Half Year 2026 Fagron NV Earnings Call

Speaker #1: Hello and good morning, everyone. Welcome to Fagran's H1 2026 results webcast. I'm joined today by our CEO, Rafael Padilla, and our CFO, Karin De Jong.

Speaker #1: Rafael will start by discussing the company's performance and a closer look at regional developments. Karin, we'll then walk you through the financial results. We will open the floor for questions at the end of the session.

Speaker #1: Hello and good morning, everyone. Trans A1 2026 results webcast. I'm joined today by our CEO, Rafael Padilla, and our CFO, Karin de Jong. Rafael will start by discussing the company's performance and a closer look at regional developments.

Speaker #1: With that, I will hand over to Rafael.

Speaker #2: Thanks, Ignacio, and good morning all. We're pleased to report a strong performance with revenues reaching $552 million EUR. This reflects 3.1% organic growth at CR.

Speaker #1: Karin, we'll then walk you through the financial results. We will open the floor for questions at the end of the session. With that, I will hand over to Rafael.

Speaker #2: Thanks, Ignacio, and good morning all. We're pleased to report a strong performance with revenues reaching $552 million EUR. This reflects 3.1% organic growth at CR.

Speaker #2: 7% were normalizing the GLP-1 effect. Growth was driven by brands, Latin America, being in North America and EMEA. Profitability grew by 12.7% to $107 million EUR.

Speaker #2: 7% were normalizing the GLP-1 effect. Growth was driven by brands, Latin America, being in North America and EMEA. Profitability grew by 12.7% to $107 million EUR.

Speaker #2: The margin of 19.4% reflects an improvement in both EMEA and Latin America and temporary effects in North America Pacific compounding services. On M&A, we closed the acquisition of Amber in Singapore and Malaysia.

Speaker #2: The margin of 19.4% reflects an improvement in both EMEA and Latin America, and temporary effects in North America Pacific compounding services. On M&A, we closed acquisition of Amber in Singapore and Malaysia.

Speaker #2: Completing 5 acquisitions across all regions in 2026. We also entered into a collaboration agreement with Nutraconnect in Asia, which will complement our nutraceutical platform.

Speaker #2: Integration of earlier announced acquisition remains on track. We have also appointed Amy Jones to lead the North American Pacific region. Finally, we're also reiterating our full-year guidance of mid to high single-digit growth at CR and an adjusted EBITDA margin of around 20%.

Speaker #2: Completing 5 acquisitions across all regions in 2026. We also entered into a collaboration agreement with Nutraconnect in Asia, which will complement our nutraceutical platform.

Speaker #2: Integration of earlier announced acquisition remains on track. We have also appointed Amy Jones to lead the North American Pacific region. Finally, we're also reiterating our full-year guidance of mid to high single-digit growth at CR and an adjusted EBITDA margin of around 20%.

Speaker #2: Moving on to the regions. In EMEA, performance was led by brands on the back of continuous strategic focus while essentials remained balanced. We saw, again, strength in compounding services through high demand for key therapies and our focus on operational excellence translated into better availability and procurement savings supporting both top-line and margin expansion.

Speaker #2: Moving on to the regions. In EMEA, performance was led by brands on the back of continuous strategic focus while essentials remained balanced. We saw, again, strength in compounding services through high demand for key therapies and our focus on operational excellence translated into better availability and procurement savings supporting both top-line and margin expansion.

Speaker #2: During the period, we completed the acquisitions of Pharmavit, Magelab, and Amber, and are working on integrating them into the group. Pharmavit and Magelab will strengthen our European platform and enhance our market positioning, while Amber will help us further expand our footprint in Asia.

Speaker #2: During the period, we completed the acquisitions of Pharmavit, Macolab, and Amber, and are working on integrating them into the Macolab will strengthen our European platform and enhance our market positioning, while Amber will help us further expand our footprint in Asia.

Speaker #2: Finally, we continue making progress in our capacity expansion project in the Netherlands. In Latin America, strong organic performance was led by the successful execution of our commercial strategy.

Speaker #2: Finally, we continue making progress in our capacity expansion project in the Netherlands. In Latin America, strong organic performance was led by the successful execution of our commercial strategy.

Speaker #2: In brands, our global R&D center in Brazil continues to be the engine of our global innovation. During the period, we completed the acquisition of Pudi Pharma and Vepacom.

Speaker #2: Like in EMEA, synergies and efficiencies during the integration process supported the region's profitability. In North America Pacific, performance was led by brands and essentials, together with contributions from Curve First and UCP.

Speaker #2: In brands, our global R&D center in Brazil continues to be the engine of our global innovation. During the period, we completed the acquisition of Foodie Pharma and Vepacom.

Speaker #2: Like in EMEA, synergies and efficiencies during the integration process supported the region's profitability. In North America Pacific, performance was led by brands and essentials, together with contributions from Curve First and UCP.

Speaker #2: Revenue growth in B&E was driven by new customer wins improved product availability, strong essential sales, and continued operational improvements. Compounding services was affected by the normalization of GLP-1 related revenues and an industry-wide IV back recall.

Speaker #2: Revenue growth in B&E was driven by new customer wins improved product availability, strong essential sales, and continued operational improvements. Compounding services was affected by the normalization of GLP-1 related revenues and an industry-wide IV back recall.

Speaker #2: Handheld wellness continued to deliver solid growth driven by high demand for personalized therapies and new product launches. On M&A, over the last 18 months, we have done 17 deals across all regions.

Speaker #2: Dental wellness continued to deliver solid growth driven by high demand for personalized therapies and new product launches. On M&A, over the last 18 months, we have done 17 deals across all regions.

Speaker #2: So far, all previously announced acquisitions have been completed except for Interplast. During the first half of this year, we have focused our efforts on integrating these successfully.

Speaker #2: Our teams have achieved significant synergies during the integration process, as shown in EMEA's and Latin America's margin performance. We will continue to benefit from further synergies during the integration process, which usually lasts 18 to 24 months.

Speaker #2: In H1 2026, M&A contributed around $69 million EUR to the overall group revenues, with all acquisitions performing as expected or better, and as Karin will comment, our balance sheet continues strong and we remain open to exploring more opportunities across our regions and categories while maintaining a disciplined approach.

During the first half of this year, we have focused our efforts on integrating this successfully. Our teams have achieved significant synergies during the integration process, as shown in MAS and Latin America's margin performance.

We will continue to benefit from further synergies during the integration process, which usually lasts 18 to 24 months.

Speaker #2: On our expansion projects, as announced during our CMD in April last year, we plan to add 500 million extra capacity by 2028. In the Netherlands, the sterile facility with a 15 million EUR CapEx investment as a revenue potential of $50 million EUR.

In H1 2026, M&A contributed around €69 million to the overall group revenues, with all acquisitions performing as expected or better.

And as Karen will commend, our balance sheet continues strong, and we remain open to exploring more opportunities across our regions and categories while maintaining a disciplined approach.

On our expansion projects.

Speaker #2: In North America Pacific, our new 538 Tampa facility is already online, with extra revenue potential of $100 million EUR. While Wichita and Las Vegas, both 503Bs, are ongoing with a combined CapEx of around $68 million EUR and revenue potential of $315 million EUR.

Speaker #2: All expansion projects are currently progressing as planned, the additional capacity positions us to successfully capture future growth opportunities. Moving on to the health and wellness activities, we have received a lot of questions regarding peptides, especially after the hearing that took place last week where the PCAC recommended the FDA 6 peptides for inclusion in the 503A books list.

Need an extra capacity by 2028 in the Netherlands. The sterile facility with a 15 million euro kapus investment as a revenue potential of 15 million euro in North America Pacific. Our new 538 Tampa facility is already online with extra Revenue, potential of 100 million while wita and Las Vegas. Both 503 BS are ongoing with a combined capex of around 68 million and revenue potential of 350 million.

All expansion projects are currently progressing as planned. The additional capacity positions us to successfully capture future growth opportunities.

Speaker #2: Given our existing infrastructure, and our proven track record, inclusion in the 503A books list will be an overall tailwind. The time to market is variable and can range from 6 to 18 months post inclusion, depending on various factors such as qualifying the right API suppliers and performing validations.

Moving on to the health and wellness activities. We have received a lot of questions regarding peptides, especially after the hearing that took place last week where the PCAC recommended to the FDA six peptides for inclusion in the 503B bulks list.

Given our existing infrastructure and our proven track record, inclusion in the 5338 Books list will be an overall tailwind.

Speaker #2: And finally, on our North America Pacific leadership team, Amy Jones has been appointed area leader after being instrumental in transforming our B&E business. She brings 15 years' experience in pharmaceutical compounding and will help scale the region to the next phase of growth.

The time to market is variable and can range from 6 to 18 months post-inclusion, depending on various factors such as qualifying the right API suppliers and performing validations.

Speaker #2: Additionally, building on our existing quality infrastructure, we are happy to announce the appointment of Kenneth Bonnell as the Global Head of Quality. Ken brings over 30 years of experience working in the industry across quality systems, quality assurance, regulation, and compliance, with this we hand over to Karin.

And finally, on our North America Pacific leadership team, Amazon has been appointed area leader. After being instrumental in transforming our BNA business, she brings 15 years' experience in pharmaceutical compounding and will help scale the region to the next phase of growth.

Speaker #3: Now, thank you, Rafa. Good morning, everyone. Thank you for joining this call, and let me walk you through the first half of the 2026 financial results and provide more color for the full year 2026.

Additionally, building on our existing quality infrastructure, we are happy to announce the appointment of Kennet Bunnell as Global Head of Quality.

Ken brings over 30 years of experience working in the industry across Quality Systems, quality assurance regulation and compliance with this. We hand over to Kings.

Speaker #3: In H1 2026, revenues increased by 16% on a reported basis to $552.5 million, driven by acquisitions and organic growth in the regions. Gross margin decreased by 218 basis points year on year, driven by acquisitions and change in North America Pacific product mix.

Now, thank you Rafa. Good morning everyone. Uh thank you for joining this call.

And let me walk you through the first half of the 2026 Financial results and provide more color for the full year 2026.

Speaker #3: Our operating expenses increased by 10% year on year, owing to our recent acquisitions though as a percentage of revenue, they decreased by 230 basis points.

Uh, in H1 2026, revenues increased by 16% on, a reported basis to 552.5 million driven by Acquisitions and organic growth in the regions.

Speaker #3: At a group level, our profitability margin decreased by 60 basis points year on year to 19.4%, mainly due to lower production volumes in compounding services in North America Pacific.

gross margin decreased by 218 basis points year on year, driven by Acquisitions and change in North America Pacific product mix

Speaker #3: We maintain our strong cash-generating capabilities as operating cash flow improved by 10.8% year on year to $58.1 million for the first half of the year.

Our operating expenses increased by 10% year on year or into our recent acquisitions though, as a percentage of Revenue, they decreased by 230 basis points.

Speaker #3: And lastly, our net debt to EBITDA ratio increased to 2.1 times largely because of payments for acquisitions. However, it remains below our internal threshold of 2.8 times.

