Earnings Call: H1 2022

Sep 27, 2022

Good morning, everyone. I am pleased to be sharing our interim results for the first half of 2022, and look forward to having a good discussion and answering any questions that anybody may have at the end of the presentation. The plan is, if you have a question, if you press your Raise Hand button, then we will keep an eye on the list. When we get to the end of the presentation, we will come to you, and hopefully the magic will happen and Helen will unmute, and we will be able to answer as many questions as we can in the time available. It is great to be here in front of you. I am sorry that Chris and I are once more remote from each other, as well as from everybody else. I have been testing positive for COVID and had COVID up until the last couple of days, so I have not yet made my transfer into London. Sitting at home, and Chris is up in London. Hopefully, that makes no difference at all, and we should all be used to it by now. Just by way of introduction, we are pleased with where we have got to. I think we feel that we have, during my tenure and certainly in the last four years, we have organized the business. It is a great platform. It is really stable. It is there for growth. We have weathered the storms of COVID, and here we are with a good result for the first half of 2022 versus a very tough comparator, which was the first half of 2021. As I think most of you know, the first half of 2021 was absolutely exceptional coming off the back of COVID, some destocking from wholesalers, et cetera. That was the same across our industry. It is great to see that animal health continues to be a good place to be, regardless of the headwinds, uncertainty, and everything that we have got going on around in the macroeconomic environment, with continuing to see the animal health business being a very positive place to be. Chris, if you pop onto the first part of the presentation. As usual, for those of you who have listened to Chris and I tic-tac on these before, we will share the presentation between us. As a lasting gift from COVID, excuse me while I cough. Okay. We have, over the past three, four, well, three years definitely, been talking about these five key business pillars for us. Where we are now, we have got solid revenue for the first half, margins continuing to improve, and our strategic progress is continuing. Here are the five areas that we always talk about. Growth portfolio, continuing to see an increase in the top 40 products, 2.4% increase in revenue. We focus on the top 40 as our core group of products, and we are continuing to see a nice margin increase in those products. That, for us, is showing increased efficiency in our business, and we are seeing some really good results there. During the first half of this year, we announced our collaboration with Orthros Medical, and that was really our first major step into building our longer term pipeline. We continue to work with a wide range of partners and colleagues and people in our business, building stakeholder relationships with those people, looking for opportunities to expand in our business development. I think everybody's hopefully aware what we are trying to do in terms of business development, is look for opportunities that are near term and also build that pipeline for the longer term. The Orthros collaboration is a critical part of that long-term build, and we continue to leverage that financial platform in pursuit of M&A and licensing deals. Moving on to the pipeline. Clearly, Orthros is a good move in the right direction for us, and that collaboration is going really well. We are expecting our full year's spend to be about half a million on the pipeline development in R&D. The other piece that we are now very actively commercializing is the STEM Plaqtiv range, which is launched in all our countries now. We waited for the VOHC, the Veterinary Oral Health Council endorsement that came just at the end of the first quarter. So now our teams are out selling. There are other additional opportunities coming through from that technology, which we continue to develop in our R&D pipeline. Chris is going to talk strong finances, so I will leave that piece to him. Then in terms of key leadership, we have mentioned before that for us, building the right capabilities for the future growth is really important, and we continue to do that. Importantly, we also have refreshed our board. We brought in Doug Hutchens, who has got some great experience in animal health with Bayer, and Sylvia Metayer, who was from Sodexo, but is our Chair of Audit and Risk. So we now have a board that has the right capabilities to help drive our future growth. So I am going to hand over to Chris to talk about that strong finance pillar. Okay. Morning, everyone. I think Jenny set the scene really nicely in terms of the headlines on our first half performance. I think when we look at some numbers that are declining on the revenue EBITDA basis, I think what we just need to remind ourselves is that we had some really exceptional growth in the first half of last year. So as Jenny said, we are really pleased with where we got to in the first half. So anyone that has been on these calls before, we have got the same slide. So we will do a headline here. We will give a bit more detail on the revenue split by how we operate, and that is our regional structure, as most people are familiar with. Jenny will just touch on the top 40, and I will come back to just a reminder on the capital allocation, which we set out when we did our final results, because obviously, that is a really important financial context to executing the strategy on BD and M&A, for example. On revenue, you can see, modest decline, just over 2% versus last