Formycon AG (FYB) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Formycon AG Earnings Call regarding the half year 2025 results. [Operator Instructions] Let me now turn the floor over to Dr. Stefan Glombitza, the CEO of Formycon.

Yes. Thank you for the introduction, Beatriz, and good afternoon, good morning, and warm welcome also from my side. We appreciate, of course, as always, your attendance and the interest into Formycon's H1 earnings call. Earlier today, as you might have read, we issued a press release with detailed insights on our midyear performance. And in a nutshell, I'm very pleased to reconfirm the full year guidance for revenue and EBITDA, while working capital cash is boosted by our recent highly successful Eurobond placement. We are also looking back at a period with very strong operational achievements across many areas. And particularly, I want to mention our pembrolizumab Phase III waiver, which is putting us in a very strong competitive lead position and opens up manyfold opportunities for this attractive asset and beyond because this breakthrough will allow Formycon to develop biosimilars faster and at lower cost. The financial numbers of the first half year are still indicating that we are at the starting point of the commercial ramp up. They are in line with our phasing assumptions for this transformational year. And we are expecting significant revenue-generating events, particularly in Q4, which make us very confident to confirm the 2025 full year guidance. We want to use the next 30 minutes as an opportunity to provide additional context on both the operational achievements and of course, the financial performance, combined with an outlook into the period to come. Enno Spillner, our CFO, and me will guide you through the key facts in our joint presentation. And Andreas Seidl, our CSO, will chime in to answer any questions in the Q&A section. As usual, in those settings, I'm starting with a legal disclaimer on forward-looking statements. Some of you might have seen this slide already quite often, but it's important to me to always refer to our strategic time plan, which we continue to execute stringently, which is unchanged, and we continue executing with laser focus step-by-step on our growth trajectory. 2024 was tremendously important for the company as we got 2 more biosimilar products approved, which prepares the ground for the next ignition stage, turning us into sustainable profitability after having those products established in key markets. Our continued operational successes are driving the transformation of Formycon into a biopharmaceutical company. Increasing commercial revenues will fuel our pipeline and continuously drive more patient access to vital medicines through our products. The business is a key driver for many players in off-patent industry. You hear that across multiple earnings calls, supported by the overall positive momentum in biosimilars and thanks to the progress of our attractive pipeline, we are at an inflection point to profitable growth. And our target remains unchanged to turn Formycon into sustainable EBITDA profitability ideally as early as next year 2026. Let me now focus on the operational achievements in more detail. The excellence and track record of our development platform remain the solid foundation for our growth path. And this is getting even more important in the light of a long-awaited Phase III waiver opportunity. In essence, this is driving higher throughput and value generation from our development platform. Looking at the milestones and the programs in detail, we have been able to communicate a bundle of achievements, not only in the year '24 as well as in Q1 '25, but also in this strong operational quarter across all programs. And in this chart, you see depicted the major achievements of the first half and also an outlook for the months to come. Starting with 201, we gained approval in Brazil. That sounds like another country we add, but it's a gate opener to LatAm, underpinning our strategy of diversification and geographic expansion into emerging markets. Another deal for emerging markets could be signed with a company called Bio Usawa, serving patients in Sub-Saharan Africa, a clear testament that our biosimilars are the solution to address high unmet needs for affordable biological treatments, which are practically not existing in those regions by now. 201 had another highlight, the EMA approval of our prefilled syringe. That was another very important milestone, a high-end ophtha device with strong technological features that have been approved and will benefit doctors and patients. Launch quantities are being produced as we speak, and the preparations are on track for the introduction into key markets, and this will generate additional market traction in those countries. Key highlight of the first half, of course, have been our FYB202/Otulfi launches in U.S. and key European markets via our commercial partner, Fresenius Kabi and the February start March that happened, followed by Canada in