Earnings call transcript: Rovi’s Q4 2024 shows revenue drop, strategic growth plans

Laboratorios Farmaceuticos Rovi reported a notable decrease in its financial performance for Q4 2024, with operating revenue falling by 7.9% to 763.7 million euros. Despite the decline, the company is optimistic about its future growth due to strategic investments and product expansions. The stock showed a slight decline of 0.36% in pre-market trading, reflecting mixed investor sentiment. Currently trading near its 52-week low of €55.74, InvestingPro analysis suggests the stock is undervalued, presenting a potential opportunity for value investors.

Key Takeaways

• Rovi’s operating revenue decreased by 7.9% year-over-year.
• Specialty pharmaceutical sales increased by 2%, driven by OKEDI’s market expansion.
• The company invested significantly in CapEx and acquired a stake in SELSIA Technologies.
• Gross margin improved by 3.7 percentage points to 62.7%.
• Rovi plans further international expansion and product launches.

Company Performance

Rovi’s overall performance in Q4 2024 was marked by a decline in key financial metrics. Operating revenue decreased to 763.7 million euros, while EBITDA dropped by 15% to 207.4 million euros. Net profit also saw a significant reduction, falling by 20% to 136.9 million euros. Despite these declines, the company’s specialty pharmaceutical sales showed resilience, with a 2% increase attributed to the strong performance of OKEDI, a treatment for schizophrenia. According to InvestingPro data, the company maintains strong fundamentals with a P/E ratio of 17.8x and has consistently paid dividends for 17 consecutive years, currently yielding 1.62%.

Financial Highlights

• Revenue: 763.7 million euros, down 7.9% year-over-year.
• EBITDA: 207.4 million euros, a 15% decrease from the previous year.
• Net Profit: 136.9 million euros, down 20%.
• Gross Margin: Improved by 3.7 percentage points to 62.7%.

Outlook & Guidance

Rovi anticipates a mid-single-digit decline in operating revenue for 2025. The company plans to continue its investments in CDMO and R&D, with expectations of OKEDI’s growth and further international expansion. New CDMO contracts are also on the horizon, which could bolster future revenue streams.

Executive Commentary

Juan, a company executive, stated, "2024 and 2025 are clearly transition years. The company is making significant investments that will lay the foundation for Rovi’s future growth." This highlights the company’s strategic focus on long-term growth despite current financial setbacks. Javier added, "We are extremely excited and optimistic about the prospect of getting new customers," indicating confidence in expanding their customer base.

Risks and Challenges

• Market Saturation: The injectable market faces a supply-demand imbalance, which could impact future sales.
• Raw Material Prices: Fluctuations in heparin raw material prices, which fell by 54% in 2024, could affect cost structures.
• International Expansion: Risks associated with launching products in new markets could pose challenges.
• Economic Conditions: Broader macroeconomic pressures may influence consumer spending and investment capacity.
• Regulatory Changes: Potential changes in pharmaceutical regulations could impact operations and market access.

Rovi’s strategic focus on innovation and international growth, coupled with its recent acquisitions, positions it for potential recovery and expansion in the coming years. However, the company must navigate the current financial headwinds and market challenges to achieve its long-term objectives.

Full transcript - Laboratorios Farmaceuticos ROVI (ROVI) Q4 2024:

Juan, Executive (likely CEO or Senior Management), Rovi: morning to everyone in the call. 2024 was a transition year for Rovi, crucial for establishing the basis for Rovi’s future. The company is currently undergoing a period where investment is essential to drive our growth and position the company for long term success. In this context, our operating revenue decreased 7.9% as a result of lower revenues from the manufacturer of the COVID-nineteen vaccine in comparison to 2023 when Rovi had booked higher income related to the production of the pandemic COVID-nineteen vaccine, and secondly, because of lower revenues related to the activities carried out to prepare the plant for production of the vaccine and the agreement with Moderna (NASDAQ:MRNA). Sales of the specialty pharmaceutical business increased 2% in 2024.

Ocadie, Usperidone ASM, has continued to grow robustly with 2024 sales during those of 2023. The slowdown in sales of our heparin franchise division was mainly due to lower orders for enoxaparin partners throughout the year. However, vimepirin sales increased by 2% to €96,400,000 in 2024. Our gross margin improved by three seventy basis points in 2024. For 2025, with the visibility that the company has at this moment, we reiterate our guidance.

Rovi expects its operating revenue to decrease by a mid single digit percentage in comparison with 2024. Let’s begin by reviewing the key milestones achieved last year. In April, Rovi announced that its subsidiary, Rovi Pharma Industrial Services, enter enter into an agreement to support the manufacture of preface syringes for a global pharmaceutical company. Under the terms of the agreement, Royce will provide a high speed production line at the Royce San Sebastian De Loreges facility in Madrid with an estimated annual capacity of 100,000,000 units. Commercial production is expected to be the first to commence in 2026.

