Q1 2023 Viatris Inc Earnings Call
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Good morning, My name is Catherine and I will be a conference operator today at this time I would like to welcome everyone to the Villa Trust 2023 first quarter earnings call and webcast.
Participant lines have been placed on mute to prevent any background night. After the Speakers' remarks, there will be a question and answer period.
You'd like to ask a question at that time. Please press star one on your telephone keypad.
If you need to ask further questions you may reenter the queue.
Lastly, if you should require operator assistance. Please press star zero. Thank you I will now turn the call over to Bill Sobolewski head of capital Global capital markets. Please go ahead.
Good morning, everyone.
It's my pleasure to welcome you to our first quarter 2023 earnings call.
With us today is our CEO , Scott Smith, President Rajiv Malik.
CFO Sanjeev ROA and Jeff now from our eye care Division.
During today's call, we will be making forward looking statements on a number of matters, including our financial guidance for 2023 and various strategic initiatives.
These forward looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections.
Please refer to todays slide presentation.
Our SEC filings for a full explanation of those risks and uncertainties and the limits applicable to forward looking statements.
We will be referring to certain actual and projected non-GAAP financial measures to supplement investors' understanding and assessment of our financial performance.
Conciliations all of those non-GAAP measures to the most directly comparable GAAP measures are available on our website and in the appendix of today's slide presentation.
An archived copy of today's presentation and other earnings materials will be available on our website at investor <unk> Dot com. Following the conclusion of today's call with that it's my pleasure to welcome our CEO Scott Smith.
Good morning, everyone.
I'm excited to speak to you today officially.
The CEO of the interest.
It's been a busy and productive first month.
The interest is a special company I knew that from the moment I joined the board in December and I appreciate it even more today.
It begins with our ability to sustainably deliver access to high quality medicines.
The people regardless of geography portion of these days.
Since becoming CEO I have met with colleagues all over the globe and I've had the opportunity to spend time with each business segment.
I have seen firsthand the unique combination of passion dedication and skill of the people will be address their unwavering commitment to our mission is infectious and.
Honored to be part of this amazing organization and I'm extremely impressed by everything that has been accomplished to date.
In addition to our historically strong regulatory clinical and manufacturing capabilities. I've also been very impressed with the company's global commercial infrastructure and the talented people we have there I.
I look forward to finding additional ways to leverage these capabilities to deliver more access to more medicines to more patients around the world.
I wanted to reiterate that our.
Firmly believe in the strategic plan announced in November of last year.
I believe that executing this plan will ensure that we are able to solidify our unique place in the global health care landscape.
A critical part of my job.
Is to enhance the already strong execution of the company and ideally accelerate our well crafted strategy.
When I have already seen and experienced I believe we are positioned well to be set up for success in phase two of our strategic plan.
I believe the DHS as a strong financial profile and financial flexibility to accelerate growth in the coming years and I am fully aligned with the future capital allocation priorities of the company laid out in November , namely that although we're not giving guidance beyond 2023, beginning in 'twenty four we expect the reshaped re.
<unk> company to generate at least $2 $3 billion of free cash flow per year, excluding transaction costs and taxes.
And in Phase III, we intend to earmark approximately 50% of our free cash flows annually to be returned to shareholders in the form of dividends and share repurchases.
With the remaining 50% and we intend to identify and be able to reinvest further in our businesses organically and inorganically with value, creating strategic transactions.
Well I'll leave the discussion of details of our first quarter results to Rajiv and Sanjeev.
I am very pleased to report the Beatrice has had a great start to the year with yet another quarter of strong operational performance gives us further confidence in our ability to return to growth as we enter phase two of our strategic plan in 2024.
In the first quarter, we delivered total revenues of $3 73 billion.
Adjusted EBITDA of $134 billion.
And free cash flow of $923 million.
Based on this strong performance, we are reaffirming our financial guidance for 2023.
We are also laser focused on executing our pipeline, especially at three franchises with the potential to reach $1 billion. Each in peak sales by 2028.
