Q2 2023 Grifols SA Earnings Call

July 27, 2023

Nuria Pascual: Hello everyone, and welcome to the Grifols Q2 2023 Conference Call. Thank you very much for taking the time to join us today. This is Nuria Pascual, Investor Relations and Sustainability Officer, and I'm joined by Thomas Glanzmann, our Executive Chairman and CEO, Grifols CFO, Alfredo Arroyo, and Víctor Grifols Deu, our Chief Operating Officer. This call will last for about 60 minutes. There will be a presentation of approximately 30 minutes, followed by a Q&A session. If you want to raise a question, press star followed by 5 when the Q&A session begins. We will kindly ask you to limit your questions to a maximum of 2. As a reminder, this call is being recorded, and the materials for the call are on the investor relations website at grifols.com.

Hello, everyone and welcome to the Griffon second quarter 2023 conference calls.

You very much for taking the time to join US today. This is not a squad of Investor Relations and sustainability officer, and I'm joined by Thomas Glassman, Our executive Chairman and CEO , Gary felt CFO , I'll say that Rio and big sort of getting funds there our chief operating officer.

This call will last for about 60 minutes, there will be a presentation of approximately 30 minutes followed by a Q&A session.

If you want to raise a question press the star followed by five when the Q&A session begins.

We will kindly ask you to limit your questions to a maximum of two.

As a reminder, this call is being recorded and the materials for the call R&D Investor Relations website at Great Falls Dotcom.

Nuria Pascual: The transcript and webcast replay of the call will also be available on the investor relations website within 24 hours after the end of the conference call. Before we start, I draw your attention to the forward-looking statement disclaimer on slide two in the slide deck of our release. Forward-looking statements on the call are subject to substantial risk and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. Now I would like to turn the call over to Thomas Glanzmann.

The transcript and webcast replay of the call will also be available on the Investor Relations website within 24 hours. After the end of the conference call.

Yeah.

Before we start I draw your attention to the forward looking statement disclaimer on slide two in the slide deck of our release.

Forward looking statements on the call are subject to substantial risks and uncertainties and speak only as of the calls original date and we undertake no obligation to update or revise any of the statements.

And now I would like to turn the call over to Thomas Glassman. Thank you know or yeah. Good afternoon and morning Tal on the call. Thank you for joining us.

Thomas Glanzmann: Thank you, Nuria. Good afternoon and morning to all on the call. Thank you for joining us. Today, I'm very pleased to announce the second consecutive quarter of strong results for Grifols. We are not only delivering on our commitments, but accelerating these as a result of our turnaround strategy. Although all through the first half of the year, we have excelled in execution, improved financial discipline, and enhanced our performance culture. We advanced on all key priorities during this H1 2023. Our operational performance continues to improve on a sequential basis. We are reporting sustainable revenue growth driven by BioPharma, which is supported by solid underlying demand, favorable pricing and product mix, led by XEMBIFY, which grew 26% in the first half of 2023.

Today, I'm very pleased to announce a second consecutive quarter of strong results for great Falls, we are not only delivering on our commitments, but accelerating DS as a result of our turnaround strategy.

Although the first half of the year all through the first half of the year, we have excelled in execution proved financial discipline and enhanced our performance culture, we adapt advanced on all key priorities. During this first half of two twenty-three our operational performance continue.

To improve on a sequential basis.

We are reporting sustainable revenue growth driven by Biopharma, which is supported by solid underlying demand favorable pricing and product mix led by 75, which grew 26% in the first half of 223.

Thomas Glanzmann: We have accelerated margin expansion, reaching an adjusted EBITDA margin of 22%+ for H1, mainly driven by our strong business performance and well-executed operational improvement plan. During H1 2023, we successfully deployed 100% of the EUR 450 million cash cost savings improvement plan. Evidence of this is the cost per liter reduction, which declined sharply since August of last year. By the end of 2024, we expect to have booked the full amount of EUR 450 million in savings on our P&L, considering the 9-month lag coming from our long inventory cycle, which, as you know, is characteristic of our industry. At the same time, plasma supply continues to grow at double-digit growth rates.

We have accelerated margin expansion, reaching an adjusted EBITDA margin of 22% plus for the first half mainly driven by our strong business performance and well executed operational improvement plan.

During the first six months of 223, we successfully deployed 100% of the Euro 450 million cash cost savings improvement plan.

Evidence of this is the cost per liter reduction, which declined sharply since August of last year.

By the end of 224, we expect to have book the full amount of euro $450 million in savings on our P&L, considering the nine month flag coming from our long inventory cycle, which as you know is characteristic of our industry at.

At the same time plasma supply continues to grow at double digit growth rates.

Thomas Glanzmann: As a result of this performance, we have exceeded our revenues and adjusted EBITDA guidance for H1, and raised H2 and full year 2023 guidance. We reiterate that leverage is a priority to us, and this includes reaching net debt to EBITDA of 4x by the end of 2024. As mentioned in previous calls, we have several work streams in place to deleverage the company, and we are working with the intent to close one deleveraging transaction by year-end. We will share more information on this matter when we are able to, including on the previously announced China opportunity. In addition to all these important milestones, we continue to focus on our innovation pipeline, where we are making solid advancements. Victor will take you through them shortly. Grifols is committed to creating value for all our shareholders and restoring goodwill with the financial community.

As a result of this performance we have exceeded our revenues and adjusted EBITDA guidance for the first half right Andres second half and full year 'twenty three guidance, we reiterate that leverage is a priority to us and this includes reaching net debt to EBITDA.

A four times by the end of 224.

As mentioned in previous calls we have several work streams in place to deleverage the company and we are working with the intent to close one deleveraging transaction by year end, we will share more information on this matter when we are able to including on the previously announced.

China opportunity.

In addition to all of these important milestones we continue to focus on our innovation pipeline, where we are making solid advancements Victor will take you through them shortly.

Griffiths is committed to creating value for all our shareholders and restoring goodwill with the financial community. We firmly believe that to do so we must consistently deliver on our goals and commitments.

Thomas Glanzmann: We firmly believe that to do so, we must consistently deliver on our goals and commitments. One of these commitments was to enhance our communication with stakeholders, and we will continue to do so. In the H1 of 2023, we had the opportunity to engage with more than 100 investors through honest and constructive discussions, which were much appreciated. Going forward, we will continue to expand our outreach and aim to engage with more equity and debt market participants. As indicated in the Q1 2023 earnings call, we made the decision to reinforce and expand our IR footprint in the US to better serve investors in North America and globally. Now we can announce that this position has been filled, and the onboarding process has started.

One of these commitments was to enhance our communication with stakeholders and we will continue to do so in the first half of 223, we had the opportunity to engage with more than 100 investors through honest and constructive discussions which were much appreciated.

Going forward, we will continue to expand our outreach and aimed to engage with more equity and debt market participants.

As indicated in the first quarter 23 earnings call. We made the decision to reinforce and expand our I our footprint in the U S to better serve investors in North America and globally now.

Now we can announce that this position has been filled in the Onboarding process has started I'm sure. Many of you will have the opportunity to interact with our new senior director of U S Investor Relations and sustainability reinforces the global team led by new area Pasquale and.

Thomas Glanzmann: I'm sure many of you will have the opportunity to interact with our new senior director of US investor relations and sustainability, who reinforces the global team led by Nuria Pascual and Daniel Segarra. Before Víctor takes us through a business update, I would ask you at the end of our presentations to take a moment and review the comprehensive efforts Grifols has also undertaken in terms of sustainability through our six pillars during H1 2023. These pillars represent our collective commitment to drive positive change and make a lasting impact. By reviewing the details of our sustainability initiatives, we trust that you will gain an appreciation of our efforts and progress, spanning from environmental stewardship and social responsibility to ethical governance, supply chain excellence, and employee wellbeing.

Danny cigar.

Before Victor takes us through our business update.

I would ask you at the end of our presentations to take a moment and review the comprehensive efforts Griffes has also undertaken in terms of sustainability through our six pillars. During the first half of 223.

These pillars represent our collective commitment to drive positive change and make a lasting impact by reviewing the details of our sustainability initiatives. We trust that you will gain an appreciation of our efforts and progress spanning from environmental stewardship.

And social responsibility to ethical governance supply chain excellence and employee well being.

Thomas Glanzmann: I would like to conclude by reiterating how encouraged I am by all our progress in the H1 of the year, and I want to thank the entire Grifols team for their hard work, dedication, and perseverance. With that, I will now hand the call over to Victor.

I would like to conclude by reiterating.

How encouraged I am by all our progress in the first half of the year and I want to thank the entire grid falls team for their hard work dedication and perseverance with that I will now hand, the call over to Victor.

Víctor Grifols Deu: Thank you, Thomas. Good afternoon, everyone, and thanks for joining us today. Turning to slide 6, we achieved revenues of more than EUR 3.2 billion for H1, growing 13.1% at constant currency and 14.8% on a reported basis. If we exclude Biotest, total revenues reach almost EUR 3 billion, an increase of 7.7% at constant currency and 9.4% reported basis. Biopharma revenues grew 14.9% at constant currency and 16.7% on a reported basis to reach EUR 2.7 billion, and by 8.4% at constant currency and 10.2% on a reported basis to EUR 2.4 billion excluding Biotest, backed by a robust underlying demand, favorable pricing, and product mix.