And as from 2027, which is expected to be the first full recurrent manufacturing year, Roby’s CDMO business expects to have a positive revenue increase impact ranging between 2045% over 2023 sales. After the completion of the share buyback program in June 2024, we informed that the canceled shares had been delisted from the Stock Exchange on September 2024. As a result, total ordinary shares now amount to 51,235,762. By the cancellation of these shares, the shareholders automatically increased their percentage interest in the share capital. Lastly, in December, for the fifth year running, Rob improved its ESG risk rating awarded by Sustain Analytics, achieved a low risk of 16.1 compared with 16.4 the previous year.

The company was placed fifth in the World ESG Risk Ranking from among the four twenty four companies evaluated in the pharmaceutical industry. And now let me give a quick overview of 2024 financials. Total (EPA:TTEF) operating revenues fell by 7.9% to €763,700,000 versus last year. However, we continue to see good performance within our Specialty Pharma business. Its sales were up 2% to €427,500,000 in 2024, positively impacted by Okeedi, Nepartis, bemeparin and the contrast agents and other hospital product division.

I will touch upon their performance later on in the presentation. EBITDA stood at EUR 207,400,000.0, a decrease of 15% compared to last year, reflecting a 2.3 percentage point decrease in the EBITDA margin, which was 27.2% in 2024. Likewise, net profit stood at EUR 136,900,000.0, a decrease of 20% in 2024 compared to 2023. Moving on to one of our main pillars of growth, our specialty pharma area. Sales of prescription based pharmaceutical plus remained stable in 2024.

Sales of the heparin franchise decreased by 2% in 2024, mainly due to lower orders from Enoxaparin Partners. Nemiparin had another strong quarter in terms of revenue performance. In 2024, sales were up 2%. The Nipponie International sales grew 16% with a strong contribution from China, Turkey, and Greece. And we continue to see momentum for the product.

We aspire to become a global leader in this field with bemeparin and enoxaparin biosimilar. In this context, we’re investing not only increase our capacities for the production of heparins, but also to become self sufficient in obtaining crude heparin, and thus becoming a vertically integrated company in all the low molecular weight heparin manufacturing phases. Robyn continues with its internalization plan. Sales outside Spain represented 64% of operating revenue in 2024 versus sixty seven percent in 2023. Regarding daloxaparinib biosimilar, it is already present in 41 countries.

And we continue to sign out licensing agreements to distribute the product in more countries. As I mentioned before, in 2024, enoxaparin biosimilar sales decreased by 6%. However, the fourth quarter was the strongest quarter of the year in terms of sales due to a higher concentration of orders from partners. Enoxaparin sales increased 37% in the fourth quarter of twenty twenty four compared to the third quarter of the same year and rose 10% in the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three. The growth drivers of the specialty pharmaceutical business were Okeedi, Nepalese, and the contrast agents and other hospital products.

Now taking each one of the brands in turn step by step. Sales of Ocadie, the first Robby product based on its leading edge drug delivery technology, ISM, for the treatment of schizophrenia in adults, reached €28,800,000 in 2024, twice as much as in 2023. We have also continued to make good progress with Ocadis launch. In the fourth quarter of twenty twenty four, the product was launched in Finland and was approved by Health Canada. In January 2025, it was launched in the rest of the Nordic countries and will also be launched in Australia, Taiwan, and The Netherlands.

Sets of neparviz, a prescientific product from Novartis (SIX:NOVN), indicated for the treatment of older patients with symptomatic chronic heart failure and reduced injection fraction increased 13% in 2024. And finally, sales of contrast imaging agents and other hospital products increased by 16% in 2024. Let me mention that in January 2025, Roby acquired a majority position in SELSIA Technologies, a pioneering company in the development of artificial intelligence assisted diagnosis in the pathological anatomy area. We believe this agreement represents an opportunity for Rovi to contribute to the improvement of health care to the development of artificial intelligence solutions. Regarding CDMO, sales declined to €336,200,000 as a result of lower revenues from the manufacturer of the COVID-nineteen vaccine in comparison to 2023, when Robby had booked higher income related to the production of the pandemic COVID-nineteen vaccine and lower revenues related to the activities carried out to prepare the plant for production of the vaccine under the agreement with Moderna.

