Formycon AG (FYB) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Formycon AG Earnings Call H1 2026. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to your host, Dr. Stefan Glombitza.

Thank you, and good afternoon, good morning, and welcome to everyone joining us today. With the publication of our Q2 and H1 2026 results earlier today, we have reached another important milestone in our financial year. Before we turn to the details of the presentation, let me just highlight a few key takeaways that reflect the significant progress we have achieved in the first 6 months of this year. First, our H1 financial performance shows substantial year-on-year growth, which is underscoring the disciplined execution of our strategy and confirming the momentum we built across our business. Just as a reminder, our business is not linear, and revenues are not equally distributed over the year. A particularly strong performance in Q4 last year underlined this seasonal pattern. Our H1 numbers 2026 are already much higher than last year's half year results. And looking ahead to the second half of '26, we expect further important milestones and a continued ramp-up. This reinforces our confidence in confirming our full year guidance and marks 2026 as an important year on our path forward to the sustainable EBITDA profitability. Second, from an operational perspective, we are looking back to a very strong H1. Multiple key milestones have been successfully delivered across all 4 pillars of our FYB4Growth strategy, especially, of course, highlighted by the positive results from the FYB206 PK study and the successful completion of the trial. In the same period, we announced an operationally as well as strategically important manufacturing partnership, representing another significant step towards enhanced cost competitiveness for sustainable long-term value creation. And third, on 15th of May, our commercial partners successfully launched our third pipeline product, FYB203 biosimilar to Eylea across several countries in Europe. Adding another product to our commercial platform is a testament of our ability to deliver against our pipeline. Over the next 30 minutes, Enno Spillner and me will walk you through our presentation and give you a bit more flavor around the numbers. Together with Andreas Seidl, our CSO, we are prepared to address any remaining questions in the Q&A session. So let us begin with the presentation, and thank you again for listening in today. As usual, before we begin, please note that our presentation and the Q&A both contain forward-looking statements that are subject to the usual risks and uncertainties as outlined in our disclaimer. Biosimilars are a key growth driver for many relevant players in the off-patent industry. You heard that in many earnings calls. The detailed strategies to win might, of course, differ a bit between the companies. FYB4Growth is our road map and strategic compass to capture the significant biosimilars opportunity ahead. Four core elements are building our guardrails to drive sustainable and profitable growth: global market diversification, a smart and selective portfolio, lean development, and uncompromising excellence and innovation. Across all 4 segments, several value-creating milestones have been achieved in the first 6 months of this year, and we envision more to come in the next quarters. Pillar 1, geographic diversification. In H1, we continue to expand our global footprint through further targeted partnerships with local commercial specialists. As reflected in FYB201 launch with Biomm in Brazil, we could establish a new FYB202 partnership with Everex for several countries in the Lat Am region and the FYB206 license deal with Lotus earlier this year shall pave the way for access across multiple APAC markets as soon as the IP situation allows. Further license agreements are in continued negotiations and will step-by-step pave into our geographic diversification. Smart portfolio management. Looking at our commercial portfolio, Cimerli has been reintroduced to the U.S. market in January and is gradually rebuilding market share. Nufymco, our second FYB201 product with partner Zydus, is going to complement our commercial offer in the U.S. The product recently received the reimbursement code, which is a key element in the preparation of a successful market uptake. On May 15, we brought a third product from our development pipeline to markets and patients in Europe, marking another addition to our commercial portfolio. Based on the achieved IP settlement, there is a clear path forward for the U.S. in Q4. Building a strong and continuously growing pipeline is critical to our mission and to our business model. And that's why we are planning to enrich our development pipeline in the second half of 2026 by further program additions. Credential matters, but trust is earned through execution. That's why operational excellence is embedded in our DNA. Our proven development and regulatory track record is complemented by differentiated innovations. And that's why advanced state-of-the-art device technologies are important to us. We could complement Fresenius Kabi's FYB202 Otulfi offering by an auto-injector, which has been introduced in European countries in H1 and is providing additional convenience to the benefit of patients and health care providers. The silicone oil-free ophthalmic prefilled syringe, which is used in FYB201, was, of course, also introduced with FYB203 in May this year. Building on the pioneering Phase III waiver approach, we could confirm pharmacokinetic equivalence for FYB201 (sic) [ FYB206 ], our biosimilar versus the reference Keytruda in February. And in June, we successfully completed the clinical program. This data package is building a key element of the regulatory dossier, which our teams are preparing full steam. The strong progress in FYB206 creates first-mover opportunities and further strengthens our position as a trusted, high-performance partner in biosimilars. In an increasingly competitive market, capital efficiency is essential. Lean development and cost-efficient manufacturing are at the heart of our FYB4Growth strategy, and that brings us to Pillar 4. By a comprehensive set of measures and initiatives, we could significantly reduce time lines and costs while maintaining the highest quality standards. Streamlined processes, smart concepts and intensified AI deployment helped us to reduce development time lines and costs for new programs by around 30% already, and we continue to work on that. Our recently announced partnership with OneSource, a leading CDMO, marks another important step towards greater cost competitiveness and sustainable value creation. Going forward, we intend to further enhance this model through additional strategic partnerships, providing benefits to both our existing and our future pipeline. So in a nutshell, FYB4Growth remains our strategic compass and starts firmly delivering results. Over the years, Formycon has established a highly credible development platform, enabling us to build a broad network of leading local and regional commercial partners across the globe. While Europe and U.S. remain core markets, we are expanding to high-growth regions with high unmet need for affordable biologic medicines. Through strong local and regional partnerships across MENA, Lat Am, APAC and Sub-Saharan Africa, we broadened patient access worldwide. We reduced the dependency on individual markets, and we strengthened our resilience against geopolitical and pricing volatility. During the first half of '26, we further strengthened our international market reach. As you can see, depicted from our global road map, we expanded our network meanwhile to commercial partner number 14. This diversified partnership-driven commercialization model enables us to scale rapidly and capture growth opportunities worldwide while we maintain a disciplined capital allocation. With that, I want to conclude my part of the presentation and hand over to our CFO, Enno Spillner, who has prepared a deep dive into the financial numbers of the first half of year 2026. Thank you for your continued attention.