At a group level. Our profitability margin decreased by 60 basis points year on year to 19.4% mainly due to lower production volumes in compounding services in North America Pacific.

Speaker #3: Moving on to the next slide, the bridge illustrates our revenue development for the first half of 2026. And may I report that a solid 4.1% organic growth at constant exchange rates, while lots of America posted an 8% organic revenue growth at CER, supported by strong performance of brands in Brazil.

We maintain our strong cash generating capabilities as operating cash flow, improved by 10.8% year on year to 58.1 million for the first half of the year. And lastly, our net debt to a data show, increased to 2.1 times largely because of payments for Acquisitions. However, it remains below our internal threshold of 2.8 times.

Moving on to the next slide.

Speaker #3: North America Pacific revenue was largely flat, growing at 0.2% organic at CER, where a strong performance in the brands and essentials was offset by soft compounding services.

Speaker #3: Our recent acquisitions contributed $68.7 million to the revenue. And as X during the period was a headwind, mainly in the US due to the weakening of the US dollar.

The bridge illustrates our Revenue development for the first half of 2026 and may, I reported a solid 4.1%, organic growth and constant exchange rate while a lot. Some America posted in 8% organic Revenue growth at CER supported by strong performance of brands in Brazil.

Speaker #3: On the right side, our P&L shows a 16% revenue increase together with our adjusted EBITDA growing 12.7%. Depreciation and amortization increased by 27.6% year on year due to the recognition of acquired intangible assets on a larger asset base reflecting both the acquisitions and continued investments in capacity and R&D.

North America, Pacific revenue was largely flat, growing at 0.2% organic at CER, where a strong performance in Independence and Essentials was offset by soft compounding services.

A recent acquisitions contribute, a 68.7 million to the revenue.

And at X During the period was a headwind, mainly in the US, due to the weakening of the US dollar.

On the right side, our P&L shows a 16% revenue increase, together with our adjusted EVA growing 12.7%.

Speaker #3: Our financial cost increased versus last year, driven by increased debt because of funding of the acquisitions and higher interest rates on our debt. As a result, earnings per share grew by 1.6% to $63 for the first half of the year.

Depreciation and amortization increased by 27.6% year-on-year, due to the recognition of acquired intangible assets on a larger asset base, reflecting both the acquisitions and continued investments in capacity and R&D.

Speaker #3: Turning to the next slide, and Maya, revenue growth reflected a solid organic demand across all categories and countries, alongside the contribution from acquisitions. Geographical diversification, along with a mix of price and volume increase, drove organic revenue growth.

Speaker #3: And looking at the region's profitability, adjusted EBITDA margin expanded by 30 basis points versus H1 2025, supported by operational excellence initiatives, sales mix, and integration benefits.

Speaker #3: And as Rafa mentioned earlier, we closed the acquisitions of PharmaFit, Margilab, and Umber during H1 2026. Moving on to Latin America, sales increased by 38.7% to $120.5 million, reflecting strong organic growth in brands and contributions from recently acquired companies, aided by a strengthening of the Brazilian AI.

Turning to the next slide, Fagron revenue growth reflected strong organic demand across all categories and countries, alongside the contribution from acquisitions. Geographical diversification, along with a mix of price and volume increase, drove organic revenue growth.

And looking at the region's profitability, adjusted EBITDA margin expanded by 30 basis points versus H1 2025, supported by operational excellence initiatives, sales mix, and integration benefits.

And as Rafa mentioned earlier, we closed the acquisitions of Pharmaceutical and Umber during H1 2026.

Moving on to Latin America.

Speaker #3: Organic growth at CER was 8%, and it was largely led by a strong volume growth and recent product launches in brands in Brazil. We achieved a 120 basis points adjusted EBITDA margin expansion to 18.6%, supported by operational improvement and strong performance of the acquisitions, especially for Pacum.

Sales increased by 38.7% to €120.5 million, reflecting strong organic growth in Brands and contributions from recently acquired companies, aided by the Brazilian AI.

Organic growth at C&E was 8%, and it was largely led by strong volume growth and recent product launches in brands in Brazil.

Speaker #3: Moving on to the next slide, revenues in North America Pacific grew by 0.4% to $213.2 million, a strong traction in brands and essentials was offset the short-term headwinds in compounding services.

We achieved a 120 basis point adjusted EBITDA margin expansion to 18.6%, supported by operational improvement and strong performance of the acquisitions, especially for Bachel.

Speaker #3: Reported growth also affected by currency movements. V&E continues to grow at a fast pace, mainly supported by operational improvements in product availability, leading to volume growth.

Speaker #3: Compounding services performance was impacted by the reduction of GLP-1 production at our 53B facility and limited availability of the IV bags. Adjusting for the GLP-1 impact, the organic growth for the region will be around 10%.

Moving on to the next slide revenues in North America. Pacific grew by 0.4% to 213.2 million. A strong Traction in Branson Essentials was offset. The short-term hatred in compounding Services. Reported growth will also affected by currency movements.

V continues to grow at a fast pace, mainly supported by operational improvements in product availability, leading to volume growth.

Speaker #3: Our operating costs in the region increased slightly year on year due to acquisitions and ongoing investments. Overall, this resulted in an adjusted EBITDA margin of 17% in H1 2026.

Hani Services' performance was impacted by the reduction of the OP1 production at our 53 facility and limited availability of the IV bags. Adjusting for the GOP1 impacts, the organic growth for the region will be around 10%.

Speaker #3: Turning now to our cash flow, our business model has several strengths, and one of them being the strong cash conversion. Our operating working capital increased by $310 basis points to $16.9% due to the recent acquisitions and higher inventories to support product availabilities in brands and essentials.

Our operating costs in the region increased slightly year on year due to Acquisitions and ongoing Investments. Overall, this resulted in an adjusted avadim margin of 17% in H1 2026.

Speaker #3: Operating cash flow increased by 10.8% to $58.1 million, and maintenance capex ended at $2.6% of revenue when excluding the one-off projects. Our free cash flow conversion was $40.9% when adjusting for one-off capex, slightly below our guidance.

Turning now to our cash flow, our business model has several strengths, one of them being strong cash conversion. Our operating working capital increased by 310 basis points to 16.9%, due to recent acquisitions and higher inventories to support product availabilities in Brands and Essentials.

Speaker #3: However, we've seen during full year 2025, we expected to correct towards the end of the year as working capital normalizes. Moving to our net debt evolution, the bridge shows an increase of $222.1 million in our net debt, growing from $283.3 million at the end of full year 2025 to $505.4 million as of H1 2026.

Operating cash flow increased by 10.8% to €58.1 million, and maintenance capex ended at 2.6% of revenue. When excluding the one-off projects,

our free cash flow conversion was 14.9%. When adjusting for 1 of capex slightly below our guidance however we seen during full year 2025, we expected to correct towards the end of the year, as working capital normalizes.

Speaker #3: The increase is mainly related to acquisition and working capital movements. As a result, our net debt to EBITDA increased to $2.1 times. However, still below our internal threshold of $2.8 times, giving us ample room to pursue opportunities.

Moving to our net debt evolution, the bridge shows an increase of €222.1 million in our net debt, growing from €283 million.

Speaker #3: So before I hand it back to Rafa, let me go through our full year 2026 outlook. For the group, we are expecting revenues to be in the mid to high single digit organic growth at CER, with different dynamics depending on the region, and a profitability margin of circa 20%.

Million at the end of 4 year, 2025 to 5505.4 million. As of H1 2026, the increase is mainly related to acquisition and working capital movements as a result, our net debt to Eva increased to 2.1 times. However still below our internal threshold of 2.8 times giving us ample room to pursue opportunities.

Speaker #3: We expect maintenance capex to be at $3.5% of revenues for 2026, excluding the already announced one-off projects and investments. I would now like to hand it back to Rafa for his closing remarks.

Speaker #1: Thanks, Karen. To conclude, background is a unique global vertically integrated company operating in the fast-growing highly fragmented market of pharmaceutical compounding, with a defensive business model predictable revenues, and strong cash conversion.

So, before I hand it back to Rafa, let me go through our full year, 2026 outlook for the group. We are expecting revenues to be in the mid to high single digit organic growth at CER with different Dynamics, depending on the region. And the profitability margin of Circa 20%, we expect maintenance capex to be at 3.5% of revenues for 2026. Excluding the already announced 1 of projects and Investments.

I would now like to hand it back to Rafa for his closing remarks. Thanks Karen to conclude

Speaker #1: We have highlighted over the years the resilience of our business model and how it is reinforced by our diverse global footprint. This was clearly visible in H1 2026 when excellent growth in EMEA and Latin America more than offset the challenges in North America Pacific.

Fagron is a unique global, vertically integrated company operating in the fast-growing, highly fragmented market of pharmaceutical compounding, with a defensive business model, predictable revenues, and strong cash conversion.

Speaker #1: These factors coupled with demographic trends and our emphasis on personalization are the basis of our success. Our quality focus together with our ongoing operational excellence initiatives will optimize our business through global synergies.

We have highlighted over the years the resilience of our business model, and how it is reinforced by our diverse global footprint.

Speaker #1: While a disciplined M&A strategy remains a key part of our growth, sustainability is a paramount priority and a strategic cornerstone for us, as together we create the future of personalizing medicine.

This was clearly visible in each Q1 2026, with excellent growth in EMEA and Latin America. More than offsetting the challenges in North America and APAC, these factors, coupled with demographic trends and our emphasis on personalization, are the basis of our success.

Speaker #1: Let's open the floor for questions. Thank you.

Speaker #2: Ladies and gentlemen, we're now ready to take your questions. If you have a question, please press pound key five on your telephone keypad. The first question comes from Frank Glaser from Growth.com.

Speaker #2: Please go ahead.

Speaker #4: Yes, good morning all. I've got two questions. First of all, on the issue with the IV bag, the supplier, could you elaborate how much did that impact your Q2 or first half results and when do you expect it to be solved?

Strategy remains key. Part of our growth sustainability is a paramount priority and a strategic cornerstone for us, as together we create the future of personalized medicine. Let's open the floor for questions. Thank you. Ladies and gentlemen, we are now ready to take your questions. If you have a question, please press the pound key and 5 on your telephone keypad.

The first question comes from Frank Plaza. Please go ahead.

Speaker #4: So that's the first question. And then secondly, on the situation in the Middle East, the turmoil, could you elaborate how is that impacting your business model?

Speaker #4: Do you already see inflation on raw materials? APIs or logistical costs? Could you elaborate on that situation? Thank you.

Yes. Uh, good morning all. Um, I've got 2 questions. Um, first of all, on the issue, with the IV bag, uh, the supplier, could you elaborate how much did that impact your Q2, or first half results and when do you expect it to be solved? So, that's the first question.

Speaker #3: Hi, good morning, Frank. Yeah, so starting with your first question on the issue with the IV bag. So if we look at North America compounding services, for the first six months, we see minus 8%.

And then secondly uh on the situation in the Middle East, the term oil could you. Elaborate. Yeah. How is that impacting your business model? Uh do you already see inflation on raw materials apis or or logistical costs could you elaborate on that situation? Thank you.