We remain excited about the near and long term potential of our globally leading CDMO business given the attractive market dynamics. Roby has invested substantial capital to build global leadership in sterile, fill and finish capacity and technology services. With such investments and with current expansions underway, Robbia expects to significantly increase its current sterile capacity and its FDA and EMEA, EU GMP and S1 compliant facilities in Spain and to become one of the largest and most experienced pharmaceutical groups in Spain with eight fully integrated plants, three of which are fully engaged in contract development manufacturing operations. Moving to research and development, we are making good progress with our two Phase I clinical trials. In July 2023, we began the Phase I clinical trial of the new three monthly formulation of Lethosol, Lethosol level in Europe to evaluate the pharmacokinetics, safety, and reliability of single ascending doses of letrosoil level at different strengths, involuntary, healthy, postmenopausal woman, the LAYLA1 study.

In September 2023, we began the phase one clinical trial of the three monthly risperidone injection, which would complement the current four weekly formulation of risperidone ISM for the maintenance treatment of other patients with clinically stable schizophrenia. The clinical trial will evaluate the safety, tolerability, and pharmacokinetics of various candidate formulations at different doses trends and injection sites. Proof of ROBI’s commitment to a sustainable business model is the recognition obtained by the company through the evaluation by Sustain Analytics. In December 2024, ROBI obtained the fifth position in the SG rating among the 424 companies evaluated in the pharmaceutical industry category. Company was likewise ranked thirty first out of a total of eight fifty one companies in the entire sector, which includes biotechnology companies, pharmaceutical laboratories, and laboratory equipment companies.

Furthermore, ROBI improved its ESG rating to 16.1 points versus the 16.4 points obtained in 2023. Among the actions that allow the rating to improve in 2024, Robi can highlight the sound management of ESG risks related to product quality and safety, corporate governance, business ethics, human capital, climate change, waste management, and an anti corruption anti bribery practices. In addition, robotics has been considered by sustained analytics as top rated among companies in the industry due its involvement in a series of activities such as the Board of Directors’ involvement

Javier, Executive (likely CFO), Rovi: in

Juan, Executive (likely CEO or Senior Management), Rovi: the company’s environmental and social aspects, the implementation of the environmental policy, and our robust quality and safety program for products and services, as well as the integration of ethical practices at all levels of the organization. Additionally, Roby has continued to work on the implementation of its ESG Master Plan twenty twenty three-twenty twenty five, approved by the Board of Directors in December 2022. To our twenty three and twenty twenty four, ’60 ’5 percent of the 45 KPIs included in the master plan were completed. Such progress is supervised by the Sustainability Committee created in mid twenty twenty three, which reports annually to the Board committees on the progress of the plan. And finally, I will provide an overview of the 2025 outlook.

As I mentioned earlier, 2025 guidance remains unchanged. And we expect operating revenue to decrease by a mid single digit percentage in comparison with 2024. Notwithstanding, this guidance is calculated using certain factors that could be relevant to the estimates and that are difficult to specify at the present time. They include, among others, the following. First, as of today’s date, the company is unable to forecast how demand and production might evolve for the vaccination campaigns that will take place in 2025.

Second, it is hoped that the expansion of the compounding, aesthetic filling, inspection, leveling and packaging capacities at the Rovi facilities in Madrid and the current high market demand for contrast manufacturing services will favor obtaining new business with a resulting sales impact. This would have to be considered, but it’s impossible to estimate at this time. 2024 and 2025 are clearly transition years. The company is making significant investments that will lay the foundation for Robi’s future growth. We are at an inflection point with a multi year growth opportunity driven by our established European footprint, which will continue delivering growth within our low molecular weight heparin platform and this success launch of OKEdI and the future avenues of growth that will come from a CDMO business and the investments efforts made in research and development with the development of the quarterly injection of Rethosone, which is nearing completion of a phase one study.

These growth levels are firmly underpinned by a very solid ongoing business, business that has delivered year after year based on our leading specialty pharma franchise and our high value added CDMO services. And with that, I would like to turn it back to Javier, who will run you through the financials in more detail. Thank you very much for your attention and for taking the time to participate in this meeting.

Javier, Executive (likely CFO), Rovi: Well, thanks, Juan. As Juan has previously mentioned, since the pandemic, we have been in a transition period in which value is being created for the future. In this context, in 2024, operating revenue was €763,700,000 a decrease of 7.9% from 2023 sales, mainly due to the performance of the CDMO business. CDMO sales fell to EUR 336,200,000.0 mainly due to the lower revenues from the manufacturer of the COVID-nineteen vaccine in comparison to 2023 when Rovi had booked higher income related to the production of the pandemic COVID-nineteen vaccine and also lower revenues related to the activities carried out to prepare the plant for production of the vaccine under the agreement with Moderna. Furthermore, Robby invoiced less than forecast in the contract manufacturing business in the fourth quarter of the previous year, basically because of a provision that had not been initially expected that was charged to revenue.