Complex Injectables novel and complex products and Ikea.
On our planned divestitures I think it is important to note that we are in a position of strength.
Executing these planned divestitures as a matter of strategic choice not a necessity that we believe will accelerate our ability to move up the value chain and lay a solid foundation for our return to growth in phase two.
We have been engaged in productive discussions with a number of interested parties to determine the right fit for these well performing assets.
We continue to believe that these divestitures will unlock meaningful value for the company.
We remain on track with our stated goals, including announcing the transaction in 2023.
I would expect to be able to announce one or more of these transactions early in the second half of the year.
And finally on business development the company laid out a strategic vision for business development in the area of ophthalmology Gi and dermatology.
Our acquisitions of Oyster point and family Life Sciences earlier in the year are excellent examples of the execution of that strategy and I am focused on continuing to look for additional significant transaction in these areas and potentially others should the right opportunities arise.
I think my combined experience with big biotech Big pharma and smaller biotech companies will help us accelerate this nation.
In summary, I could not be more energized by my time at the company. So far by the people I've met and buy all that I've experienced I look forward to the exciting path ahead.
I'll now turn the call over to Rajiv to provide you with an update on our operations and our pipeline and then the Sanjeev, who will give you more detail on our financial results and capital deployment activities.
Rajiv.
Thanks, Scott and good morning, everyone as Scott mentioned, we had another strong start to the year.
Quarter of operational performance across the segment as well as product categories.
Let me now begin by sharing our commercial segment highlights from the quarter.
As I do I will be making certain comparisons on an operational basis.
Excludes the negative impact of foreign currency rates.
Plan that supports our financial guidance as it relates to Q1 really good rich.
Which also excludes the results from Biosimilars.
Biosimilars business from Q1 'twenty two.
Our well balanced business, our domestic market the brands make up close to 60% of our net sales delivered another strong quarter.
Europe performed ahead of our expectations with France, and Italy, driving that strong performance.
We can do low single digits in Q1 compared to the prior year on an operational basis.
Making it our fifth consecutive quarter after year over year growth our.
Our key brands like that Mr <unk> and blueprint as well as our genetics portfolio continued to perform strongly in Q1.
Our North America business also performed well.
Expectations, driven by better than expected performance in our <unk>.
That is portfolio, including lennar to Mike and our Injectables portfolio.
Branded business was led by stronger performance of utility.
We look forward to launching several new products in North America, this year, including banner, our genetic the symbicort.
We and our partner can do a lot of drug delivery have settled patent litigation.
And expect to launch the product offer exploration of regulatory exclusivity.
We anticipate launching they announced a 180 days first to file, Connecticut exclusively subject to Fda's shield carrier termination of the issue.
And then another Anda filer becomes eligible for final approval.
For the remainder of the year.
Markets, we expect to meet or exceed our expectations of North America and Europe .
Moving to a multi markets Korea, Malaysia, Thailand.
<unk> delivered strong performance.
Lipitor, Norvasc and wagler performed better than expected.
<unk> also performed ahead of expectations driven by solid performance.
We remain confident for this segment to deliver mid single digit growth for the full year, primarily driven by our brand category update.
Vijay.
Jan the brand category fell slightly behind expectations.
Similarly, due to customer buying patterns in Japan.
We remain confident in our overall outlook for the year due to the projected strong performance of our genetics.
<unk> authorized generic as well as our brands like Creon MEP that in effect sock.
Greater China performed better than expected with 5% year over year growth on an operational basis.
We expect another strong year of a breakthrough performance in line with our expectations as we continue to focus on the retail segment and growing the self pay patient base, while navigating the evolving policy environment.
I'm also pleased to confirm that we have 10 regulatory submission under review with the FDA in China.
Moving to Ikea to glass launch continues to progress as planned.
As a part of the assay.
March lillard.
Throughout the highest launched to date monthly prescriber com and total prescriptions.
Furthermore, we remain excited about derived opportunities ahead.
Good even driving prescriptions from the recent Medicare part D coverage Vince.
