class providing a solid base for sustainable growth without concentration on any single asset. Third, we remain disciplined on capital deployment with a strong balance sheet supporting both on M&A and early-stage licensing. We continue to work toward delivering on our mid- and long-term ambitions, supported by our position portfolio, a strong and targeted pipeline and strategic positioning in the right dermatology indications. This combination of pipeline depth, financial discipline and execution, gives us confidence as we continue to advance and eye towards leadership in medical dermatology. With that, we conclude the presentation and turn to Pablo for the Q&A.

Thank you very much, Carlos. Sharon, back to you for the Q&A, please. .

[Operator Instructions] And your first question comes from the line of Hamburg from DB.

I've just got a couple. The first one, you mentioned there's a Germany pricing adjustment from July. If you get to know a bit of clarity about what effect that's tapping into H2? And also how this fits into maybe the German drug pricing reform that's taking effect in '27 and how you think that will impact Ebglyss and Ilumetri and maybe whether that's included in your '28 EBITDA margin target, 25%. And then my second question, please, is you didn't reiterate your peak guidance for Ebglyss is a reason for this, yes, just a bit more clarity.

Thank you., Not sure about the second question. You're asking us to affirm the pictures estimate for revenues.

Yes. Yes. .

Okay. Sure. Thanks for the question, Ken. So the German rising reform is certainly not good news for the industry in Europe. However, there's still a number of clarifications as the deductions and modifications that now need to be clarified by the general government between now and the end of the year. Once we have clarity on this report, we will be able to to provide further clarity on how we see this impacting the business. In terms of the big sales guidance for Ebglyss, yes, we remain very confident on the outlook that we have provided. And so we're happy to reiterate peak sales above EUR 450 million.

Your next question today comes from the line of Shan Hama from Jefferies. .

Two for me, please. Are you able to quantify the extent of the planned price decrease Ebglyss in Germany in July or from July? And then secondly, can you tell us about some early ordering patterns you're seeing in 3Q for Ebglyss and whether you're expecting a return to acceleration from 3Q despite the typical slowdown during the summer season.

Thank you, Shan, for the question. If I understood well, you're asking about the price decrease in Germany this year, it will be from January 1, 2027. Question or not.

Your question, Shan, if I understood what you are asking the price reduction of Ebglyss in July, right?

Yes, exactly.

Yes. So it has been a low single-digit one that it was agreed with the German government at the point of launch of the product. It has -- it's minor, but it has had an impact on the phasing of orders between quarters. So we expect an acceleration in the Q3. So this is the answer of your first question. You want to take for -- sorry I misunderstood the question. Thanks Jon for your help. You want to take the number 2 as well?

Yes. Your second question, Shan, was about other partner in the second half of the year and the tone to accelerate. Yes, I mean, remain confident in the long-term profile of the product, we continue to see very positive feedback from our key opinion leaders in the market, and we continue having long-term life cycle management. The long term -- the market consensus for the product shown at this point in time is a range of EUR [ 190 million to EUR 195 ] million, and we remain comfortable in this ballpark for this year. Just to reiterate that our focus remains fairly on the long-term opportunity. And as usual, we would encourage all the analysts to have a view in 12 months more than a quarter-on-quarter phasing. Hope this addresses the answer to your question, Shan. .

Your next question today comes from the line of Juan Ros Padilla from ODDO BHF.