Thank you, Stefan, and a warm welcome also from my side to everyone. Great pleasure having you here on the call today. And I do have also the pleasure of introducing our quite positive H1 2026 numbers to you. Let's have a look at our P&L overview first. And revenues are gaining momentum and do show a very significant step-up versus H1 2025, increasing almost 3x revenue compared to last year's reporting period, clearly confirming our growth path. Transformation of our revenue structure continues, now with significantly more revenues coming in from efforts in the commercialization and commercializing of our products. Main revenue drivers continue to be FYB202 and FYB206, like in Q1 2026 also reported. This mainly includes milestones and royalties as major revenue drivers and I'll introduce the details to you on the coming slides. In context of this, the significant revenue growth also increased our COGS, which is in the range of roughly 1/3 compared to H1 2025, and this was expected. Also here, we continue to recognize our transformation towards a more commercial-related setting, with significant parts of the COGS related to commercial efforts, like, for example, prepayments for supply, but also correlated with development work like, for instance, for FYB206. Details also here to follow on the next slides. R&D expenses significantly reduced, especially with FYB208 having achieved the TPoS, technical proof of similarity, and therefore, respective costs being capitalized since the last fall 2025. Also, continued development costs for FYB206 are either recognized under COGS, as just mentioned, or being capitalized. I'll come back to that later. Thus, currently, the most relevant asset from an R&D cost perspective is our asset FYB210. However, the remaining assets, FYB209 and FYB210, are still less cost-intense due to their earlier development stage. This triggers the overall R&D spend to be reduced accordingly, but please bear in mind that major parts of our R&D-alike activities are recognized under COGS or capitalized development expenditure. So in total, we continue to invest significantly into our pipeline and into our assets. EBITDA made a big positive step forward and improved significantly by more than EUR 14 million, and we are not yet positive, but we are heading towards the right direction. This is consisting of different effects, of course. Revenues increased significantly, while COGS only show a moderate underproportional increase. R&D and other expenses have been noticeably reduced or kept stable, respectively. And continued cost control, active management of our structural costs and some beneficial effects like, for instance, sale of drug substance, helped to reduce our other expenses. The group adjusted EBITDA amounted to minus EUR 6.9 million versus minus EUR 19.2 million in H1 2025. And this, again, is a significant EUR 12.3 million uplift against the comparable H1 2025 numbers. Since the adjusted EBITDA, in addition, only mirrors the performance of our joint venture, Bioeq AG, this slightly weaker performance of Bioeq AG mainly reflects the started relaunch of FYB201 sales and marketing activities in the U.S., triggering a negative contribution by our joint venture for the reporting period. This effect, by the way, we aim to turn around during H2 2026. The capitalized development cost, of course, is not a P&L position, but belongs to the balance sheet. However, it partially reflects our continued investment into our advancing products, and this is why we wanted to show it here. In H1 2026, investments were mainly contributed to the further development activities of FYB208 and FYB206. Please note, development costs for FYB206 continue to be capitalized partially, namely for the European part, where we don't have a partner yet, while the North American and rest of the world part is being covered under COGS in context of our latest partnerships with Zydus, MS Pharma and Lotus. The significant decrease of our investment total is mainly due to 2 facts: number one, FYB206 clinical trials were in full swing during H1 2025, while in H1 2026, this investment has mainly concluded; number two, the other significant part of this development cost is now shifted to COGS since it is associated to milestone payments from our partners for North America and the rest of world. Furthermore, FYB208 is not yet in the clinic and consequently only shows moderate development expenditures. Let's take a closer look at the breakdown of our sales. We have added a new slide here for you, which shows the different revenue types, and we may also introduce that in our future reportings going forward. Recharges for development work on FYB201 and FYB203 stayed fairly stable, with remaining development work being conducted, especially for FYB203. Royalties more than doubled compared against H1 2025. However, market environment remains challenging, and we are not fully where we wanted to be with this revenue type. While growth of FYB202 royalties continues, we had expected a stronger momentum and thus better performance in H1. Milestone recognition took a huge step to EUR 14.3 million. This effect mainly is attributable to deferred milestones, which we are recognizing for FYB206 in context of our partnering agreements for North America and for rest of world. This FYB206 performance simply didn't exist in H1 2025 since the new partnerships were only signed in late 2025 and early '26, respectively. In addition, not to forget the FYB202 milestone, which we received as a one-off for our auto-injector approval in the European Union earlier this year. We mentioned that in our Q1 report already. A new class is revenue from supply management. This newly added category stands mainly in context with handling supply for our various partners under FYB202 and FYB203 agreements. Now, reviewing our sales per product. Current development is clearly reflecting our changed revenue structure among the different products. Royalties for FYB201 now needs to reaccelerate after pausing marketing in the U.S. until end of 2025, which our U.S. partner, Sandoz, now is pushing again to rebuild U.S. market share, which, of course, may take some time to reaccelerate. We are optimistic seeing further acceleration during H2 2026. Revenues for FYB202 more than tripled. This is a revenue mix consisting of royalties of the just mentioned one-off milestone and supply management. And while the