May. And the second half of this year started already with an exciting addition, the launch of Fymskina, the second brand of our FYB202 in Germany. The product is distributed by our commercial partner, Teva, Ratiopharm, and this shall add complementary customers and patients while maximizing our overall market penetration. Coming to FYB203, several commercial partnerships have been installed in the last months. U.S. with a new biosimilar specialist Valorum, Europe with a very familiar partner, Teva, and we also struck the second product deal with Lotus for APAC. And you'll see more of those license deals for additional countries in the next months. All are lining up for a staggered launch as soon as the IP situation allows. The year 2025 also started with a breaking news from a positive agency feedback, allowing us to wait the Phase III clinical study for FYB206, our Keytruda biosimilar. That puts the critical path on our Phase I study with a major time driver recruitment speed. And already in July, we could share the great news on last patient in. Combined with the Phase III waiver, this means that the patient recruitment for the total 206 study program is completed now. And this unique time advantage puts us into an extremely competitive situation -- strong competitive situation, sorry, around the attractive assets. And we sense that very tangibly when it comes to this multiple licensing pages. Upfront payments are planned as an important contributor to our revenue target this year. We expect those to come in Q4. Of course, this is not the end. Our clinical team will dedicate full focus on accurate execution of the remaining treatment schedule until we have the final Phase I study results in hand, and this is expected for Q1 2026 already. FYB208 has a very attractive cell line feature and is further progressing towards the so-called TPoS milestone, which is the entry gate to manufacturing scale-up and clinical phase and by the way, at a high probability of success. So in essence, you can expect that the strong operational momentum would generate continuous positive news flow in the second half of this year and beyond. And these operational achievements are creating the foundation of future revenues as a lifeblood of our growth path. Allow me some thoughts on key strategic success drivers for the future because you always have to be agile and adapt to the needs, and there are clear success drivers that are important on the way forward, particularly the rather young segment of biosimilars is still evolving, and we are observing multiple dynamic changes. There are huge opportunities to embrace and the underlying momentum in that segment is definitely growth. One key lever towards sustainable success in such a fast-moving business environment is geographic diversification. This helps to grasp as many opportunities as possible and boost the global leverage of our developments, including also a rapidly expanding network of international commercialization partners. We have intensified our efforts in this direction in the first half of the year. You saw some deals we struck for emerging markets and through expansion into the high-growth emerging markets and with a broad network of regional marketing specialists, we are today laying the foundation for tomorrow. Pipeline selection excellence is and will always be of essence. Identifying where to play and how to win is super important. And then, of course, advancing with focus and conviction. Striking semi-exclusive deals, which we also have done partially already for certain territories provides the opportunity to even maximize revenues from this existing portfolio by complementary market strategies. Our strong backbone is the excellence in biosimilar development. And this excellence is the basis for innovation as a key differentiator, top-notch novel technology and device development, like, for instance, our ophtha prefilled syringe is important to offer superior product features to patients and health care professionals. And innovation means for us also shaping the science. So challenging existing policies, shaping the regulatory landscape with novel, creative approaches in constant dialogue with the regulators. And this happened successfully, for instance, with our Phase III waiver in FYB206. And this is, by the way, not only saving investments of high-double digit millions in our program, same science applied to our younger pipeline enables us to develop biosimilar projects faster and more cost efficiently. Building on our extensive biosimilar experience, we are thus streamlining our development processes through targeted AI deployment and a constant refinement of our approaches. Streamlined development time lines and advanced cost efficiencies will enable us to fully leverage our development platform and take even more advantage of the unprecedented number of LOE opportunities in the upcoming years. So speaking about cost efficiencies is a perfect timing to switch over to the financial part. Happy to hand over to Enno, our CFO.