At any event, this is a situation limited to 2024 which does not affect or change the forecast for the current year 2025. However, sales of the specialty pharmaceutical business increased 2% to EUR 427,500,000.0 compared to EUR €420,200,000 in 2023. Sales of low molecular white heparins slightly decreased by 0.2% to €241,600,000 in 2024. Gross profit decreased 2% to €478,500,000 in 2024 compared to last year. Gross margin was up 3.7 percentage points to 62.7% in 2024.

This increase was mainly due to the decrease in the contribution to a contract manufacturing business of revenue relating to activities to prepare the plant to produce medicines under the agreement with Moderna, which contributed lower margins to group sales. The increased contribution to the CDMO business by existing customers, excluding Moderna this time, which contributed high margins and the increased contribution of sales of Okebi, which likewise added high margins. In 2024, raw material prices for low molecular white heparins fell 54% compared to 2023. Now with outstanding spite of the decrease in HEPA and raw material prices, the impact on the gross margin was negative in 2024. However, a positive impact on the gross margin is expected from 2025 onwards.

Rovi continues to be committed to innovation. R and D expenses increased 3% only to EUR 25,800,000.0 in 2024 due to the development of the Phase I of letrosoil LEV, which began in July 2023 and the development of the Phase I of a new formulation of risperidone ISM for a three monthly injection which began in September 23. Selling, general and administrative expenses, SG and A increased 12% to EUR245.2 million in 2024 compared to 2023. This increase was a consequence of higher employee benefit expenses excluding R and D, which increased 10% in 2024 versus 2023, resulting mostly from a wage increase of 10.3% in accordance with the twenty eighth General Collective Agreement for the chemical industry, twenty one-twenty ’3 percent and also a 3% wage rise due to the entering force of the twenty first collective agreement of the chemical industry, in this case twenty four-twenty six in November 24 and also an increase of 13% in other operating expenses excluding again L and D due to the Okebis launch Europe and to non recurrent expenses. The latter includes the process for a strategic assessment of the contract manufacturing business and the dismantling of the sodium heparin production plant in San Sebastian De Lorelles subsequent to the investment in a new plant in Escusal approved by the European authorities in June 24.

Nevertheless, other operating expenses excluding R and D and nonrecurrent expenses only increased by 5% compared to 2023. EBITDA totaled EUR207.4 million in 2024, a decrease of 15% compared to 2023, reflecting a 2.3 percentage point decrease in the EBITDA margin, which decreased to 27.2% in 2024. EBIT decreased 19% to EUR 179,400,000.0 in 2024, reflecting a three point percentage point decrease in the EBIT margin which decreased to 23.5% in 2024. Net profit decreased 20% to €136,900,000 in 2024. Moving on to the evolution of CapEx and cash flows.

As we have been saying, we are on track to becoming a key leading player with the CDMO industry in terms of injectable capabilities. In this context, Rovi invested €62,200,000 in 2024. Of this amount, €46,600,000 relates to investment CapEx regarding our facilities including important projects such as the ISM industrialization, the glycopeptone joint venture for the construction of a plant dedicated to the production of compounds of high biological value from the intestinal mucus of pigs and finally the new filling lines and the operations expansions. Lastly, we invested €15,600,000 related to maintenance and other CapEx. I’m very pleased to report that cash flows from operating activities has increased to EUR 138,300,000.0.

I would like to mention that Rovi’s working capital improved by EUR 9,000,000 in 2024 mainly due to the decrease in inventories. We expect inventories to continue decreasing throughout 2025 as a result of the fall in the prices of the raw materials of raw molecular weight Regarding our debt, as of thirty first December twenty fourth, ROE’s total debt increased to EUR 114,400,000.0, EUR 80 6 point 9 million instead with banks representing 76% of total debt, While €16,100,000 correspond to financial liabilities for leases representing 14% of total debt. And finally €11,400,000 correspond to debt with public administration related to the development of R and D projects which is 0% interest rate debt representing 10% of total debt. As thirty first December twenty fourth, bank borrowings increased to €49,200,000 At the same way, as of 12/31/2024, Robbie had a gross cash position of EUR 29,300,000.0 and therefore net debt of €85,100,000 Regarding the dividend, Robi’s board of directors will put a proposal to the general shareholders meeting for distribution of a dividend of €94,910,561.05 equivalent to €0.9351 per share entitled to receive it charged to the 2024 profit. This would entail distribution to an amount equivalent to approximately 35% of the consolidated net profit for 24% attributed to the parent.