year, AER flat at CER. As I said, we will give some more detail later, both on the revenue slide and the top 40. If we look at underlying EBITDA, which is down a touch at GBP 8 million, I think one of the key strengths that is underpinning that EBITDA movement is the gross margin. That was up, as you can see on the left-hand side, that was up by 1.4% overall. Again, you will see later on that really the underlying driver of all of that is all the work we have talked before about rationalizing the portfolio, focusing on the higher margin brands. That includes obviously Daxocox. So you will see again that the top 40 margin in strength is really the driver of that. In terms of that split of the increase in GM, it is mostly sales mix, but also a bit of price as well. Maybe we will touch on through the Q&A, in terms of what pricing strategy we put in place to mitigate the ever increasing inflationary pressures that obviously a lot of you will be familiar with. In EBITDA, we talk about from an SG&A perspective, so there is a GBP 0.5 million increase at SG&A. Most of that is around our employment base. In that regard, it all centers around our continuing drive to bring us some great people to really help us deliver the strategy. Jenny has mentioned the board, we have got some great new people on the board. In the annual report, we talked about a lady called Sandra Single, who joined as the strategic product and portfolio director. There is also someone else that has joined in her team that is really helping drive some of our pipeline development opportunities, in particular around OTC. So continuing to build that platform to drive future growth. The other small factor in the half year SG&A cost increase, but you will have seen it in the note on the outlook for the full year, an increase in fact to the second half is Orthros. So we will come onto it in more detail, but the research collaboration part and the research costs are in our P&L. So it is GBP 100K for the first half, but what we are saying is that that will accelerate to something like GBP 0.5 million for the second half, and we will give some more detail on that. That P&L shape, we will see into future years in 2023 as the investment in our pipeline reflects the move towards novel products, which has obviously been one of the key drivers of the strategy. Just finishing off on the P&L, EPS is not on here. That was marginally down on the 8 pence last year. Reason for the slightly lower decrease versus EBITDA is really around the ETR. So there is a lower ETR in this first half versus last year, and we expect that to be a theme of the full year. Coming on to cash conversion. You can see a significant decline this year versus last year, but actually all in line with where we expected and how we exited 2021. Again, we talked about this in our annual report. 2021 cash conversion was at 109%. A lot of that was driven in the second half of the year, as you can see. We exited 2021 and into 2022 with a very low working capital position. Some of that was around sales phasing, but also around some delays in some proactive stock building that we sought to do at the end of Q4, and that came in Q1. That was really as expected in the first half. Directionally for the full year, we have talked in the press release that we are expecting to be at an annual cash conversion total of around 70%. That is in line, but at the bottom end of the range that we highlighted in the finals again. We targeted to have an average of 90%-100% for 2021 and 2022. The 70% means that we are going to be more like the 90% rather than 100%, but still importantly within that targeted range that, as we will come onto, is a real underpin of our ability to invest in our development pipeline. Just briefly on net debt, that is up by a couple of million to GBP 7.4 million. About half of that is IFRS 16 liabilities. We have a new office in Spain, which is our largest business, from the start of the year. Effectively there is a 10-year operating lease that has gone onto the balance sheet. That is a significant increase from a non-cash perspective. The rest really is around, so the free cash flow was nil. Operating cash was effectively used to fund CapEx, which I will touch on a bit more later on. Leverage 0.6, so still well below our target range of one to two. Still in a really healthy position from a balance sheet strength position. If we come on to a bit more on the revenue. As we said, it is a reminder about the exceptional comparator in the first half, and this will give just some more color on the species dynamics and then on the region dynamics on the left-hand side. I will start on the right-hand side and then we will just read across to the left. Before. No, sorry. I am on a call. Excuse me. Key driver of the overall performance was companion animals. As I said, that represents 70% of the sales, so the majority of revenues as historically. Revenue was down modestly at 2.7%, which is a really good result when we compare that to the 29% growth that we achieved in the first half of last year, which as we all know, had the benefit of that post-COVID rebound in the companion animal markets. If we just look at some of the underpins of that 2.7 movement, clearly new products, Daxocox really is the key driver of the GBP 1.5 million increase in sales from new products. Touch on a bit more, but really pleased with the momentum. Really confident that will be our largest product within the stated three to five year from launch, and really confident about the peak year sales and long-term potential of that. So continuing to put some investment behind that. A lesser extent in the first half performance on new products, but we will see into the second half, but more next year is the