Formycon AG (FYB) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Formycon AG Earnings Call 9 Months 2025. [Operator Instructions] Let me now turn the floor over to Stefan Glombitza, the CEO of Formycon.

Yes. Thank you for the introduction, Beatrice. Good afternoon, good morning, and warm welcome also from my side. We appreciate your attendance and interest, as always, in Formycon's Q3 earnings call. Earlier today, we already issued a press release providing detailed insights into our Q3 and 9-month performance. In short, I'm pleased to reaffirm our full-year guidance across all key financial indicators. Revenue and EBITDA remain on track, while working capital remains at the elevated level from our half year update. During the third quarter, we achieved several highly accretive operational milestones across all programs. Just to pick out one, most notably, we successfully completed patient recruitment for our Phase I clinical trial of FYB206 Keytruda biosimilar, an achievement that positions us in a very competitive spot for this highly attractive and important PD-1 segment in oncology. Building on pioneering Phase III waiver secured earlier this year, this milestone unlocks substantial first-mover advantages. Financially, Q3 results reflect the commercial ramp-up phase for Otulfi, being only a few months into its launch. In Q3, we are already seeing growing traction in key geographies. And these results align with our phasing assumptions for this transformational period. We anticipate significant revenue generations and events in Q4, reinforcing our confidence in meeting the 2025 full-year guidance, and we will come to that. Over the next 30 minutes, we will provide additional context on both the operational achievements and the financial performance, along with an outlook for the coming period. Enno Spillner, our CFO, and I will guide you through the key facts in our joint presentation. Nicola Mikulcik, our CBO; and Andreas Seidl, our CSO, are also here and will join in for the Q&A session to address any questions you may have. Let us start with the presentation now. As usual, in those settings, I'm starting with the legal disclaimer on forward-looking statements during our presentation and the Q&A section. Our strategic road map remains unchanged. We continue to execute with discipline and laser focus on our growth trajectory. 2024 was pivotal for Formycon, with 2 additional biosimilar approvals laying the groundwork for the next stage of acceleration. And this progress positions us to achieve sustainable profitability as soon as these products gain traction in the key markets. Our ongoing operational successes build a solid foundation for transforming Formycon into a leading biopharmaceutical company. Let me just comment on the FDA's recent move towards streamlining biosimilar development. This promotes faster, more cost-efficient pathways, thus creating tremendous opportunities, playing strongly to our advantage. With the recent regulatory movements, comprehensive analytical characterization and similarity assessments are becoming even more critical. And these represent core differentiating strengths of Formycon's development platform. We are excited to leverage these. Our products already are improving the lives of patients worldwide. As commercial revenues continue to grow, they will further fuel our pipeline and expand access to vital medicines, advancing our mission through the strength of our development powerhouse. Supported by the positive momentum in the biosimilars market, recent encouraging signals from the U.S. regulators and the strong potential of our pipeline, we are at an inflection point pivoting toward profitable growth. Our target remains unchanged; achieve sustainable EBITDA profitability ideally as early as 2026. The biosimilar segment, while still relatively young, is evolving rapidly and undergoing dynamic changes and everybody sees that. This creates tremendous opportunities and the underlying momentum is unmistakably one of growth. In such a dynamic environment, having a clear strategic compass, knowing where to play and how to win is essential. And our operational and commercial activities are guided by clear strategic drivers, essential levers that are flagged here and that position us for long-term success. There is significant geopolitical momentum underway everywhere, underscoring the importance of geographic diversification. Expanding into high-growth emerging markets and building a broad network of regional marketing specialists enables us to capture opportunities globally and maximize the leverage of our developments. We intensified our diversification efforts and will continue to do so because this is laying the foundation today for tomorrow's growth. Excellence in pipeline selection remains critical. That's undoubted. Identifying the right assets then advancing with focus and conviction. The current initiatives on streamlined development and the improved regulatory policies create compelling business cases now for targeting reference products in the niche-buster category while helping to address the significant biosimilar demand. Our strong backbone is deep, deep biosimilar development expertise, which also serves us as the basis for innovation as another key differentiator. Advanced