Thank you so much good afternoon, everyone and thanks for for joining us today.

Turning to slide six we achieved revenues of more than $3 2 billion for the first half of the year growing 13, 1% at constant currency and 14, four and 8% on a reported basis.

We explored by your test total revenues reached almost 3 billion and.

An increase of 7.7% at constant currency and 9.594% reported basis.

Biopharma revenues grew 14.9% at constant currency and 16.7% on a reported basis.

Two two to reach $2 7 billion and by eight 4% at constant currency and 10.2% on a reported basis to $2 4 billion as clothing biotech backed by a robust underlying demand favorable pricing.

And product mix.

Víctor Grifols Deu: Now turning to Biopharma, slide 7. The significant growth in our IG flagship product seen in Q1 has continued into Q2, resulting in an H1 growth of 13.6% at constant currency. As before, we have seen sustained upward momentum supported by higher plasma supply and robust underlying demand, coupled with favorable pricing and some product mix. Subcutaneous IG revenues grew 26% in H1 2023. We continue to expand our offering of subcutaneous immunoglobulin, XEMBIFY globally. To that end, you would have seen that we initiated a launch in Spain and plan to launch XEMBIFY in Australia in H2 of the year, just as two examples. In albumin, a strong demand and favorable pricing in China and rest of the world are the main drivers of growth, offsetting some weaker volumes in the US.

Now turning to Biopharma slide number seven.

The significant growth in our Asia flagship product sitting in Q1 has continued into Q2, resulting in a healthier growth of 13, 6% at constant currency.

And before we have seen sustained it upward momentum supported by higher plasma supply.

And robust underlying demand.

Coupled with favorable pricing and some product mix.

<unk> revenues grew 26% in half one 2023.

We continue to expand our offering of subcutaneous and global and simplify globally.

And to that end you will have seen that we initiated allowance in Spain.

<unk> planned to launch can be five in Australia in the second half of the year.

Just as two examples.

In albumin is strong demand and favorable unfavorable pricing in China and.

In rest of the World are the main drivers of growth offsetting some weaker volumes in the U S going forward overall, we expect volume demand to remain very robust throughout the year.

Víctor Grifols Deu: Going forward, overall, we expect volume demand to remain very robust throughout the year. Finally, our Alpha-1 and specialty protein segment grew 0.3% on constant currency, driven by a mixed geographic volume performance in Alpha-1, with higher volumes in the US, partially offset by lower volumes in certain European countries. We are increasing testing volumes in the Alpha-1, which will trigger further sales growth during the rest of the year. On the other side, we noted a favorable performance in our hyper portfolio and continued positive trend in our partnerships in bleed management products. Partially offsetting that, we have lower demand of our plasma-derived Factor product. Now turning to slide eight.

Finally, our alpha one and specialty protein segment grow 0.3% on constant currency driven by a mix of traffic volume performance in Alpha one with higher volumes in the U S, partially offset by lower volumes in Saturday.

European countries.

We are increasing.

Testing volumes in the Alpha one which will trigger further sales growth during the rest of the year.

On the other on the other sites.

We know that our favorable performance in our hybrid portfolio.

And continued positive trend in our partnerships in Blyth management products, partially offsetting that we have lower demand of our plasma drive factory product.

Now turning to slide eight.

Víctor Grifols Deu: Grifols is strengthening its IG franchise as we continue to see a solid growth opportunity in the EUR 40 billion IG market, which is growing high single digits and is expected to continue to do so. We have three strong brands and a unique strategy to drive further growth. We are accelerating our commercial and innovation efforts to capture opportunities with our subcutaneous IG products, XEMBIFY, which commands a higher price than IVIG and currently represents only a single-digit percentage of our IG sales, and we expect this to continue increasing over time. In parallel, we are building on our IVIG GAMUNEX-C track record, consolidating our industry-leading position in neurology and acute care, while continuing our work to keep IG therapy as the standard of care.

The first is a strengthening its hydro franchise as we continue to see a solid growth opportunity in the 40 billion Euro IGT market, which is growing high single digits and is expected to continue to do so.

We have three a strong brand and a unique strategy to drive further growth.

We are accelerating our commercial and innovation efforts to capture opportunities with our subcutaneous as your production refi.

Which commands a higher price than IV AG and currently represents only a single digit percentage of our AG sales and.

We expect this to continue increasing over time in.

In parallel we are building on our IV AG Chem Onex track record.

Consolidating our industry, leading position in neurology and acute care, while continue while continuing our work to keep Ics therapy as a standard of care at the standard of care. In addition, we believe by your tissue removal will be instrumental in supporting these long term growth and reinforcing our position in Europe .

Víctor Grifols Deu: In addition, we believe Biotest and Hema will be instrumental in supporting this long-term growth and reinforcing our position in Europe. We continue to remain focused on the immune deficiency market, which comprises the largest share of IVIG usage, with primary and secondary immunodeficiencies growing ahead of the rest of the users. As global plasma supply increases, we are anticipating a strong growth with opportunities on core indications, especially PID and secondary immune deficiency, but also in CIDP. Demand has remained robust and is expected to continue to be so. Many patients, even in top markets, remain underdiagnosed. Demand for treatment of secondary immune deficiency, for which currently there is no competitive threat, continues to show growth. Even though incidences of diseases are similar across geographies, consumption rates can vary very significantly among them.

We continue to remain focused on the immune deficiency market, which comprises the largest share of IV IV usage with primary and secondary mainland immune deficiency is growing ahead of the rest of the users.

As global plasma supply increases we are anticipating a strong growth with opportunities from core indications, especially PID and secondary immune deficiency, but also in CRT P. M D.

Demand has remained robust and is expected to continue to be so many patients even in tough markets remain and they are underdiagnosed.

Demand for treatment of secondary immune deficiency for which currently there is no competitive threat continues to show growth.

Even though incidences of diseases are similar of course across geographies consumption rates can vary very significantly among them actually AG in the U S is still consume at almost three times the rate the rate per capita of population when compared to Europe .

Víctor Grifols Deu: Actually, IG in the US is still consumed at almost three times the rate per capita of population when compared to Europe. Therefore, IG market growth is expected to outpace potential erosion from disruptive technologies. Turning now to slide nine. Our ambition going forward is to increasingly focus on innovation as a key driver of our medium- to long-term growth. To support this objective, we are expanding our existing commercial offering, as well as seeking new commercial opportunities, especially in the use of IG. We are pleased to announce that we achieved a number of key milestones since our last quarterly update. During Q2 2023, we finalized the enrollment of the PRECIOSA trial and also for the SPARTA trial study, with the latter progressing ahead of schedule.

Therefore, I actually market growth is expected to outpace potential erosion.

From disruptive technologies.

Turning now to slide nine.

Our ambition going forward is to increasingly focus on innovation as a key driver of our medium to long term growth.

To support this objective we are expanding our existing commercial offering as well as seeking new commercial opportunities, especially in the use of hygiene.

We are pleased to announce that we achieved a number of key mice milestones since our last quarterly update.

During Q2, 'twenty three we finalized the enrollment of the placebo trial.

And also for the spirit that trial study.

With the laser progressing ahead of schedule.

Víctor Grifols Deu: We have also made significant advancements on our biotech innovation commitments with both fibrinogen and trimodulin Phase 3 trials on track. With regard to fibrinogen, we completed the AdFIrst trial and presented top-line study results in line with our expectations. The data will be used for clinical submission both in Europe and US, where we expect to receive market approval by the end of 2024 and late 2025 respectively. For trimodulin, we initiated the EScCAPE trial study, and the field sites have already been activated. Finally, we have completed the Yimmugo BLA submission to the FDA. Now moving into diagnostic, slide number 10. Diagnostic revenues continues to be driven by blood typing solutions, where we are seeing a strong growth across the US, Argentina, Brazil, and Spain. It is noteworthy mentioning the Grifols blood typing solutions.

We have also made significant advancement on our biotech innovation commitments with both fiber and northern anti Muslim Firstly trials on track.

With regard to fiber in ocean.

We completed the first trial and presented top line study results in line with our expectations. The data will be used for clinical submission both in Europe , and U S, where we expect to receive.

To expect.

<unk> market approval by the end of 'twenty 'twenty, four and late 2025, respectively for three modeling when we initiated the escape <unk> study and the phase <unk> caffeine already activated and finally, we have completed the move of BLA submission to the FDA.

Now moving into the agnostic slide number 10.

Diagnostic revenues continues to be driven by blood typing solutions, where we are seeing a strong growth across the U S, Argentina, Brazil and Spain.

It is noteworthy mentioning the greenfields blood typing solutions, it's outperforming the market growth and continues to gain market share.