All right. Good morning Frank. Um,

Speaker #3: If we take the GLP-1 impact out of that, which, as you all know, normalized, will be around 4% roughly. So this is below the guidance of high single digit, low double digit before any capacity expansion for that segment.

yeah, so starting

Speaker #3: So this gap was driven by the availability of the IV bags at our compounding services facility. And so that gap really is driven by, and the one side, the mis-sales.

Speaker #3: You see that impacting Q1 and Q2, but also a CAPA that was initiated by the supplier and triggering a revalidation of us. So we expect to be back in the course of Q3 with the IV bags.

Speaker #1: Yes, and good morning, Frank. On the Middle East one, so far we have not seen any disruption in supplies. So we have as we have discussed before, and you always ask the operational question.

Speaker #1: So thanks for that. Our product availability is high. It's good. What we have seen on the raw materials, derivating from oil, an increase there, which of course we have the ability as we also saw with COVID and the previous years that we have the ability to pass the price increase through.

With your first question on the uh, uh, issue with the IV bag. So, if we look at North America compounding services, for the first 6 months, we see minus 8%. Uh, if we take the dp1 impact out of that, uh, which as you all know, uh, normalized will be around 4% roughly. So, this is below the guidance of high single digit low double digits before any capacity expansion for that segment. So this Gap was driven by the availability of the IV bags at our compounding services facility. Um, and so that Gap really is uh, driven by and the 1 side, the missiles. You see that impacting q1 and Q2 but also a Kappa that was initiated by the supplier and triggering a revalidation of us. So we expect to be back in the course of 2 3, uh, with the IV bags,

Yes, and good morning. Frank on the Middle East 1.

Speaker #1: It's also true that the beginning of the year we took a strategic move and we also discussed that during Q1 to increase our inventories for key items, mainly for the A items also again coming from this oil source.

So far we have not seen any disruption in Supply. So we have as we have discussed before and you always asked the the operational question. So thanks for that. Our product ability is uh is high, it's good. What we have seen on the raw materials derivative from uh from oil and increase their which of course we we have the ability as we also saw with Co and and the previous years that we have the ability to pass the price increase through, it's also true that the beginning of the year. We uh we

Speaker #4: Okay. That's helpful. Thank you.

Speaker #1: Thanks, Frank.

Speaker #3: Thanks, Frank.

Speaker #2: The following question comes from Stein, the master from ING. Please go ahead.

We took a strategic move, and we also discussed that during Q1—to increase our inventories for key items, mainly for the A items. Also, again, coming from this oil source,

Speaker #1: Yes, good morning. Thanks for taking my question. I have a couple. Maybe first on peptides. The PCAC hearing showed that support for these peptides is not unanimous.

Okay. Uh, that's helpful. Thank you.

Thanks. Thanks.

Speaker #1: Given these drugs often lack symmetrical evidence and burden to self-medication. Nevertheless, the drive from the industry to grow this segment seems very strong. Can you address any concerns that won't be unfavorable evolutions down the line such as adverse results from using these drugs?

The following question comes from the mayor from ING. Please go ahead.

Speaker #1: That's the first question. And secondly, on the profitability outlook of circa 20%, can you decompose that a bit for the different regions? And then lastly, on the 503A to B developments, to what extent are you currently benefiting from this regulatory change that was implemented a while ago?

Speaker #1: Could you maybe give some examples on where this is boosting your business? Thanks. Yes, thanks a lot for the question, Stein, and good morning.

Yes, good morning. Thanks for taking my question. I have a couple maybe first on peptides, uh, the pcac hearing showed that support for these peptides is not unanimous. Uh, given these drugs often lack, some medical evidence and border to self medication, nevertheless to drive from the industry to, uh, to grow these segments, seems very strong. Can you address any concerns that will be unfavorable of the emotions down the line such as adverse, uh, uh, results from using these drugs? That's the first question and secondly, on the profitability out group of Circa, 20%, can you decompose that a bit for, uh, the different regions?

Speaker #1: On the peptides, you have said it really well. So there are six peptides that were voted for inclusion in the 503A booth list. What's currently happening now is a grave market, an important market from Asia of Finnish goods and people are self-medicating.

And then lastly on um the 5 or 3, A to B developments uh to what extent are you currently benefiting from this regulatory change? That was implemented a while ago. To could you maybe give some

Some some examples on on where this is is boosting your business. Thanks.

Speaker #1: So with these initiatives, of course, if the FDA, if the FDA votes for, because the last word is on the FDA, then this market will be regulated, will be reduced, compounded in 503A facilities across the country and not adverse effects.

Speaker #1: Of course, we cannot comment on these ones as we are not technically capable to do that. We believe that we are well positioned to capture this growth opportunity as we have a nice network of 503As.

Yes, thanks a lot for the questions time and good morning on the peptides. You have said uh, really well. So there are 6 peptides that were voted for inclusion in the 5038 Bulls list. What's currently happening now is the is a grave Market important Market from Asia of Finnish of Finnish goods and people are self-medicating. So with this initiative of course it is. The FDA is FDA both for because the last word is uh, on the FDA. Then we this Market will be regulated, will be, uh,

Speaker #1: We have one in Tampa, as we said, previously today, with the capacity of 100 million dollars. We have CURFERS in the North East part of the country.

Speaker #1: And of course, UCP, our last acquisition in the US, in the West Coast, in San Diego, so we are well prepared to capture this growth.

Speaker #1: And of course, we have a good track record on that.

Speaker #3: Yeah, good morning, Stein. And on your question on guidance for profitability, so the first half of the year profitability was supported by strong performance in EMEA and LATAM.

Speaker #3: Driven by solid underlying business momentum and also the positive contribution from recent acquisitions and early realization of integration synergies. So for H2, EMEA is expected to maintain its strong performance with further integration benefits still to be captured.

We believe that, uh, we are, well, positioned to capture, uh, this growth opportunity, as we have a nice network of 538, we have 1 in Tampa. As we said, previously today, with the capacity of 100 million dollar, we have Cur first in the North East, part of the country. And of course, UCP, our last acquisition in the US in the west coast in San Diego. So we are well preferred to capture this uh growth and of course we have a good track record on that.

Speaker #3: It is important to note that while a portion of the readily achievable synergies already been realized, our integration program typically delivered a majority of benefits over an 18 to 24 month period.

Yeah, good morning. This time, and on your question on guidance for profitability: So, the first half of the year, profitability was supported by strong performance in MHA and LOAM, driven by solid underlying business momentum, and also the positive contribution from recent acquisitions and early realization of integration synergies.

Speaker #3: Providing continued, albeit a more gradual potential for margin improvement. For LATAM, we expect to deliver further margin expansion in H2, supported by favorable seasonal trends as we always see.

Speaker #3: And the additional synergy realization of the acquisitions, mainly beauty pharma. And now moving to North America, the profitability was temporarily impacted by product availability constraints within compounding services.

So for H2 M, as expected to maintain, its strong performance with further integration, benefits still to be captured. Uh, it is important to note that while uh, portion of the readily achievable opportunities already been realized our integration programs, typically deliver the majority of benefits over an 18 to 24 month, period uh providing continued or with the more more gradual potential for margin improvements.

Speaker #3: And as we said, we expect the gradual improvement during the second half as the production capacity is restored again and we recover our volume.

For Lotto, we expect you to deliver further margin extension in H2, supported by favorable seasonal trends, as we always see, and the additional synergy realization of the acquisitions, mainly Beauty Farm Market.

Speaker #3: So we expect to step up also in North America. So overall, we reiterate our guidance of circa 20% adjusted EBITDA margin for the full year.

Speaker #1: And on the last question, Stein, on the B2A developments. Next, the fact that the underlying market is increasing rapidly driven by telehealth. There are two drivers, two positive tailwinds.

And I'm moving to North America. The profitability was temporarily impacted by product availability, constraints within Compounding Services. And as we said, we expect a gradual improvement during the second half as the production capacity that we support is restored again and we recover our volume. So we expect a step up also in North America. So overall, we reiterate our guidance of circa 20% adjusted EBITDA margin for the full year.

Speaker #1: One is outsourcing that we always commend and the other one is the B2A phenomenon. And this can increase substantially our revenues in the US in the upcoming years.

And on the last question, time on the beat developments.

Next, the fact that the underlying market is increasing rapidly, driven by telehealth. There are, um,

Speaker #1: Therefore, we took the strategic decision of investing in new capacity. We have explained that on the 503B side of the business, we're bringing 350 million dollars extra capacity in 2028 in both Wichita and Las Vegas.

Two drivers to positive spell wins: one is outsourcing, that we always comment, and the other one is the B2A phenomenon. And this can increase.

Speaker #1: We have identified already 20 items that we want to produce of course, we need to go through all the validations steps that you are very much aware of.

Speaker #1: And at this moment in time, we have already one item being sold and we have five more in the pipeline ready to be launched during the second semester.

substantially our revenues in the US in the upcoming years. Therefore, we took the specific decision of investing in new capacity. We have explained that on the 5 or 3 b side of the business. We're bringing 350 million dollar, extra capacity, in 2028, in both, which the end Las Vegas. We have identified already 20 items that we want to produce. Of course, we need

Speaker #1: So of course, when we get those 20 items that we expect to get during next year with the extra capacity, this will be a nice tailwind for us.

Speaker #4: Thank you. I'll put my phone back in the queue because I have some more questions.

Speaker #1: Thanks, Stein.

Speaker #2: The following question comes from Usama Tariq from ABN Amro Auto VHF. Please go ahead.

To go through all the validation steps that you are very much aware of. And at this moment in time, we have already one item being, um, sold, and we have five more in the pipeline ready to be launched during the second semester. So, of course, when we get those twenty items that we expect to get during next year with extra capacity, this will be a nice win for us.

Speaker #4: Hi, good morning team. Thank you for the opportunity. I just have two general questions. Number one, with respect to, for instance, yesterday's press release by Medios, they are expecting some trouble with regards to their pricing and margins, especially in the medical cannabis market.

Thank you. I'll put myself back in the queue because I have some more questions.

Thanks time.

The following question.

Comes from Usama, Tarik from ABN Amro VHF. Please go ahead.

Hi, good morning, team, thank you for the opportunity. I just have to general questions.

Speaker #4: I just wanted to indicate I just wanted to ask is there a trend that you are seeing in EMEA or is it something that is only related to the beer?

Speaker #4: And my second question would be with regards to the peptide market. I mean, I apologize for my ignorance, but if something really concludes for Fagron, if it's an opportunity going forward, when would be the earliest that you see some of it flowing into your sales?

Speaker #4: Would it be more like a 2027 opportunity or 2028? Some clarity there would be really great. Thank you.

Number one. Uh, with respect to, for instance, uh, yesterday's press release by Medios, um, they, uh, they are expecting some trouble with regards to their pricing and margins, especially in the medical cannabis market. I just wanted to indicate, uh, I just wanted to ask: is there a trend that you are seeing in, in Maya, or is it something that is only, um, related to the B2B area? And my second question would be with regards to the, to the peptide market. I mean, um, I apologize for my ignorance, but if some...