technologies such as our ophthalmic pre-filled syringe delivers superior product features for patients and health care professionals. But innovation for us also means shaping science, challenging the existing policies, influencing regulatory frameworks through creative pioneering approaches such as the Phase III waivers. These initiatives not only provide significant savings like the high double-digit millions in the FYB206 program, but they also enable faster, more cost-efficient development across our pipeline. Building on our extensive experience from the 3 approved programs, we are streamlining development processes as we speak, supported by targeted AI deployment and continuous refinement of our approach. We are constantly reshaping our organization, reflecting these important improvements like the Phase III waivers in our operational model. As a result, Formycon can now deliver its biosimilar pipeline at greater speed and at lower cost. And this will finally allow us to fully leverage our platform and capitalize on the unprecedented number of loss of exclusivity opportunities in the coming years. Throughout the first half of 2025, we communicated a series of achievements and thanks -- really big thanks to the strong performance of our operational teams, we have further enhanced our value proposition across our pipeline. Let's have a closer look at our operational achievements in Q3. For 201, Q3 marked 2 significant milestones in our strategic road map: innovation and diversification. The introduction of the first ranibizumab biosimilar and especially designed ophthalmic pre-filled syringe represents a major step forward after a demanding development journey. This pre-filled syringe delivers a safe and more convenient way of administration to the retina specialists and their patients with severe ophthalmologic diseases. It underscores our commitment to advancing ophthalmic care. Executing on our diversification strategy in emerging markets, our partner, Bio Usawa, achieved the first registration for FYB201 in Sub-Saharan Africa and is preparing for launch in a remarkably short time. We are excited and feel honored to help address the high unmet need for affordable biologic treatments in regions where such options have been virtually non-existent. FYB202 is gaining commercial momentum step by step. A key highlight, of course, of Q3 was Fresenius Kabi's exclusive distribution agreement with CivicaScript. Together with our partner, we anticipate incremental sales in Q4 from this arrangement. Fresenius Kabi is pursuing conventional and partly innovative ways, targeting health plans in non-exclusive and exclusive settings, including distribution models such as the exclusive agreement with CivicaScript. The pharmacy benefits landscape in general is evolving and the trend strongly, by the way, supported by the U.S. government continues to accelerate biosimilar adoption. Looking globally, the product has been launched in 20 countries as of today and market penetration in key European markets continues to progress. And we are confident that our commercial partners will leverage their strong sales capabilities and brand reputation to drive market share gains and access for patients across Europe with severe immunological diseases. For FYB203, additional commercial partnerships have been secured for Latin America and Australia, complementing our global coverage. All partners are in the wings for a staggered launch as soon as the IP conditions allow. And a major milestone in this context was the settlement agreement with Regeneron, paving the way for a U.S. launch in Q4 next year. For FYB206, the year began with a breakthrough news, positive regulatory feedback from FDA, allowing us to waive the Phase III clinical efficacy study for our Keytruda biosimilar. This shifted the recruitment time of patients in our Phase I PK study on the critical time path for submissions in the first countries. In July already, we announced last patient in, meaning recruitment for the FYB206 clinical program is now complete and we expect final Phase I results as early as Q1 next year already. This unique time advantage positions us extremely well for this highly attractive asset, a fact that is evident in multiple licensing discussions. So in parallel to our development focus, we are very busy with putting in place our commercial partnering network. And we expect to sign licensing agreements for certain geographies still in Q4, with others following in 2026. Just to say, our priority remains securing the best possible partnerships for this asset in each region rather than rushing deal signatures. FYB208 demonstrates highly attractive cell line characteristics, and we successfully achieved the so-called TPoS milestone technical proof of similarity. This is an essential gateway to manufacturing scale-up and to clinical development with elevated probability of success. So looking at all the achievements in Q3 even, our strong operational momentum will continue to generate positive news flow also in Q4 and beyond. And these achievements form the foundation for future revenues, the lifeblood of our growth journey. And with that, I want to conclude the strategic and operational part and hand over to our CFO, Enno Spillner, for financial details.