Thank you, Stefan, and also a very warm welcome from my side. Happy to introduce our H1 2025 numbers to you, plus, of course, providing an outlook/guidance for the remainder of the year. Let's take a look first at our P&L, which is mainly on track. And starting with the revenues. Revenues are in range of what we expected for H1 based on our guidance, which we provided on end of March to you of this year. Due to transformation of our revenue structure, revenues are clearly reduced compared against H1 2024, and I will introduce some more details on the next slide. Cost of goods also reduced against H1 2024. However, at first site production takes place in a smaller scope. This is mainly due to the fact that we are now recording the regular amortization of FYB202, which makes about EUR 6.2 million per quarter, something we didn't have during the first half of 2024. Would we adjust for this accounting measure, we would be looking at operational cost of sales of approximately EUR 10 million for H1 2025 versus EUR 25 million in H1 2024. R&D expenses remain in a similar ballpark with the main spending for FYB208 and FYB210. EBITDA is about the same range. This is a -- is in the same range, sorry. This is a, due to savings and phasings along the previous positions I just mentioned to you; and b, due to the fact that the beforementioned amortization is neither EBITDA nor cash flow relevant. The adjusted EBITDA declined due to the reduced equity result coming from our joint venture, Bioeq, which is running our FYB201 performance. With Sandoz pausing its U.S. activities for similarly and the Q1 sales being under some price pressure, there's lower contribution from this joint venture in H1 2025. The capitalized development costs in 2025 are fully contributed to the clinical development activities of FYB206 and the clear increase of this investment is due to the fact that FYB206 clinical trials started in June '24, extending the investment at that point in time. Let's take a closer look at the breakdown of our sales, which are consisting of 3 pillars: a, service/development recharges; b, upfront and milestone payments; and c, royalties. In the future, we will recognize a kind of a fourth category, namely sales as manufacturer of FYB202 for retained countries and FYB203 supply chain management. However, both haven't recognized revenues in H1 2025 yet. Current development is clearly reflecting our change in our revenue structure, while recharges for development work on FYB201 and FYB203 continue to reduce as products mature successfully, deferred milestones from FYB202 have now completely faded out due to the successful approval of the product in fall 2024, and FYB201 royalties reduced mainly due to pausing marketing of the project -- product in the U.S. by our partner, Sandoz, as mentioned before. However, the last position we assume to resume in H1 2026. In return, FYB202 royalties generated EUR 1.7 million of revenues, a relatively moderate start year-to-date, assuming to pick up in the second half, especially Q4 of this year. These incoming royalties are not yet in a range to compensate for the other effects, which I mentioned to you. Upfront payments and on milestone payments from, for example, FYB206 partnering are yet to come and are anticipated to contribute to our overall performance in the future. Therefore, in total, revenues in H1 2025 declined compared against H1 2024, which was expected due to the backloaded 2025 revenue structure. Also with regards to our cost of sales, we are recognizing similar structural changes as just described in context of our revenues. Operational cost of sales reduced significantly for FYB202, going down by almost EUR 10 million, plus cutting more than 50% of cost of sales for FYB201 and FYB203, respectively, due to reduced and fading out development work. On the other side, we do record a new position of FYB202's regular amortization. And this EUR 12.5 million amount is neither EBITDA nor cash relevant, but significantly influences our cost of sales. In total, our cost of sales reduced by approximately 10%. Let's review some group asset KPIs. Our balance sheet totals at a strong EUR 743 million. The light reduction mainly results from reduced trade receivables as well as a reduced cash position at the end of the reporting period. Equity is reduced by EUR 54 million due to the net result. And at the same time, our liabilities increased by EUR 24 million or 8%, which mainly is a technical effect from our noncurrent liabilities resulting from a change of WACC or weighted average cost of capital from 10% down to 8.7% being used to discount the earn-out obligations. In consequence, our equity ratio slightly drops, but remains with a strong 55%. Cash and cash equivalents adjusted to EUR 27.3 million at the end of H1 2025. Also, while we continue to invest a lot