Leveraging <unk> commercial infrastructure and launching its first direct to consumer marketing campaign in Q4, which together provides confidence in our current full year outlook.
As the last beyond back.
We havent made significant progress in stabilizing our business, which we believe is one of the key elements to the successful execution of our phase II study in 'twenty four and beyond.
One of the Brian This virus lower expected stabilization is.
Effective management of our brand portfolio.
Approximately two thirds of our overall base.
I am pleased to report that for the last several quarters, our branded business has consistently performed at or above our expectations across immediate geographies.
This continued strong performance of our branded category.
Genetics across the segments combined with our anticipated 500 million plus of new product launches, including three gig.
Gives us tremendous confidence that our base business.
Excluding the positive impact of our <unk> Division.
Turn to growth in the second half of the year versus the prior year.
We believe we are headed into the final stages of completing all aspects of our phase one commitments and will deliver another strong year that we expect will put the company in a very solid position to execute create too.
Let me not switch to provide noteworthy updates on our pipeline with a focus on the three key buckets, we highlighted at the beginning of the year.
I will begin with our portfolio of complex injectable products.
We secured a solid first to file position for a recovery a weight loss treatment. In addition, we can also confirm that we have achieved a sole source supplier status for our <unk> eight milligram.
As we have previously disclosed we have a shared first to file position on the other expense offers MP.
In addition, we have strengthened this portfolio and submitted our NDA for <unk> used is actually at bank of breast cancer as well as advanced our <unk> one five months.
And I think will blend into its political faced on development.
We did our select novel and complex products pipeline.
I'm really excited to announce that we've filed our NDA for.
Our glatiramer acetate once monthly to FDA.
As we have previously noted our GAA once monthly product metrics primary endpoint of reduction in annual relapse rate unit flexible controlled phase III study.
Giovanni monthly demonstrated a 30% reduction in <unk> compared to placebo.
In addition to this Giovanni monthly when compared to placebo demonstrated politically.
Spit identity on the expanded disability status scale score that was statistically significant.
Our Meloxicam, we have completed our end of phase two meeting with FDA unmanned floods with positive outcomes and we look forward to initiating our phase three clinical trials in the second half of this year.
Finally, we are progressing our IND, enabling study.
Our botox program and remain on track to making our R&D filing this year.
Our eye care pipeline is also advancing as planned.
We are pleased that we have received positive top end of those start <unk> in China.
We along with our partner are now tracking our submission in China to our vest out this year.
Our clinical program for <unk> 144, nice presenters services is progressing well.
We also submitted our R&D and our phase III study for our <unk> 148 for dry eye disease.
In addition, we aligned with FDA on the PSC study design funnel Blepharitis program, which will get initiated later this year.
Finally.
We are executing R&D, enabling studies for our nerve growth factor product Ahmad one floor, six which we hope to progress to treat all stages of neurotrophic keratitis.
Before I hand, it over to Sandeep.
I wanted to recognize that our execution has been and continues to be a team effort and I would like to tanker colleagues around the globe for delivering another strong quarter.
With that I will now hand, the call over to Sandeep.
Thank you Rajiv and good morning, everyone.
We're off to a great start to the year and as a team could not be more confident in our strategy to deliver our plan and return the company to growth.
As Scott mentioned first quarter was in line or slightly ahead of our expectation.
Our business fundamentals are strong and we are encouraged by continued performance, including the stability of our base business.
In the quarter versus prior year, excluding biosimilar net sales from our Europe emerging market, China businesses grew operationally.
New products contributed well we are looking forward to several exciting launches.
In the second half of the year.
Early in the quarter, we closed the <unk> acquisition, and our SG&A and R&D expenses for Q1 includes costs associated with the commercial infrastructure and late stage pipeline of these businesses.
We continue to see benefits from our unique platform and its ability to generate significant cash flow from operations. We feel good about the opportunities ahead that can strengthen our free cash flow generation.
Looking at quarter, one 2023 highlights you will see our summarized results versus prior year on a reported basis.