Yes. Thank you, Stefan, and welcome, everyone, to our Q3 2025 numbers call. It's a great pleasure having you on the call, and I will certainly also provide our outlook for the remainder of the year. But let's start with a look at our P&L, which is on track to what we anticipated for Q3 2025 so far. And looking at the revenues, which are in range of what we expected for Q3, namely at EUR 10.5 million for the respective quarter based on our guidance, which we provided end of March of this year. Due to the transformation of our revenue structure, revenues are clearly reduced compared against the first 9 months of 2024. Furthermore, I reiterate on what we indicated already in previous calls and especially during our H1 call, we will see a very backloaded and therefore, Q4 focused revenue performance in 2025. Details, I will have on the following slides. Cost of sales increased against Q3 2024. And while this might be a bit surprising at first sight, it is to be considered that more than 50% of cost of sales stem from FYB202's regular amortization, which simply didn't exist in the first 9 months of 2024. Would we adjust for this accounting measure, we would be looking at operational cost of sales of approximately EUR 18.5 million for the first 9 months of 2025 versus EUR 32.5 million in the first 9 months of 2024, thus a massive reduction of costs. R&D expenses reduced compared to 2024 due to possible phasing of development costs for our early-stage projects as we do have more time to develop these. Major costs do come from FYB208 early-stage development. EBITDA is about in the same corridor than last year. This is due to savings and phasing, along the previous positions I just described and due to the effect that the before-mentioned amortization is neither EBITDA nor cash flow relevant. Adjusted -- or the adjusted EBITDA declined significantly 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 Cimerli effective Q2 2025 and Q1 sales being on the lower end, there's little contribution from this joint venture during the first 9 months of 2025. The capitalized development costs in 2025 have fully contributed to the clinical development activities of FYB206. The clear increase of this investment is because FYB206 clinical trials started in June 2024 only. Therefore, no major relevance in the first half of last year. Let's review the breakdown of our sales, consisting now of 4 pillars: a, development compensation; b, upfront and milestone payments; c, royalties; and d, and that's new supply. As indicated during our H1 call already, the new category supply represents sales as a manufacturer of FYB202 for retained countries and FYB203's supply chain management. Both haven't been recognized as revenues in the first 9 months of 2024 yet. Current development continues to reflect our change in revenue structure. While recharges for development compensation on FYB201 and FYB203 continue to reduce as products mature successfully, deferred milestones from FYB202 have completely faded out in 2025 due to the successful approval of the product in fall 2024. FYB201 royalties reduced mainly due to the pausing of the marketing of the products in the U.S., which we assume to resume in Q1 2026, by the way. In return, FYB202 generated $3.7 million of revenues, including milestones from retained countries, showing an acceleration comparing against Q1 and Q2 of this year. While royalties for the first 2 quarters totaled in the range of $1.5 million, we recorded $1.6 million in Q3 alone, thus developing into the right direction. In total, the incoming royalties are not yet in a range to compensate for the other effects, but we see 3 positive factors pointing into the growth direction. FYB201 to return for marketing in the U.S. during Q1 2026, also according to public information by Sandoz. FYB202 expected to further accelerate revenue in Europe and the U.S. in particular; and FYB203 with a settlement now in place for the U.S., starting sales and marketing during the course of Q4 2026. Also with regard 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 EUR 8 million, plus cutting more than 50% of cost of sales for FYB201 and also FYB203 cost of sales being reduced due to fading out of our development work. On the other side, we do record a new position for FYB202's regular amortization. This EUR 18.8 million amount is neither EBITDA nor cash relevant, as I mentioned already, but significantly influences our cost of sales. Adjusted for this amortization, our operational cost of sales reduced by more than 40%. Let's review some group asset KPIs. Our balance sheet totals at a strong EUR 789 million. The increase mainly results from an increased cash position derived from our new bond facility. Equity is reduced by EUR 59 million, mainly due to the net result. And at the same time, our liabilities increased by EUR 76 million