Ipsen S.A. (IPN) Earnings Call Transcript

[Audio Gap] 2020 half year results. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, CEO, David Loew. Please go ahead.

Good morning, good afternoon, and thank you for joining us for the Ipsen Half Year 2020 Results Conference Call. I'm David Loew, the CEO of Ipsen. And it's a real honor and privilege to be here on my first earnings call. Before we get into the details of the half year results, I would like to share a little about my initial impressions during my first months. I was first attracted to Ipsen as I saw a solid organization with deep roots, a strong purpose and the potential to build on the transformation of recent years. Since joining the company, I've started an intense period of reviewing our pipeline, businesses and meeting our employees. Even though it's early days, what is clear to me is that while we face a number of known challenges, there really is an incredible opportunity to build and transform it and, in so doing, create value for patients and for our shareholders. I have already had the opportunity to meet, both in person and virtually, many of our employees. What has really struck me is the quality of the leadership team, the talent in our workforce and the absolute commitment to our patients across the organization. This is a great starting point for me as the new CEO. I understand that many of you on the call today are eager to hear more about our strategic initiatives and priorities going forward. To clearly define these, I'm working closely with the executive management team and the Board and will engage with internal and external stakeholders in the coming weeks and months. We plan to share these results of our strategic review at a Capital Markets Day on December 1. So please put that date in your diaries. In the meantime, I'm looking forward to meeting and engaging with many of you in the coming months. Next slide. Before we begin, here is our safe harbor statement that outlines the routine risks and uncertainties contained within this presentation. Next slide. On the call today, I will provide an overview of first half results before turning the call over to Aymeric to review the financial performance and our full year guidance in more detail. I will then conclude and open the call for questions. Next slide. I'm pleased to report that Ipsen delivered a resilient performance in the first half of 2020. Despite the impact of COVID-19, we continued to execute against our growth strategy and delivered top and bottom line growth. Starting with the top line. Group sales increased 3.1% to nearly EUR 1.3 billion with good geographic diversification of sales driven by Specialty Care growth of 5.9%. In the first half, Specialty Care represented 92% of sales, while Consumer Healthcare represented the remaining 8%. As we have guided, we experienced a significant negative impact on our sales in the second quarter from COVID. On the bottom line, our core operating income grew by 6% to reach EUR 410 million, representing a 32.3% margin, our highest to date. Unlike the top line, OpEx benefited from the COVID lockdown as a result of the switch to digital sales detailing, reduced travel expenses and the conversion to virtual conference and medical meetings. There was a limited impact on our R&D activities, and we continued to accelerate investment in our pipeline. As for the pipeline, we advanced several late-stage programs for Cabometyx and Onivyde, which we expect to deliver upside potential for these franchises. I will cover these in more detail a little later. We also remained active in business development with the signing of an option agreement for an early-stage oncology program. Next slide. Turning to Ipsen's resilience during the COVID pandemic, first, I would like to extend a huge thanks to our employees who have come together in an extraordinary way during this time. It has been a truly remarkable effort throughout all of our sites to support our mission of bringing important medicines to patients in need. Their health and well-being as well as those of all of our stakeholders remains a priority for us. As for the commercial portfolio, oncology remains relatively resilient as it is compromised of highly differentiated treatments for critical conditions. Existing patients largely adhered to their therapies, while there was a drop in new patients diagnosis and some destocking. In terms of sales, our team was able to adapt and support health care providers virtually. Moving on to manufacturing. We have always taken great pride in our excellent supply chain management, which has been an ongoing objective at Ipsen. We have adequate inventory and do not anticipate any shortage in this current situation. With regard to R&D, we have seen limited impact on our ongoing clinical trials where we have been focused on ensuring that patients continue to have access to their study treatments. In common with other companies, though, we have seen a general slowdown in the recruitment of new patients and insight activations across Europe and the United States. Next slide. Next, looking at our business performance in more detail. Oncology sales grew by 9.5%, representing 76% of group sales in the first half of 2020. As expected, the slowdown from the first quarter reflected destocking in the second quarter in some European countries. Somatuline continues to drive Specialty Care with 16% growth. This included an excellent performance in North America where the 20% growth was driven by volume increases and steady market share gains despite the impact of COVID. When we look at Europe, the octreotide generic continues to have minimal impact despite additional country launches. Market research data shows that Somatuline continues to maintain both total and new patient market share, and there has