Speaker #1: Yes, thanks a lot, Usama. On your first one on cannabis, as you know, we for the last 20 plus years, we worked together with BMC.

Speaker #1: That's part of the Dutch Ministry of Health distributing on a European scale cannabis. We also repacked that one in one of our facilities in the Netherlands.

Something, uh, really concludes for Fagron, if it’s an opportunity going forward—uh, when would be the earliest that you see, uh, some of it flowing into your sales? Would it be more like a 2027 opportunity or 2028? Some clarity there would be really great. Thank you.

Speaker #1: And so far, we have not seen any price erosion from that part of the business. And then on your second question on the peptides, after inclusion, that time between now and inclusion, there's uncertainty.

Speaker #1: As we were discussing with Stein, it's an FDA call, of course. So after inclusion, it will take for us a period between six and 18 months and depends on two things.

We also react that 1 in 1 of our facilities in the Netherlands and so far, we have not, we have not seen any price erosion from that part of the business. And then on your second question on the peptides.

Speaker #1: First is the sourcing of API supplier of a peptide supplier. Of course, FDA registered. And the second one, it's all the validation process that we always go through in our compounding facilities.

Speaker #4: Thank you. Thank you.

Speaker #1: Thank you, Usama.

Speaker #2: The following question comes from Michael Haider from Beerenberg. Please go ahead.

After inclusion that time between now and inclusion. There's uncertainty as we were discussing with Stan, it's an FDA call of course. So after inclusion, it will take for us uh period between 6 and 18 months and depends on 2 things. First is the the sourcing of a API supplier of a peptide supplier. Of course, FDA registered and the second 1. It's all the validation process that we always go through in our compounding facilities.

Speaker #4: Hi, good morning from my side. Thanks for taking my questions. Most of them have been answered, but maybe you can shed a little bit more light on the margin in LATAM.

Thank you.

Thank you. Thank you.

The following question comes from Michael Haider from Date & Bear. Please go ahead.

Speaker #4: I was positively surprised, to be honest, to see the progress already in the first half. You already explained that you had early synergies, but maybe you can give a little bit more detail here how much of the synergies are already have already been seen in the first half, how much more do you expect to come, and how did you manage to realize them so quickly?

Speaker #4: Thanks.

Speaker #3: Thank you, Michael. Yeah. So indeed, what we see in LATAM, what we saw a similar pattern in EMEA that when we exclude the contribution from acquisitions, is that the underlying business is performing very strong.

Hi. Good morning from my side. Thanks for taking my questions. Most of them have been answered, but, uh, um, maybe you can shed a little bit more light on the, um, margin and let them I was, uh, positive surprise, to be honest, to see, uh, the progress, um, already in the first half. Um, you already explained that, uh, you had early synergies but uh, maybe you can, yeah, give a little bit more detail here. Um, how much, uh, of the synergy

Are already, um, have already been seen in the first half. How much more do you expect to come? And how did you manage to realize them so quickly? Thanks.

Speaker #3: So the profitability compared to last year, for both regions, improved despite the dilutive impact of the acquisition. So you see that mainly for LATAM, our strategy on increasing and accelerating our brand strategy, but also operational excellence initiatives that we have taken in that region regarding, for instance, product availability, strengthen our position in that market.

Speaker #3: And you see that in the underlying performance of that region. And historically, we guided that it would go towards 19 to 20% and we're well on track of that.

Speaker #3: If we then look at the two acquisitions specifically for the LATAM region, we have Puri Pharma, which is diluted, as you know, we according to our M&A playbook, we've lined out the synergy benefits over a period of time in this case 18 months.

Thank you. Uh, Michael. Yeah. So indeed, uh, what we see in lockdown, but we saw a similar pattern in AA that when we exclude the contribution from Acquisitions, is that the underlying business is performing very strong. So the profitability compared to, uh, last year for both regions, uh, improved, um, despite the dilutive impact of the acquisition. So you see that mainly for a lot of them, our strategy on uh, increasing and accelerating our brand strategy, but also operational excellence initiatives that we have taken in that region regarding for instance product availability, uh, strengthen our position in that market. And you see that uh, in the underlying performance of that region and historically regarded that as we go towards 19 to 20% and we're well on track of that.

Speaker #3: And of course, on the back of that playbook, we have some early wins on procurements and some cost savings. That's what you see translated.

Speaker #3: And second, for PACOM also performed very nicely in their running business. So overall, positive for the region and as said, we expect a continuation of that in H2 on the back of seasonality that we have in that region, but also a further improvement of the performance specifically for Puri Pharma.

If we then look at the 2 acquisition specifically for the lotto region, we have a pretty Farah uh which is diluted as you know. Um, we according to our m&a, Playbook we've lined out the Synergy benefits over a period of time. In this case, 18 months and of course on the back of that table we have some early wins on procurement and some cost savings. That's what you see translated.

Speaker #4: Okay, so Puri Pharma by itself would still be dilutive, of course, but you're still working on that, right?

Speaker #3: Yeah, yeah, yeah. Of course. So we have usually for all acquisitions an 18 to 24 month period where we work on our initiatives for synergies.

And second, for BUM also performed very nicely in their running business. So, overall positive for the region and, as said, we expect a continuation of that in H2, on the back of seasonality that we have in that region, but also a further improvement of the performance specifically for Beauty Pharma.

Speaker #3: And so we expect a continuation. So it's not at the level yet.

Speaker #4: Yeah. Many thanks. Great.

Speaker #3: Thanks.

Speaker #1: Thank you, Michael.

Speaker #2: The next question comes from Matthijs Geertzenau from KBCS. Please go ahead.

Speaker #4: Hi. Yeah, congrats on the results. First of all, a small question on North American performance. Because yeah, the organic growth was down compared to last year.

Okay. So but so pure Summer by itself would still be dilutive, of course. Uh but uh you're still working on that, right? Yeah, yeah, yeah, of course. So we have usually for all acquisitions in 18 to 24 months period, where we uh, work on our initiatives for synergies. And so we expect a continuation. So it's not at the level yet. Yeah, many thanks, great. Thanks. Thank you, Michael.

The next question comes from M. Here. It's Lina from KBCS. Please go ahead.

Speaker #4: And I was wondering about what you see in the underlying demand for yeah, compounding services there. Thanks.

Hi. Um, yeah. Congrats on the results. Um, first of all, I had a small question on, um, North American performance.

Speaker #1: Yeah, thanks a lot, Matthijs. And as we were discussing before, the underlying demand is remains strong. We see clear tailwinds, telehealth is one of the tailwinds.

Um, because, yeah, the organic growth was down, uh, compared to last year. And I was wondering about, uh, what you see in the underlying demand, uh, for, for your compounding services there. Thanks.

Speaker #1: This is also related to the preventional lifestyle market. It's clear that not only the US, also in the rest of the regions, countries, we see that people want to live longer and better.

Thanks a lot. And as we were discussing before,

Speaker #1: And that's what preventional lifestyle is about in personalization plays an important role there. And outsourcing is also a clear tailwind. You see regulation quality requirements increasing and of course, as you know, really well, Matthijs, one of our strategic enablers is quality focus.

Speaker #1: We want to perform the market from a quality perspective. And therefore, you see as well positioned to capture these market growth.

Speaker #2: increasing and of course, as you know, really well, Matthijs, one of our strategic enablers is quality focus. We want to perform the market from a quality perspective.

Speaker #4: Okay, top. Thanks. And you still see the capacity to yeah, to fill all of the capacity that you're building now because yeah, that's quite a lot.

Speaker #2: And therefore, you see as well positioned to capture this market growth.

Speaker #4: So a lot of growth will be needed to fill that.

Speaker #6: Okay, top. Thanks. And you still see the capacity to yeah, to fill all of the capacity that you're building now because yeah, that's quite a lot.

Speaker #1: Yes, that's correct. That's a very good question, Matthijs. So next to our current capacity, so what we were explaining, 503A, we have three sites: Tampa, brand new 100 million revenue, Carefirst Northeast was in a position, also new Sunny and the rest of the team, they built up a nice facility.

Speaker #6: So a lot of growth will be needed to fill that.

Speaker #2: Yes, that's correct. That's a very good question, Matthijs. So next to our current capacity, so what we were explaining, 503A, we have three sites, Tampa, brand new 100 million, revenue curve first northeast was in a position, also new sunny in the rest of the team.

Speaker #1: We're around 40% there. And then UCP, as well, we see a nice facility in the West Coast in California. So we have capacity on our 503A facilities.

Speaker #2: They built up a nice facility where around 40% there and then UCP as well. We see a nice facility in the west coast in California.

Speaker #1: And then when you go to the beast, we have integrated them as we're discussing many quarters. Ago. And you have Las Vegas, which is at 85, 90% capacity.

Speaker #2: So we have capacity on our 503A facilities. And then when you go to the beast, we have integrated them as we're discussing many quarters.

Speaker #1: The current Wichita one, as we said during this year, we would reach at 80, 90% capacity. And then when we start filling the factory and then we, of course, we need to wait for new capacity.

Speaker #2: Ago. And you have Las Vegas, which is at 85, 90% capacity. The current Wichita one, as we said during this year, we would reach at 80, 90% capacity and then when we start filling the factory and then we, of course, we need to wait for new capacity.

Speaker #1: And then of course, we have those two facilities that we were discussing before the new one in Las Vegas and the new one in Wichita.

Speaker #1: 350 million extra capacity that will be online during 2028. And the growth that will come next year will be coming from our Boston facility, which is at around 40% now.

Speaker #2: And then of course, we have those two facilities that we were discussing before the new one in Las Vegas and the new one in Wichita.

Speaker #2: 350 million extra capacity that will be online during 2028. And the growth that will come next year will be coming from our Boston facility, which is at around 40% now.

Speaker #1: So we have a lot of room for growth there. It's a new facility coming from Casino Scabby. So we are well placed to capture this growth.

Speaker #1: And we have good visibility on the market on how the market is developing. So we are quite confident that we will fill this capacity in the upcoming years.

Speaker #2: So we have a lot of room for growth there. It's a new facility coming from Virginia Scabby. So we are well placed to capture this growth.

Speaker #4: Okay, top. Sounds good. Thanks.

Speaker #2: And we have good visibility on the market, on how the market is developing. So we are quite confident that we will fill this capacity in the upcoming years.

Speaker #1: Thanks, Matthijs.

Speaker #2: Thanks, Matthijs. The following question comes from Eric Wilmer from Kempa. Please go ahead.

Speaker #6: Okay, top. Sounds good. Thanks.

Speaker #2: Thanks, Matthijs.

Speaker #4: Thanks, Matthijs.

Speaker #4: Good morning, Rafa and Karen. I also had a question on your EMEA profitability, which I believe came in ahead of expectations. Perhaps this margin was held a bit by M&A particularly the margin profiles some of your more recent deals may have fueled it.

Speaker #1: The following question comes from Eric Wilmer from Kempa. Please go ahead.

Speaker #6: Good morning, Rafa. I'm Karen. I also had a question on your EMEA profitability, which I believe came in ahead of expectations. Perhaps this margin was held a bit by M&A particularly the margin profile of some of your more recent deals may have fueled it.