Plaqtiv+ range. So this is coming out. These are the first products coming out of the STEM JV. We launched them later than expected. VOHC took a long time. That was needed to go into the veterinary market, so it is an important rubber stamp of the quality and efficacy of the product. So we launched very late into Q2. So we will see that come more into the results for the full financial year and on. We talked about in the RNS about loss of distribution, right? If we pause here, so that has had an impact on the companion animals performance in the first half. It actually has impacted the top 40 growth as well. But just a reminder is that this is something that we saw more and more as we have taken the route on our strategy over the last few years, where we have been evolving the portfolio, some of the tail products, et cetera, to have a portfolio that we would call is sustainable, and that is really moving towards more of our own IP and long-term license products rather than distribution. So it is one of those things that we have had to deal with over the last few years. It has unfortunately hit our results in the first half, but again, still really positive from an overall performance. We will maybe touch on this in some more Q&A, but we are seeing some moderation in demand levels across Europe. I think that is seen in all our competitor communications. What we would say is it really varies by species, so whether it is companion animal production. So companion animal is continuing to be the growth driver of the market. Production animal, we are largely seeing a decline where we operate. And then also by country, there is some real variations. But I think the important things linking to what Jenny said at the start was the fundamentals of the market remain resilient, and it remains in growth, albeit that the growth is perhaps lower than it was this time last year. On production animals, there is a 5% decline there. As a reminder, most of that portfolio lies in the south. There is a tiny bit left in the north, in the Benelux. Really the driver of this is the AMR legislation, EU regulations that came into force in January 2022. That's led, in particular for us, to a big reduction in the use of premixes for effectively general prevention. That's against the backdrop in Spain, for example, of actually increasing antibiotics up to that time. So it had an impact on us. Again, it will be a theme of the full year. It's something that we'll monitor and manage over the course of the next months and into 2023. You also noted some supply disruptions in the RNS in this area, relatively small, expecting they'll be resolved before the end of the year. So don't think it'll have any kind of impact in this particular area on the full year. Equine, another very briefly. Really strong growth here, and that's really around phasing of the resumption of supply of one of our key. As a reminder, it was a manufactured transfer affected in 2020 that led into 2021. So our network partners customers built stock. So effectively there was relatively low sales in the first half of last year and normalized sales in the first half of this year. So that's what's driving that. If we look at the regional performance network partners I've just talked about, South Region, Spain, which is our largest entity by some way, continues to perform really well. The Spanish, the companion animals part of the business unit part of that business is continuing to trade really strongly, both in existing portfolios as well as existing business, as well as the. You see that in the top 40 brands as well as the new products, so doing well with Daxocox. Obviously that's offset by the production animal decline that I talked about. So overall, modest growth, but essentially very strong growth in companion animals overall, offset by the production animal moderation. In the North, if we broadly bridge that couple of million decline, this is where we see the bigger impact of the loss of distribution rights, because that's a companion animal portfolio of products. Obviously, the Daxocox will achieve this, but when you lose a mature product and then you've got a new product coming in, the uptake curve just needs a bit of time to catch up. So Daxocox is gathering momentum across the business, whether it's in the North or the South, but essentially just needs to take some time to make up that loss. Other factor we've seen in the North is, on the data we've got, is there's been some de-stocking. So we don't know whether this is a change in wholesaler stocking policies or whether it's perhaps some de-stocking because they were carrying more stock post-Brexit and COVID. We need to wait and see. But what we are seeing is that there's been a general reduction, particularly in the U.K. wholesalers, in the first half, which does have an impact on performance. As I said, we've already talked about a bit of moderation to growth. I think that's probably a little bit more of a factor in the North rather than the South. Jenny, shall I hand over to you on this one? Yeah, can do. I think in the introduction, and those of you who've been with us for a while know that we've really been trying to focus on tidying up this portfolio and reducing the tail, which we took out. We're about 150 brands now. But also making sure that we are putting our efforts in those top 40 products. So we now are in a good state. We've got increasing revenue from the top 40 brands in half one at 2.4. Most of that is the drive from Daxocox and Plaqtiv+, and a lot of that margin improvement is also particularly Daxocox because it's had a bit more time. But the improvement in gross margin, we're constantly making sure that we are focused on driving those products. Our sales force are focused