It is important to note that for comparison purposes, our reported results for quarter one 2022.
<unk> the Biosimilar business.
Our net sales and adjusted EBITDA walks show sales for the quarter were in line with that expectation.
And on an operational basis down slightly versus the prior year.
Foreign exchange had a negative impact of approximately 5% of net sales versus the first quarter 2022.
The stability of our business was primarily driven by growth in Europe across diverse portfolio key products in greater China and brands in emerging markets.
As mentioned base business performance was in line with our expectation.
And the full year remains on track with the estimate we provided in February due to ramp of new products and volumes.
New product revenues off to a solid start and benefited from sales of additional cent of lenalidomide.
Adjusted gross margin of approximately 60% in the quarter exceeded our expectation.
And was driven by positive portfolio and segment mix, new product launches the lower impact of inflation on Cogs and the impact of certain positive variances.
We reported strong adjusted EBITDA, which included SG&A investment in the <unk> franchise, and R&D to progress key programs across injectable and complex products.
We had another excellent quarter of free cash flow of $923 million in the quarter free cash flow conversion continued to improve.
The year on year decline was driven by lower adjusted EBITDA, a biosimilar divestiture and the impact of foreign exchange.
In the quarter, we incurred approximately $22 million in transaction costs, primarily related to <unk> acquisitions.
We continue to deliver on our capital allocation plan and financial commitment.
As a result, we remain in a strong balance sheet position with a low coupon fixed rate capital structure.
We are committed to our investment grade rating and we continue to pay down debt to reach our leverage target of three times.
In the quarter, we paid down approximately $550 million of debt for a total of approximately $6 billion since the beginning of 2021.
Additionally, we returned approximately $400 million of capital to our shareholders in the quarter.
Before I discuss the 2023 outlook.
Although we are not providing guidance beyond 2023.
Especially given the strong start to this year.
Even more confidence in our phase two outlook beginning in 2024.
This includes the expectation of generating at least $2 3 billion in free cash flow from the Rebased business before any associated transaction cost in Texas.
Coming back to 2020, we are reaffirming our 2020 guidance ranges.
We currently expect full year revenue adjusted EBITDA and free cash flow to be at the midpoint of the ranges.
While foreign exchange continues to be dynamic based on current rates, we have assumed a slight headwind in Q2 and minimal to neutral impact for the fleet.
Now a few update on our expected phasing for rest of the year.
We continue to expect total revenue to be higher in the second half due to ramp and launch of new products and.
Including <unk>, our genetic version of Symbicort as well as normal product seasonality, particularly in Europe .
We now expect adjusted EBIDTA to be evenly weighted between the first half in the second half driven by two factors.
Number one gross margin stepping down in Q2 and moderating in the second half due to portfolio and segment mix.
Specced at the higher Cogs because of inflation and expectation that positive variance in the first quarter will not repeat.
And number two.
SG&A and R&D spending to step up in Q2, an increase sequentially in the second half of.
This includes the expected DTC invested in <unk> as well as increased investment in the ICF pipeline and organic R&D.
We expect cash flow to be lower in subsequent quarters, given the expected increase in capital expenditure onetime cost and working capital specifically quarter to quarter four will be lower due to timing of semi annual interest payments.
As a reminder, our adjusted EBITDA and free cash flow guidance exclude any future acquired IP R&D, but unsigned needs.
And our free cash flow does not include any transaction cost in Texas.
The planned divestiture of the icon acquisition.
In closing based on the sound fundamentals of our business, we are well positioned for a strong 2023 and nothing has changed with respect to our phase two outlook beginning in 2024 with that I'll hand, it back to the operator to begin the Q&A.
At this time I'd like to ask a question. Please press star one on your telephone keypad.
You wish to remove yourself from the queue you may do so by pressing star Chip, we remind you to please pickup your handset and please limit yourself to one question. We will take our first question from John Glenn as Centennial from Jefferies.
Yes, Thanks Scott.
Wanted to start with you.
It's been a couple of months since you've been on board, we had a chance to look at everything in.