Speaker #4: But yet I would expect this I would expect the usual time it takes to pass in to pass on inflationary costs to more than outweigh this, is, especially given from where you source the majority of your APIs.

Speaker #6: But yet I would expect this I would expect the usual time it takes to pass in to pass on inflationary costs to more than outweigh this, especially given from where you source the majority of your APIs.

Speaker #4: And also basically from the lessons we've learned I would say past COVID. And I guess a lot comes down to operational savings from potentially previous deals.

Speaker #4: So I'm just very keen to understand where specifically you managed to further optimize your operational footprint and squeeze out these sequential improvement for EMEA.

Speaker #6: And also basically from the lessons we've learned I would say past COVID. Hence, I guess a lot comes down to operational savings from potentially previous deals.

Speaker #4: Thank you.

Speaker #6: So I'm just very keen to understand where specifically you managed to further optimize your operational footprint and squeeze out these sequential improvement for EMEA.

Speaker #3: Yeah, good morning, Eric. If we look at the EMEA region, they had a strong improvement in profitability if we take out the acquisitions. And if we take out the biggest one, that we announced pharma fit, it had a dilutive impact on the overall margin.

Speaker #6: Thank you.

Speaker #1: Yeah, good morning, Eric. If we look at the EMEA region, they had a strong improvement in profitability if we take out the acquisitions. And if we take out the biggest one that we announced pharma fit, we'd have a dilutive impact on the overall margin.

Speaker #3: Of EMEA, we see that if we exclude that, that EMEA had strong performance. And it was driven by a couple of elements. First, we have operational excellence initiatives, which are paying off.

Speaker #3: And that's where you see in product availability increase, having a direct impact on top line. We see procurement savings, having an impact on margins.

Speaker #1: Of EMEA, we see that if we exclude that, that EMEA had strong performance. And it was driven by a couple of elements. First, we have operational excellence initiatives, which are paying off.

Speaker #3: And then we have solid pricing power. Of our strong position that we currently have in certain markets. So the combination of that, we see translated into our EBITDA improvement of the underlying business.

Speaker #1: And that's where you see in product availability increase, having a direct impact on top line. We see procurement savings, having an impact on margins.

Speaker #1: And then we have solid pricing power. certain markets. So the combination of that, we see translated into our EBITDA improvement of the underlying business.

Speaker #3: On top of that, we indeed have some early synergy benefits from the acquisitions. And as I earlier mentioned, we expect a continuation of that, maybe a bit more gradual over the period.

Speaker #3: But we do expect to see improvement. As said, of course, we are well positioned when we have price increases on our raw materials to pass them through to our customers.

Speaker #1: On top of that, we indeed have some early synergy benefits from the acquisitions. And as I earlier mentioned, we expect a continuation of that, maybe a bit more gradual over the period, where we do expect to see improvement.

Speaker #3: There can be a lagging impact there in the sense that can take a bit more time but in general, we have the experience that we are able to do that.

Speaker #1: As said, of course, we are well positioned when we have price increases on our raw materials to pass them through to our customers. There can be a lagging impact there in the sense that can take a bit more time but in general, we have the experience that we are able to do that.

Speaker #3: So from on the back of that, we believe that there's still upside potential for the EMEA margins to increase will of course be at the lower part than for instance North America.

Speaker #1: So from on the back of that, we believe that there's still upside potential for the EMEA margins to increase will of course be at a lower part than for instance North America.

Speaker #4: That's helpful. Thank you.

Speaker #3: Thank you, Eric.

Speaker #1: Thank you, Eric.

Speaker #2: The next question comes from Stijn de Meester from ING. Please go ahead.

Speaker #1: Yes, thank you. Two additional ones from my end. First one, maybe part of it. This has been a somewhat larger acquisition at the low group margin.

Speaker #6: That's helpful. Thank you.

Speaker #1: Thank you, Eric.

Speaker #4: Thank you, Eric.

Speaker #1: The next question comes from Stijn de Meester from ING. Please go ahead.

Speaker #1: In a relatively new product category, which may also be a bit more competitive product category. Can you comment on the integration of this acquisition where you are in terms of margin and also uptake of this nutraceuticals with clients?

Speaker #5: Yes, thank you. Two additional ones from my end. First one, maybe file of it. This has been a somewhat larger acquisition at a below group margin.

Speaker #5: In a relatively new product category, which may also be a bit more competitive product category. Can you comment on the integration of this acquisition where you are in terms of margin and also uptake of this nutraceuticals with clients?

Speaker #1: Second question is on the guidance. Maybe the price reaction is today driven a bit by the fact that you need some growth acceleration in the second half.

Speaker #1: Whereby the IV batch issue, yeah, expected to persist in Q3. So what gives you the confidence in this growth acceleration and what phasing do you expect over Q3 and Q4 in terms of organic growth?

Speaker #5: Second question is on the guidance. Maybe the price reaction is today driven a bit by the fact that you need some growth acceleration in the second half.

Speaker #5: Whereby the ID batch issue yeah, expect it to persist in Q3. So what gives you the confidence in this growth acceleration and what phasing do you expect over Q3 and Q4 in terms of organic growth?

Speaker #1: Thanks. Yes, thanks a lot, Stijn. And the pharma bit question, which we like a lot because we believe that the nutraceutical products that pharma bit carries have a well, we believe we are certain that it has a huge match with our portfolio across the globe, especially in Latam.

Speaker #5: Thanks.

Speaker #2: Yes, thanks a lot, Stijn. And the pharma bit question, which we like a lot because we believe that the nutraceutical products that pharma bit carries have a well, we believe we are certain that it has a huge match with our portfolio across the globe, especially in Latam.

Speaker #1: When you look at compounding in Latin America, in Brazil, there is a lot of compounding in the nutraceuticals segment. So when you make a pickup analysis with the pharma bit portfolio, you see an overlap of more than 85%, mainly the same manufacturers, specifications.

Speaker #2: When you look at compounding in Latin America, in Brazil, there is a lot of compounding in the nutraceutical segment. So when you make a feedback analysis with the pharma bit portfolio, you see an overlap of more than 85% mainly the same manufacturers, specifications.

Speaker #1: So the first part of our M&A playbook that we explain in each one of our integrations is, let's first integrate the operations. That's mainly the procurement and the manufacturing.

Speaker #2: So the first part of our M&A playbook that we explain in each one of our integrations is let's first integrate the operations. That's mainly the procurement and the manufacturing.

Speaker #1: Being of course the quality control labs and the repackaging. So this is now ongoing. It's going above expectations. The collaboration with the pharma team is great.

Speaker #1: Entrepreneurial family state really easy to work, to collaborate. We execute fast, good decision making and this is very important in this first operational part of the M&A integration playbook as we are capturing there the synergy.

Speaker #2: Being of course the quality control labs and the repackaging. So this is now ongoing. It's going above expectations. The collaboration with the pharma team is great.

Speaker #2: Entrepreneurial family state really easy to work, to collaborate. We execute fast, good decision making and this is very important in this first operational part of the M&A integration playbook as we're capturing there the synergy.

Speaker #1: So we announced when we acquired pharma bit, that the ABDA margin was around 14%. And as Karen was explaining in the previous question, we have seen an early improvement there.

Speaker #2: So we announced when we acquired pharma bit that the EBITDA margin was around 14%. And as Karen was explaining in the previous question, we have seen an early improvement there.

Speaker #1: So that's a positive. Second part of the integration, well, of course there is always an integration phase zero, which is finance, IT, all the admin part, which of course we integrate rapidly.

Speaker #2: So that's a positive. Second part of the integration, well, of course there is always an integration phase zero, which is finance, IT, all the admin part, which of course we integrate rapidly.

Speaker #1: Then you go into the second part of the integration, our integration playbook, which is the commercial part. We already started with that. So we are introducing our branded items into the pharma bit platform.

Speaker #2: Then you go into the second part of the integration, our integration playbook, which is the commercial part. We already started with that. So we are introducing our branded items into the pharma bit platform.

Speaker #1: And this will bring for sure nice revenues and margin developments because the conversations with the customers will be not only on the essentials and the raw materials, which of course there's a quality part involved.

Speaker #2: And this will bring for sure nice revenues and margin developments because the conversations with the customers will be not only on the essentials and the raw materials, which of course there's a quality part involved.

Speaker #1: And as you said before, there's the competitive price involvement. We will also have a more scientific discussion with them. And this is a copy-paste of the Brazilian model, which we have seen giving excellent results.

Speaker #2: And as you said before, there's the competitive price involvement. We will also have a more scientific discussion with them. And this is a copy-paste of the Brazilian model, which we have seen giving excellent results.

Speaker #1: So then we add the brands on top. And then third part of our integration playbook, which is the regional expansion, we have as we speak, we are planning now a plan together with any endurance pharma business leader previous owner and Ronald and Kim, of course, we are now developing a plan to enter the US market, which is the biggest one by far, in the nutraceuticals segment.

Speaker #2: So then we add the brands on top. And then third part of our integration playbook, which is the regional expansion we have as we speak, we are planning now a plan together with any endurance pharma bit business leader previous owner and Ronald and Kim, of course, we are now developing a plan to enter the US market, which is the biggest one by far in the nutraceutical segment.

Speaker #1: And this complements our compounding offering, which again, there is an overlap of 85%. So thanks a lot for your very nice question, Stijn.

Speaker #3: Yeah, and then on the second question, Stijn, on the sales guidance, if we look at the different regions, we expect EMEA to maintain its strong momentum.

Speaker #2: And this complements our compounding offering, which again, there is an overlap of 85%. So thanks a lot for your very nice question, Stijn.

Speaker #3: Delivering mid-single digit percentage of growth for the full year. Latam is on track for high single digit growth with potential upside driven by the continued strong execution.

Speaker #1: Yeah, and then on the second question, Stijn, on the sales guidance, if we look at the different regions, we expect EMEA to maintain its strong momentum.

Speaker #3: And then North America as you know was impacted in the first half by this continuation of the GOP1 production. And the limited IV back availability.

Speaker #1: Delivering mid-single digit percentage of growth for the full year. Latam is on track for high single digit growth with potential upside driven by the continued strong execution.

Speaker #3: Comparison will become more favorable of course in the second half. As the impact from GOP1 lessens, we expect compounding service activity to recover gradually with a more meaningful acceleration towards the fourth quarter.

Speaker #1: And then North America as you know was impacted in the first half by this continuation of the GOP1 production. And the limited IV back availability.

Speaker #1: Comparison will become more favorable of course in the second half. As the impact from GOP1 lapses, we expect compounding service activity to recover gradually with a more meaningful acceleration towards the fourth quarter.

Speaker #3: As Rafa mentioned, underlying demand remains healthy and our other businesses are performing very nicely. Supporting a stronger second half outlook for North America. So overall, we reiterate our guidance for the full year revenue growth in the mid to high single digit range, albeit towards the lower end of that range.

Speaker #1: As Rafa mentioned, underlying demand remains healthy and our other businesses are performing very nicely. Supporting a stronger second half outlook for North America. So overall, we reiterate our guidance for the full year revenue growth in the mid to high single digit range albeit towards the lower end of that range.