Víctor Grifols Deu: It's outperforming the market growth and continues to gain market share. As you saw in Q1, our revenues in NAT technology are somehow affected by the pricing concessions in exchange for extending a large contract with a key customer to up to 20 years. However, a number of factors in Europe and Asia are helping to partially offset this, including a strong demand in Japan and instrument sales in Philippines as an example. Now turning to slide 11. The Biosupplies Division revenues grew 57% at constant currency, benefiting from the integration of Access Biologicals. All three subdivisions have reported a strong revenue growth, with biosupplies diagnostics revenues more than doubling. Now I hand it over to Alfredo.

As you saw in Q1, our revenues in NFC technology.

Are somehow affected by their pricing concessions in exchange for extending a large contract with our key customers to up to 20 years. However, a number of factors in Europe .

In Asia are helping to partially offset this including a strong demand in Japan and in.

Instrument sales in Philippines, as an example.

Now turning to slide 11.

W supply division revenues grew 57% at constant currency benefiting from the integration of access biologic US all three of the regions have reported some strong revenue growth with our suppliers diagnostics revenues more than doubling and now I hand, it over to Alfredo.

Alfredo Arroyo: Thanks, Victor, and thank you for joining us today. Moving to slide 13. We're very pleased to report a continuation of the strong momentum seen in Q1. Revenue growth across key divisions and margin came in above expectations, driven by strong business performance and the execution of our operational improvement plan already 100% deployed. Total revenues increased by 14.8%, reaching EUR 3.2 billion, +9.5% like for like excluding Biotest. Biopharma revenues grew 16.7% or 10.2% like for like. Therefore, the revenue growth is tracking above our previous full-year guidance of 8% to 10% for the group and 10% to 12% for Biopharma. Adjusted EBITDA margin improved further in Q2 to 23.4% from a 21% margin in Q1.

Thanks Victor.

Thank you for joining us today.

Moving to slide 13.

We're very pleased to report a continuation of the strong momentum seen in the first quarter revenue growth across key issues and margin came in above expectations.

DRAM by strong business performance.

And the execution of our operational improvement plan already 100% deploy.

Total revenues increased by 14.8% reaching.

Reaching <unk> 2 billion euros.

Plus nine 4% like for like.

<unk> bio test.

Biopharma revenues grows.

16.7% or 10, 2% like for like.

Therefore, the revenue growth is tracking above our previous full year guidance of 8% to 10% for the group and 10% to 12% for Biopharma.

I guess at EBITDA margin improved further in Q2 to 23, 4%.

A 21% margin in Q1.

Alfredo Arroyo: This translates to a 22.2% EBITDA margin for H1 of the year, exceeding our guidance for the period. Our leverage ratio declined to 6.9x by the end of June, supporting our commitment to deleveraging our balance sheet. Plasma supply and cost per liter have both improved sequentially versus Q1 2023, where plasma supply increased by 12% and the cost per liter declined by 20% versus 2022 peak. This slide shows the sequential improvement across financial key metrics. We continue to see mid- to high-single-digit revenue growth driven by Biopharma, which has benefited from solid plasma supply, robust underlying demand, pricing, and product mix. As a result, our top line has reached almost EUR 6 billion on the last twelve months basis, with 17% growth versus Q2 2022.

This translates to a 22, 2% EBITDA margin for the first half of the year.

Exceeding our guidance for the period.

Our leverage ratio declined to $6 nine times by end of June supporting our commitment to deleveraging our balance sheet.

Plasma supply and cost per liter for both improved sequentially versus Q1 'twenty three.

Where plasma supply increased by 12% and the cost per liter declined by 20% their shoes 2022 peak.

This is light.

So the sequential improvement our gross financial key metrics.

We continue to see mid to high single digit revenue growth.

Driven by Biopharma, which has benefited from solid plasma supply.

Robust underlying demand pricing and product mix.

As a result.

Top line had reached almost 6 billion euro on the last 12 months basis with this 17 growth. There. She was Q2 2022.

Alfredo Arroyo: Our profitability is steadily improving, shown in the last twelve month EBITDA trajectory, which is now close to EUR 1.3 billion. EBITDA margin reached a remarkable 23.4% in Q2, representing 35% growth versus Q2 2022, driven by the strong business performance and the acceleration of the operational improvement plan. Deleveraging continues improving now at 6.9x compared to last year peak of 9, improving by 2.1x, driven entirely by business performance and cost discipline. The next slide shows the adjusted EBITDA bridge that progresses, you know, and the progress versus last year, where year to date June, the EBITDA has reached EUR 655 million.

Our profitability.

This is steadily improving.

Shown in the last 12 months EBITDA trajectory, which is now close to $1 3 billion Euro.

EBITDA margin reached a remarkable 23, 4% in Q2.

Representing 35% growth versus Q2 2022.

Devin by the strong business performance and the acceleration of the operational improvement plan.

Deleveraging continuous improving now teach pro nine times compared to last year's peak of nine.

Improving by two one times.

Didn't entirely by business performance and cost discipline.

Next slide shows the adjusted EBITDA Bridge.

That said progresses, you know on the <unk>.

These vessels.

Last year, where year to date June .

The EBITDA has reached 655 million euros.

Alfredo Arroyo: That represents an improvement of EUR 93 million, 22.2% margin, which implies an additional 150 basis points versus prior year, driven by Biopharma contribution as well as the operational improvement plan. We have a EUR 135 million of one-off charges that includes mainly the EUR 140 million restructuring charges that we booked in Q1. No additional restructuring costs are expected. The next slide shows the operational improvement plan is progressing above our expectations. All the initiatives have been 100% deployed, exceeding the EUR 450 million savings. We have already achieved EUR 235 million in cash savings in H1, and we're expecting additional EUR 160 million cash savings in H2.

That 3% an improvement of 93 million euros.

22, 2% margin.

Which implies an additional 150 basis points, there's just pretty good year.

Driven by Biopharma contribution as well as the operational improvement plan.

And then we have 130 mine.

35 million euros of one off charges that includes mainly the 140 million restructuring charges that we booked in Q1.

No additional restructuring cost are expected.

The next slide.

So the operational improvement plan is.

Is progressing above our expectations.

All the initiatives having 100%.

Deploy exceeding four.

450 million Euro savings.

And that.

We have already achieved 255 million in cash savings.

In the first half of the year and we're expecting additional $160 million.

<unk> cost savings in the second half.

Alfredo Arroyo: If we consider that almost 75% of the total savings are plasma cost related, and due to the nine months plasma inventory accounting, EUR 75 million savings have been posted through the P&L in H1. An additional EUR 85 million will come in H2. A carryover of two hundred and eighty million euro savings will be booked in 2024. Plasma cost per liter. As shown in this slide, as of June, we made a rapid progress in reducing our plasma cost per liter by 20% from the 10% drop reported in Q4 2022, versus all July peak cost in 2022. Plasma supply increased by 12% in H1 of the year, which is aligned with the plasma needs to support our growth.

If we consider that almost 75% of the total savings are.

Plasma cost related and due to the nine months blood my inventory accounting.

75 million euros savings, having posted through the P&L in each one.

An additional 85 million euros will come in the second half.

And the carryover of 280 million Euro savings would be booked in 2024.

Plasma cost per liter.

As shown in this is light and.

And so.

We've made rapid progress in reducing our plasma cost per liter by 20%.

From the temperatures drop reported.

In Q4 2022.

They choose all right peak cost in 2022.

Plasma supply increased by 12% in the first half of the year, which is aligned with the plasma needs to support our growth.

Alfredo Arroyo: Close to the 50% of the cost per liter decline comes from lower donor compensation, and another 50% from other optimization initiatives, such as process optimization, streamline operations, overheads, processes, and digitalization. In line with the previous slide, plasma cost reduction has a very positive impact in the gross margin. Considering, you know, once again, the nine months inventory accounting, those plasma cost savings will mainly impact in 2024 P&L. In H2 of this year, we see a potential of more than 250 basis points margin improvement compared to H1 of the year. We expect further margin expansion in 2024, supported by the operational improvement plan of the initiatives currently deployed. Next slide shows our leverage commitment at 4x leverage by the end of 2024 that remains unchanged.

Gross to the 50% of the cost pellet the decline comes from lower total compensation and another 50% from all other optimization initiatives.

Such as process optimization.

Timberland operations.

Hit processes and utilization.

Language produces light plasma cost reduction as a very positive.

Impact in the gross margin, but considering you know once you gain the nine months inventory accounting.

Those plasma of course savings will mainly impact in 'twenty 'twenty four P&L.

In the second half of this year, we see a potential of more than 250 basis point margin improvement compared to the first half of the year.

We expect further margin expansion in 2024 supported by the operational improvement plan of the initiatives currently deploy.

Next slide.

So our leverage commitment at four.

Four times leverage by the end of 'twenty two before that remains unchanged. We continue deleveraging organically as a result of Florida business performer and our operational improvement plan.

