Good day and thank you for standing by. Welcome to the Alvotech Q4 and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Benedikt Stefansson. Please go ahead.

Thank you and good morning or afternoon to everyone joining this call today. Yesterday evening, the company issued a press release that can be found in the News section of our investor portal, investors.alvotech.com. The release outlines key highlights related to our full year 2023 results. Additionally, we will, throughout today's call, refer to a slide presentation which is available on our investor website in the Events section. If you have not already accessed the slides, please go to investors.alvotech.com and select Events. Our presentation materials and some of our statements that we make today may include forward-looking statements. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission and the NASDAQ Iceland Stock Exchange. These risks and uncertainties could cause actual results to differ materially from forward-looking statements that we make. With me on today's call are Robert Wessman, Chairman and CEO of Alvotech; Anil Okay, Chief Commercial Officer; Joel Morales, Chief Financial Officer; and Ming Li, Chief Strategy Officer. With that, I would like to turn the call over to Robert Wessman, Founder, Chairman and CEO of Alvotech.

Thank you, Benedikt. And thank you all for joining us on today's earnings call and business update for the full year 2023. We are very excited about the position that we find ourselves in today. Alvotech has successfully cleared our inspection status with the U.S. FDA. This puts Alvotech in a position to access the largest pharma market in the world. This result has led to approval of SIMLANDI in U.S. and also clears the way for our biosimilar to STELARA which we expect will be approved by FDA next month. Additionally, our pipeline has been steadily progressing and we are in a position to file at least three applications for new biosimilar candidates this year. And those are just a few of the events that are driving excitement and anticipation here at Alvotech. But before we discuss in more details regarding 2023 and take a look into 2024, I would like to take a step back for a moment to recap our strategy and positioning. Alvotech is proud to be focused entirely on biosimilars which position us amongst a small group of companies dedicated to meet the global need driven by the high-cost biologic medicines. Further, we are vertically integrated with end-to-end capabilities and have established a comprehensive infrastructure platform from where we can develop and manufacture biosimilars. Having this dedicated infrastructure will further differentiate us from other biosimilar developers. We also have a multi-product portfolio-based strategy. With our recent launch of Jamteki or biosimilar to STELARA in Canada, we have two different molecules now on the market. We continue to grow and advance our overall pipeline and portfolio which has 11 disclosed assets today. And finally, we have a global regulatory and commercial strategy as we see biosimilars as both a global opportunity and necessity. A global strategy…

Thank you, Robert and thank you to everyone on the call today. I would like to start with our recent approval of SIMLANDI. SIMLANDI is the first interchangeable high concentration biosimilar to HUMIRA in the U.S. market. We view this approval as a victory for patients in the U.S. as we believe the product profile that combines interchangeability with the high concentration strengths will help expand conversion in the U.S. market, where we have seen minimal usage of biosimilar HUMIRA to date. Moreover, we know that we have exclusivity for our interchangeable designation in our approved presentations. While we always expect the exclusivity, the confirmed nature of that exclusivity is a very helpful point in the outreach to the market, where we have coordinated closely with our partner channel. And as a reminder, the high concentration form of HUMIRA is the dominant form used by patients today. Moving to Slide 10, in today's presentation, I would like to dive a bit deeper in the commercial approach for SIMLANDI in the U.S. which we divide into four pillars. The first was just discussed regarding our unique product profile and the exclusivity that helps protect against others seeking interchangeable designation. On the pricing front, Teva's [ph] plan will be a 2-tier pricing strategy that will enable us to serve patients more broadly across both commercial and government insured patients. Currently, our partner supported by us are in active discussions with the PBMs to secure formulary placements. As part of that, the finalization of these negotiations will provide us better clarity on final net pricing. The next key part of our commercial strategy is to ensure consistent and uninterrupted supply. Alvotech has a manufacturing site that's 100% dedicated to our products. We have in the past hosted our major potential customers at our…