Speaker #3: Maybe also good to add, our inorganic contribution for the full year is expected to be around mid-teens. With 14.4% recorded in the first half of the year.

Speaker #1: Maybe also good to add our inorganic contribution for the full year is expected to be around mid-teens. With 14.4% recorded in the first half of the year.

Speaker #1: Thanks. If I can squeeze in one more. I saw some approvals for GLP-1 in Brazil. Including from Sandoz. Is that a threat to your weight loss category in that region?

Speaker #5: Thanks. If I can squeeze in one more. I saw some approvals for GLP-1 in Brazil. Including from Sandoz. Is that a threat to your weight loss category in that region?

Speaker #2: Yeah, that's a really, really good one. We have continuous conversations with the teams. So what we're doing now, and if you go to Instagram, you can follow us in the channel GLP-1 support.

Speaker #2: And it's more generic account. So we are offering to our prescribers a combination of adjacent products or formulas, compounded formulas personalized or muscle recovery.

Speaker #2: Yeah, that's a really, really good one. We have continuous conversations with the teams. So what we're doing now, and if you go to Instagram, you can follow us in the channel GLP-1 support.

Speaker #2: And it's more generic account. So we are offering to our prescribers a combination of adjacent products or formulas, compounded formulas, personalized or muscle recovery.

Speaker #2: So we launch a nice brand that's strong. Two years ago, which works perfectly to regain, regain muscle mass. And of course, other nutritional branded items that we have in our portfolio supporting the GLP-1, GLP-2, and G receptors.

Speaker #2: So we launch a nice brand that's strong. Two years ago, which works perfectly to regain, regain muscle mass. And of course, other nutritional branded items that we have in our portfolio supporting the GLP-1, GLP-2, and G perceptors.

Speaker #2: And acceptance of these new concepts that we have launched to support this therapies as you have just already asked, Stijn. It's quite positive and we see it back translated in our results.

Speaker #2: And acceptance of this new concepts that we have launched to support this therapies as you have just already asked, Stijn. It's quite positive and we see it back translated in our results.

Speaker #1: Wow, that's good to hear. Thank you very much.

Speaker #2: Yeah, thanks a lot for the question.

Speaker #4: Ladies and gentlemen, just as a reminder, if you would like to ask a question, please press pound key five on your telephone keypad.

Speaker #5: That's good to hear. Thank you very much.

Speaker #2: Yeah, thanks a lot for the question.

Speaker #6: Ladies and gentlemen, just as a reminder, if you would like to ask a question, please press pound key five on your telephone keypad.

Speaker #1: Well, thank you very much for your participation today. I will remain at your disposal should you have further questions. We wish you all a great summer.

Speaker #1: Thank you and goodbye.

Speaker #7: Well, thank you very much for your participation today. I will remain at your disposal should you have further questions. We wish you all a great summer.

Speaker #7: Thank you and goodbye.

Speaker #2: Thank you.

Speaker #1: Thank you.

Speaker #2: Bye. Bye-bye.

Speaker #1: Hello and good morning, everyone. Welcome to Fagron's H1 2026 results webcast. I'm joined today by our CEO, Rafael Padilla, and our CFO, Karin De Jong.

Speaker #1: Rafael will start by discussing the company's performance and a closer look at regional developments. Karin, we'll then walk you through the financial results. We will open the floor for questions at the end of the session.

Speaker #1: With that, I will hand over to Rafael.

Speaker #2: Thanks, Ignacio, and good morning, all. We're pleased to report a strong performance, with revenues reaching €552 million. This reflects 3.1% organic growth at CR.

Speaker #2: 7% were normalizing the GLP-1 effect. Growth was driven by brands, Latin America, being in North America and EMEA. Profitability grew by 12.7% to $107 million EUR.

Speaker #2: The margin of 19.4% reflects an improvement in both EMEA and Latin America and temporary effects in North America Pacific compounding services. On M&A, we closed the acquisition of Amber in Singapore and Malaysia, completing 5 acquisitions across all regions in 2026.

Speaker #2: We also entered into a collaboration agreement with Nutraconnect in Asia, which will complement our nutraceutical platform. Integration of the earlier announced acquisition remains on track.

Speaker #2: We have also appointed Amy Jones to lead the North American Pacific region. Finally, we're also reiterating our full-year guidance of mid to high single-digit growth at CR and an adjusted EBITDA margin of around 20%.

Speaker #2: Moving on to the regions, in EMEA performance was led by brands on the back of continuous strategic focus, while essentials remained balanced. We saw, again, strength in compounding services through high demand for key therapies, and our focus on operational excellence translated into better availability and procurement savings, supporting both top-line and margin expansion.

Speaker #2: During the period, we completed the acquisitions of Pharmavit, Magelab, and Amber, and are working on integrating them into the group. Pharmavit and Magelab will strengthen our European platform and enhance our market positioning.

Speaker #2: While Amber will help us further expand our footprint in Asia, finally, we continue making progress in our capacity expansion project in the Netherlands. In Latin America, strong organic performance was led by the successful execution of our commercial strategy.

Speaker #2: In Brands, our global R&D center in Brazil continues to be the engine of our global innovation. During the period, we completed the acquisition of UDI Pharma and Vepacom.

Speaker #2: Like in EMEA, synergies and efficiencies during the integration process supported the region's profitability. In North America Pacific, performance was led by Brands & Essentials, together with contributions from CareFirst and UCP.

Speaker #2: Revenue growth in B&E was driven by new customer wins, improved product availability, strong essential sales, and continued operational improvements. Compounding services was affected by the normalization of GLP-1 related revenues and an industry-wide IV bag recall.

Speaker #2: Handheld wellness continued to deliver solid growth driven by high demand for personalized therapies and new product launches. On M&A, over the last 18 months we have done 17 deals across all regions.

Speaker #2: So far, all previously announced acquisitions have been completed except for Interplast. During the first half of this year, we have focused our efforts on integrating these successfully.

Speaker #2: Our teams have achieved significant synergies during the integration process, as shown in EMEA’s and Latin America’s margin performance. We will continue to benefit from further synergies during the integration process, which usually lasts 18 to 24 months.

Speaker #2: In H1 2026, M&A contributed around $69 million EUR to the overall group revenues, with all expected or better. And as Karin will comment, our balance sheet continues strong and we remain open to exploring more opportunities across our regions and categories, while maintaining a disciplined approach.

Speaker #2: On our expansion projects, as announced during our C&D in April last year, we plan to add 500 million extra capacity by 2028. In the Netherlands, the sterile facility with a €15 million CapEx investment has a revenue potential of €15 million.

Speaker #2: In North America Pacific, our new 538 Tampa facility is already online, with extra revenue potential of 100 million USD. While Wichita and Las Vegas, both 503Bs, are ongoing with a combined CapEx of around 68 million USD and revenue potential of 315 million USD.

Speaker #2: All expansion projects are currently progressing as planned, the additional capacity positions us to successfully capture future growth opportunities. Moving on to the health and wellness activities, we have received a lot of questions regarding peptides, especially after the hearing that took place last week where the PCAC recommended the FDA 6 peptides for inclusion in the 503A books list.

Speaker #2: Given our existing infrastructure and our proven track record, inclusion in the 503A books list will be an overall tailwind. The time to market is variable and can range from 6 to 18 months post-inclusion, depending on various factors such as qualifying the right API suppliers and performing validations.

Speaker #2: And finally, on our North America Pacific leadership team, Amy Jones has been appointed area leader after being instrumental in transforming our B&E business. She brings 15 years' experience in pharmaceutical compounding and will help scale the region to the next phase of growth.

Speaker #2: Additionally, building on our existing quality infrastructure, we are happy to announce the appointment of Kenneth Bonnell as the Global Head of Quality. Ken brings over 30 years of experience working in the industry across quality systems, quality assurance, regulation, and compliance, with this we hand over to Karin.

Speaker #3: Now, thank you, Rafa. Good morning, everyone. Thank you for joining this call, and let me walk you through the first half of the 2026 financial results, and provide more color for the full year 2026.

Speaker #3: In H1 2026, revenues increased by 16% on a reported basis to $552.5 million, driven by acquisitions and organic growth in the regions. Gross margin decreased by 218 basis points year on year, driven by acquisitions and a change in the North America Pacific product mix.

Speaker #3: Our operating expenses increased by 10% year on year, owing to our recent acquisitions though as a percentage of revenue, they decreased by 230 basis points.

Speaker #3: At a group level, our profitability margin decreased by 60 basis points year on year to 19.4%, mainly due to lower production volumes in compounding services in North America Pacific.

Speaker #3: We maintain our strong cash-generating capabilities, as operating cash flow improved by 10.8% year on year to €58.1 million for the first half of the year.

Speaker #3: And lastly, our net debt-to-EBITDA ratio increased to 2.1 times, largely because of payments for acquisitions. However, it remains below our internal threshold of 2.8 times.

Speaker #3: Moving on to the next slide, the bridge illustrates our revenue development for the first half may I report that a solid 4.1% organic growth at constant posted an 8% organic revenue growth at CER, supported by strong performance of brands in Brazil.

Speaker #3: North America Pacific revenue was largely flat, growing at 0.2% organic at CER, where a strong performance in the brands and essentials was offset by soft compounding services.

Speaker #3: Our recent acquisitions contributed €68.7 million to the revenue. And as X during the period was a headwind, mainly in the US due to the weakening of the US dollar.

Speaker #3: On the right side, our P&L shows a 16% revenue increase together with our adjusted EBITDA growing 12.7%. Depreciation and amortization increased by 27.6% year on year due to the recognition of acquired intangible assets on a larger asset base reflecting both the acquisitions and continued investments in capacity and R&D.

Speaker #3: Our financial costs increased versus last year, driven by increased debt because of the funding of the acquisitions and higher interest rates on our debt. As a result, earnings per share grew by 1.6% to €0.63 for the first half of the year.

Speaker #3: Turning to the next slide, EMEA revenue growth reflected solid organic demand across all categories and countries, alongside the contribution from acquisitions. Geographical diversification, along with a mix of price and volume increases, drove organic revenue growth.

Speaker #3: And looking at the region's profitability, adjusted EBITDA margin expanded by 30 basis points versus H1 2025, supported by operational excellence initiatives, sales mix, and integration benefits.

Speaker #3: And as Rafa mentioned earlier, we closed the acquisitions of PharmaFit, Magilab, and Umber during H1 2026. Moving on to Latin America, sales increased by 38.7% to €120.5 million, reflecting strong organic growth in brands and contributions from recently acquired companies, aided by a strengthening of the Brazilian real.

Speaker #3: Organic growth at CER was 8%, and it was largely led by a strong volume growth and recent product launches in brands in Brazil. We achieved a 120 basis points adjusted EBITDA margin expansion to 18.6%, supported by operational improvement and strong performance of the acquisitions, especially for PACOM.

Speaker #3: Moving on to the next slide, revenues in North America Pacific grew by 0.4% to 213.2 million, a strong traction in brands and essentials was offset the short-term headwinds in compounding services.