Alfredo Arroyo: We continue deleveraging organically as a result of our business performance and our operational improvement plan. The 4x leverage target will come from 70% of the operational improvement plan, plus EBITDA organic growth, and the remainder, 30%, the leverage will come from deleverage transactions, whose cash proceeds will be fully used for debt reduction. We currently have a total liquidity of EUR 1.2 billion, including EUR 500 million in cash. Based on the strong H1 results delivered, and since we are very confident on the H2, we're raising our guidance for the full year revenues and EBITDA. We expect full year 2023 total revenue growth, including Biotest, of 10% to 12% at constant currency, compared to the previous guidance of 8% to 10%.

The four times leverage target will come from.

70% of the pollution and put them in brand blush, EBITDA organic growth and the remainder 3% delever.

The leverage will come from the level of transactions.

Whose cash proceeds will be fully used for debt reduction.

We currently have a total liquidity of $1 2 billion, including $500 million in cash.

Based on the strong.

First half of the year.

We source delivered and since we are very confident on the CECO how's the year, we're raising our guidance for the full year revenues.

And EBITDA.

We expect.

Full year, 23, total revenue growth, including biotech of 10% to 12% at constant currency.

Compared to the previous guidance.

8% to 10%.

Alfredo Arroyo: This is backed by biopharma revenue growth of 12% to 14% compared to a prior guidance of 10% to 12%, or at cost and currency. Regarding the EBITDA, now we expect the EBITDA margin for the H2 of the year to be in a range of 24% to 25%, and a full year EBITDA margin at 24%, expecting the continuation of a strong sequential quarterly margin improvement. This should lead to an adjusted EBITDA, including Biotest, of EUR 1.4 to 1.45 billion by the end of the year. Considering the annualized cash cost savings, the pro forma 2023 EBITDA is expected to be in the range of EUR 1.7 to 1.75 billion, representing 28% to 29% EBITDA margin, which basically is coming back to 2019 margins.

This is backed by Biopharma revenue growth.

12 two.

14%.

Compared to our prior guidance of 10% to 12% all at constant currency.

Regarding EBITDA.

Now we expect the EBITDA margin for the second half of the year.

To be in the range of 24, 25% and our full year EBITDA margin at 24%.

<unk>.

The continuation of a strong sequential quarterly margin improvement there.

This should lead to an adjusted EBITDA increase.

Including bio test of Euro one four to one for $50 billion.

By the end of the year.

And considering the annualized cash cost savings did pro forma 2020, EBITDA is expected to be in the range of one 7 billion to $1 75, representing 20, 29% EBITDA margin, which basically coming back to 2019.

Margins.

Alfredo Arroyo: Now I hand over to Thomas for closing remarks.

Now I hand over to Thomas for closing remarks. Thank you Alfredo I would like to conclude by reiterating a few points. We have already made I will also highlight the main triggers that support raising guidance for the second half of 223 and for the whole year.

Thomas Glanzmann: Thank you, Alfredo. I would like to conclude by reiterating a few points we have already made. I will also highlight the main triggers that support raising guidance for H2 2023 and for the whole year. We are pleased with the progress made during H1 of the year through operational performance, both on the commercial and innovation front, as well as on the deleveraging. We will continue to execute on all of these with the same focus in H2 of the year and beyond. In Q2 2023, Grifols accelerated its delivery further from the very solid momentum seen in Q1.

We are pleased with the progress made he made during the first six months of the year through operational performed formats, both on the commercial and innovation front as well as on the deleveraging and we will continue to execute on all of these with the same focus in the second half of the year and beyond.

In the second quarter of 223, Griffes accelerated its still a really further from the very solid momentum seen in the first quarter. We expect the strong sales growth to continue driven by demand for the key proteins product and country mix.

Thomas Glanzmann: We expect the strong sales growth to continue, driven by demand for the key proteins, product, and country mix. The company has already successfully deployed 100% of EUR 450 million cash cost saving plan. Testament to the execution of the plan is the cost per liter reduction of 20% while plasma supply grew 12% for H1 2023. As mentioned, we also made good progress with our focus on innovation. We met numerous innovation milestones, which will support further growth and margin expansion in the coming years, including the European approvals for XEMBIFY and Biotest's Yimmugo. We are therefore confident in our ability to deliver on the raised financial guidance in H2 of the year. Deleveraging remains a top priority and our commitment to reduce the leverage ratio to 4x by 2024 is unchanged.

The company has already successfully deployed 100% of euro of $450 million cash cost.

Of the cash cost saving plan Testament of the execution of the plan is the cost per liter reduction of 20% while plasma supply grew 12% for the first half of 'twenty three as mentioned, we also made good progress with our focus on innovation we.

Met numerous innovation milestones, which will support further growth and margin expansion in the coming years, including the European approvals for semi Fi and biotech CMO goes.

We are therefore confident in our ability to deliver on our raised financial guidance in the second half of the year.

Deleveraging remains a top priority and our commitment to reduce the leverage ratio to four times by 224 is unchanged.

Thomas Glanzmann: We are today advancing on several work streams supporting our deleveraging efforts. Finally, I want to reiterate the board is fully invested and focused on creating value and making our commitment a reality while the executive team is laser focused on accelerating the execution of the company's strategy. Key focus continues to be on operational excellence, on cash flow improvement, and debt reduction, and ultimately on increasing value for all shareholders. Once again, I want to thank our entire Grifols team for making it all happen. Without everyone's effort, focus, and dedication, the progress made in the H1 of 2023 would not have been possible. I appreciate your attention and now turn it back to Nuria, who will open it up for questions.

We are today advancing and several work streams supporting our deleveraging efforts.

Finally, I want to reiterate the board is fully invested and focused on creating value and making our commitments of reality, while the executive team is laser focused on accelerating the execution of the company's strategy.

Key focus continues to be on operational excellence and cash flow improvement and debt reduction and ultimately.

And increasing value for all shareholders. Once again I want to thank our entire griffes team for making it all happen without everyone's effort focus and dedication the progress made in the first half of two twenty-three would not have been possible.

I appreciate your attention and night now turn it back to <unk>, who will open it up for questions.

Nuria Pascual: Thank you, Thomas, and thank you all for your time. With that, let's start the Q&A session. As you know, you need to press star five to ask a question. We need to stick to two questions per analyst, and if you have follow-ups, you can dial star five again, and you will be placed into the list once more. After your question, we may need to put you on mute to avoid background noise. Now, our first question comes from Peter Verdult from Citi. Hi, Peter.

Thank you Thomas and thank you all for your time.

With that let's start the Q&A session. As you know you need to press star five to ask a question we need to stick to two questions per analyst and if you have follow up. So you can dial five again and you will be placed into the latest one smaller.

So your question, we may need to put you on mute to avoid background not nice.

So now our first question comes from the old from and Citi Hi, Peter.

Peter Verdult: Yeah. Hi, Nuria. Peter Verdult. Hi, everyone. Thanks for taking my questions. I will stick to two and then go back in the queue. The two are related around the deleveraging point, which you touched on Thomas in your prepared remarks. Could I just push you firstly on RAAS, the partial disposal, anything you're willing to say more on timing and the number of interested parties would be helpful. The question we often get asked by existing and potential investors. Secondly, on diagnostics, are you looking to stabilize this business further and demonstrate a sort of sustainable growth rate before considering alternative options that could further accelerate the leverage?

Yes.

People don't see her hi, everyone. Thanks for taking them.

My questions I will stick to it and then get back in the queue, but two are related around the deleveraging point, which.

You touched on Thomas in your outlook.

Ted remarks, because I just push you a first deal rats.

Partial disposal anything you're willing to say more on timing.

Number of interested parties would be helpful. It's a question, we often get asked by our.

Existing and potential investors and then secondly on diagnostics are you looking to stabilize this business further and demonstrate a sort of sustainable growth rate before considering alternative options that could further accelerate deleverage I know you've said very clearly that started the year at one to two transactions in 2023.

Peter Verdult: I know you said very clearly at the start of the year, 1 to 2 transactions in 2023, but it feels to me at this juncture that it's more likely just to be RAAS divestment in 2023. Feel free to put me back in my box if you feel I'm coming at it to the wrong conclusion, but just wanted to get a bit more color on RAAS and diagnostics. Thank you.

It feels to me at this juncture.

Small age to be Russ.

Divestment in 2023, so feel free to put me back in my books, if you peel them coming into their own conclusion, but just wanted to get a bit more color on breast and diagnostics.

Thomas Glanzmann: Thank you, Peter. Great, great to hear your voice. Well, let me basically reiterate some of the things that we've said. The potential China deal or Shanghai RAAS is in process. Discussions are ongoing. We cannot offer more comments at this point, but we will obviously inform you as soon as we have news. We do stand by our June release of the potential transaction that would generate EUR 1.5 billion in cash and would retain a strong position in China. I do wanna remind you that this is one of our work streams, but also that 70% of fixing our balance sheet, and I'll come back to what Alfredo mentioned, really is on improving our operational performance.

Peter Great Great to hear your voice.

Well, let me, let me basically reiterate some of the things that we've said.

The potential China deal our Shanghai Ross is in process discussions are ongoing.

We cannot offer more comments at this point, but we will obviously inform you as soon as we have news we do standby.