Considering the group’s cash generation and the market situation, Rovi decided to launch a buyback program for the company’s shares effective as of twenty six July twenty three. On eleventh June twenty four, Robby informed of the completion of this buyback under the Visa (NYSE:V) framework, a total of 2,233,466 shares were acquired for an amount of €130,000,000 which represents approximately 4.13 percent of the share capital. As notified when the buyback program commenced, the purpose of the program was to cancel sales of ROBI through our reduction of capital and at the same time to contribute to ROBI shareholders remuneration by increasing the profit per share. The reduction of the capital was carried out by cancelling 2,780,003 hundred and 95 shares. On 12/2024, Robbie informed that the canceled shares had been delisted from the stock exchange.

So regarding news flows for this year, we will continue to monitor the evolution of the manufacturing of the Moderna products and also the rest of our portfolio of customers of the CBMO business unit. We expect to announce OKADIS launch in more countries. The product is currently being marketed Germany, UK, Spain, Portugal, Italy, Austria, Greece, Serbia and Finland. In addition, in January, it was launched in the rest of the Nordic countries and as Juan said before, will be followed by Australia, Taiwan and The Netherlands. We also look forward to hearing about the licensing of new products.

Regarding our R and D strategy, we are making good progress with the first clinical trial of Letyrosol ASM and the new formulation of risperidone for a three month injection. Regarding the clinical development of letrosoil LEV, we will request to meet with the FDA in 2025 to discuss the next steps with them. That’s all regarding our financial results for 2024. Therefore, we can now start the Q and A session. If you want to ask any questions, please do not hesitate to send them through the question button on the platform.

Martha, Moderator/Investor Relations, Rovi: Thank you very much, Javier. So, Patriciati Fuentes has three questions. The first one is for you, Javier. Could you tell me about the nature of the miss in EBITDA in q four? Assuming that only part of it came from sales, I would like to know why there are additional costs or provisions that put pressure on the 02/2024 EBITDA?

And in particular, how much did the strategic review project cost you?

Javier, Executive (likely CFO), Rovi: Sir. Thank you. Thank you very much for your questions, Patricia. As we announced a couple of weeks ago, in the context of the preliminary closing of the last year results And in relation to the closing of EBITDA levels forecasted by the market consensus, the company, as all of you know, made the announcement that these EBITDA levels could be lower than expected, probably or the market consensus expected lower below a range of between 1015%. And as we’ve been commenting this morning, the closing EBITDA figure was $2.00 €7,000,000 and that is, approach 13% lower than the market consensus at that time.

Basically this was due and as we have tried to explain several times that we invoiced less than expected in the contract manufacturing business, the CDMO business unit in the last quarter of twenty twenty four. And it was mainly due to booking a provision with an impact on the sales figures that had not initially been forecasted by us. As we said this morning as we have said this morning in the press release, this is a situation only affecting 24% which although contributed to an 8% reduction in our operating revenue, which was more or less in guidance with our in line with our guidance forecasted for 2024. So therefore, this and this is important, does not affect or change the forecast for the current year for this 2025. With regards to your other question, additionally in the fourth quarter of twenty twenty four, operating expenses increased due to, I would say, a series of nonrecurring elements, which were related to the process mainly to the process of this strategic evaluation of the contract manufacturing business.

In this case, we informed the market that this amount was around EUR 4,300,000.0 and we have also dismantled our facility for sodium small facility though for sodium heparin manufacturing. This was in San Sebastian Del Oreges and this has been done due to the approval of the Scorsair plant approved by the European authorities in June 24. And we have closed down the facility in San Sebastian De L’Orealjes which amounted to was a write off of around EUR 4,000,000 because we wanted to focus on exclusive and in this way to allow us to have more synergies and to reduce the operating cost in the future.

Martha, Moderator/Investor Relations, Rovi: Thanks, Hariet. The second question from Patrizia is for you, Juan. What are your growth prospects for Heparin for 2025?

Juan, Executive (likely CEO or Senior Management), Rovi: Hi, Patricia. Good morning. Thank you for your question. Regarding oxaparin, we expect flat or slightly decreased in terms of sales. Regarding vimepirin, as we have expressed during our presentation, both Javier and myself, we see good momentum from international sales.

So we do expect some growth, especially coming from the countries that we have mentioned before, China, Greece, and Turkey. So we see that there is a growth item that it will be delivered, in this year in 2025.

Martha, Moderator/Investor Relations, Rovi: Thanks, Juan. Patricia also asks, how much could the ex Moderna business grow this year?

Juan, Executive (likely CEO or Senior Management), Rovi: I mean, before answering the question, let’s go back to 2024. I mean, the ex Moderna business in the CDMO franchise, it grew it grew up double digit. One of the reasons of that incremental growth was because, as we have shared with the market, we temporarily shut down the Julan Camarillo facility just to do some upgrading. I mean, the the facility is is already an s one compliant, but we want we we have to upgrade certain equipment, and we have added a new line. And that, it made us to to shut temporarily, the manufacturing plant, in the first quarter in twenty twenty five.