Speaker #3: Reported growth also affected by currency movements. B&E continues to grow at a fast pace, mainly supported by operational improvements in product availability, leading to volume growth.

Speaker #3: Compounding services performance was impacted by the reduction of GOP1 production at our 503(b) facility and limited availability of the IVE bags. Adjusting for the GOP1 impact, the organic growth for the region will be around 10%.

Speaker #3: Our operating costs in the region increased slightly year on year due to acquisitions and ongoing investments. Overall, this resulted in an adjusted EBITDA margin of 17% in H1 2026.

Speaker #3: Turning now to our cash flow, our business model has several strengths, one of them being strong cash conversion. Our operating working capital increased by 310 basis points to 16.9%, due to recent acquisitions and higher inventories to support product availability in brands and essentials.

Speaker #3: Operating cash flow increased by 10.8% to 58.1 million, and maintenance capex ended at 2.6% of revenue when excluding the one-off projects. Our free cash flow conversion was 40.9% when adjusting for one-off capex, slightly below our guidance.

Speaker #3: However, we've seen during full year 2025, we expect it to correct towards the end of the year as working capital normalizes. Moving to our net debt evolution, the bridge shows an increase of €222.1 million in our net debt, growing from €283.3 million at the end of full year 2025 to €505.4 million as of H1 2026.

Speaker #3: The increase is mainly related to acquisition and working capital movements. As a result, our net debt to EBITDA increased to 2.1 times. However, still below our internal threshold of 2.8 times, giving us ample room to pursue opportunities.

Speaker #3: So before I hand it back to Rafa, let me go through our full year 2026 outlook, for the group we are expecting revenues to be in the mid to high single digit organic growth at CER, with different dynamics depending on the region, and a profitability margin of circa 20%.

Speaker #3: We expect maintenance capex to be at 3.5% of revenues for 2026, excluding the already announced one-off projects and investments. I would now like to hand it back to Rafa for his closing remarks.

Speaker #1: Thanks, Karen. To conclude, Fagron is a unique, global, vertically integrated company operating in the fast-growing, highly fragmented market of pharmaceutical compounding, with a defensive business model, predictable revenues, and strong cash conversion.

Speaker #1: We have highlighted over the years the resilience of our business model and how it is reinforced by our diverse global footprint. This was clearly visible in H1 2026, when excellent growth in EMEA and Latin America more than offset the challenges in North America Pacific.

Speaker #1: These factors coupled with demographic trends and our emphasis on personalization are the basis of our success. Our quality focus together with our ongoing operational excellence initiatives will optimize our business through global synergies.

Speaker #1: While a disciplined M&A strategy remains a key part of our growth, sustainability is a paramount priority and a strategic cornerstone for us as, together, we create the future of personalized medicine.

Speaker #1: Let's open the floor for questions. Thank you.

Speaker #2: Ladies and gentlemen, we're now ready to take your questions. If you have a question, please press pound key 5 on your telephone keypad. The first question comes from Frank Glaser from Clove.

Speaker #2: Please go ahead.

Speaker #4: Yes, good morning all. I've got two questions. First of all, on the issue with the IVE bag, the supplier, could you elaborate how much did that impact your Q2 or first half results, and when do you expect it to be solved?

Speaker #4: So that's the first question. And then secondly, on the situation in the Middle East, the turmoil, could you elaborate how is that impacting your business model?

Speaker #4: Do you already see inflation on raw materials, APIs, or logistical costs? Could you elaborate on that situation? Thank you.

Speaker #3: Hi, good morning, Frank. Yeah, so starting with your first question on the issue with the IVE bag, so if we look at North America compounding services, for the first six months, we see minus 8%.

Speaker #3: If we take the GOP1 impact out of that, which, as you all know, normalized, will be around 4% roughly. So this is below the guidance of high single digit, low double digit before any capacity expansion for that segment.

Speaker #3: So this gap was driven by the availability of the IVE bags at our compounding services facility. And so that gap really is driven by, and the one side, the missed sales.

Speaker #3: You see that impacting Q1 and Q2, but also a capa that was initiated by the supplier and triggering a revalidation of us. So we expect to be back in the course of Q3 with the IVE bags.

Speaker #1: Yes, and good morning, Frank. On the Middle East one, so far we have not seen any disruption in supplies. As we have discussed before—and you always ask the operational questions, so thanks for that.

Speaker #1: Our product availability is high, it's good. What we have seen on the raw materials, deriving from oil and the increase there, which, of course, we have the ability—as we also saw with COVID and the previous years—we have the ability to pass the price increase through.

Speaker #1: It's also true that the beginning of the year we took a strategic move and we also discussed that during Q1 to increase our inventories for key items, mainly for the A items also again coming from this oil source.

Speaker #4: Okay, that's helpful. Thank you.

Speaker #1: Thanks, Frank.

Speaker #3: Thanks, Frank.

Speaker #2: The following question comes from Stain the Macer from ING. Please go ahead.

Speaker #5: Yes, good morning. Thanks for taking my question. I have a couple. Maybe first on peptides. The PCAC hearing showed that support for these peptides is not unanimous.

Speaker #5: Given these drugs often lack symmetrical evidence and burden to self-medication. Nevertheless, the drive from the industry to grow this segment seems very strong. Can you address any concerns that will be unfavorable evolutions down the line, such as adverse results from using these drugs?

Speaker #5: That's the first question. And secondly, on the profitability outlook of circa 20%, can you decompose that a bit for the different regions? And then lastly, on the 503A to B developments, to what extent are you currently benefiting from this regulatory change that was implemented a while ago?

Speaker #5: Could you maybe give some examples on where this is boosting your business? Thanks.

Speaker #1: Yes, thanks a lot for the question, Stain, and good morning. On the peptides, you have said it really well. So there are six peptides that were voted for inclusion in the 503A booth list.

Speaker #1: What's currently happening now is a grave market. It's an important market from Asia of Finnish goods and people are self-medicating. So with these initiatives, of course, if the FDA, if the FDA votes for, because the last word is on the FDA, then this market will be regulated, will be reduced, compounded in 503A facilities across the country and not adverse effects, of course, we cannot comment on these ones as we are not technically capable to do that.

Speaker #1: We believe that we are well positioned to capture this growth opportunity, as we have a strong network of 503As. We have one in Tampa, as we said previously today, with the capacity of $100 million.

Speaker #1: We have CURFERS in the North East part of the country. And of course, US, in the West Coast, in San Diego, so we are well prepared to capture this growth.

Speaker #1: And, of course, we have a good track record on that.

Speaker #3: Yeah, good morning, Stain and on your question on guidance for profitability, so the first half of the year profitability was supported by strong performance in EMEA and LATAM, driven by solid underlying business momentum and also the positive contribution from recent acquisitions and early realization of integration synergies.

Speaker #3: So for H2, EMEA is expected to maintain its strong performance with further integration benefits still to be captured. It is important to note that while a portion of the readily achievable synergies already been realized, our integration program typically delivered a majority of benefits over an 18 to 24 month period.

Speaker #3: Providing continued, albeit more gradual, potential for margin improvement. For LATAM, we expect to deliver further margin expansion in H2, supported by favorable seasonal trends, as we always see, and the additional synergy realization of the acquisitions, mainly Beauty Pharma.

Speaker #3: And now moving to North America, the profitability was temporarily impacted by product availability constraints within compounding services. And as we said, we expect a gradual improvement during the second half as the production capacity is restored again and we recover our volume.

Speaker #3: So we expect to step up also in North America. So overall, we reiterate our guidance of approximately 20% adjusted EBITDA margin for the full year.

Speaker #5: And on the last question, Stain on the B2A developments, next the fact that the underlying market is increasing rapidly driven by telehealth. There are two drivers, two positive tailwinds.

Speaker #5: One is outsourcing, which we always commend, and the other one is the B2A phenomenon. And this can impact our revenues in the US in the upcoming years.

Speaker #5: Therefore, we took the strategic decision of investing in new capacity. We have explained that, on the 503B side of the business, we're bringing $350 million extra capacity in 2028 in both Wichita and Las Vegas.

Speaker #5: We have identified already 20 items that we want to produce of course, we need to go through all the validations steps that you are very much aware of.

Speaker #5: And at this moment in time, we have already one item being sold and we have five more in the pipeline ready to be launched during the second semester.

Speaker #5: So of course, when we get those 20 items that we expect to get during next year with the extra capacity, this will be a nice tailwind for us.

Speaker #1: Thank you. I'll put my phone back in the queue because I have some more questions. Thanks, Stijn. Thank you, Stijn.

Speaker #2: The following question comes from Usama Tariq from ABN Amro, Ottawa VHF. Please go ahead.

Speaker #6: Hi, good morning team. Thank you for the opportunity. I just have two general questions. Number one, with respect to, for instance, yesterday's press release by Madios, they are expecting some trouble with regards to their pricing and margins, especially in the medical cannabis market.

Speaker #6: I just wanted to indicate—I just wanted to ask, is there a trend that you are seeing in EMEA, or is it something that is only related to the peer?

Speaker #6: And my second question would be with regard to the peptide market. I apologize for my ignorance, but if something really materializes for Fagron—if it's an opportunity going forward—when would be the earliest that you see some of it flowing into your sales?

Speaker #6: Would it be more like a 2027 opportunity or 2028? Some clarity there would be really great. Thank you.

Speaker #1: Yes, thanks a lot, Usama. On your first one on cannabis, as you know, we for the last 20 plus years, we worked together with BMC.

Speaker #1: That's part of the Dutch Ministry of Health distributing, on a European scale, cannabis. We also repacked that one in one of our facilities in the Netherlands.

Speaker #1: And so far, we have not seen any price erosion from that part of the business. And then, on your second question on the peptides, after inclusion, that time between now and inclusion, there's uncertainty, as we were discussing with Stain. It's an FDA call, of course.

Speaker #1: So after inclusion, it will take for us a period between six and 18 months, and depends on two things. First is the sourcing of API supplier or peptide supplier.

Speaker #1: Of course, FDA registered. And the second one, it's all the validation processes that we always go through in our compounding facilities. Thank you, Usama.

Speaker #2: The following question comes from Michael Haider from Datenberg. Please go ahead.

Speaker #6: Hi, good morning from my side. Thanks for taking my questions. Most of them have been answered, but maybe you can shed a little bit more light on the margin in LATAM.

Speaker #6: I was positively surprised, to be honest, to see the progress already in the first half. You already explained that you had early synergies, but maybe you can, yeah, give a little bit more detail here—how much of the synergies have already been seen in the first half, how much more do you expect to come, and how did you manage to realize them so quickly?

Speaker #6: Thanks.

Speaker #3: Thank you Michael. Yeah, so indeed, what we see in LATAM, what we saw a similar pattern in EMEA that when we exclude the contribution from acquisitions, is that the underlying business is performing very strong.

Speaker #3: So, the profitability compared to last year for both regions improved despite the dilutive impact of the acquisition. You see that mainly for LATAM, our strategy on increasing and accelerating our brand strategy, but also operational excellence initiatives that we have taken in that region regarding, for instance, product availability, strengthened our position in that market.

Speaker #3: And you see that in the underlying performance of that region. And historically, we guided that it would go towards 19 to 20 percent and we're well on track of that.