or 25%, which mainly is in context of the issuance of our bond. Please let me remind you that the rest mainly are earn-out liabilities, which do correlate to the performance of our products. Consequently, we only have to pay these once we receive respective cash inflows, especially from FYB201. Therefore, these liabilities are no hard or no fixed liabilities with regard to the final numbers. Furthermore, we do experience a technical effect from non-current liabilities, resulting from a change in our WACC from 10% down to 9.3% being used to discount the earn-out obligations. In consequence, our equity ratio slightly drops, but remains with a solid 51%. And cash and cash equivalents adjusted to almost EUR 80 million at the end of Q3 2025. Cash flow and working capital were determined by multiple factors. Net cash from operating activities was quite balanced between our negative EBITDA and a positive impact from trade receivables. Net cash from investing activities reflects our strong engagement into FYB206, showing a EUR 32 million investment, while at the same time, receiving more than EUR 12 million from Bioeq, repaying further parts of their shareholder loan to Formycon. Net cash from financing activities was mainly affected by the bond versus some earn-out payments. In addition, on the working capital side, aside of the strong EUR 80 million cash position, current receivables as well as current liabilities and accruals were the most influential factors, leading to Q3 2025 working capital of EUR 83 million. But let's get back to our financial guidance for the remainder of the year. It is obvious that with revenues of EUR 19.5 million recognized for the first 9 months of 2025, aiming for EUR 55 million to EUR 65 million for the full year still looks ambitious. However, we remain positive, as Stefan already indicated just now, to achieve the revenue guidance for the full-year 2025 based on 2 main revenue drivers. First, regarding FYB202, we are receiving positive signs from our commercialization partners for a further increase in revenues and thus, royalties for Formycon. This is especially true for the fourth quarter of 2025, also based on indications made by Fresenius Kabi during their recent Q3 call that they are anticipating incremental sales with Otulfi in Q4, following the exclusive U.S. distribution agreement with CivicaScript. Second, we continue to push for indicated conclusion of first licensing partnerships for 206, and we are progressing well in positive discussions with various industry players, which may become our future partners for FYB206. Not yet a done deal, but we consider it realistic to conclude accordingly still this year. That said, and to be very clear, we will not sign a deal for any price, but we want to come out within our expected range for commercial targets. Otherwise, we would rather sign at a later stage than participating -- partnering at a suboptimal terms or conditions. So in essence, Formycon expects a strong and very dynamic fourth quarter due to the before-mentioned 2 main effects, plus continued revenue contribution from FYB201and FYB203. Overall, we confirm our guidance for 2025. Revenues for 2025 will be backloaded due to market grip of FYB202 and expected licensing deals for FYB206. Full-year EBITDA will benefit from the expected positive revenue performance during the fourth quarter of the year. Adjusted EBITDA also should reverse slightly based on an underlying roughly plus/minus 0 at-equity result of our Bioeq joint venture. And working capital will -- or was already uplifted in H1 2025, mainly due to the successful bond financing. This should remain unchanged. Liquidity, with the additional EUR 70 million gross from our bond issuance, leaves us with sufficient cash to fuel the development of our current pipeline and achieving EBITDA profitability. Just 3 points very briefly on this slide. Engagement of our existing anchor investors remains very stable. Comparing trading volume from 2024 versus the first 9 months of '25 shows an approximately 4x increase of our average share liquidity. And one comment on research coverage. As many of you probably know, quite a few changes are taking place within the German small and mid-cap banking community, including research capabilities being reduced. In this context, Hauck & Aufhauser as well as M.M. Warburg informed us that they will cease their research activities and therefore, discontinue their coverage on Formycon. This will happen the latest at the end of this year. We, of course, regret these measures. I would like to sincerely thank the respective analysts for constructive dialogue and a very good interaction, and hope to meet them again very soon in another context. With that said, I'm at the end of my part of the presentation and would like to hand back to Stefan for a final summary. Thank you very much.