So that means that we have to bridge and to increase the capacity and the output during 2024. So again, for that reason, we expect as part of the production for 2025 was produced during the last quarters of twenty twenty four, we expect that this Moderna sales in the CDMO franchise will slightly decrease in 2025.

Martha, Moderator/Investor Relations, Rovi: Thanks, Juan. Francisco Ruiz from, Benete has two questions. The first one, Javier, it is for you. If one of the reasons, lower sales in q four is acquisition that is no longer to be here in 02/2025. Why do we maintain the guidance in sales instead of increasing?

Javier, Executive (likely CFO), Rovi: Yes. Thank you, Martha and Paco. Well, basically, as we tried to explain earlier this morning, the forecast for 2020 guidance and the sales for 2024 was very similar that we expected and slightly very minor miss compared to our guidance. So for 2025, we expect to maintain the guidance that we provided in November. So it’s in the same direction and it’s aligned with our current forecast.

So that’s right. The commission is not the problem and we expect that the guidance for ’25 to be as a mid single digit decrease.

Martha, Moderator/Investor Relations, Rovi: Thanks, Javier. Juan Paco also asks, you booked €19,000,000 investment in Terrafront project. Do you expect further investment of this kind in the future?

Juan, Executive (likely CEO or Senior Management), Rovi: I mean, the TeleFront is a very, I mean, interesting project. You know? I mean, it it gives the chance to really to set a foot on the on advanced therapies, cell therapies, and personalized medicine. That was the initial first milestone that we had committed to invest on the company. We are right now assessing all the different projects that they have been that different academic groups have approached and and and have proposed us to to fund it.

I would not expect at least in 2025 to make any additional, milestone payments. And, again, it’s going to depend on the quality, the number of projects, and, the investment requirements to take it to five to commercial phases or even to licensing out phases. So it’s very difficult to forecast at this moment of time. But definitely, in 2025, we don’t see any need for any additional funding to Terrafront.

Martha, Moderator/Investor Relations, Rovi: Thanks, Juan. The next question is from Guillermo Sampaio from CaixaBank. Javier, how do you expect SG and A and R and D to grow in 2025?

Javier, Executive (likely CFO), Rovi: Thank you, Guillermo, for your question. As we’ve been trying to deliver in today’s presentation, we are in a transitional period where we are trying to prepare ourselves to become a leading CDMO player and we are also investing for the projects for the next coming years. In this sense, for 2025, as you are asking us in terms of SG and A, we expect that we need to increase the number of people in the CDMO business units as we are adding new lines. As you know that we had an important agreement that we signed last year and for that agreement we are adding or we added a new line that will be booked by that agreement. So we need people to manufacture to run the lines and to be involved on the manufacturing process.

So I would say that also with the launch of OKD in the countries, in Europe and the different projects alongside the company, we expect that an increase of SG and A that could be, I would say, a mid single digit growth at least. And in terms of R and D, I believe that this is still early to assess the forecast for the year. As we said before, we need to meet with the FDA for the Lettosol project and depending on how we ended up the Phase one clinical trials, we’ll probably need to enter on new phases and therefore we could be coping with more or incremental R and D costs. I think that probably in the Capital Market Day, we can provide more visibility on the R and D front and therefore to explain and devote much more time around R and D and explain the future of the projects.

Martha, Moderator/Investor Relations, Rovi: Thanks, Javier. The next question comes from Carlos Garcia from MuduActivos. The contract that Javier, for you. Sorry. The contract that you mentioned for a customer in in CDMO, can you clarify how do you expect production to ramp up?

You mentioned full year impact in 02/1927, but should we assume 50% impact in 02/1926?

Javier, Executive (likely CFO), Rovi: Yeah. As I was explaining before, this agreement implies a new line which is already in our site of San Sebastian De L’Oreales. We are we have already validated the line and we are starting to do the technical tech transfer with the customer. It’s it’s always difficult to have a clear or a very accurate assessment of when we are gonna start the routine manufacturing business with the customer. That’s why we assessed that ’27 would be our full year, first full year of routine manufacturing business Depending on how quick and or how fast is the tech transfer done and how the regulatory process in the different regions is approved, our manufacturing line is approved.

We could even start routine manufacturing business as as Carlos mentioned at half of twenty six, so in the middle during the middle of twenty six. Still at this point it’s early to forecast it. But, yeah, you can bear in mind that it will be either mid year twenty six or beginning ’20 ’7.

Martha, Moderator/Investor Relations, Rovi: Thanks, Hayat. So, the next, two questions, come from Mark Proficlich. So the first one is for you, Javier. You state that you hope to gain some new CDMO contracts in 02/2025 and realize revenues, from those new revenues. Is this realistic given the long lead times in the CDMO business?