<unk> seen too.
I agree with the strategic plan and are comfortable with everything so could you revisit what you expect.
The proceeds to be from the three asset sales coming later this year.
I think for memory, you said $5 billion to $6 billion pre tax and what is that off the tax alone.
What's the plan for those proceeds as well 50% of that be returned to shareholders because that would imply a share repurchase significantly bigger than the authorization. We currently have outstanding so any more details around the back half of the year is that as it relates to that capital deployment will be helpful. Thanks.
So good morning, Glenn. Thank you very much for the question. So you said comfortable with the strategic plan I think I am more than comfortable I'm very very supportive of the strategic plan.
As I came in on the board at the end of the year one of the things I was most impressed with was the what's the plan on the way forward.
It's a very very strong plan is very very much supportive of it.
You asked a question about divestitures as well and I think it's really important to note that we.
Expect to be as I said in my prepared remarks, we expect to be in the previously announced ranges for both value and for timing.
And.
It's really important to note that we don't need to do to these divestitures. We have strong financial performance. These are a matter of strategic choice and not of necessity. So.
Strongly performing assets Theres a lot of interest the priorities. We are on track to announce all of them hopefully by year end 2023, and we hope to be able to announce one or more early in the second half. So we're very very pleased where we are from that perspective, but again, it's really important to note that we don't have to do these divestitures in order to execute.
Our plan our plan is strong and.
Due to the strong operational and financial performance of the company.
Okay.
So Jason I think Scott you covered everything I think just two part of that I'll, just double click on that Glenn to your point about.
The ranges so we talked about.
And the net proceeds of about four 9% to $6, one and that was off of the.
After the taxes.
One time cost entity.
What's the point acquisition at that point, so we stayed within the range and the idea that we need.
A process that will be available for additional debt paydown buying back shares and investing in the business part of the capital allocation plan that was delayed.
We laid out.
Our next question comes from Chris Schott from Jpmorgan.
Great. Thanks, so much just following up on the divestiture process. It sounds like things are on track.
But you mentioned this position of strength I guess to the extent the current rate environment does not result in valuations that are aligned with your targets can.
Can you still kind of push forward with this capital allocation story and.
Kind of a targeted acquisitions, just given the step up in free cash flow or would that part of the plan have to change I know I know thats not plan, a but just to the extent that we werent able to get all of these to go away and kind of should we think about there being a different outlook or is the pretty much the same regardless. Thank you.
Thank you very much for the question Chris.
Important to note that due to the strong operational and financial performance of the company we can execute.
On our financial commitments and on the plant without the divestitures. So these are really good well performing assets.
Deterioration I believe interest rates in the high growth economic environment, and we are doing.
Any sale, but we don't think.
And then just the value that we see in these important assets again, having said that there is a lot of interest in these assets and we believe they're going to move forward and I believe they're going to be by the time, we get to the end of this process I believe theyre going to be in the previously announced range both for value and for timing, but no that not necessarily for us.
Thanks Sheila.
Okay.
Our next question comes from Jason <unk> from Bank of America.
Hey, guys. Thanks for taking our questions. This is Bob and Baton for Jason.
First one in your monthly GAA for multiple sclerosis, how do you see the market opportunity.
Given the decreased use of jewelry overall and do you believe you can increase the use of GAA with monthly depot and then on the turbine.
Just barely impressions what do you think is needed to drive the launch curve to look like more successful dry launch annualized. Thank you.
Back to you for your question.
First of all very happy to announce today.
The submission of the Sandy a very important vertical for us.
Without a partner may be.
It's not just a compliance play we have studied that.
Very carefully over the last.
A couple of months.
Deep into the previous studies, which are available the signet brands statement effect of the people product and reducing that.
Samsung by the MRI endpoints supports the use of GAA depot for the Artemis patients that Bill just map portfolio had it wrong.
As against one injection four months 14 injection as to what current treatment.
Almost 560 milligram drug against the quality of that exam. Moreover, normally just once.