on them, and our supply teams and our global commercial teams are focused on really getting the most out of those products. So we're pleased with how that's going. We continue to take products out of the tail if they're no longer delivering sufficiently. Chris mentioned inflationary headwinds. We're all hearing about inflationary headwinds all the time. So far in the first half, we have been able to mitigate the impact of some of the inflationary pressures that we're seeing, predominantly by pricing, and we have been almost completely aligned to our competitors and other people in this business around when we implement price increases and actually the frequency and scale of the price increases. We're kind of aligned with the rest of the business. We have been able to mitigate much of the inflationary pressure for the first half, and obviously we're watching carefully as to what happens next. So we continue to drive that portfolio as a critical driver of our efficiency and also generating cash for future growth. Chris? We put this, as I said, we put this slide in when we did the final, so no real changes here. I'll canter through this quite quickly. What we have got on the next slide is some more information about Orthros, because I think this was a scene setting on Orthros, but that was a post-year end. Obviously that's got, as we talked about, there'll be an increasing factor in our P&L with research costs and then there'll be some capital. As I said, no significant changes. Essentially from a balance sheet perspective, leverage is still below the range. We've got ample facility headroom. Those facilities are committed to 2025, thankfully, given some of the recent news, et cetera. Really what we're wanting to do and continue to do is be really active in effectively using that balance sheet strength to accelerate growth. Pipeline, we'll talk a bit more about, but essentially as a reminder, the reason why we're absolutely focused on the strength of our operating cash flows, because that is what's funding our pipeline and the bottom box, this has not changed. Our view is that we want to increase the level of investment as a percentage of sales, and we've got a 5%-10% range in there. Again, that's been communicated before and unchanged. What that does do is reserve the debt capacity and any equity capacity we have for M&A. We continue to be very active. I think that the summary is that we spent over the last months, and even longer than that, really building the relationships around some of the potential opportunities. I think our view is these things take time. We are really keen to do deals, but we want to make sure that it's the right deal for the organization. We continue to have a number of opportunities in the deal pipeline which we're actively pursuing. I think Jenny and I, if we're being very honest and open, we would have loved to have said, "Here's something that we've done." We continue to, that is our objective, and the sooner we can communicate to you guys in the market, then that's really where we want to land. Shame we haven't done anything yet, but please take away, it's not for the want of trying, if that makes sense. Just a reminder on where we want to focus on M&A. We've kind of got two strands to this. Geographic expansion. Remembering that actually from where we operate today, Spain is our only business that's in the top 10 animal health companies in a particular country. What we're saying is we're small everywhere else, so we shouldn't forget that there's an objective to potentially scale some of our existing organizations through some bolt-on M&A. Clearly there's some markets where we don't have a direct relationship at the moment. We've talked about France before, and again, we continue to actively pursue opportunities in that geographic area. Again, from a product perspective, we've kind of said either individually that feels more difficult given the number of opportunities that we're seeing versus acquiring a portfolio of products within a business, that aligns to our strategy. I think we're saying the opportunities tend to be more business than particular products, if that makes sense. We've talked about debt, dividend. We've kept the interim dividend in line with 2P. We'll continue to monitor that in line with investment, but essentially that's something that, as a business, we'll continue to pay a dividend, but the expectation is that earnings will accrete faster than that. Okay. Okay. Just building on the conversation around M&A and pipeline. Because Orthros was an early this year announcement and because it's something really new and really exciting for us, I thought it would be worthwhile us just talking about Orthros. Partly because it also is a bit of a blueprint for what we want to do to really drive transformational change in the future. Chris talked about looking for opportunities in France, looking for M&A opportunities, buying in existing business, rapidly accretive, and all of that activity is ongoing. I share Chris's frustration that we really hope to be talking to you about a specific example by now, but we are absolutely all over it and working hard on those early straight accretive deals. But I thought it might be worthwhile talking a little bit more about the Orthros deal, given that you're starting to see it come through in our numbers. We talked a little at the time that we announced the deal about this. Just to be really clear, what we've done with this deal, and actually there's another couple of things that we are talking to people about in this same area, sort of much longer term. What we've done is tried to make sure that we de-risk it. So at every stage, if the product isn't doing what it intends to do, what we want it to do doesn't