Javier, Executive (likely CFO), Rovi: I mean, what I can tell you right now is that, we are extremely excited and optimistic about the prospect of getting new customers. I think, I mentioned before that we believe that there is a current imbalance between supply and demand in the injectable market and Roby is well positioned to take advantage of the current situation of the market. We believe that we are gaining and winning customers and these clients are quite confidential and we cannot disclose news or breakout news about these sort of customers. Again, it’s difficult to quantify or to visualize the impact on ’25, but I’m sure that at least next year onwards we could visualize and we could materialize most of these new customers that we are winning right now. And I think we could provide more visibility as long as the year goes by.

And again, we are terribly optimistic and excited and that’s why we keep investing on adding new capabilities on the CDMO business unit.

Martha, Moderator/Investor Relations, Rovi: Thanks, Javier. The second question from Mark is for you, Juan. In January 2025, Ruvi acquired an AI diagnostic company aiming to improve health care through AI. Could you elaborate further on the strategic fit of this acquisition?

Juan, Executive (likely CEO or Senior Management), Rovi: I mean, this is, a startup that we identify, some quarters ago. We thought it had a perfect fit within our hospital product portfolio. I mean, anatomy pathology departments nowadays worldwide are getting digitalized. So new equipment is being bought by hospitals in order to enhance and also to speed up the process of diagnosis and the reports regarding the millions of biopsias and, and pathological samples that they are processed at, regularly basis on all hospitals worldwide. It does fit perfectly with our strategy because, we have a stronghold in Spain and a very well knowledge of the central departments of any hospital setting.

I mean, radiology is a hospital department that provides services to the rest of the medical departments. So anatomy pathology works in the in the same way. At the end of the day, this company has developed what we believe is a extraordinary technology in producing algorithms to that provides more reliability, flexibility, and a faster report time for something that is becoming crucial within the oncological setting and the biopsia setting worldwide. Again, it has been a very minor investment, but it fits perfectly with our strategy. It’s a good fit for our hospital sales force.

And as well, it’s a it’s a good fit for our European footprint. I mean, it’s very easy to scale up for a European perspective. We just bought the company in January. And as the year goes by, probably in the next forthcoming quarters, we could provide more visibility in terms of launching and in terms of all the commercial activities, a potential stream of revenues for the company.

Martha, Moderator/Investor Relations, Rovi: Thanks, Juan. The next two question comes from Joaquin Garcia Quiroz from JB Capital. Javier, could you provide us a bit more color on 2025 EBITDA with sales declining by 5%, gross margin improving, and costs going up. Is it correct to assume a similar to or a similar to slightly declining EBITDA for 2025?

Javier, Executive (likely CFO), Rovi: Thank you. Thank you. As we have confirmed this morning, our operating revenue guidance for 2025 has not changed previous prior guidance. And although we do not provide the market with guidance on the EBITDA Right now at Robbie, we are in a moment of which is essential to invest on the company in order to drive our growth for the future as we’ve been telling in today’s conference call. We are concentrating our efforts in increasing our production capacities in the CDMO business and reinforcing the company’s internationalization strategy through OKD across different subsidiaries in Europe.

All these means are increasing in expenditures and we are hiring as I said before, talent to support the development of our new production lines, which will come into operation this year and also in 2026 and 2027. And as I said before, the routine manufacturing business will not be fully running until 2027 or even 2026 hopefully before. So this year also we are ending the Phase I of LetroSol and the quarterly risperidone and we hope to begin the following phases as I said before also on the different projects, which again will also mean significant financial effort. Although these expenses would be significant, we believe that this will set the basis necessary for solid and sustainable growth in the next coming years and that’s why we invite you all of you for the Capital Market Day next month in order to give you more visibility for the growing prospects of the company.

Martha, Moderator/Investor Relations, Rovi: Thanks, Hari. The second question is what levels of CapEx should we assume for the upcoming years?

Javier, Executive (likely CFO), Rovi: Yes. Basically, as I said before, on 2025 and 2026, we are expanding our manufacturing capabilities. We are also ending the facility with our joint venture Glycopecton for the manufacturing of biological products. So I believe that for 2025, we could expect a similar CapEx than in 2025. And again, this is always an investment for the future due to the exciting situation that the company is at the moment.

Martha, Moderator/Investor Relations, Rovi: Thanks, Javier. The next question comes from Alvaro Lenti from Alantra Equities. Should you consider launching another share buyback program considering your solid balance sheet, positive cash flow generation, and the fall in the share price?

Javier, Executive (likely CFO), Rovi: Thank you, Alvaro. I mean, for us, the remuneration of our shareholders is a key criteria. And this is always in our minds when we need to do capital criteria investment decisions. So you know that we believe in organic investments and inorganic growth. So we don’t foresee the use of capital for M and A purposes or at least transformative M and A inorganic growth.