Yes. Thank you, Enno, for the helpful financial insights. So let me conclude with an overview where we are positioned. So with 3 pipeline assets approved, 2 already marketed and the third one poised for a U.S. launch following the recent settlement agreement, we have established a trust-building track record. We believe we have all the ingredients for long-term success, the right strategy, scientific excellence and the agility to adapt and seize opportunities. And this enables us to expand patient access to critical biologics through our licensed partners and play an increasingly important role in this high-growth segment. Biosimilars are still young, but here to stay. We operate in the fastest-growing segment of pharma, with more than 100 biologics losing exclusivity over the next decade. No single player can address them all. But with a streamlined development, we can deliver biosimilars faster and more cost effectively, capturing a greater share of these opportunities for the benefit of patients and health care systems worldwide. The stage is set for the next chapter of Formycon's growth story. Thank you for your attention. With that, I conclude the presentation and hand over to the moderator for the Q&A session.

[Operator Instructions] And first up is Natalia Webster from RBC.

My first one is just around your full-year guidance. So it's implying obviously, Q4 quite a large step-up. Just curious if you're able to provide any more indication of how much you're factoring in, in terms of the pickup in FYB202 royalties versus the milestones for a potential deal for FYB206, appreciating some of those agreements may come in Q1 next year? And then my second question, specifically on FYB202. If you're able to talk a bit more around the market penetration in the U.S. and Europe, are you still expecting it to take around 9 to 12 months in terms of reaching that inflection point, the market opening up more significantly? And then around your agreement with Fresenius Kabi in the U.S. I know they signed that exclusive agreement with Civica. Do you expect further contracts? And do you expect those to influence Q4? Or will that more likely be in 2026?

Thank you, Natalia. So let me maybe take the #2 and #3, and then I hand back to Enno for the guidance question. So on ustekinumab performance in general and in U.S. specifically, we anticipate, as mentioned in the call, in the presentation, incremental sales in Q4 following the Fresenius Kabi's exclusive distribution agreement with CivicaScript. And the general -- this is a very important milestone and following a set of deals that Fresenius Kabi is driving relentlessly to gain coverage. Fresenius Kabi is going conventional, but also partly new types of ways with exclusive and non-exclusive agreements targeting direct health plans, direct distribution agreements and like the ones with CivicaScript. In general, we see a good movement there with Fresenius Kabi moving forward and signing one deal after the other. But on the other hand, the market penetration in general in the pharma benefit segment doesn't move that fast. And we always indicated that it's not a big splash, but an incremental increase. And it still takes time what we see. I mean, we're 6 months in the market. And if you look at adalimumab comparable case, it took more than a year until we saw a significant inflection. And now we are talking worldwide of over 60% market share and also more than 26% market share in the U.S. of the biosimilars. So, it will come step by step. Still some time to remove Stelara from the lead position on many formularies. But we see it moving in the right direction, and we see Fresenius Kabi really doing a great job there and going several avenues to achieve more traction and achieve more market share in reasonable deals. And with that, as read, we feel confident to confirm the guidance with the Civica deal delivering results already in Q4, and we see more deals, of course, and signatures to come for the next deals, which make us confident. And then back to the guidance, Enno?

Yes. Welcome, Natalia, also from my side on your question on the full-year guidance. Of course, I cannot disclose any detailed numbers here right now also due to ongoing negotiations with our potential partners. But clearly, if we succeed and also locking in one of the major regions, for instance, we certainly would assume that upfront and/or milestones in total would be clearly double-digit for FYB206 and then followed by FYB202 revenue generation in the last quarter. So, that would be the 2 leading part of our revenue generation. And as I said, certainly, 203 and 201 will also contribute, but that is certainly a couple of levels below the expectation for these 2 assets. That's as detailed as I can go right now. Sorry about that.

If I could just add one more question just around your costs. You mentioned around the Phase III waivers and lower development costs. Just curious to hear if that could benefit your P&L over the midterm or whether you'll look to reinvest that back into the pipeline?

I mean, in general, if you look at the costs, there's a lot of, of course, positive momentum by the streamlining regulatory framework motions that we see not only from the FDA but also from major regulators across the world, EMEA and U.K. And I mean, already depends on the Phase III waiver, it really depends on the clinical program costs and they might differ several magnitudes from oncology studies to other indications. But in principle, we see that we feel enabled to with the cost efficiency measures to develop a biosimilar for a cost investment in the range of EUR 80 million to EUR 100 million. And this is a significant reduction towards the past. And this, I think, puts us in a very competitive situation. It's still maybe the next question that might come, will that increase the competition heavily? But as I said, I mean, we're talking significant investments still. The entry barriers are pretty high with that. So, that does not mean cost reduction and investment reduction, does not mean that it opens up to multiple players that can now afford to develop biosimilars, just as an additional comment.

And next up is Yi Chen from H.C. Wainwright.

Congratulations on the quarter. This is Eduardo on for Yi. In regards to 203, I'm curious if you have any estimates or ideas about price at launch in Q4 '26?

Yes, that's a question I can really not comment and not answer. I mean we, of course, have now the settlement, are very happy that we are in this wave of additional biosimilars that first got first settlements. But there is a -- I mean, as soon as we start the marketing and preparation activities, we will know more about the pricing, but this is too early and of course, nothing we would be able to share officially. Sorry, I hope you can understand that.

That's okay. I guess in similar, maybe this one, you can have some idea as you prepare for the launches. You mentioned about -- you alluded to adalimumab as this 1-year time line and how you see this incremental growth over time. Do you anticipate that 206 would be a similar ramp after launch -- 203, I mean?