been limited pricing impact. Next, Cabometyx sales growth of 23% reflects continued steady launch across geographies and indications as well as a destocking impact in Q2. In second-line renal cell cancer, Cabometyx is firmly positioned as the TKI of choice. As expected, we are gradually seeing IO combination secure reimbursement and move into first-line renal cell carcinoma in Europe. As in the U.S., Cabometyx is capturing the majority of patients who progress or do not respond to IO in first line. We expect to continue to gain increasing share in second-line as IO combinations are established as standard of care in first-line renal cell carcinoma. Moving on to Onivyde. The 18% decline in sales in the first half is mainly attributable to lower sales to our ex-U.S. partner. We continue to leverage our U.S. oncology commercial infrastructure and see gradual growth in the U.S. markets. As for Decapeptyl, the 2% decline in sales was due to the negative impact from COVID in China and destocking in Q2 in Europe. We believe these are temporal factors and that the underlying market dynamics for Decapeptyl remain attractive in both Europe and China. Next slide. Turning to Neuroscience. The 7% decline in Dysport sales in the first half reflects the negative impact of COVID across most geographies as treatment centers for both therapeutics and aesthetics were closed in Q2. This was slightly offset by sales to our partner, Galderma. We're carefully monitoring the COVID recovery across the different geographies. Setting aside the impact of COVID, the neurotoxin market enjoys strong underlying fundamentals, and we expect it to return to double-digit growth in both therapeutics and aesthetics as the crisis subsides. We also note, looking at rare diseases, sales decreased by 13% in the first half and represented 2% of group sales. With regards to the palovarotene program, we continue to be in active dialogue with the FDA on the appropriate patient population eligible for treatment and on the potential regulatory path forward for FOP. Meanwhile, patients are gradually reinitiating therapy in the Phase III MOVE trial, which will gather additional data to potentially support the regulatory submission. While we remain optimistic that we can bring palovarotene to patients with FOP, we have decided to discontinue investigation of the MO indication due to the lack of efficacy signals in the Phase II MO pediatric trial. Beyond palovarotene, the BLU-782 program, also targeting FOP, is on track to enter Phase II by the end of the year. We remain strongly committed to serving the FOP patient community and look forward to keeping you updated on our progress. Next slide. Finally, for Consumer Healthcare, sales were down 21% in the first half mainly due to Smecta, reflecting the impact of COVID and the central procurement system in China as well as lower performance in France. We expect our CHC business still to be affected by the COVID-19 situation as we look into the second half of 2020. Next slide. Turning to our pipeline. There were several positive developments in the first half that we believe will contribute to upside potential in some of our key products. Starting with Cabometyx, we have opted-in to 2 ongoing Phase III trials: the CONTACT-01, which is exploring Cabometyx in combination with atezolizumab in second-line, non-small cell cancer; and CONTACT-02 for Cabometyx in combination with atezolizumab in prostate cancer. There was encouraging data in each of these indications in the Phase I/II COSMIC-021 trial, which we believe justifies further investigation in Phase III. With regards to CheckMate 9ER, the results have been accepted for presentation at ESMO as part of the Presidential Symposium in September, and we are preparing for a regulatory submission in the next few months. As you recall, the top line results were positive across all 3 efficacy endpoints, including the primary endpoint of progression-free survival and secondary endpoint of overall survival and overall response rates. Furthermore, the safety profile was consistent with the known safety of the IO and TKI components in first-line renal cell carcinoma. Taken together, we believe this compelling data set is highly competitive with available TKI-IO combination results in Phase III trials in first-line renal cell carcinoma. Looking ahead, we are expecting headline results from the COSMIC-312 trial of Cabometyx in combination with atezolizumab in first-line liver cancer by the end of the year. For Onivyde, we were pleased to receive FDA Fast Track designation in first-line pancreatic cancer where we have shared encouraging 1-year follow-up data at ESMO GI earlier this month. Results from the Phase III trials of first-line Pancreatic ductal adenocarcinoma and second-line small cell lung cancer are expected in 2022. Shifting to Neuroscience. Dysport received approval for glabellar lines in China, which is an important and dynamic growth market for aesthetics, especially for neurotoxins. Dysport will be the third branded product on the market and the second international brand to be launched. Dysport also received FDA approval to treat upper and lower limb spasticity in pediatric patients 2 years of age and older, including spasticity caused by cerebral palsy. Finally, you will have noted from this morning's press release that we have terminated some programs as we continuously prioritize our most promising R&D opportunities. We know we have work to do to build and strengthen our pipeline, and this will be a particular area of focus for me and my team in the coming months. However, I'm reassured by the recent news flow, and I'm particularly excited by the progress we are making with Cabometyx. With that, I would like to turn the call over to Aymeric to take you through the financials of our guidance.