Thanks, Anil. I'll now provide some brief financial highlights for year ended December 31, 2023. In terms of liquidity, we recently announced in February that we completed a private placement with Icelandic and other European investors worth $166 million in gross proceeds. Giving effect to this financing, our pro forma cash balance as of December 31 would have been $172 million, excluding $25.2 million of restricted cash. In terms of our operating performance, total revenues for 2023 were $93.3 million versus $85 million in the prior year, an increase of around 10%. The company recorded $48.7 million in product revenues for 2023, almost doubling revenues from the same period in the prior year. This sharp increase is driven by the timing of launches that started in the second quarter of 2022. Since then, our partners have continued to expand on share in existing markets throughout Europe and Canada and we have also launched into Australia in late Q4 of 2023. In particular, we recognized $18.9 million of revenue in the fourth quarter which proved to be our strongest quarter of 2023, driving full year revenues, consistent with the expectations we communicated during our last earnings call. The company also recorded $42.7 million in milestone revenues in 2023, largely driven by the recognition of $31.6 million of milestone revenues in the fourth quarter as a result of the positive top line results we achieved on the clinical efficacy and safety study for our AVT06 program, a biosimilar candidate to EYLEA. Another point worthwhile noting is that the cost of product revenue for the year ended December 31, 2023, is disproportionate relative to product revenue due to timing of new launches, scale-up manufacturing activities, production-related charges and costs associated with FDA inspection readiness. We do expect this to normalize as we've obtained…

[Operator Instructions] The first question comes from the line of Balaji Prasad from Barclays.

Congratulations on the results and what seems to be a compelling outlook for 2024 and 2025. Also, appreciate the color on this because I know you have multiple moving parts to the business between milestones and revenues. A couple of questions on this. Firstly, with regard to the revenue cadence that you have provided in the milestones which are -- could you summarize the key milestone-based events that you're looking forward to during the course of the year, especially in 2Q? And second, I think with the -- where I'm struggling to model is clearly on the gross margins. Can you help us understand how should we think about gross margins? And typically, as inventory builds up before the launch, it looks like you're booking the -- or you have booked the COGS before the revenues get booked. Is that right?

I'll take that. Thank you for your question. I'll do my best to address all of those questions. I think, firstly, in terms of the revenue cadence, you're right. So the milestones that we're expecting to recognize this year and particularly -- in particular, were driven by the submissions as well as BLA filings. I should say, BLA filings as well as the completion of clinical. We're expecting completion of clinical in the second quarter. We're also expecting key launches. We received milestones upon key launches and we have several planned in -- obviously, we have one in the U.S. and throughout the world. But in the second quarter, in particular, I think you have some key clinical completions that we're expecting to report out on as well as the key launch in the U.S. With respect to your last question on COGS, we do not recognize COGS before we recognize revenue. Just as a reminder, when we ship our product to our partners worldwide at that point, we're recognizing our share of revenue. And it's at that point that we recognize our cost of sales. And I think the -- yes, go ahead.

Sorry, that's very helpful. Maybe just a quick follow-up on biosimilar, HUMIRA. If you can help us frame your expectations of the product and the revenue outlook that you're seeing in the U.S. market and maybe provide greater details around the 2-tier pricing strategy from Teva and what this means.

Thank you, Balaji. Anil speaking. Regarding granularity on the U.S. market, we will not be able to give you exact numbers. But what I can tell you is that, as we said during the prepared remarks that our partner is leading active discussions with the payers. Then the nature of those discussions, I can say, are very positive and we believe strongly that we will gain broad formulary access. I would say that the official results will no later than July 1 will be available but we also hope to provide you more color even earlier. On the 2-tier pricing, that's a very strategic decision that our partner, Teva, took. I will not be able to provide you the details of that. But anyway, you will be seeing this in the public domain very soon as we aim to launch the product in Q2 later.

[Operator Instructions] The next question comes from the line of Carl Byrnes from Northland Capital Markets.

Congratulations on the progress in the approval to SIMLANDI. With respect to SIMLANDI and in addition to your prepared comments, how can Teva increase awareness of the interchangeable designation to faster conversion of branded HUMIRA and other biosimilars, particularly during the exclusivity period?