Our June release of the potential transaction that would generate $1 5 billion in cash and would retain a strong position in China.

But I do want to remind you that this is one of our work streams, but also that 70% of fixing our balance sheet and I'll come back to what Alfredo mentioned really is on improving our operational performance.

Thomas Glanzmann: With regard to the diagnostics, you know, we're obviously looking; we have a couple of work streams going. We are looking at a number of things at the moment. We have valuable assets and diagnostics is one of them at this point in time. You know, as these discussions are ongoing, as you will appreciate, they're obviously very confidential and I cannot divulge, you know, the more details on the different work streams until we actually can make something official.

So with regard to the diagnostics you know where we are obviously looking we have a couple of work streams going we are looking at a number of things that are at the moment, we have valuable assets in diagnostics is one of them at this point in time and you know as these discussions are ongoing as you will appreciate.

They're obviously very confidential and I cannot divulge.

The more and more details on the different work streams until we actually can make something official.

Nuria Pascual: Thank you, Thomas, and thank you, Peter. We have James Gordon from JP Morgan on the line. Hi, James.

Nuria Pascual: Thank you, Thomas, and thank you, Peter. We have James Gordon from JPMorgan on the line. Hi, James.

Thank you Thomas and I think get better and we have saw James Gordon from Jpmorgan on the line items.

Yeah.

James Gordon: Hello, James Gordon, JP Morgan. Thanks for taking the 2 questions, both about immunoglobulin, please. The first one was immunoglobulin performance this quarter and this year. It looks like maybe immunoglobulin has decelerated slightly, but still seems to be growing low double digit this quarter, so strong performance. I think I heard a comment about an uptick in sales ex-US. Have you seen any softening in US demand growth as one of your peers seemed to suggest that they'd seen? That's why you're shifting more sales to Europe. How does the profitability compare of selling IG more in Europe than the US? That's the first question, please. The second one, I think you alluded to it on the call already, that argenx, they had their headline Vyvgart CIDP results.

Hello, James Gordon Jpmorgan, Thanks for taking my two questions both about immunoglobulin place.

It looks like maybe immunoglobulin is decelerated slightly but it still seems to be growing low double digits. This quarter's strong performance well I think I heard a comment about an uptick in sales ex U S. So have you seen any softening in U S demand growth as one of your peers seem to suggest that 18.

So thats why youre shifting more sales to Europe , and how does the profitability compare of selling more in Europe and the U S. That's the first question please and the second one.

I think you alluded to on the call already there are generics they had their headline they've got CRT P results.

James Gordon: Just curious, any thoughts on the data that they generated, whether you think that would see much erosion of your franchise or not, your perspective on that data, whether we might see significant switching.

So just curious any thoughts on the data that they generated whether you think that would see much erosion of your franchise or not let's say your perspective on that data, whether we might see significant switching.

Víctor Grifols Deu: Hello, James. Good, good to hear you as well. I take the first question on immunoglobulin, it's about the, let's say the geographic. Clearly in Europe, outside US, we see a strong demand. As long as we have now rebound on the plasma supply, we are able to keep supplying that nice growth that we are seeing outside. In fact, we are growing very nicely there. In the US, similar case, we continue to see a strong underlying demand in the market, and now as well we are able to supply this market. In addition, as you know, we are ramping up, continue ramping up our subcutaneous product, XEMBIFY.

Hello, James I.

Well I take the first question on immune globulins about the let's say the geographic clearly in a in Europe , our southern Europe outside U S. We see a.

Strong demand and as long as we have now rebound on the plasma supply we are able to keep supplying.

That that nice growth that we're seeing outside in fact, we were growing very nicely there in the U S. A similar case, we continue to see a strong underlying demand in the market and now at where we are able to supply. This market. In addition, we as you know we are ramping up continue to ramp them up our subcutaneous.

Our product can be filed.

Víctor Grifols Deu: In both, we are seeing nice growth and a stable pricing. Profitability at the end of the day comes to pricing in this franchise. As we all know, there is a price gap between US and outside US countries, and this is driving the different kind of profitabilities that we see geographically.

And in both we are seeing nice nice growth and a stable a stable pricing and profitability at the end of the day comes to pricing in this in this franchise and as we all know there is a price gap between U S and outside U S countries and this is driving the different kinds of profitability set.

Geographically.

Thomas Glanzmann: Hey, James, this is Thomas. I'll take the second question. Well, first of all, we believe that the results are actually good for us because they really reconfirm our position that the argenx results are gonna have very little impact on our business. We continue to be very optimistic about the IGIV opportunity with a EUR 14 billion market growing at high single digits, and the opportunities that we have with not only in the US, but globally with our product range. Particularly as was pointed out with XEMBIFY, which, you know, still represents a very, very small portion of our total IG sales. As I mentioned before, or as had been mentioned in our protocols, the profitability of XEMBIFY obviously is significantly higher.

Hey, James This is Thomas I'll take the second question well first of all.

We believe that the results are actually good for us because they really reconfirm our precision that that the organics results are going to have very little impact on our business. We continue to be very optimistic about that.

The I JV opportunity with a 14 billion market growing at at high single digits and the opportunities that we have with not not only in the U S, but globally with our product range and particularly as was pointed out with 75, which still represents a very very small portion of our total <unk> sales.

And as as I mentioned before or as had been mentioned in our protocols. The profitability of 75, obviously significantly higher and as we shift more or sell more of 75 that will significantly improve also the the overall profile of our biopharma.

Thomas Glanzmann: As we shift more or sell more of XEMBIFY, that will significantly improve also the overall profile of our Biopharma business and profitability. We're actually, you know, continue to be extremely excited about where we're going, what we're doing, and the future of our IG franchise.

Our business and profitability. So we're actually you know continue to be extremely excited about where we're going what we're doing in and in the future of AIG franchise.

Nuria Pascual: Thank you. Thank you, James. Now we go for Jaime Escribano from Banco Santander. Hola, Jaime.

Thank you thanks, James and now we go far and mesquite Ivano from Banco Santander.

<unk>.

Jaime Escribano: Hi, and good afternoon. A couple of questions from my side. Just if you can elaborate a little bit more on the sales performance of 7% growth at constant currency ex Biotest in Q2 versus around 9% in Q1. Within your slide, IG seems to be growing at double digits, albumin at around 5%. Then there is this piece that you mentioned growing close to zero, Alpha-1, Hyperimmune, Factor VIII. Maybe if you can give us a little bit more color on this. Also how does this reconcile with increasing the top line guidance for the year? Because you basically accelerate or increase the top line growth to double digits in plasma.

Hi, good.

Good afternoon until a couple of questions from my side. So just if you can elaborate a little bit more on the sales performance of 7% growth at constant currency. Excluding by your tests in Q2 were switched around 9% in Q1 I'm reading your <unk>.

It seems to be growing at double digits and I don't mean at around 5%. But then there is this these pieces that you mentioned growing close to zero.

One hyperglycemia and saying factor rate, maybe if you can give us a little bit more color on this in.

And also how does this reconcile with increasing the top line.

Items for the year, because you basically accelerate or increase the top line growth.

The heat in plasma. So my question would be the second half and are you seeing an acceleration maybe of this part.

Jaime Escribano: My question would be, if in the H2 are you seeing an acceleration maybe of this part that has been a little bit weaker this quarter? My second question is regarding the Biotest licensing agreement that was announced back in May. If you can give us a little bit more details on how this is going to be implemented and how should we think about the P&L, if there is anything we should bear in mind going forward. Thank you very much.

Okay.

Hey, we got this quarter shuttle and then my second question is regarding then the entire test licensing agreement.

That was announced back in May that you can give us a little bit more details on how is this going to be implemented on a on how should we think about the P&L. If if there is anything we should bear in mind going for what thank you very much.

Víctor Grifols Deu: Hello, Jaime. I will take the first question. In this, let's say, third bucket that we call it Alpha-1 and specialty proteins. Really, it's a bucket that contains many different, let's say, product lines. The main one, of course, being Alpha-1. Clearly it's a mix of performance on those different business lines. As I said, if we focus on Alpha-1, as you know, Alpha-1 is highly related with diagnosing potential patients to be put lately on therapy. During 2022, what we experienced as we were exiting the pandemic, we were ramping up our testing in the franchise.

Hello, Hi, Matt I will take the first question.

In this in this let's say a third bucket that we call. It alpha one in specialty proteins really saw it as a backend that contains many many.

Many different let's say product lines. The main one of course being alpha one.

Clearly, it's a mix of performance on those different business lines as I said, if we precise on on Alpha one.

As you know our Hawaiian is highly related with diagnosing of potential patients to read the report lately, our onset on therapy and during 2020 at all what we experienced as we were exiting.

The pandemic, we were ramping up our our testing in the franchise you'll have seen that we have kind of reinforced. This this testing approach with the home kit to expand the progression and there is a lag time between diagnosis to truncate that into into our EBITA.