into our FYB206 Phase I study, we saw significant cash savings due to the fact that we didn't have to continue to invest into prior Phase III activities. The recent concluded bond is not yet considered in these numbers as it was only settled in July or July 9 to be more precise. Cash flow and working capital were determined by multiple factors. So net cash from operating activities was quite balanced between our negative EBITDA on the one hand side and a strong positive impact from more than EUR 20 million trade receivables, mainly from a Fresenius payment. Net cash from investing activities reflects our strong engagement into FYB206, showing a EUR 25 million investment, while at the same time, receiving almost EUR 8 million from Bioeq, our joint venture, repaying further parts of their shareholder loan to Formycon. On the working capital side, current receivables as well as current liabilities and accruals were the most influential factors leading to H1 2025 working capital of EUR 17 million. What you need to know about our debut bond offering, in June, we announced the offering of our first-time Nordic bond as a debut offer to institutional and to retail investors, opening the network to a new group of investors joining Formycon. The offer was well taken by investors from DACH, from Scandic, but also from the U.S. And while initially targeting for EUR 50 million, we finally have more than EUR 100 million on the table and decided to lock in for EUR 70 million. The transaction was concluded on July 9, 2025. And this is why, as I mentioned, the reason why the successful chapter was not yet accounted for in the H1 reporting. The bond is publicly traded. The proceeds will be utilized for further developing our existing product pipeline, pushing our assets further down the value chain towards [indiscernible]. The loan is unsecured and contains very moderate covenants and maintenance only. Interest is floating at 3-month Euribor plus 700 basis points, turning out at the lower end of the spread, payable quarterly with first payments due on October 9, 2025. The term is 4 years. Our so far existing shareholder loan was, by the way, waived in this context while also seeing a commitment into this new loan from some of our major shareholders, which, of course, is highly appreciated. But let's get back to our financial performance and our respective guidance for second half of 2025. It is obvious that with revenues of EUR 9 million recognized for H1 2025, aiming for a range of EUR 55 million to EUR 65 million of revenues for the full year looks a bit like a stretch. That said, we remain positive to achieve this revenue guidance for the full year 2025 based on 2 main revenue drivers. Formycon expects a strong and very dynamic second half of the year due to the targeted conclusion of first licensing partnerships for FYB206 and further establishment of FYB202. This is especially true for the fourth quarter of 2025 and therefore, and backloaded or a backloaded expectation. Regarding FYB206, we are progressing in positive discussions with various industry players, which may become our future licensing and commercialization partners for FYB206. Not yet a done deal, but we consider it realistic to conclude accordingly still in this year. Regarding FYB202, we are receiving encouraging signs from our commercialization partners for further accelerating increase in revenues and thus royalties for Formycon. Recently announced deals, for example, in the U.S. between Fresenius Kabi and CivicaScript confirm this trend. However, it takes a while until these agreements materialize into revenues with benefits for Formycon. So overall, we confirm our guidance for 2025. Revenues in H1 2025 came in below '24. And as just described, '25 will be backloaded due to the market grip of FYB202 and expected licensing deals for FYB206. Full year EBITDA will benefit from the expected positive revenue performance during the second half of the year. Adjusted EBITDA should even reverse slightly. And working capital is the position we change, namely uplift, mainly due to the successful bond financing contributing to the working capital. Liquidity with the additional EUR 17 million gross on our accounts will get us through the developing of the current pipeline and achieving EBITDA profitability. Just 3 very brief points on this particular slide. Engagement of existing anchor investors remains stable or unchanged. Comparing our trading volume for H1 2024 versus H1 2025 shows a more than 4x increase of our average share liquidity. And now with a publicly listed bond in place, we do have the second publicly listed vehicle in the capital markets. And with that, I'm at the end of my part of the presentation and would like to hand back to Stefan for a final summary. Looking very much forward to your questions, and thank you very much.