Thank you very much for the question. First of all, the wind is changing when it comes to interchangeability. We -- in our active discussions, we see that the payers are more and more appreciating interchangeability, that was a really very positive recognition from our perspective. And secondly, having exclusivity is, of course, giving us a natural advantage in the market space. Teva is -- I know that Teva is very well reminding that to the relevant industry stakeholders. And I think it's also a good opportunity for me to really remind why interchangeability matter. Just as a reminder, we are the first and only high concentration interchangeable biosimilar to HUMIRA, where approximately 90% of the market still today on high concentration. And secondly, we, in the market, use this as a differentiation point because this will really be the one of the fundamental advantage of our [indiscernible] product profile to move the market in 2024. And we also showed you more details on our device platform that we believe is another advantage, connected to interchangeability because we believe interchangeability matters even more with our device platform because our device is really unique and very patient-friendly. So all in all, we think that interchangeability is highly appreciated in the market as of now. And we believe this is going to really make Alvotech's and Teva's products, hopefully, the leading biosimilar in the U.S. markets.

[Operator Instructions] The question comes from the line of Kirsty Ross Stewart from Citi.

This is Kirsty Ross Stewart of Citi on for Andrew Baum. Just two questions, please. First, a quick one regarding the pending FDA approval of AVT04. Just trying to understand your confidence in approval on the 16th of April target action date in U.S.? Specifically, are there any remaining questions on the resolution of the CRL? Or can we assume that the issues have all been addressed given the approval of SIMLANDI? And second, regarding your future KEYTRUDA biosimilar candidate. Do you think Merck move to continuous perfusion manufacturing process could result in any regulatory delays biosimilar launch in light of their recent patent applications which is suggesting improved shelf life linked to lower oxidation of the product?

Yes. Thank you for the question. This is Ming and Anil can take the second part. As far as our AVT04 application, we have high confidence the -- really, the only outstanding hurdle was the inspection. And of course, that's -- as Robert said earlier, it's the same with SIMLANDI. So we have very high confidence that approval will happen as the inspection status should be clear at this stage. Anil?

Thank you, Ming. On KEYTRUDA question, of course, that's a very strategic asset for us and we are very carefully analyzing all the life cycle moves from the brand company. As you very well know, we have been very successful in doing that in HUMIRA case and a few other assets. So when it comes to continuous perfusion, as you know, Alvotech is one of the few companies has this technology in-house. We had strategically invested into that technology 8 years ago. Even if there is a process change of the product, we would be prepared to do that still in-house. Even if not, we are very carefully monitoring all the life cycle moves from the [indiscernible] company on that specific asset.

[Operator Instructions] The question comes from the line of Thibault Boutherin from Morgan Stanley.

Just the first one on the HUMIRA in the U.S. Thanks for the color that you provided. My question is specifically on the time line of inclusion on formularies. Are you confident with the window of opportunity to get on formulary this year in 2024 with an optimal position? Or is it more likely to potentially happen from January 2025? Second question is on EYLEA biosimilar. I'm not sure I heard correctly but I just wanted to know if you could continue to think the approval could potentially happen this year? And then if you have any thoughts on the IP situation because we saw some setback from other biosimilar makers on the legal side for EYLEA. And then the last question is on STELARA transferability status. If you could provide us an update on when you think we could see steady results for transferability? And is it your base case that Amgen could have an exclusivity on this one? And if you could help us on the time line [indiscernible] production as well?

Thank you, Thibault. Nice to hear from you. I will take the question one and two. I will hand over the number three to Ming. When it comes to U.S. formulary timing. As per our dialogue, we believe that we will be in the formularies by 1st of July. So I don't see any reason to wait up until 1st of January; so this is the one. When it comes to second question regarding EYLEA biosimilar, we will be filing the product within this year. And of course, we expect the approval before the LOE date in 2025. We are very well aware of the ongoing litigation and various settlement events in global markets. For us, this is an area that we are very active. Teva is very active, as you know, when it comes to litigation and first-to-market opportunities. So we are working on a strategy for that asset to be on market when the LOE happens.