Thank you, David. So first, as you can see, in the first half of the year, the foreign currency had almost no impact on the top line as the stronger U.S. dollar was offset by other currencies. U.S. dollar represents now 34% of our sales driven by the strong performance of Somatuline in the U.S. This explains the positive impact of currency on core operating margin helped by our cost -- local cost in currency and also by our hedging strategy. Our core operating income grew by almost 6% higher than sales growth, many thanks to significant savings mainly related to COVID 19. If we go more into the detail of each of our operating expenses by nature. First, our cost of goods as a percentage of sales improved by 0.2 points driven by the positive mix shift from our growing and resilient Specialty Care business with higher gross margin contribution than Consumer Healthcare, partly offset by higher and growing Cabometyx royalties. Selling costs decreased by 6%, a reduction of 2.9 points as a percentage of sales, mainly due to COVID-19 with lower travel and variable expenses through the group and the conversion to virtual conference and medical meetings. R&D costs increased by 8% or plus 0.7 points as a percentage of sales, reaching 15% of net sales, reflecting significant investment to support the advancement of our internal pipeline programs in oncology, in neurotoxin and also for palovarotene, but also reflecting some savings related to lower expenses related to COVID-19. Other revenue decreased by 39% driven by lower royalties and milestones received from Galderma for Dysport in aesthetic and also lower Consumer Healthcare revenue from Adenuric following the entry of generic since Q2 of 2019. As a consequence, our core operating margin improved by 80 basis points to reach a record level of 32.3% of net sales. If we look more at the detail of the improvement of the core operating margin of 80 basis points, as you can see, it was driven by the strong performance of our Specialty Care business with resilient sales growth and significant savings on the selling expenses, again, due to COVID-19, while we were investing to support our commercial products and clearly advancing our R&D pipeline. Consumer Healthcare was significantly impacted by COVID-19 with a drop of more than 20 points of the profitability in H1, resulting in a negative 1.5 points impact on the group margin. Significant actions are being implemented to protect the profitability of our Consumer Healthcare business in a challenging COVID-19 and competitive environment. Currency, as already mentioned, had a positive 0.5 point impact on group margin. Overall, we are very pleased to report operating margin expansion driven by lower spending in the context of lower sales growth impacted by COVID-19 and a continuing effort to invest in our internal and external R&D program to advance our pipeline. Now turning to some items below core operating income. First, our operating income reached EUR 250 million, including an impairment loss of EUR 82 million before tax, mainly related to our palovarotene program and the termination of the MO-Ped study. It also includes some restructuring costs for EUR 35 million, resulting from the group transformation programs. Our consolidated net profit of EUR 223 million is growing by 2% after a positive impact in H1 2020 in financial results and impacts of the Clementia MO CVR write-up to be compared with the negative impact in H1 2019 of Onivyde earnout reevaluation. Our core effective tax rate of 22.5% improved by 1 point as compared to H1 2019. This was important to partly offset some higher financing costs and to show a core operating income and EPS growing by 5% in the first half of the year. Next, I would like to highlight our strong cash flow generation. In the first half of 2020, we generated free cash flow of EUR 233 million as compared to over EUR 100 million only in H1 2019. This was driven by a 7% increase in EBITDA, in line with our core operating income, reaching EUR 460 million, together with good control of working capital and delayed capital expenditures mainly due to COVID 19. Net debt reached EUR 923 million at the end of June 2020 after payment of the dividend for EUR 84 million. Our net debt is now at 1x debt to EBITDA on the rolling 12 months, showing a significant leverage as compared to 1.9x a year ago in June 2019 after the acquisition of Clementia Pharmaceuticals. We are clearly replenishing quickly our financial M&A firepower. As we had previously indicated, based on the leverage of our balance sheet up to 2x debt to EBITDA, we have an additional EUR 1 billion for business development by the end of 2020. Turning now to our outlook. We are very pleased to announce that we are reinstating full year guidance for 2020. So now we are expecting group sales growth greater than 2% at constant currency, knowing that we expect the impact of currency to be slightly adverse by 0.5 point based on the current level of exchange rate that we've seen in average in the month of July. For core operating margin, we expect to exceed 30% of net sales based on continued but lower savings in H2 across all geographies and businesses from COVID-19, while to continue increasing investment in R&D to support our internal pipeline and in commercial to support our Specialty Care portfolio. To note that this guidance excludes any impact of potential business development on sales or margin. We are clearly taking a cautious approach on assuming only a gradual recovery from the pandemic due to the high level of uncertainty regarding COVID-19, which is seeing a resurgence in part of the U.S. and Europe. Separately, as with our previous guidance, we continue to assume no impact of new generic entry in the Somatuline markets. And now, I will turn back the call to David for the conclusion and closing remarks.