meet its target, then we can walk away. So we are very clear that we only want to spend money as we get data to get the next piece of data, et cetera. So just this is a schematic. It's not in scale. The net sales diagram on the right-hand side definitely isn't to scale. But effectively what we're doing is we've paid a small upfront license payment, and then we are also paying for the R&D, which is what you're seeing starting to come through in our Opex. So year one and year two are really about getting proof of concept, preclinical studies, and we pay a milestone as we demonstrate effectiveness. So once we've got proof of concept, the investment, there's a smaller milestone payment, but the investment in chemistry, manufacturing, and compliance starts to build up. We start to build regulatory batches. We start to implement the safety and tox. All along these milestones, you get more certain about the ultimate outcome being positive. Then the big finance piece for us is doing the regulatory clinical trials, assuming everything's gone well to that point. Then we have global rights for these products that come out of the Orthros deal, both in the U.S. and EU. So we will submit them for regulatory review in year 5, get the marketing authorization, and then we're into the product launch, and there's a milestone when you actually get the marketing authorization, and it's positive. So just in terms of how we are building the costs, we're being very careful about making sure that at every stage we know what we've got before we go onto the next stage and before we commit any other funding. But these products are really exciting, and the collaboration that we have with Orthros is going really very well. There's two bits of it. One is actually developing some products that they already had that are at an early stage. The second one is really looking for how else the Orthros concept could be used in different indications, in new opportunities. So this is very exciting. As I say, there's another couple of things that we plan to do around this same area, but again, being really careful managing the risk as we go through. Then on the right-hand side, just to make the point, I think when we talked about the deal, we talked about we had a headline sort of number of GBP 11 million. But I want to be really clear that if we start spending that level, then it's because we've got net sales that are very exciting. So frankly, if we start paying big money, it's because the royalties on the sales are really high. Just to be clear that up until the launch milestone, we're not investing huge amounts of money, and then we expect these products to be significant. Really, if everything goes right, they're transformational for us. So just wanted to share that so that there's a bit of reassurance about how we're gating each of those decisions, but also a little bit of excitement about this is going well. We'll continue to push through and hopefully these products get on the market, and they will be game-changing for us if they do. So that was just sharing on that. On the next one, we've used this really to say that we're building an organization that can scale and flex as it grows. Some of the conversations we're having about M&A and BD activities, we're really pleased that we can now talk to people about having an organization that we can plug new products in, and that if we can find the right deal, the right M&A, we've got an infrastructure that is really an effective infrastructure. So sales and marketing, we've got a great sales and marketing team in Spain, and we're rolling out the learnings across the rest of the organization because that really does, I believe, absolutely, that the Spanish performance that Chris talked about and the South performance is because we've got some great sales and marketing people. So that productivity is just phenomenally important for us. And if we think about the best way to combat some of the uncertainties and some of the headwinds, it is actually having the best people out there giving their best sales and marketing every day. We are also helping to develop the leaders in our organization because we see this as a real opportunity to, again, increase productivity and make sure the organization is really achieving at the right level. Senior and board level, we talked about Sandra Single, who is bringing some great skills from her previous background, and also Doug and Sylvia on the board. I think that has made quite a big difference to how our board is helping us to achieve that longer-term growth. Product pipeline. The Orthros products have definitely strengthened that. We have got some other products in the pipeline that are going to be coming out in the next few years. They are smaller products, but they really build and enhance our existing portfolio. And of course, you cannot avoid or we do not want to avoid the commitment that we have to sustainability, and we have now established our sustainability, and Chris is leading the program around ESG, and you can see that in some of our reporting. So really good, solid platform which is driving organic growth and will continue to drive the inorganic growth as we move forward into some more deals and opportunities. Finally, on summary and outlook, we love this picture of the dog. I do not know what it is about his face, but there is something kind of about him. So solid revenue performance. We have talked about prior year comparator, and also watching the market and seeing the moderation of market demand a bit. Gross margin continues to improve, and Daxocox and things like Plaqtiv+ will really help as we move away, as Chris says, from some of the legacy distribution deals that were relatively lower in margin into some of our