Víctor Grifols Deu: You have seen that we have kind of reinforced this testing approach with the home kit to expand the progression. There is a lag time between diagnosis to truncate that into to be put on therapy. Back to your point, we expect this ramping up in testing that started H2 last year, and that is continuing during H1. We expect this to deliver more patients to be, let's say, put on therapy, and this will help the improvement in performance and in growth during H2. In addition to that, to your broader question about H2, for instance, albumin, you see this 5.1%.

And back to your point, we expect this ramping Marvin testing that they started second quart second half last year and that is continuing during this first semester, we expect this to deliver.

More and more patients to be let's say put us at a b and this will have the the improvement in performance and growth in during the second half. In addition to that to your broader question about second half for instance, albumin, you'll see this 45, 1%.

Víctor Grifols Deu: We expect this to continue to be accelerated, and we expect to see a better, let's say, performance than the 5.1 in albumin also. This makes the overall year to look higher than what looks today.

We expect these two to continue to be accelerated and we expect to see a better let's say performance.

Then they weren't in the FIFO and widening in argument also and this makes the overall year tour to look higher than what it looks like today.

Thomas Glanzmann: Okay. Jaime, to your

Alfredo Arroyo: Okay. Jaime, to your second question about Biotest. Yes, we signed this transfer tech and license and development agreement by which it is gonna cover, you know, the exchange of technology knowhow. Therefore working together between Grifols and Biotest. To your point to the P&L, there is no P&L or cash impact at all as a result of this transfer tech agreement.

Okay.

Yes.

To your.

Alfredo Arroyo: Second question about Biotest. Yes, we signed this transfer tech and license and development agreement by which it is gonna cover, you know, the exchange of technology knowhow. Therefore working together between Grifols and Biotest. To your point to the P&L, there is no P&L or cash impact at all as a result of this transfer tech agreement.

Second question about the biotech, yes, we will shine this transfer take.

Taken license and development agreement.

They reached is going to cover the exchange of technology Knowhow. So therefore, working together between riffle shot.

I'm biotech.

And to your point to the P&L, there is no P&L or cash impact at all as a result of this.

Sure.

Nuria Pascual: Thank you, Alfredo. Now we have a question from, well, or two, from Thibault Boutherin from Morgan Stanley. Hi.

Thank you all for them.

And now we have a question from one or two from civil with ethane from Morgan Stanley .

Hi.

Thibault Boutherin: Hello. Thank you very much for taking my question. First one is on immunoglobulin versus other proteins. I mean, we're seeing more growth right now of immunoglobulin. If you could just tell us a little bit about your thinking in the context of the last liter economic logic, how you're thinking about balancing growth between protein going forward. Is it an issue at some point in terms of profitability if immunoglobulin continue to grow faster than other proteins? My second question is, if you could just talk a little bit about the cost of treating CIDP patients.

Hello, Thank you very much for taking my question.

First one is.

An email email Caribbean Justice proteins, I mean, we're seeing more growth right now of immunoglobulin if you could just.

That's little bit of both.

Youre thinking.

We continue to grow faster.

Then.

Thanks.

My second question is.

Yes.

Thank you.

<unk>.

Thibault Boutherin: We know already that the annual cost of Vyvgart in CIDP is going to be similar to Myasthenia Gravis, so probably a little bit more than $200,000 per year per patient. If you could contrast this with the average annual cost of treating a CIDP patient today in the US with immunoglobulin. If you could comment on, you know, IG potentially having or not a cost advantage compared to new innovation in CIDP. Thank you.

We know already that.

Instead, it is going to be similar to master that Travis So club digital Britain, Northern tundra thereof, that's all that doesn't at all.

And so if you could contrast, this with the average annual cost of <unk> patients.

Today in the U S.

<unk> and <unk> and if you could comment on it.

I'm sure you're having.

That cost advantage.

Two new innovation, Thank you Pete.

Thank you.

Víctor Grifols Deu: Okay. It was a little bit hard to understand the whole question, but on the first one, if I understand, is the unbalanced or balanced growth in our proteins. I should say that we are working towards a goal, a strategy to rebalance our protein growth, both especially the top ones, which as we know are IG and albumin. There is still a gap, but we are targeting during this year, 2023, and the coming year, 2024, to rebalance as we were pre-pandemic, which is the optimal, let's say, scenario from the profitability standpoint. It's not yet there, but we are working towards balancing those two proteins.

Okay.

Is it hard to understand all the whole question, but on the first one if I understand is the on balance our balance growth in our proteins.

I'll say that we are we.

We are working towards our goal our strategy to rebalance our protein growth.

Both especially the top ones, which as we know our IGN and albumin that is still a gap.

But we are targeting during this year Tony it honestly.

The coming year 'twenty 'twenty four to rebalance as we were pre pandemic, which is the optimal or let's say a scenario from the profitability standpoint is not yet there, but we are working towards balancing those two proteins.

Thomas Glanzmann: Okay. I'm not sure I heard your questions very clearly, but if I think I got it was you were asking about the pricing differential between the new product that was just went through clinicals and our IGIV. Is that right?

Okay.

I'm not sure I heard your question very clearly, but if I if I think I got it. It was you were asking about the pricing differential between the new product that was just went through clinical's.

And our <unk> JV is that right.

Okay.

Thibault Boutherin: Okay. Can you hear me?

Okay can you hear me.

Thomas Glanzmann: Now we can hear, yes. Did I get this right?

Now we can hear yes is that did I get that right. Okay.

Thibault Boutherin: Okay.

Thomas Glanzmann: Okay.

Thibault Boutherin: Yeah, no, you get it. I mean, we already know, I mean, argenx I think commented that the price, the cost in CIDP is going to be similar to Myasthenia Gravis. We know already it's going to be in the tune of $200,000 or maybe a little bit above that. If you could just compare this with IG and implication in terms of reimbursement and access to treatments.

Yeah, you got it I mean, we already know the analytics I think commented that the price.

Yes.

Okay.

You may now to Mr. Greg. So we know already is going to be in the tune of $200000.

It's a bit above that.

And so if you could just compare with suites.

And implication in terms of a free investment there's access to treatments.

Thomas Glanzmann: Well, first of all, obviously, you know, the treatment for IGIV, it's about, you know, $80,000, or compared to the $200,000, we've heard even much higher numbers than the $200,000 for a full treatment of the patient. IGIVs obviously are significantly lower in cost to the system and the patients than what we had expected. And actually, you know, if you take the $6,600,000, you know, the cost differential could be ten times. Depending on what number they state, they tell you, we think that there is a significant difference. We also think that this is gonna be, you know, something that people will look at closely as we move forward.

First of all obviously you know the treatment for a JV it's about.

80000 or compared to the 200, we've heard even a much higher numbers than the 200 for a full treatment of the patient. So I gebbie's RBC are significantly lowering cost to the system and the patients than what we had expected.

And actually if you take the 60 600000.

The cost differential could be 10 times, so depending on what number they state stay tell you. We think that there is a significant difference and we also think that this is going to be something that people will look at closely as we move forward. So that gives us another very optimistic view of of the fab.

Thomas Glanzmann: That gives us another very optimistic view of the fact that IGIVs will, you know, will do very well going forward, even in the CIDP segment.

Fact that I Joey's will will you know will do very well going forward even in the COPD segment.

Nuria Pascual: Okay. Thank you. We have now on the line, Tom Jones from Berenberg. Hi, Tom.

Thank you.

And we have fun now underlying Tom Johnson Miranda item.

Tom Jones: Good afternoon, everyone. I had a couple of questions. Probably one for Alfredo, actually. Just a pretty boring one, but on operating and free cash flow. Obviously the business is improving, but free cash flow is still pretty weak and negative. You're still, by the looks of it, continuing to invest in inventory. When should we expect those drags on working capital to either abate or become a bit of a tailwind and start printing some positive free cash flow? Is this more a 2024 story, or do you think you can do that in H2? The second question, kind of allied to cash flow, but tied to the leverage story.

Good afternoon, everyone I had a couple of questions.

Probably one for Friday, actually just pretty boring, one but on operating them.

And free cash flow.

Actually the business is improving but free cash flow is still pretty weak and negative you're still continuing.

Continuing to invest in inventory when should we expect those drags on working capital to either abate or become a bit of a tailwind to need to start printing some pulse.

Positive free cash flow or is this more a 'twenty 'twenty four story or do you think you can do that in the second half of the year.

And then the second question kind of a large cash flow but.

The leverage story.

Tom Jones: I think, you know, we're all fairly confident that there's a clear path to how you can knock two turns of EBITDA off your leverage by organic EBITDA growth. You still need one further whole turn to come from asset sales, which, to some degree, not entirely within your control. You need third parties to play ball on that. You know, given the end of 2024 is only 18 months away, how are you thinking about kind of plan Bs at this point, with the leverage if the asset sales don't come to pass? I'm just wondering what your

I think you know we're all.

Fairly confident.

Their path to how you can knock two turns of EBITDA or of your leverage by organic EBITA growth, but you still need one third the whole Ted to come from asset sales, which up to some degree not entirely within your control you need third parties to play ball on that so given the end of 'twenty 'twenty four is only 18 months away.