Thank you, Aymeric. In closing, I would like to highlight a few items. First, we were able to deliver a resilient first half performance on both our top and bottom line despite the unprecedented challenges of the COVID pandemic, driven by our portfolio of high-valued oncology products and our ability to manage expenses. Second, despite the continuing impact of the pandemic, we have reinstated 2020 financial guidance with top line growth and the higher level of margin that was originally anticipated at the beginning of the year. As Aymeric mentioned, we are taking a cautious approach due to the high level of uncertainty regarding COVID-19. Finally, we are focused on executing on our pipeline, and we achieved several encouraging advances in the first half, mainly to support upside potential in our oncology franchise. Next slide. In the near term, we will focus on achieving our 2020 objectives based on maximizing growth and profitability, building the value of our pipeline and enhancing our culture. And of course, we will do this in a carefully controlled way as our markets recover from COVID-19. At the same time, together with my executive leadership team and the Board, I will be conducting an in-depth review of Ipsen's capabilities, strengths, weaknesses and opportunities as part of a comprehensive strategic review. As I mentioned earlier, I look forward to sharing these results of this strategic review, together with my vision and priorities, at the Capital Markets Day on December 1. And now, operator, we are ready to open the call for questions.

[Operator Instructions] Your first question comes from the line of Matt Weston of Crédit Suisse.

And David, welcome. Three questions, if I can. The first on Cabometyx. Can you just walk us through some of the underlying drivers? I realize there were COVID effects, but the underlying growth does seem to be modest relative to your peak sales expectations. I understand the excitement about adding the new indications, but do you need them to reach the peak? Or are those on top of the previous peak? Secondly, on palo and interacting with the FDA, it seems that there are 3 topics: the pediatric hold, the adult periodic dosing and the adult chronic dosing. Are you treating those separately? Or is it all being rolled up into a single discussion with the FDA? And essentially, we need them -- we need answers on all of them before you can move forward. And then finally, this might be a little bit unfair ahead of December, David, but you mentioned deep roots in your introduction. I fully understand that the consumer portfolio is part of those roots, but I can't help but note EUR 5 million of EBIT in 6 months, your comments on limited signs of improvement. There's a real question, I guess, as to why it's part of Ipsen. I don't know whether you feel you can comment.

Thank you, Matt. So perhaps I start with Cabo first. The Cabometyx is, of course, approaching its fourth year of launch in the second-line renal cell market. So the growth rate is slowing off somewhat on a larger base. It remains the TKI of choice in the second-line market and continues to steadily gain incremental market share. Now you need to look at the underlying dynamics. We believe the market opportunity in second line will continue to expand as IO combinations gradually become standard of care in the first-line RCC market that has been moving a bit slower than, for example, in the United States. We also see, in addition, potential for significant growth in the coming years, in combination with checkpoint inhibitors in first-line RCC and HCC. And we are looking forward to sharing the exciting results on the Presidential Symposium at ESMO. So I invite you to attend there. There is, of course, however, just to frame that Checkmate 9ER, also the environment in terms of payers and market access that we need to observe given the COVID times and the reimbursement situation that we might be facing. So that explains you a bit the current situation that we have with the current indications. We are going to think that we still stick to the guidance which has been given before. So we -- it's a question of timing. And the answer to your question, do we need the new indications to get there? No, the new indications are going to come on top of it. Your second question regarding palovarotene and the FDA hold. So we are responding still to questions of the FDA regarding the clinical hold. But regarding the FOP, so we have discussions with FDA and the EMA, which are ongoing. And I actually, to really answer your question, invite you to go and assist to the bone conference in September. And you will then better understand where we are with this, but we are optimistic that we will be able to file. On CHC, as you mentioned, it's really early days. So we are doing the strategic review. We do have a solid portfolio of brands, especially Smecta, but it is clear that we need to look at all options, given the size of the business that we have. Now on the near term, our objective is to manage the COVID-19 dynamic and really get CHC back to growth. And then you will hear more once we have done the strategic review.