own, either licensed or owned products. Financial platform. Absolutely confident that we have got a good platform to grow from. And heart and soul into looking for M&A opportunities. And the VHH pipeline collaboration is really a great opportunity and a great model for us to look at that longer-term transformational growth. So in terms of outlook, you have seen the adjustment and the increase for the Orthros R&D investment, which really does show our confidence for the future, and we anticipate that our full-year earnings will be within the market expectations. And against that backdrop that I think everybody is seeing of intensifying headwinds, we anticipate a marginal revenue bias to half one versus half two in 2022, just given the way that the market is developing and changing at the moment. But overall, really pleased with where we have got to. It feels like a great organization. We just need to get those M&A deals landed, and I think it is exciting times ahead. So Helen, I think it would be good to open up for questions, and see whether anybody- Jenny, I can see a couple of questions. First hand up is Mike Mitchell. I am going to click Allow to Talk, and hopefully you will be able to hear him. Great. Hi, Mike. Hi there, Jenny. Can you hear me okay? Yeah, all good. Fantastic. Great. Thanks for letting me ask some questions. Let me just start off. I was just thinking about the expectations for the companion animal market growth that have been addressed by some sector peers, and I think one view is that the estimated rates are broadly around 4%-5% per annum in the U.S., about 2%-3% in Europe. I know we're talking sort of single digits there as things have been normalizing. But given that sort of difference between the two regions, I'm just wondering how focused you are around a go-to U.S. strategy whenever you're considering new pipeline opportunities or possible collaborations. How much of that is a priority in the decision-making process? Yeah. It's a good question, and something that we have quite a big focus on at the moment. At the moment, we are looking to make sure that we have a good footprint in Europe. We have a little bit more focus in terms of footprint on France and building that European piece. What we are doing, though, is a lot of the M&A and product licensing activities that we have ongoing are actually with North American companies. Okay. What we're doing is keeping an open mind as to if somebody has the right product opportunity, the right licensing opportunity or, for example, is established in the U.S. and hasn't got a European arm, how could we also use that as a stepping stone into the U.S.? Yeah. Whilst we're not directly going for and looking for buying a U.S. business, if it has something that we want that would benefit us everywhere, then we're very interested. It's a slightly different way around from somewhere like France, where we're absolutely looking for the business. No, understood. Just looking then to that European positioning and, I think, Chris, you touched on the variability in terms of species and country. Are there any significant European market niches or subcategories you are currently targeting to accelerate growth? In terms of the key growth areas, I think pain is one of the absolute key drivers of growth. I think OTC, wait to see where that is going. Pain, obviously Daxocox, Orthros is absolutely aimed at that area as well. I think the perioperative but also the long-term osteoarthritis pain we see, in most of the markets where we have got the data as key drivers of companion animal growth in areas where we operate. There are parasiticides, et cetera, in there. I think that just underpins our confidence around, as I talked about, the long-term outlook of Daxocox and also some of the things that we are doing either with Orthros or some other opportunities around that continuing long-term growth trajectory in the pain market. Got it. Just to build on that, Mike, I think with the launch of Plaqtiv+ and with our existing strength with Orozyme, coupled with the fact that a lot of. If you read in the veterinary press, you see quite a lot of noise around the importance of dental health in companion animals. I think that is somewhere that we are looking at as an opportunity to build and build and build. The dental area is important for us. No, thank you. Just on Orthros then, and actually perhaps a little adjacent to Orthros, since you mentioned it a couple of times just now. I am just wondering how easy it would be to manage another Orthros-type deal in terms of resourcing and financing if an ideal opportunity appeared tomorrow. I mean, it is a great template. So, with that in mind, how many other deals are you seeing coming through, and is it easy to get to the front of the queue? Yes. So there is a few questions in there. I think we had always planned to increase our R&D spend to between 5 and 10. So we recognize we still have some headroom even after the Orthros deal. I think in terms of internal resources, because of the way that we set up the Orthros deal and because how we want to set up future ones, because we are not doing internal, we are not lab coating and lab space type thing. It is more about making sure we have the right project managers. So we probably, I think if we did another deal the size of Orthros, we would probably need to have a bit more project management in-house. So I think we could probably manage another one or two, but we would be very careful about how we risk-adjusted it. Yeah. I think Mike Mitchell, it is a great question. I think for us, and we have seen through, and I have talked about this, we have got some extra R&D because of Orthros going through the P&L. So I think for us as the size of our organization, because