royalty part currently still is developing modestly, we see positive commercial trends from our partners' activities, in particular in the U.S., in France, and in Germany, leaving us optimistic for the further course of the year 2026. We acknowledge that H1 could have shown some momentum, but the commercial indicators we are seeing support our expectations of stronger performance in H2. This is in line with the nonlinear nature and appearance of our business. FYB203 remains stable with revenues mainly originating from recharges plus some supply management activities. And the new kid on the block is our revenue recognized in context of FYB206, derived from an upfront payment and deferred milestones from our FYB206 partnerships with Lotus, Zydus and MS Pharma. FYB206 currently stands for more than 40% of our total H1 revenues. In total, this effectively means a very substantial revenue increase, alongside a continued structural change of revenues for H1 2026, with a broad revenue mix from different products and different revenue types. Also with regard to our COGS, we continue recognizing similar structural changes as just described in context of our revenues. COGS increased overall by EUR 6.4 million to EUR 28.8 million and thus clearly underproportional in relation to our revenue increase. Also here, FYB206 is the current gamechanger. This new item of EUR 11.5 million in COGS for FYB206 stands in direct context of our revenue recognition of our beforementioned milestones. The costs resulting from continued development and regulatory work to fulfill these milestone-based performance obligations for North America and rest of the world are recognized under COGS. Operational COGS reduced a bit for FYB202. Furthermore, we continue recording a regular amortization of FYB202, which makes about EUR 10.5 million in H1 2026 versus EUR 12.5 million in H1 2025. Would we adjust for this accounting measure, we would be looking at operational COGS of approximately EUR 18.3 million for H1 '26 versus EUR 9.9 million in H1 '25. Please also bear in mind that the regular amortization of FYB202 considered under these COGS is neither EBITDA nor cash flow relevant. COGS for our recharge development efforts on FYB201 and FYB203 reduced once again for both products. Let's review some group asset KPIs. Our balance sheet totals at a strong EUR 714 million. The EUR 26 million reduction mainly results from the net cash outflow and some prepayments. Equity is reduced by roughly EUR 13 million, or 3% accordingly, mainly due to the net result. And at the same time, our liabilities decreased slightly by net EUR 12 million, which is driven by 2 main effects. On the one hand side, trade payables have been reduced while contract liabilities increased. In the consequence of the above, our equity ratio effectively remains stable at a strong 54%. Cash and cash equivalents reduced to EUR 51.8 million at the end of H1 '26, which mainly results from prepayments, the operational result, and other investment activities into our products, while major receivables from the earlier mentioned revenues were open for payment at the end of H1 2026. And this is a good segue for looking at our cash flows and working capital indicators, which were determined by multiple factors. Aside from the operational result and some prepayments, increase in our inventories and orders as well as reduced trade payable influenced our net cash flow from operating activities. In addition, continued but reduced capitalized investment activities into FYB206 and FYB208 versus some incoming loan payments from Bioeq overall reduced net investing activities. In total, we recorded a reduction of our cash and cash equivalents from EUR 68.8 million to EUR 51.8 million, which is in range of what we anticipated. On the working capital side, you will also notice that our receivables remain also relatively high, resulting from various items such as royalties, upfront payments, milestones, reimbursements, and prepayments. This KPI is balanced with a comparable amount of trades payable in range of approximately EUR 21 million, leading to an H1 2026 working capital of EUR 51.2 million. Let's take a look at our guidance for the remainder of 2026. Revenue-wise, we had a good and strong acceleration into the new year with positive factors from different products. Going forward, revenue growth shall be driven by an increase of FYB202 royalties, which are expected to grow compared to H1. This may happen nonlinear but more in waves depending on new contracts and orders coming in. Commercial biosimilars revenues can be influenced by tender timing, by customer contracting, inventory movements, and the timing of royalty recognition. And while we continue to work in a challenging environment, our focus for the second half is on further market penetration for FYB202, coordinated by our licensing partners and continued commercial execution across our portfolio. Furthermore, FYB206 is anticipated to contribute in a similar ballpark like in H1 2026 when considering recognition of milestones over time for North America and rest of world. Additional partnerships for Lat Am and APAC may contribute on top once signed, depending on final upfront and milestone arrangement. FYB201 is anticipated to reaccelerate further based on regaining market share in the U.S., which ideally leads to increasing royalties. FYB203 is launching in Europe and in the U.S., with the U.S. starting in Q4 2026. Thus, no significant impact to be expected in 2026, but some revenues resulting from remaining development recharges as well as handling the supply for FYB203 product. In essence, FYB202 and FYB206 will be the main pillars of our revenue guidance, with FYB201 and FYB203 adding to the overall financial performance. Based on this planning, going concern is secured at this point in time, and we can confirm guidance. Let's take a brief look at our shareholder structure and recommendations by our research coverage. Our anchor shareholders remain a very committed and stable part of our overall shareholdership within Formycon. We maintain to have a free float around 40% and all our -- or most of our research coverage analysts remain with a buy recommendation at this point in time. With having said that, I conclude my part of the presentation and would like to hand back to the operator, opening the Q&A session, which we are looking forward. Thank you very much.