Your next question comes from the line of Thibault Boutherin from Morgan Stanley.

Maybe a first one on the Somatuline market. If we put aside generics for a minute, could you give us your view on this market in terms of penetration, concentration of therapies and room for further market expansion, both in the U.S. and in Europe? And in terms of market share, you have been consistently taking market share from Somatuline over the past few years. Do you think there is still a lot of upside here as well? So basically, the question is, if generics are not making more progress, how much more room for growth does Somatuline have? Maybe a second question on M&A and the business development environment. What is your view of the current environment to make business development deals, both in terms of valuation of the assets and also in terms of the conditions to review the potential deals and due diligence? And [Audio Gap] from your December Capital Markets Day?

Okay. On the market of Somatuline, yes, there is independent now of looking at generics, clearly still growth potential by better diagnosis, by further growth of the market. There is upside to the market in volume and value as well as gaining market shares. We have launched a new syringe, for example, in the United States, and we have clearly seen an acceleration of the market share gains. Now on M&A, on the environment, as you know, the central banks have pretty much flooded the market with money. Is that going to continue like this for long term? We have to see. Some of the valuations have gone up a bit. Now when you do licensing deals, you have to be very disciplined, clearly. And we are looking at the mix of deals also in our strategic review as well as the therapeutic areas where we really want to be active. And of course, the valuations will also play a role in that strategic decision. Are we going to do a potential deals before December? I would say, at least it's our ambition. Given the change, I think we need to now take some deep dives where do we want to do these deals, how do we want to do them, et cetera. So I prefer not to go into the details now regarding the end of the year regarding potential deals.

Your next question comes from the line of Delphine Le Louet from Societe Generale.

Many questions on my side. I'll try to make it clear. And I understand a better idea -- to get a better idea on the resilience of Somatuline in the U.S. and the performance in terms of operating margin as a specialty pharma. So this in light of what you say for the guidance for the full year, meaning that with such a margin in H1, and we see this is driven mostly by Somatuline, how come you can be so sure with your full year guidance of above 30%, which is more or less in line with what you said at the beginning of the year? So what are your expectations? You're mentioning during the call cost to be back on track, but on the basis of what? Can you be more specific, Aymeric, on this point? Second question, on Cabometyx. I don't understand why you don't want to be more active in terms of giving us a peak estimate for first-line setting. Is it -- and to be back on Matt's question, does your current setting include the first line or not? Second -- third question. On North America, the performance has been outstanding. And now North America is becoming your first region. How that will change the culture, the structure of Ipsen in the years to come? And finally, to be back on the collapse of the margin at Consumer Health, why is it not more resilient? Can you tell us what went wrong during this quarter, especially for this division, not even Smecta, but also the rest of the portfolio? What is the issue? Is it a fixed cost base, which is absolutely enormous compared to the business? Can you be more specific on this one?