And we will lap for Ta <unk> significantly reduced the contrast enhanced lesions by 28% Avnet.
Meanwhile, the locking key tool hyper intensity in Boston and significantly.
How some of the Etfs, which is expanded disability status scale. So I think that all this we are looking forward to.
Jeez.
This molecule it still has a significant market share.
And historically, we would have liked.
This vertical for the revival full stack.
Isolation.
Yes, sorry, yes.
On the <unk> side, if we look at share by outperformance in 2020, twos predominantly driven by commercial coverage and as we enter into 2023, we've increased Medicare part D coverage from single digits now to leaving the quarter about 54% of Medicare part D.
Cover lives being covered so if you think about the marketplace approximately half of all dry eye disease prescriptions come from Medicare part D. So we expect that to be a significant tailwind as we enter as we exited the quarter in March we had the strongest launch today for prescribers and prescriptions. We expect this to continue in digital advertising.
<unk> ramps and we initiate the DTC campaign and that ended the year and <unk>.
Furthermore, when we leverage <unk> commercial infrastructure, we feel that's going to drive an additional intermediate and long term tailwind for tier VI on the overall portfolio.
Maybe a quick comment on tour volume.
This as well.
Need to remember this deal closed in January .
Need to remember this deal closed in January .
So this Q2 is our first full quarter with our oyster point under the reinsurance <unk>.
With revenue and demand for <unk> were in line with our expectations for Q1 in March at the highest demand as previously noted we see.
See opportunities for leverage strong parts of the existing organization, including commercial access and our large development team to help accelerate revenues in the future, including initiating DTC later in this year I just want to say that we're very very excited about not only survive at the eye care business in general.
Our next question comes from Bill <unk> from Barclays.
Hi, good morning, everyone. Thanks for the questions Scott just a couple of questions on the EBITDA side, you called out $2 $3 billion of EBITDA for 2024 at least.
Can you help us understand will just factors I would imagine this factors you're asking Dennis lens.
And maybe some helpful color would be on what is it like for like.
Thank you Amy.
Cadence implies that Q2 EBITDA is below where the street is currently our lending pull forward of EBITDA from Q2 to Q1. Thanks.
And yes, I did confirm $2 3 billion going forward, but let me take a Swiss engineers to get into some more context around your EBITDA question is yes.
Thank you <unk>.
I will now cover book products that you've talked about in terms of.
334, so simple way to think about this as a tool.
Scott mentioned made them up to par three free cash flow for 2024.
Is after taking out all of the divested assets that we have announced.
So.
Talk about today.
<unk> guidance that we have $2 5 billion that includes already divested assets that we have with us but this is to kind of show you. The starting point for phase two which is assuming all the diversity ethics are out of the numbers and thats, how we get to that two country.
1 billion important to note that before.
Cost for divestments for any taxes, which will obviously be funded through the divestment proceeds on that and we are well on track and we.
We feel very good about where we are on that particular point as far as EBITDA is concerned again, we had a strong <unk>.
Strong quarter.
Came in at our expectations slightly ahead of our expectation the way to think about impact on them in terms of the phasing is going to be now evenly between first half and second half.
And thats going on because of there are two factors that is driving the first is obviously the gross margin, which first quarter came in ahead of our expectation for gross margin is going to step down in Q3 Q2, and then go to moderate in the second half of the.
A function of product and portfolio mix.
The impact of the inflation and not a non repeat of certain positive variances that we had in the first quarter and then you obviously have the SGA and R&D is stepping up.
Starting from Q2 11 year, because the investment that we're making in the IC Division.
R&D pipeline on organic products and the DTC that Scott talked about for <unk>, which is going to kick in later part of the that's why we feel great about overall, where we are but that's the cadence that we expect now, but it's still going to be at the midpoint of our EBITDA guidance.
Our next question comes from David Epsilon from Piper Sandler.
Thanks, So just wanted to ask a couple of product specific questions. So you still have a lot of exposure to lipitor and Norvasc can you talk about how sticky you think those products globally.