Hey, how are you thinking about kind of planned phase at this point.

With the leverage if the asset sales don't come to pass so I'm just wondering what your.

Thomas Glanzmann: Your kind of thinking might be at this point, in terms of trying to hit that 4x target.

Thinking might be at this point in time to try to hit that four times target.

Alfredo Arroyo: Okay. Hi, Tom. Good to hear you again. Regarding the cash flow, I mean, if we think in terms of operating cash flow, basically in Q1, we have a negative cash flow, mainly driven by the restructuring costs. Even if we adjust the restructuring costs, in Q1 was slightly negative, around EUR 25 million. In the year to date, the operating cash flow, excluding the restructuring costs, is being EUR +72 million. That means that the Q2 will have turned into EUR +100 million operating cash flow. You take a look at the annexes that we have published. Remember that that cash flow, free cash flow includes the interest expenses because it starts the calculation from the net profit.

Okay.

Don.

Good to hear then.

Regarding the cash flow I mean, if we think in terms of operating cash flow.

Basically in Q1, we have a negative cash flow, mainly driven by the restructuring costs, even where yes. They are still getting cost in Q1 was slightly negative around $25 million.

India yesterday.

The operating cash flow.

Excluding the restructuring cost is being positive 72 million that leaves then the Q2, we have turned into 100 million a positive operating cash flow. So you take a look at the the unexpected we have published remember that that cash flow free cash flow includes.

The interest expenses that because you just start from the operator.

Star the calculation from the from the net profit, but operational cash flow wise, we have already moved into our second quarter positive.

Alfredo Arroyo: Operational cash flow wise, we have already moved into Q2 positive. In the H2 of the year, on the back of higher EBITDA, you know, point number one, and then the absence of any further restructuring costs, and we expect that the operating cash flow is gonna keep improving from now to the H2 of the year.

In the second half of the year on the back of higher EBITDA.

Point number one and then the absence of any.

Part of it is still tooling cost.

We expect that the operating cash flow is going to keep improving from now to the second half of the year.

Nuria Pascual: From the leverage? There was the second question that was on the leverage and the asset sales, and what's the plan B.

Okay.

And there was the second question that was on the leverage and the asset sales and what's the plan B.

Thomas Glanzmann: Well, plan B is we're gonna execute on what we said. You know, we have one transaction that we've announced. As you pointed out, Tom, you know, a significant part of it is operational, from operational performance. We're very set on delivering on those two things to get to the 2024.

Well plan, because we're going to execute on what we said so you know we have 111 <unk> transaction that we've announced and as you pointed out.

Tom you know a significant part of it is operational from operational performance. So we're very set on delivering on those two things to get to the $2 24.

Okay.

Nuria Pascual: Okay. Thank you. We have Guilherme Sampaio from CaixaBank. Hi, Guillermo.

Okay. Thank you.

We have.

Some higher some guys have anxiety asthma.

Guilherme Sampaio: Hello. Thank you for taking my questions. The first one on cost per liter. You've talked about some efforts going forward to continue reducing cost per liter. With the announced EUR 450 million cost savings already deployed, what else should we get in terms of additional savings? The second question about plasma collections, how should we think about growth over the remaining part of the year? Thank you.

Hello.

Thank you for taking my questions.

So the first one on cost per liter. So you've talked about some of the efforts going forward to continue reducing costs per liter.

We've announced 450 million cost savings already deployed what else should we catch in terms of additional savings.

And the second question about plasma collections, how should we think about growth over the remaining part of the year.

Thank you.

Alfredo Arroyo: Regarding the cost per liter, as we said, you know, as of today, we are 20% below peak of cost per liter last year. That was during the summertime. We expect that it will be slightly better. That means that we expect that the cost per liter finally will decline around 25%. Okay, but now not on the back of donor fees, but on the back of other, I would say, opportunities and other initiatives that we have launched. That's gonna further help in the gross margin. Regarding the collections, we are monitoring.

Regarding the cost per liter gas as we said you know.

As of today, we are.

20% below.

Peak of cost per liter last year had wuxi during the summertime and respect that.

It will be and as Lady M D.

So that means that we expect that the cost per liter finally will decline around 25, okay.

But then now not on the not on the back of donor fees, but on the back of older bootie older opportunities and all the initiatives that we have for lunch.

So that's you know that's just going out.

Further help in the gross margin.

Regarding the collections.

We were monitoring remember that there is a high correlation between garner compensation and collections.

Alfredo Arroyo: Remember that there is, you know, high correlation between donor compensation and collections. Of course, you know, we need to make sure that we fine-tune the collections in terms of volume, to make sure that the volume that is coming, you know, is enough to support our sales growth.

Of course, you know the.

We need to make sure that we fine tune the collections indenture volume to make sure that the volume that is coming.

Asia is enough to support our share.

Sales growth.

Nuria Pascual: Thank you. Next question, coming from Alvaro Lenze from Alantra Equities. Alvaro?

Thank you and our next.

Our next question coming from Nevada landfill from Alantra equities.

Adam.

Alvaro Lenze: Hi. Thanks for taking my questions. The first one is on guidance. I believe that the increase I would have expected from the increase that you have provided on top-line guidance and being in the upper range of margin, I would have expected the total EBITDA in euro terms to be upgraded more. I guess it seems that the increase in the EBITDA guidance from over EUR 1.4 billion to EUR 1.4 to 1.45 is not that much of an increase. I was wondering whether this is due to good performance in Grifols standalone, but a worse performance in Biotest. How is the increase in the EBITDA that low for 2 additional percentage points of top line?

Álvaro Lenze: Hi. Thanks for taking my questions. The first one is on guidance. I believe that the increase I would have expected from the increase that you have provided on top-line guidance and being in the upper range of margin, I would have expected the total EBITDA in euro terms to be upgraded more. I guess it seems that the increase in the EBITDA guidance from over EUR 1.4 billion to EUR 1.4 to 1.45 is not that much of an increase. I was wondering whether this is due to good performance in Grifols standalone, but a worse performance in Biotest. How is the increase in the EBITDA that low for 2 additional percentage points of top line?

Hi, Thanks for taking my questions. The first one is on guidance.

I believe that the increase I would have expected from the increase that you have provided on top line guidance and being in the upper range of margin.

Would have expected it.

Total EBITDA in euro terms to be upgraded or more I guess it seems that the increase in the EBITDA guidance from over one 4 billion to.

One four to 145 if not.

There's not that much of an increase so I was wondering whether this is due to good performance in greenfield standalone, but the worst performance in biodiesel.

The increase in the EBITDA.

That low for two additional percentage points of top line.

Alvaro Lenze: Also, continuing with the guidance, at the last call, you indicated that you were comfortable with the consensus on 2024 EBITDA, which was somewhat above EUR 1.8 billion. How does this increase in the guidance for 2023 feed into 2024, whether this is just an acceleration of the cost savings or whether this could also imply better performance in 2024? Thanks.

Álvaro Lenze: Also, continuing with the guidance, at the last call, you indicated that you were comfortable with the consensus on 2024 EBITDA, which was somewhat above EUR 1.8 billion. How does this increase in the guidance for 2023 feed into 2024, whether this is just an acceleration of the cost savings or whether this could also imply better performance in 2024? Thanks.

And also.

Continuing with the guidance.

Last call you indicated that you were comfortable with the consensus on 2020 for EBITDA, which was somewhat above $1 8 billion.

So how does this increase in.

In the guidance for 2020.

<unk> three <unk> into 'twenty 'twenty four.

Other.

This is just an acceleration of the cost savings or whether this could also imply better performance in 2024. Thanks.

Alfredo Arroyo: Okay. Thanks for the question. To the first point, the guidance for this year, remember that, you know, even though we have already achieved and deployed those EUR 450 million, as I said, you know, especially since more than 70% of the savings are coming from plasma costs, it takes time to go through the P&L. That's why, you know, as I said, most of the plasma cost savings will hit the 2024 P&L. We have increased from 1.4 to 1.45 because the phasing of the savings flowing through the P&L.

Okay. Thanks for the question so the.

The first point the guidance for this year.

Remember that even though we have already.

Chief and deploy those 450 million shares.

Said.

And especially since the more than 70% of the savings are coming from plasma cost.

It takes time to go through the P&L.

So that's why you know as I said most of the plasma cost savings, which will hit the 'twenty 'twenty four P&L.

So we have increased from one four to $1 450.

Because because the phasing of the savings flowing through the P&L regarding next year.

Alfredo Arroyo: Regarding next year, you know, we will provide you with a guidance at a later stage, and we feel comfortable that this year we're gonna close the year at 24%. You know, as I said, you know, we have provided already with pro forma EBITDA 2023 based on the savings, which is EUR 1.75. Later on, let me first, you know, close the year, and then, you know, early next year, we will keep you posted about 2024 guidance.

We will provide you with our guidance at a later stage.

We feel comfortable that this year with a.

We will close the year at 24%.

Then.

As I said, we have provided already with pro forma EBITDA.

2023 based on the on the on the <unk>.

Savings.