That's a long list of questions, Delphine. So I hope I will get this right. First, resilience on Somatuline United States, why are we shy on the guidance? I mean as we have both said, Aymeric and myself, we have decided to take a conservative stance. You have seen in the last week, a pretty heavy resurgence in several areas in the world, including the United States, which is at a level that even we have not seen in April. So it's much higher than ever before. And so we wanted to just be cautious here. Then I'll let Aymeric comment on the cost in just a minute, and I will quickly elaborate on the other questions. So regarding Cabo peak estimate first line. So we are not guiding on peak market shares. And to really guide on the first line, we will have to first work through the whole pay research in more detail, et cetera, because this is ex-U.S. and there is, with the COVID situation, a certain sensitivity of payers, and we need to really better understand that before we are guiding on the CheckMate 9ER. Now the guidance that we have given you before was including part of first line but only in monotherapy and also second line in monotherapy. So you should keep that in mind. Regarding North America, and I hope I got your question right. I'm actually not quite sure. So you mentioned that is it impacting your culture and structure of Ipsen. Listen, I think we have already adapted actually the setup in the United States. We have geared up our U.S. organization. So we have, I think, a strong organization, which has shown that it can deliver and play a significant role, for example, in oncology. So that's great news. And it's well positioning us also for making potential deals in the United States. I think you have also -- and here, I share kind of my recent joining experience. As I was 1 month ago, still outside of Ipsen, but clearly, the group has changed quite significantly in terms of culture and has become a true global player. So I think that's great assets, and we are going to certainly continue that journey. Can we still collaborate better across all the different geographies? Yes, there is certainly probably potential to become even better at executional excellence. But we are on a really good path, and I'm very optimistic about that. CHC, the question was where is the decrease coming from? So you need to dissect CHC a bit because there is actually an OTX part where, for example, in China as well as in France, in the prescription business of Smecta, we have had significant price decreases. In the part of OTC, for example, Smecta, we have actually seen some market share gain. However, the market was, of course, significantly affected by COVID. Because when you have less travel, people get less diarrhea, as an example. And when you have less social interaction, the same thing holds true. So the whole market has actually decreased on diarrhea, as an example, and Spectra, of course, being among our main products. We have also seen less people during Q2 appear in the pharmacies because they stayed at home. So there is a mix of the Rx impact on our CHC business and underlying market dynamics with [indiscernible] as well as with the market itself, which is picking up. And I hand over to Aymeric on the cost -- on your cost question in the second half of this year.

Yes. So Delphine, regarding the guidance, so we have upgraded our guidance regarding the margin, which initially was around 30% based on the H1 performance where we delivered 32% margin, we now upgrade to greater than 30%. We still see a pattern of expenses, which is much more heavy in H2 as compared to H1 as a percentage of sales, knowing that H2 is always lower given the month of August and December. Now talking about the cost, we clearly see a gradual recovery from COVID-19 across H2 where we will progressively expect to come back to reinvesting. At the same time, we see more investment in R&D. As you've seen in H1, we grew our R&D due to the number of Phase III programs in our pipeline, and we anticipate to continue to grow in H2, especially with the new indication for which we have obtained for Cabometyx, together with our partner, Exelixis. So basically, we're very pleased to continue to show leverage and margin improvement even in this environment where there's been significant savings from COVID-19.

Your next question comes from the line of Sachin Jain from Bank of America.

Sachin Jain from Bank of America. A few questions, please. So firstly, for David, as we think about the CMV, how do you philosophically think about long-term targets? They were withdrawn at the beginning of the year. Do you intend to restate? Or do you think you would want to move away from having those kind of targets? Second and third questions for Aymeric. I understand the guidance is conservative around your assumptions on COVID. Why don't you just give us some color on June and July trends for some of the key products? And if those were to continue, where you would land? Any color you give there? Third one on margins. You commented on 2H '20, but just a more longer-term question, sustainability of COVID-driven savings into '21. And then the final question on Cabo and ESMO. Are there any specific aspects of the data you'd point us to as we look for potential differentiation versus this competitive landscape, safety or aspects of efficacy? Anything you could suggest there?

Okay. On the Capital Markets Day and are we going to give long-term guidance? Our intention currently is yes. We have to, of course, observe how COVID is going to continue to spread because there is going to be immediately a question, okay, what's going to happen with COVID in 2021? You alluded just to that. That's, of course, a big question mark, right? So -- and in that context, it is probably going to be relatively difficult to give a very confident, long-term target with a narrow range. So that's something that we will have to discuss in-house, and we will have to also see how COVID is behaving. Vaccines might play a role there, but it is going to probably take at least until summer next year until we see kind of more mass vaccinations. And so being realistic, until you have vaccinated everybody, et cetera, hoping that a vaccine will come, we will certainly, in 2021, still see a lot of circulating COVID-19, unfortunately. So more to come, I would say, in December. Then perhaps, I give you the answer on Cabo ESMO, and then I hand over to Aymeric. So what should you be looking for at ESMO? I would say, you can look at 2 things. One is what's the patient population if you compare it to other trials? And the second one is have a look at the subgroup analysis and the efficacy that you're seeing correspondingly in these subgroups. That is what makes me excited. And we cannot say more about the data. You will have to go to the congress and wait a little bit and be patient. But I'm -- personally, I'm very excited about it. With this, I hand over to Aymeric regarding the June and July trends, right?

