Alvotech Q4 FY2024 earnings call

• Alvotech has invested around $2 billion over 12 years, with a strategic advantage as a pure play biosimilar company having end-to-end in-house manufacturing and global commercial reach to over 90 countries.
• The company had 10 products in advanced development and 18 molecules with passed cell line development. In 2024, they delivered 2 million units of finished products, had multiple launches including AVT02 in the U.S. and AVT04 in Europe, and secured major U.S. payor contracts and formulary positions.
• Achieved two major U.S. approvals and accepted filings for three additional projects in global markets. Passed multiple health authority inspections. Raised over $300 million in capital in 2024.
• Acquired Xbrane’s R&D operation in Sweden to accelerate pipeline development, gaining a fully functional R&D unit and a biosimilar candidate to Cimzia, and exploring listing on the Stockholm Exchange.

In 2024, Alvotech's revenues grew over 400% to $492 million. Adjusted EBITDA was approximately $108 million, a significant improvement from the $300 million loss in 2023. Product revenues exceeded milestone revenues, reaching just over $273 million, which is a 460% increase from the previous year. Product gross margins were negative in the first quarter but gradually increased to 45% in the most recent quarter. The driver for increased margins came from improved scale, process improvements, higher utilization, and improved product mix.

• 2025 revenue projection: $570 million to $670 million, representing a strong 25%+ growth year-on-year from the midpoint. Adjusted EBITDA expected to be in the range of $180 million to $260 million.
• Longer term goal: To reach $1.5 billion in revenues and a 40%-45% EBITDA margin by 2028, with launches of biosimilars to Prolia, Xgeva, Simponi, Simponi Aria, Eylea low dose, high dose Eylea, and Entyvio planned.
• 2025 plans: Expect approval for three biosimilars by end of 2025, increase R&D pace with 5 projects entering preclinical phase, and deliver over 3 million units of finished products.

No specific risks discussed in detail during the call.

Q: Hey, thanks for taking our questions, and congrats on all the progress. Maybe just one on Stelara - wanted to get your thoughts on where pricing is coming out to be and how you think about that, and then what gives you confidence about a potential private label deal here? We saw the innovative alternative player from getting into such a deal. Then separately, a second question just on the milestone revenues, here it would be helpful if you can help us understand the cadence of how this will shake out. It’s a pretty sizeable contribution in 2025 guide - what’s driving that, and I thought you had initially indicated that it would be a step down versus 2024? Then as you progress for 2026 and 2027, what’s the level of milestone revenue that you expect?

A: Okay, thank you Ash. Anil is speaking, thanks for the questions. Let me take them from my perspective, from the commercial perspective. Starting from the milestone revenue, 2025 we have a significant portion of these milestones that have been already signed, so we have good confidence on achieving those numbers because of--based on signed contracts. As Joe and Robert mentioned, we also managed to advance further programs in our portfolio that are candidates for further business development deals, and we have very attractive and active dialogues going on, so we feel fairly confident in achieving those milestones in 2025. Going back to your Stelara pricing question, first of all, let me divide the question into two pieces, the U.S. and Europe. In the U.S., as you can appreciate, we just launched the product a month ago. Our initial experience is very positive with the uptake. We are seeing a relatively faster trend than Humira phase out, so we remain optimistic in our market position of Stelara in the U.S. I think it’s too early to really communicate the U.S. pricing yet because it’s just a very recent launch, as you can appreciate. In Europe, the good thing is that we were--day one in the market, we were the first company launching Stelara in the market. We have significant market share, we are one of the number one and number two players, depending on the market. There, we have more established pricing and we have made our 2025 AOP based on this established trend, and of course as the competition increases, we also assume certain price pressure on the portfolio for that specific product, both in the U.S. and in Europe. The last piece of your question was on the private label. We have various active discussions ongoing, and also we have a contract which is very advanced to be signed that will give us a position in one of the private label businesses in the U.S. market. Overall, we feel very confident about Stelara revenues in 2025 and beyond.

Q: Thanks Ash guys.

A: Thanks Ash, and to answer the second part of your question on milestone revenues, I think ultimately the size of milestone revenue contribution is a function of the progress that we’re making in our R&D lab in our facility, and you heard some comments from Robert and Joe in particular about how we’ve been prioritizing that and advancing the pipeline. I think with respect to the higher contribution this year than maybe we had previously communicated, I would attribute that just to the good progress that our organization has been making in prioritizing our R&D programs. With respect to phasing, as I mentioned in the prepared remarks, we are expecting a higher weighting in the second half of the year, about 75% of our milestones we’re expecting to recognize in the second half of the year, in particular in the fourth quarter. That’s really driven just by the timing of the number of milestones that we’re achieving in the fourth quarter, including we receive milestones once we get approvals from our partner, upon launches by our partner, as well as just some other, I would say development milestones that we’re also planning to achieve in that second half of the year. As I look more broadly through 2028, we mentioned--or I should say at least in the management presentation, you’ll see we’re expecting cumulatively to recognize about a billion dollars in milestone revenues between ’25 and ’28, and I think that would more or less approximate about $250 million per year between now and 2028, just given the programs that we have in place in our pipeline at this time.