Speaker #3: If we then look at the two acquisitions specifically for the LATAM region, we have Puri Pharma, which is diluted, as you know, we according to our M&A playbook, we've lined out the synergy benefits over a period of time in this case 18 months.

Speaker #3: And of course, on the back of that playbook, we have some early wins on procurements and some cost savings. That's what you see translated.

Speaker #3: And second, PACOM also performed very nicely in their running business. So overall, it was positive for the region and, as said, we expect a continuation of that in H2 on the back of the seasonality that we have in that region, but also a further improvement of the performance, specifically for Puri Pharma.

Speaker #6: Okay, so Puri Pharma by itself would still be dilutive, of course, but you're still working on that, right?

Speaker #3: Yeah, yeah, yeah, of course. So, we usually have for all acquisitions an 18- to 24-month period where we work on our initiatives for synergies, and so we expect a continuation.

Speaker #3: So, it's not at that level yet.

Speaker #6: Yeah. Many thanks. Great.

Speaker #3: Thanks.

Speaker #1: Thank you, Michael.

Speaker #2: The next question comes from Matthijs Geertzenau from KBCS. Please go ahead.

Speaker #5: Hi, yeah, congrats on the results. First of all, a small question on North American performance, because, yeah, the organic growth was down compared to last year, and I was wondering about what you see in the underlying demand for, yeah, compounding services there.

Speaker #5: Thanks.

Speaker #1: Yeah, thanks a lot, Matthijs. And as we were discussing before, the underlying demand remains strong. We see clear tailwinds; telehealth is one of the tailwinds.

Speaker #1: This is also related to the prevention lifestyle market. It's clear that not only in the US, but also in the rest of the regions and countries, we see that people want to live longer and better, and that's what prevention lifestyle is about. Personalization plays an important role there.

Speaker #1: And outsourcing is also a clear tailwind. You see regulation quality requirements increasing and of course, as you know, really well, Matthijs, one of our strategic enablers is quality focus.

Speaker #1: We want to perform in the market from a quality perspective, and therefore you see us well positioned to capture this market growth.

Speaker #5: Okay, top. Thanks. And you still see the capacity to, yeah, to fill all of the capacity that you're building now because, yeah, that's quite a lot.

Speaker #5: So, a lot of growth will be needed to fill that.

Speaker #1: Yes, that's correct. That's a very good question, Matthijs. So next to our current capacity, so what we were explaining, 503A, we have three sites: Tampa, brand new 100 million revenue, Carefirst Northeast was in a position, also new Sunny and the rest of the team, they built up a nice facility where around 40 percent there and then UCP as well.

Speaker #1: We see a nice facility in the West Coast in California. So we have capacity on our 503A facilities and then when you go to the beast, we have integrated them as we're discussing many quarters.

Speaker #1: Ago. And you have Las Vegas, which is at 85, 90 percent capacity. The current Wichita one, as we said during this year, we would reach at 80, 90 percent capacity and then when we start filling the factory and then we, of course, we need to wait for new capacity.

Speaker #1: And then, of course, we have those two facilities that we were discussing before: the new one in Las Vegas and the new one in Wichita—$350 million extra capacity that will be online during 2028.

Speaker #1: And the growth that will come next year will be coming from our Boston facility, which is at around 40 percent now. So we have a lot of room for growth there.

Speaker #1: It's a new facility coming from Casini Scabby. So we are well placed to capture this growth and we have good visibility on the market on how the market is developing.

Speaker #1: So, we are quite confident that we will fill this capacity in the upcoming years.

Speaker #5: Okay, top. Sounds good. Thanks.

Speaker #1: Thanks, Matthijs.

Speaker #2: Thanks, Matthijs. The following question comes from Eric Wilmer from Kempa. Please go ahead.

Speaker #5: Good morning, Rafa and Karen. I also had a question on your EMEA profitability, which I believe came in ahead of expectations. Perhaps this margin was helped a bit by M&A particularly the margin profiles some of your more recent deals may have fueled it.

Speaker #5: But yet, I would expect this—I would expect the usual time it takes to pass on inflationary costs to more than outweigh this, especially given from where you source the majority of your APIs.

Speaker #5: And also basically from the lessons we've learned I would say past COVID. And I guess a lot comes down to operational savings from potentially previous deals.

Speaker #5: So, I'm just very keen to understand where, specifically, you managed to further optimize your operational footprint and squeeze out these sequential improvements for EMEA.

Speaker #5: Thank you.

Speaker #3: Yeah, good morning, Eric. If we look at the EMEA region, they had a strong improvement in profitability if we take out the acquisitions. And if we take out the biggest one, that we announced, PharmaFit, it had a dilutive impact on the overall margin.

Speaker #3: For EMEA, we see that if we exclude that, EMEA had strong performance. And it was driven by a couple of elements. First, we have operational excellence initiatives, which are paying off.

Speaker #3: And that's where you see an increase in product availability, having a direct impact on the top line. We see procurement savings having an impact on margins.

Speaker #3: And then we have solid pricing power, due to our strong position that we currently have in certain markets. So, the combination of that, we see translated into our EBITDA improvement of the underlying business.

Speaker #3: On top of that, we indeed have some early synergy benefits from the acquisitions. And as I mentioned earlier, we expect a continuation of that, maybe a bit more gradual over the period.

Speaker #3: But we do expect to see improvement. As said, of course, we are well positioned when we have price increases on our raw materials to pass them through to our customers.

Speaker #3: There can be a lagging impact there in the sense that can take a bit more time but in general, we have the experience that we are able to do that.

Speaker #3: So from on the back of that, we believe that there's still upside potential for the EMEA margins to increase will of course be at a lower part than for instance North America.

Speaker #5: That's helpful. Thank you.

Speaker #3: Thank you, Eric.

Speaker #2: Thank you, Eric. The next question comes from Stijn de Meester from ING. Please go ahead.

Speaker #1: Yes, thank you. Two additional ones from my end. First one, maybe part of it. This has been a somewhat larger acquisition at the below group margin.

Speaker #1: In a relatively new product category, which may also be a bit more competitive product category, can you comment on the integration of this acquisition, where you are in terms of margin, and also the uptake of these nutraceuticals with clients?

Speaker #1: Second question is on the guidance. Maybe the price reaction is today driven a bit by the fact that you need some growth acceleration in the second half.

Speaker #1: With regard to the IDVAC issue, yeah, it's expected to persist in Q3. So what gives you confidence in this growth acceleration, and what phasing do you expect over Q3 and Q4 in terms of organic growth?

Speaker #1: Thanks. Yes, thanks a lot, Stijn. And the PharmaFit question, which we like a lot because we believe that the nutraceutical products that PharmaFit carries have a—well, we believe, we are certain that it has a huge match with our portfolio across the globe, especially in Latam.

Speaker #1: When you look at compounding in Latin America, in Brazil there is a lot of compounding in the nutraceuticals segment. So, when you make a pick-up analysis with the PharmaFit portfolio, you see an overlap of more than 85%, mainly the same manufacturers and specifications.

Speaker #1: So the first part of our M&A playbook that we explain in each one of our integrations is, let's first integrate the operations. That's mainly the procurement and the manufacturing.

Speaker #1: Being, of course, the quality control labs and the repackaging. So this is now ongoing. It's going above expectations. The collaboration with the Pharmafit team is great.

Speaker #1: Entrepreneurial family state—really easy to work, to collaborate. We execute fast, good decision-making, and this is very important in this first operational part of the M&A integration playbook, as we are capturing there the synergy.

Speaker #1: So we announced when we acquired PharmaFit that the EBITDA margin was around 14 percent. And as Karen was explaining in the previous question, we have seen an early improvement there.

Speaker #1: So that's a positive. Second part of the integration, well, of course, there is always an integration phase zero, which is finance, IT, all the admin part, which, of course, we integrate rapidly.

Speaker #1: Then you go into the second part of the integration, our integration playbook, which is the commercial part. We already started with that. So we are introducing our branded items into the PharmaFit platform.

Speaker #1: And this will bring for sure nice revenues and margin developments because the conversations with the customers will be not only on the essentials and the raw materials, which of course there's a quality part involved.

Speaker #1: And as you said before, there's the competitive price involvement. We will also have a more scientific discussion with them. And this is a copy-paste of the Brazilian model, which we have seen giving excellent results.

Speaker #1: So then we add the brands on top. And then, the third part of our integration playbook, which is the regional expansion: we have, as we speak, we are aligning now a plan together with any endurance.

Speaker #1: This is PharmaFit's business leader, previous owner, and Ronald and team, of course. We are now developing a plan to enter the US market, which is by far the biggest one in the nutraceuticals segment.

Speaker #1: And this complements our compounding offering, which again, there is an overlap of 85%. So, thanks a lot for your very nice question, Stijn.

Speaker #3: Yeah, and then on the second question, Stijn, on the sales guidance: if we look at the different regions, we expect EMEA to maintain its strong momentum.

Speaker #3: Delivering mid-single digit percentage of growth for the full year. Latam is on track for high single digit growth with potential upside driven by the continued strong execution.

Speaker #3: And then North America as you know was impacted in the first half by this continuation of the GOP1 production. And the limited IVBAC availability.

Speaker #3: Comparison will become more favorable, of course, in the second half. As the impact from Q1 lapses, we expect compounding service activity to recover gradually, with a more meaningful acceleration towards the fourth quarter.

Speaker #3: As Rafa mentioned, underlying demand remains healthy, and our other businesses are performing very nicely, supporting a stronger second half outlook for North America. So overall, we reiterate our guidance for full-year revenue growth in the mid- to high-single-digit range.

Speaker #3: Albeit towards the lower end of that range. Maybe also good to add our inorganic contribution for the full year is expected to be around mid-teens.

Speaker #3: With 14.4 percent recorded in the first half of the year.

Speaker #1: Thanks. If I can squeeze in one more—I saw some approvals for GLP-1 in Brazil, including from Sandoz. Is that a threat to your weight loss category in that region?

Speaker #2: Yeah, that's a really, really good one. We have continuous conversations with the teams. So what we're doing now—and if you go to Instagram, you can follow us in the channel GLP-1 Support.

Speaker #2: And it's a more generic account. So we are offering to our prescribers a combination of adjacent products or formulas—compounded formulas personalized for muscle recovery.

Speaker #2: So, we launched a nice brand that's strong, two years ago, which works perfectly to regain muscle mass. And of course, other nutritional branded items that we have in our portfolio, supporting the GLP-1, GLP-2, and G receptors.

Speaker #2: And acceptance of these new concepts that we have launched to support these therapies, as you have just already asked, Stijn, is quite positive, and we see it reflected in our results.

Speaker #1: Wow, that's good to hear. Thank you very much.

Speaker #2: Yeah, thanks a lot for the question.

Speaker #4: Ladies and gentlemen, just as a reminder, if you would like to ask a question, please press the pound key followed by five on your telephone keypad.

Speaker #1: Well, thank you very much for your participation today. I will remain at your disposal should you have further questions. We wish you all a great summer.

Speaker #1: Thank you and goodbye.