Yes. Thank you, Enno, for providing us with all the necessary details to understand the numbers. Let me just conclude in a summary regarding our company and the way forward. So with 3 pipeline assets approved, 2 being marketed and the third one in the waits was a very strong and steadily progressing pipeline, we were able to create a trust-building track record. And at the same time, also a robust platform for commercial partners that are seeking to license in our attractive assets for their portfolio. And we believe we have all the ingredients in place, the right strategy, the right science and excellence, combined with passion and agility to adapt and grasp the multiple opportunities. And this is enabling us to increase access of patients with severe diseases to our biologics through our partners and play an increasingly leading role in this attractive growth space. Biosimilars have come to stay. And we are acting in the fastest-growing segment of pharma with more than 100 biologics losing exclusivity in the next decade. So the ground is prepared for the next chapter of Formycon's growth story. With that, I want to conclude the presentation. Thank you for your attention and hand over to the moderator for the Q&A section.

[Operator Instructions] And first up is Nicolas Pauillac from Kepler Cheuvreux.

Hopefully you can hear me. Maybe a few annoying questions from my side. But just to come back on this good slide that you showcased for the ramp-up of the revenues over H2. I was wondering, first, if you could maybe give us some color on how much of the, let's say, total sales will be exposed to the licensing deal? And so how much will be tied to FYB? I think broad idea on that would be clear. And then maybe a second question tied to that. We saw like this increase in trade receivable and you are saying that this is tied to Fresenius. So are we to expect that maybe there is like potentially a private label deal or something like that, that can happen around the end of the year for 202? And then on 203, if you have any update on the time line, that would be really helpful, too.

Yes. Thanks, Nicolas for questions, and I'll start with the 203 first in the different order. So although I cannot tell a lot more than last time, I think you're probably aware that FYB203 or aflibercept biosimilars are currently multiple litigation and court proceedings in several countries, and each country is handled differently on different courts and different grounds. And we will learn more about the timing depending on the outcome of those proceedings in the next couple of months. There is still a lot going on there. We feel well positioned, but the outcome is never 100% to predict. And for those reasons, we are currently unable to make a valid statement here. I mean we have also announced that we have approvals and commercial partners. So we are in the waits for the launches to come. But besides that, we have to wait for the outcomes country by country and then be ready for launch, which we are. Then 202, the statement of the Civica deal. So we are happy to confirm that Fresenius Kabi has signed an agreement with CivicaScript and CivicaScript will act as exclusive distributor of unbranded ustekinumab product as Fresenius customers. So that's a very positive announcement and deal, and this is in the series of deals we expect. So we -- the market penetration, of course, goes step by step. So it doesn't move fast in the PBM segment, but Stelara is still dominating the formularies, but Fresenius Kabi is well positioned based on the established customer relationship and also on an integrated commercial infrastructure. This team is -- the U.S. team is not only launching this molecule, but also other molecules with the same payer structure. So the U.S. team is relentlessly driving coverage gains step by step with a growing number of deals and totally different types of settings, direct, indirect, exclusive, nonexclusive and the CivicaScript is a nice and a good example for that. And the first question, was that around 206...

It was basically about the revenue ramp-up and breakdown. And we can -- at this stage, we cannot guide on detailed numbers with regard to each single asset. Clearly, we can confirm that 202 from royalty performance and 206 hopefully from upfront payments/milestones will be the 2 major revenue contributors. Of course, we will also see some revenues from 203 from preparation work and services. The same is true for 201. But clearly, 206 and 202 met to be the major revenue drivers, but no details. Both of them, however, will probably show their most significant impact in Q4 of this year.

Next up is Simon Scholes from First Berlin.

I've got 2. So I think it's likely you'll be disclosing the originator product for 208 in the course of the remaining months of this year. I was just wondering if you could remind us or tell us for the first time roughly how large or how the market for the 208 originator product compared to the size of the originator of the market for some of your other assets? And then just on the working capital position, I was just looking at your balance sheet, your H1 balance sheet, it looks if you generated about EUR 13 million from receivables in the first half and EUR 8 million from payables. I mean that makes it roughly comes to the EUR 20 million you mentioned in the slides. I was just wondering what might happen to those positions in the second half of this year?

Yes. Thanks, Simon. Happy to hear you, and thanks for your questions. I mean first -- on the first one, I have to ask for your patience. So we will disclose, I can confirm, we will disclose around the TPoS, which is expected in the next few months. And in that moment, we will disclose, and that will come then, of course, with the size and the description and the molecule. So we have to ask for a bit more patient and for the work patients. And for the working capital, handing over to my neighbor.

Yes. And welcome, Simon, from my end as well. With regard to the receivables that you were mentioning, this is basically the repayment of the shareholder loan that we received from Bioeq which is a larger position still remaining. And we had an extended slide on that, I think, 2 quarters ago, how the structure works. So whenever Bioeq is in a liquidity position to repay positions of this loan, they will transfer. So it's hard to guide on regular numbers here. And the EUR 13 million payables that you were referring to is based on receivables from Fresenius royalties, right?

The next question comes from Yi Chen from H.C. Wainwright.