And then secondly, just in general how are you thinking about the trajectory.
The established brands portfolio over time.
And then another question I have is just this is the high level philosophical question as you think about your exposure to granular rated generic oral solid generics.
In developed markets.
How do you think about.
The role of that business and the overall organization.
And I guess more specifically is.
Our oral solid generics.
Business that.
You want to deemphasize over time, thank you.
Okay I can start with the SEC from second thought I think we now are.
While deemphasizing.
Deemphasizing, the oral product business.
We did was diligently looked into our portfolio looked into there are multiple options products are commoditized.
More than 10, 15th brands out there at SaaS is not an issue and we prune prune that portfolio and focused on growing up the value chain.
Focus on excess of more complex hot for us.
Somebody is going to take the lead to bring those perhaps too. So I would say the genetics are still a very important part of our access basically it's all about a SaaS and paas.
We have been focusing on bringing SaaS for the Hartford typical for us in this segment across the globe. So we're not walking away from that segment that prefers being second from a brand point of view established brands, Brian have you not just slippage.
These brands we happen. These brands some of these brands are before upjohn or even the average experience we endeavor.
Declining at an accelerated rate and.
And why it's because David perhaps not enough focus over the last three years.
I know, we what we have to work with and we are focused on these products over the last several quarters six to eight quarters, we have been able to stabilize this bucket very successfully from decline of initial decline of four 5% to about $1 one person and in fact this quarter. It was flat in next quarter.
You will see this segment coming through a little bit of growth. So it's all about stabilization of this bucket, which is leading to the further.
Robustness of this platform. So we are very excited with it.
What we have done around this and our ability to manage this portfolio.
Our next question comes from Ashwin <unk> from UBS.
Hi, Thanks for taking our questions. So I have two one pipeline one more on bolt ons have you received the clarity from the FDA with a.
Can you share with us what's going to be the tire designed by the <unk> index account focus for them.
In pursuing this incentive COVID-19 indication indications here and not aesthetic.
And then separately.
Can you elaborate a little bit low point in the value proposition.
On a movie.
Expand the market opportunity or is it going to cannibalize the high dose product that you have.
Thanks.
Sudan low dose as.
Lockheed is already late.
Commoditized cannot rise I would not say, it's kind of life or monetize that now 123 players out there and <unk>.
<unk> low dose <unk>.
Medical needed.
No unmet need or there has been always and ask for a low dose.
No.
Harbor, a protocol over here and we are well on track we are phase one studies are now completed.
Irritation Edison in Phase III studies underway targeting about 100 room and then we are looking forward to bring this.
The market, maybe by 25%, sorry, 46 or in this case.
On average the botox, yes, very early on maybe almost yet and hop back.
Softer alignment in regard to alignment with the FDA very clearly what they are what are your expectations for around CMC and one on the clinical.
Like for example, one of the clinical study they were looking on a sort of micro dystonia as.
Extensive digital umbrella. So all of those studies are well and all that work is well on track and we will be submitting our R&D later this year for the initiation of phase three study.
Our next question comes from <unk> and Becker.
Hi, guys. Thanks for taking my question I have two here if I may 1st.
It seemed like China has been a very good tailwind.
Through the duration of Covid, Lockdowns and considering it did so well last year and considering it's doing so well are up 5% and <unk> as well.
How are you baking in potential for a restart and implementation of BBT programs across China into back half of this year and especially into next year number one.
Number two.
Symbicort I know advair opportunity did not necessarily play out versus your internal expectations and perhaps wasn't really a needle mover in fact, one of the big drop off this quarter as you are with Sela product.
Why should symbicort would be different and to what extent has the brand discounted on symbicort already thank you very much.
Thanks Mark.
Sure.
Thanks Sheila.
And with sell out always has an ever since launch a very meaningful contributor even this quarter. It has been a very decent contributor to lower projected ocular numbers and all of that and it's a very important product we have met and exceeded every expectation expectation we had around the seller and we expect.
Leverage what we learned through the market to further leverage the same expertise to leverage in this product. We are very much looking forward to bring this product once.