Yes. So Sachin, regarding your questions, we have seen in most of our products that were impacted by COVID-19 in Specialty Care, being Decapeptyl or especially Dysport, a significant recovery on the June. And today, it's quite early to talk about July trend, which is positive, meaning that the COVID-19 impact is progressively going away. Having said that, to your question about what's the link with the conservative guidance on the full year is clearly related, as David said, on the global environment on the evolution of the pandemic itself. So clearly, we see still a strong resilience of our 2 products, Somatuline and Cabometyx, in Q2 and going forward, and we're being very cautious on the evolution of the pandemic by itself. Regarding your question about the savings and the impact on the margin beyond 2020, it is clear that a lot of the savings today generated by COVID-19 being lower travel and expenses, being lower congresses and conference meetings, being lower medical and marketing spend, all of that are not recurring. We are working today to make sure that we're taking some of the lessons from COVID-19 and be able to be more efficient. And this is clearly too early to give you a number regarding 2021.

Your next question comes from the line of Emily Field of Barclays.

I just had a question on Cabometyx and the opportunity in China. And it's something that you guys have talked about in the past. If you think you're any closer towards maybe thinking about launching that, or just your thoughts about market entry for that product there. And a second question kind of asked, but I'm going to ask a little differently. Do we know if the generic lanreotide in Finland and generic octreotide in the U.S. that received a CRL, are those applications still active? I mean I know that you said that you don't expect any octreotide generics in the U.S. for this year. I was just wondering if you could give us any update in terms of your market intelligence, what you may be seeing. And then in connection with that, thinking -- I would imagine we'll get an update on this in December, but given the importance of whether there's a generic or not to those 2022 targets, I mean, would you think of issuing those on a conditional basis, sort of with and without generics just because it appears that we're getting ever closer to that LOE and it doesn't appear that there's been any movement on the generic front?

Okay, Emily. So regarding China, as you know, we are conducting the combination trial with atezolizumab in first-line hepatocellular carcinoma. And it contains a cohort of patients also in China, which we need. So we will have to recruit a bit longer than the global cohorts, and we believe it's actually a very significant opportunity, obviously, since hepatocellular carcinoma is such a large indication in China. But this was one of the trials where we had a little bit of a slowdown in terms of recruitment and ramping up. So clearly, the organization now will have to be focused on evaluating how can we accelerate the recruitment into this trial and really be able to launch in a reasonable amount of time. We will come back to you with more details regarding that. And in terms of a date, I would want to not give a date right now because that is just a discussion that we have started and where we need to have a closer look. Regarding competitive intelligence information on octreotide and lanreotide, as we mentioned before and in the script, in the main section, we don't really see an impact of the octreotide. On our generic potential appearance from Advanz, we have no new information regarding the appearance of a potential generic. So that's the information we currently have. In terms of giving you guidance then, and I understand your question that the swing, of course, of if you have a generic or if you don't have a generic, is quite significant. I mean, you can, of course, see that Somatuline is still growing. So if you would say, okay, no appearance of a generic, we, for sure, would see continued growth on Somatuline. But if a generic comes and depending a bit on the timing, it's, of course, a sensitive situation like on any patent expiration and when you have a generic coming. So it's really hard to predict, and we have to have a still internal discussion how we're going to guide you for the future when we come to Capital Markets Day. And I hand over to Aymeric for also some additional comments.

So maybe to make sure there is a good understanding of our assumption regarding generics, so clearly, today, we do not see any entry of generic, as we said for our guidance 2020. Regarding guidance for next year, we're going to inform you as we see the situation evolving, especially given the 2 important markets being octreotide in the U.S. or lanreotide in Europe. Regarding the outlook, as David said, our 2022 outlook will be -- there will be upside if there were delayed entry of generic as compared to our assumption that we provided earlier this year in the $2.8 billion and the 28% margin where we were assuming entry of additional generic as early as 2021.

Your next question comes from the line of Richard Vosser from JPMorgan.

Richard, we can't hear you. You might be on mute.

Hello? Can you hear me?