Thibault, it's Ming. Thank you for the question. With respect to interchangeability on STELARA, we are seeking interchangeability with STELARA. And I think there's a couple of potential ranges or potential outcomes. One is that we may have the ability to launch with interchangeable designation and one we may be able to -- or would launch shortly after our launch, so in April. And that interpretation is tied to a part of your question which was Amgen's exclusivity. It will depend on how the FDA views the earlier of clauses in the BPCIA. One would be 18 months after approval or one 18 months after the settlement, if they tie the litigation and the settlement to the application which is certainly plausible. Again, our last call, we said shortly after which is a more conservative date. But obviously, we're watching that closely and would know but, of course, before our launch, whether or not it could be the more optimistic version which is launching with interchangeability.

[Operator Instructions] The next question comes from the line of Patrik Ling from DNB Markets.

Could I just get a little bit more clarity on your sort of -- if you could walk us through -- from revenue line down to your guidance for the adjusted EBITDA, given that it's $100 million difference from high -- from low to high in both cases and your milestone indications, at least from the low to the highest around $80 million. Could you elaborate a little bit on how you see your cost development in the different scenarios, whether you will end up at $50 million in EBITDA or $150 million in EBITDA?

Thank you, Patrik. So I'll try my best to describe some of the drivers maybe in arriving at the upper and lower end of our revenue range and guidance range overall. So first of all, you know that our revenues are generated from two sources. You have your product revenues, obviously, as we supply our partners and then you have our milestone revenues as well which I described. We have several planned for this year, in particular in the second quarter. This is the first time, obviously, that we've had multiple revenue opportunities for launches in multiple markets across the world. In terms of our launches, we used a range on share and price based on our understanding of where the market is today as well as feedback from the market overall. On the milestone front and as we mentioned in the prepared remarks, we have multiple programs. We typically are recognizing milestones when we commence clinical, when we complete clinical successfully, when we submit. Also, you have performance-based milestones when we launch. And we also have, as I mentioned earlier, several net sales -- cumulative net sales targets as well that we can also achieve. And so we're planning on achieving several of those and we see several actually happening in the second quarter which is creating some of the lumpiness that you see in our overall P&L. So we do have good visibility into our milestones, right but there's ultimately still a range of outcomes. And I think you're seeing we're providing our EBITDA range of $50 million to $150 million. We're not providing any more clarity at this point in time. Obviously, this is the first time that we've provided guidance since our listing. But as our business matures, Patrik, we will offer more details with time.

But would you say that the majority of the difference here is mostly tied to differences in milestones? Or are there any other differences in your expectation when it comes to costs for R&D or COGS or...

I think you have a range, both at milestones and you also have a range at product revenue throughout the year that you're seeing there. So it's a combination of events.

But it's mostly revenue driven rather than cost driven. Is that a fair assumption?

That is a fair assumption.

[Operator Instructions] The question comes from the line of Niall Alexander from Deutsche Bank.

It's Niall from Deutsche Bank. Guidance given. So is it fair to assume that for the likes of AVT02 and AVT04, you're implying for FY '24 sales of the total revenue. So that's, in other words, into $240 million, my math is correct here. Can you just clarify what sort of sales split we're going to see between AVT04 and AVT02, FY '24 guidance? And then for FY guidance, again, can you just be more specific on what sort of split we could potentially see between milestone revenue and actual product sales revenue?

Sure. Yes. So at the top, thank you so much for your question. Thank you. So first of all, with respect to milestone revenues, the split that we've indicated is anywhere between 40% to 50% of the total revenues that we've guided in the period. So that should be insightful for you both on the high and low end as to how we're thinking about the potential range there. To answer your second question, at this point in time, we're not offering a detailed level of guidance in terms of the splits between 02 and 04 in 2024.

[Operator Instructions] Dear speakers, there are no further questions. I would like now to hand the conference over to Benedikt Stefansson for any closing remarks.

Yes. Thank you, Nadia. And on behalf of the Alvotech team, I'd like to thank all the participants in today's call. I'd like to remind our listeners also that we're tomorrow, hosting a live webcast from our Capital Markets Day and you can find further details on our website, investors.alvotech.com. So this ends today's Q4 and full year 2023 earnings call from Alvotech, have a nice day.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.