Really exclusively expired everything is lined up and we anticipate launching this with the 180 days.
Dave first of file genetic exclusively.
As we mentioned subject to Fda's future determination of this issue when another Anda filer becomes eligible for final approval now let me switch back to China.
For yourself successful implementation of the BP, China has significantly improve the cost efficiency and time will tell you.
We don't have any more products to go through the BBB at all at this point of band we have gone multiple rounds.
<unk> award towards segmentation of privacy.
And government reimbursement rate and what have we done it already.
Commercially we have aligned we have continued to made a lot of progress effectively to completed.
Especially in the private bank channel leverage the brand equity of the product and the product breakdown and reorient ourselves.
Operationally, what we have done is loaded up the pipeline, we have already 10 products under active review with FDA and sooner than later this pipeline will start coming up into the act with the growth.
The last one I was just there.
Our management team as risk off in China to review and I'll tell you we had a great team gap in product performing really wonderful value to weather the COVID-19, even though the integration.
For the first time, we ended up that after integration.
Nothing to say about addressing the NPL confidence.
Confidence in that business has been reconfirmed Scott do you want to add something yeah. Thank you Omar for the question I would just add to what Rajiv said there my first international trip on behalf of the interest was to China to meet the China team and I was incredibly impressed by the by the leadership.
And by the strength of the leadership team.
And the overall strength of the operating affiliates in China.
Very very strong, particularly commercial organization that we have there.
As Rajiv noted lots of products in the pipeline and really looking forward to the next step with our affiliate in China.
And our last question comes from Nathan Rich from Goldman Sachs.
Great. Thanks for the questions.
One high level and then one on the quarter I guess Scott.
How are you thinking about the best way to prioritize the free cash flow that you're planning to reinvest in the business either organically or to drive growth Inorganically and any thoughts on therapeutic areas that you think the company should focus on.
And then on the quarter the level of base business erosion was a little bit high relative to the full year guidance.
Having complex generics are called out as a soft spot I guess could you maybe just talk about.
How this is expected to trend over the balance of the year. Thank you.
Thank you for the questions and just relative to the BD strategy going forward.
It was laid out in November the areas, we were going to focus on where Gi dermatology.
And of course, eyecare and I am very very comfortable on all of those areas.
Very significant experience, both development experience and commercialization experience and Gi and dermatology and again very comfortable moving forward in those areas I will say, however, though we will also be opportunistic.
If theres something and we're very open to something outside of these areas. If it fits our business dynamic and is right and we will bring the right kind of value to the company. So.
I am very excited about the strategy going forward again focus by care Derm Gi.
Gi for opportunistic and open to other opportunities as they come in and I think if you take a look at the model of the type of acquisitions that we would like to make take a look at the oil Oyster point and family Life Sciences that was completed earlier in the year. So that for example, an excellent example of the execution of that strategy, we acquired a company with an approved asset.
<unk> facing organization and we were able to marry it with the family development assets. So I think that's a really good example of the type of deals that we'd like to do going forward.
Yeah and Nick on.
Erosion.
As we had expected everything asphalt expected it came from the complex todays category Astronautic, largely driven by <unk> growth in the North America.
One was the thesis because we had almost exclusively.
Last year over this period, we had additional competition come on Zulli Avondale and Thats, one second contributor and the third was the seller that we have seen some hyper competition over there. So I think these three products largely contributed to the erosion in that North America.
Flex in this category, but as we look forward, we know I think we're looking forward to.
Factoring in the developed markets back to the growth in the second half of the year.
Hey, guys I believe that was the last question at the end of the questions I'd just like to take a moment to say thank you to everybody on the call here time and attention today.
Really really proud of the strong operational and financial quarter. We had in Q1, a great start to the year and I really look forward to meeting and spending more time with all of you as we move forward in the future here. So thank you very much.
This does conclude today's DHS 2021st quarter earnings call and webcast. Please disconnect. Your line at this time and have a wonderful day.
Yes.
Yeah.
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