[Operator Instructions] And we have the first question from Simon Scholes from First Berlin.

I've just got one. It's on the Q2 income for FYB206. In Q1, I think it was basically the completion of the Phase I trial plus a Lotus upfront. Can we just clarify what the income was in Q2 for FYB206?

Yes. Thanks, Simon. Hand over to Enno directly.

Yes, happy to do so. And the income in Q1 was, as you rightly say, was the recognition of a one-off milestone, namely the upfront payment by the signature of the Lotus deal, while the other part or the major part of the revenues were deferred revenues. So we have a bundle of revenues, which we partially already realized, like, for instance, the successful conclusion of the PK Phase I study for Merck Keytruda trial and some other milestones, which will hopefully happen in the future so that we have these milestones deferred and part of that was already recognized in Q1, of course. And so that means for our Q2, in total, we have about EUR 10 million or EUR 11 million from our partners coming in through that revenues.

Maybe to add on that, because that question might come on top for H2, that means that the rest -- remainder of the milestone expectations or revenue expectations is coming from the remaining deferred milestones, which will come from starting and successfully completing the regulatory procedures for our partners, and we feel pretty confident based on our regulatory capabilities that we can manage that and that there's a high likelihood and a lot of derisk situation for FYB206 milestone payments.

So in Q2 was EUR 6.2 million and -- sorry, Q1 was EUR 6.2 million and Q2 was EUR 5.9 million. So this...

Yes, roughly, you're in the right ballpark.

Yes. And what was the EUR 5.9 million again? So it's just deferred...