So whenever we need to think about the future and about the capital needs, sellbackbacks is always on the table. So I cannot confirm at this point if we are gonna have sellbackback program in the future because it’s not on my only criteria, but it’s always on the table and I think that balance sheet is will be reinforced this year. I mean, we cannot disregard that option, but again, it’s not in our short term plans anyway right now.

Martha, Moderator/Investor Relations, Rovi: Thanks, Javier. The next question comes from Pablo de Renteria from the Carto Chocol. You mentioned that despite the 50% decline in raw material prices for low molecular weight caperings, the impact on gross margin in 02/2024 was negative, which I presume was due to inventories built at higher prices. Could you please provide more details or quantify the expect expected savings impact for 02/2025? Additionally, should we expect the low lower raw material costs to result in reducing pricing for in licensed agreements in the international segment?

Javier, Executive (likely CFO), Rovi: Yeah. With regards to your first question, I think, we are really, really looking forward to this year results in the sense that after a few years of constraint on the margin due to the increase of the sodium raw material in the sodium heparin raw material prices, This ’25 is the first year that we are going to see a very positive contribution or a positive contribution from the decrease of the heparin raw material prices. Again, and this is as you were mentioning in your question as we have very long stocks and the manufacturing process, very large stocks as the manufacturing process is very long, It’s also difficult to quantify very accurately the impact in a given year, but I could think that we can assess that the impact on the raw material and the gross margin positive impact due to the separating raw material prices could be I would say between two to three point percentage points, two to three percentage points on the gross margin. So positive additional gross margin for the company, which following your second question is correct somehow in the sense that if prices are material prices are going down or raw material prices are going down, it is easy to expect that the market, the selling market prices in the tender front of the raw of the heparins could be impacted.

So maybe we also need to have that in to bear in mind that we’ll have a negative contribution on the selling prices of the heparins due to a price competition pressure. Probably, therefore, we will need to decrease somehow the transfer pricing to our partners. But overall, I would say that we could think maybe a 2% increase on the gross margin front.

Martha, Moderator/Investor Relations, Rovi: Thanks, Hariel. The last question is for you, Juan, from, Chris Richardson from Jefferies. Could you please give us an idea of expected growth ex CDMO growth?

Juan, Executive (likely CEO or Senior Management), Rovi: I mean, ex hi. Thank you for the question. Good morning. I mean, ex CDMO growth, I mean, really, we’re expecting a very important growth, mainly coming from OKEDI. I mean, the launch of OKD has been a success.

We’re just really still launching the product in many in many countries. So we do expect, with double sales versus last year. So we expect to have a tremendous organic growth in the in Ocadie, not only coming from new launches, but as well coming from the existing countries. So we do expect still being far away from big sales in countries like Spain, Germany, Italy, just been launching in Nordic countries. Taiwan, Australia, and Canada will follow shortly.

So again, the the expectations of of OKD in terms of growth for the company are still very high. And that’s that’s a really positive thing, not only for the sales itself, but as well because it, it validates our SM technology and the prospect of our follow-up process that we have in our research and development programs. Heparin as well, we do expect, growth. But eparin is, we believe, as I mentioned before, that we’ll have, still, an strong contribution, in the following in the following years, not only from Spain, but as well from the international sales that they grew 16% last year. And we expect that China, Turkey, and Greece will still bring additional growth to the company.

And I believe, as Javier has mentioned in his presentation, the pharma business in Spain is also going pretty well, pretty solid. We do we’ve our we have already faced the the price decrease related to the generic launch in in Orbates and and Voluspa, but the service is showing a strong growth as well as the contact the hospital products in general. And we do expect to well, let’s say, we are optimistic as well on new in licensing agreements coming into place in the in the next coming quarters. So I think the good thing about the company is that not only CDMO has got a very bright future, but as well the pharmaceutical part of the business, we represent slightly over 50% of our revenue line. Really, we have a very important organic item yet to be delivered with almost no uncertainty.

So there is a I cannot give you a sad figure because I don’t have it on top of my head. But really, the predictability in terms of organic growth in the pharma business is strong right now.

Martha, Moderator/Investor Relations, Rovi: Thanks, Juan. We are out of time. Thank you very much for your high participation. The Rovi, Aya team will answer the pending questions as soon as possible. Let me now turn the floor over to Javier for the closure of the presentation.

Javier, Executive (likely CFO), Rovi: Well, thank you, Martha. As, as you were saying, we unfortunately, we are out of time. As we said before, our IR team will help you if you have any pending further question. Thank you very much for joining us in this Rovi’s twenty four financial results call and have a nice day.

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