Which is 1.717 50.

Later I'll, let me first you know.

Through the year and then you know.

Early next year.

We'll keep you posted about 2024 days.

Nuria Pascual: Okay. We have a question coming from Joaquín García-Quirós from JB Capital. Hi, Joaquín.

Okay.

Have a question from coming from parking at the Aikido is from David capital.

Yeah.

Joaquín García-Quirós: Yes, hello. Thank you for taking my question. It's just a follow-up regarding the free cash flow. You didn't say anything about working capital, so when can we expect a reversal of working capital, especially in the inventories? Is it more for H2 of this year, or should we expect more of a reversal during next year due to the reduced plasma cost from England? Thank you.

Yes, Hello, Thank you for taking my question.

Just a follow up regarding the free cash flow.

Did you said that working.

You say anything about working capital. So when can we expect a reversal of working capital, especially inventories.

Is it more for the second half of this year or should we expect more of a reversal.

During next year due to the reduced costs from England from plasma cost. Thank you.

Alfredo Arroyo: Yeah. On one hand, the inventory is gonna grow in line with the activity. As you know, that's the way that working capital works, especially inventory. At the same time, as of today, the DIOs, the days inventory are declining. For H2, we expect that the volume-wise, the inventories are gonna increase. However, due to this cost-saving plan, the cash cost savings associated to plasma will offset that volume increase.

Yeah.

On one hand, the EBIT is going to grow in line with our with the activity as you know that's the way that our working capital work, especially inventory, but at the same time.

As of today.

The days of the days inventory.

Our declining.

For the second half the year, we expect that the volume volume wise, the EBIT to cycling case, however, due to this.

Cost saving plan, the cash cost savings associated to plasma will offset that.

The volume increase.

Nuria Pascual: Great. We have a couple of follow-up questions. First from, he was the first to be again on the list. Tom, I think you have something else.

Great.

Follow up questions first from the first of it to be again in the last time, I think you'll have something else.

Tom Jones: Yeah. Thanks for taking my follow-up. It was a very quick one. I'm just wondering if you could remind us when the price concessions related to the renegotiated contract with CTF kicked in. From memory, it was the sort of mid-level last year that the contract was signed. I guess I'm just trying to figure out when the price headwind drops out of the comparative quarters, whether it's Q3, Q4, or we should wait until next year before that happens.

Yes, thanks for taking my follow up so it was a very quick one.

Just wondering if you could remind us when the price concessions related to the renegotiated contract with Cts kicked in from memory. It was.

Middle of last year that the contract was signed but.

I'm, just trying to figure out when the price headwind drops out with a comparator quarters, whether it's Q3 Q4, we should wait until next year before it happens.

Alfredo Arroyo: As you know, as of today, I mean, during this year, the price concessions are going through the P&L. We signed this agreement, it was Q1 last year, if I recall right. That's as of today, is the only reason why the gross margin of Diagnostics is slightly declining. Remember, in exchange of that, we have signed a contract up to 20 years. We have secured the largest and the most profitable client of all.

As you know as of today I mean during this year.

We are the price concessions are going through the P&L.

We signed this agreement.

Russia Q1 last year.

And in flight.

If I recall right and so that's as of today is the only reason why the the gross range of diagnostic is slightly declining but never in exchange of that we have shiny contract up to 20 years.

So we have secured the largest and the most profitable climb aboard.

Nuria Pascual: Okay. Also another follow-up from Jaime Escribano. Jaime?

Okay and now also another follow up from a heightened good Ivano highway.

Jaime Escribano: Yeah. Hi, yeah, it's a quick one. Just to make sure I understand slide 18 properly, where you say that the gross margin ex Biotest could increase in the H2 250 basis points, although you do it with base 100. If we take the gross margin of the H1 ex Biotest, which is around 37.5%, my question would be, would it be fair to think about a gross margin in the H2 for Grifols excluding Biotest of close to 40%, so 37.5 plus these 250 basis points? Is that the way we should think about this slide? Thank you very much.

Yeah, Hi, Yeah, just a.

A quick one so just to make sure I understand slide 18 properly where you say that the gross margin are expired. This could increase in the second half 200 and.

50 basis points, although usually with a range of 100, but if we take the gross margin of the first half our expanded test which is not wrong.

That is a 37, 5% my question would be would it be fair to think about our gross margin in the second half.

For Agri false ex screen by your dash and close to 40% or 30.

Seven five plus 250 basis points is that the way we should think about this as like thank you very much.

Alfredo Arroyo: Well, you know, for the H2, basically, what is gonna happen, we're gonna see a strong growth on one hand. You know, I'm gonna give you what are the main growth drivers. A strong growth volume-wise IG, but especially volume in China, point number one. Point number two, the plasma cost savings will start, you know, helping the P&L, flowing through the P&L. Number three, all the other non-plasma cost savings, basically OpEx savings, are gonna also impact the P&L. Since the H2 sales will be higher, the operational leverage will be higher.

Well you know for the for the second half of year.

Basically.

What is going to happen, we're going to see the strong growth we had.

I'm going to give you the what are the main growth drivers are strong growth.

Worldwide, I G, but especially.

I've, even in China and put another one point to the M D.

The plasma cost savings will start.

Helping the P&L flowing through the P&L number three the all the other non plasma cost savings basically opex savings aren't going out also.

But the P&L and she is difficult how the change will be higher the operational leverage will be higher and therefore all of these factors all of these components will will will support that.

Alfredo Arroyo: Therefore, all of these factors, all of these components will support that, you know, the increase of EBITDA margin. You're gonna see sequentially that, you know, that we move from this 21 to 23, and then in Q3 and Q4, you know, further quarterly margin improvement on sequential basis.

The increase of of immediate margin youre going to see sequentially that you know that we move from this.

'twenty one to 'twenty three and then in Q3 and Q4.

Further a.

Quarterly margin improvement.

Sequential basis.

Nuria Pascual: Okay, thank you. I guess that here we have one final, so Peter, you open and you close the Q&A session. Can we have your follow-up question?

Okay. Thank you and I guess that here, we have one final sell data you will open and close the Q&A session. So.

Can we have your follow up question.

Peter Verdult: Yeah, thank you. Peter Verdult. Just the final question is on innovation. When you did the Biotest deal, the fibrinogen and the IGM opportunities were highlighted as significant. I was under the understanding that the AdFIrst fibrinogen phase 3 data was imminent. I think you've cited the H2 event, but can I just push you either Víctor Grifols Deu or Thomas Glanzmann, when do you expect the data to be in-house? Or when do you expect to at least topline the data to the market? Can you remind us again your comfort of, I think the EUR 400 to 800 million revenue opportunity was quoted at the time of the deal. I believe CSL does about EUR 300 million of fibrinogen sales off-label.

Yes. Thank you people don't see just the final question is on the innovation.

When you did the box is still the.

Fibrinogen and the RCM opportunities were highlighted as significant so.

I was under the understanding that they got its first flight Burnishing phase III data.

It was imminent.

Thank you.

H two.

Event, but I'm trying to push you either.

Victor or autonomous when do you expect the data to be in house or when do you expect to at least.

Top line data to the market and can you remind us again will come from.

<unk> 800 billion revenue opportunity was quoted at the time of the deal.

I believe see yourself, there's about $300 million of sufferings themselves off label, but can you remind us there's still $4 million to $800 million that you believe is the.

Peter Verdult: Can you remind us, is it still EUR 400 to 800 million that you believe is the peak sales opportunity for the fibrinogen? Thank you.

Peak sales opportunity because what brings them. Thank you.

Víctor Grifols Deu: Yeah. Thank you. We expect the to provide the data probably starting next year, 2024, during H1, I should say. This is the expectations that we are targeting. Regarding, yes, the peak sales remain similar to what we have announced.

Thank you.

We expect the.

To provide the data probably starting next year 'twenty 2024.

During the first half I should say.

This is our the expectations that we that we are targeting and regarding yes. The big sales remain similar to what we have announced.

Thomas Glanzmann: EUR 400 to 800 million.

Announced.

Víctor Grifols Deu: Yeah.

Yeah.

Thomas Glanzmann: Yes.

Yes.

Nuria Pascual: Okay. With that, I think we will close today's call and we hope to see you or hear you again in our next quarterly calls. In the meanwhile, for those of you who have not been yet on holiday, enjoy summer and speak to you soon. Thank you all.

And now with that.

I think we will close them today's call and we.

We hope to see you R. R and hear you again in our next quarterly calls and now in the Meanwhile for those of you who have not been yet on holiday. So enjoy your summer and stick to you soon thank you all.

Thomas Glanzmann: Thank you all.

Víctor Grifols Deu: Thank you. Bye.

Thomas Glanzmann: Bye-bye.

Víctor Grifols Deu: Thank you. Bye.

Thomas Glanzmann: Bye-bye.

Víctor Grifols Deu: Thank you. Bye.

Thomas Glanzmann: Bye-bye.

Thank you Bob.

Yeah.

[music].

<unk>.

Yes.

Okay.

Q2 2023 Grifols SA Earnings Call

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