these are kind of potent. Jenny talked about when you can see that scale of the post-commercial milestones. These are the things that are huge opportunities to us, but kind of early stage. And the thing being very kind of candid about our ability to do this from a financial perspective is really that is the room in our P&L to take more research because we obviously know that EBITDA, et cetera, is really important. So we definitely have a very close eye on balancing that when we build the pipeline. As Jenny talked about, there is the risk reward, PTRS, all those kind of things as well. But, I think the view is that I think we could do another one. I think there is some great opportunities out there, but I would not expect that we come out with every single deal that looks like this, if that makes sense. Yeah. And I think the piece that we're trying to do, Mike, is to balance it with the short-term accretive deals. So that ideally we would have liked to have done one of those and then do Orthros, then do another one, then do next one. So I think that's going to be the future for us, is making sure that we're balancing the short term, bring something in M&A activity to really be able to fund the R&D activity on something very exciting longer term. Yeah. Understood. And that competitive landscape when you're looking at these opportunities? There's lots of opportunities out there. I think it's one of the reasons why we brought Sandra in, because she really helps us to understand the potential of the opportunities. So when we're talking to people, if sometimes there's lots of people talking, sometimes we've seen an opportunity that others haven't. So I think most of the big guys are trying to move into that same space. So it is a bit about being clever. Understood. Jenny, Chris, that's great. Thank you for that. No, it's fine. Thank you. I've got another question from Max Herrmann. Hi, Max. Hi, Jenny. Hi, Chris. Thanks for taking my questions. Three, if I may. Firstly, just in terms of, obviously, you've highlighted that you want the proportion of your business to become more owned versus distribution type business. I wonder what the current split is between owned and distribution. Secondly, just in terms of the pipeline, obviously, launch of Plaqtiv+ was a nice launch in the first half. What are the plans for future pipeline launches in, I guess, the next 12-18 months, either in terms of other presentations of existing products? I know there was DispersinB, which was another product that came from STEM. Just to understand a bit more about the near-term pipeline opportunities, irrespective of what the size of those are. Finally, just in terms of inflation, price rise, putting up price rises. We are seeing a difference now between volume growth and overall revenue changes. In some ways, we would expect revenue growth to accelerate if you are putting price rises through, dependent on what happens with volume. Just interested in understanding the dynamics there. Max, shall I take one and three? Sounds good. So owned versus distribution. I think post-merger, I think we were roughly 50-50, something like that. We are probably 35/65 now at the half year stage, progressing through it is probably something that we are like us looking at geographic expansion, et cetera. Yeah, about 35/65 is the- Great current split at the moment. Just on inflation, so really what we're trying to do is hold margin. The continuing thing that I kind of remind everyone in our business is that it's not just about cost of goods when we're thinking about how do we mitigate inflation, because as everyone knows, logistics, employment, et cetera, that's going to be an increasing factor. Margin as best as we can. I think across the portfolio of countries, it's sometimes easier, sometimes a bit more difficult, depending on competitor intent. But on the whole, as we said in the first half, wasn't really a factor. I think we're confident that we can mitigate the majority for the full year as well. I think Jenny notes that us, like lots of other businesses, are doing, it used to be one price rise a year, and now it will be two, if not more, depending on kind of what we're seeing through suppliers, because obviously they're doing the same. Chris, can I just follow that up? Yeah. In the first half, you're saying that the price element of revenue, the price rise element of revenue is fairly negligible? Yeah, it's fairly small. I think from a gross margin perspective and then the revenue perspective, I think it's really around gross margin, if I look at price volume mix, it's more mix. Right. Volume, we talk about the market volumes, but volume in app, we don't tend to look at volume because we could sell 2 million GBP of fluid, for example, and then we tend not to look at that on an overall basis. But really, it's the mix that's driven our gross margin. And there's a little bit on price, but those price rises were kind of effective, probably broadly, on average, more in Q2 than Q1. Good question. On the market, where we have the data, I think you're right. If we're saying, look, average price rises are, I'm just going to give you an example, 5%, then you kind of go, well, if volumes stay the same, your revenue will be up 5%. And that's not the case. So there are moderations in volume in certain markets. I think we're seeing that more in the north region than the south region. Germany being an example to start with. I think when we talk about moderation, we are seeing moderation in some volumes, which is probably why you're not seeing some of the kind of growth that one would expect if you're saying all that price rise effectively focused on the top line. Does that answer the question? Yeah. Lovely. Thank you. Okay. Max, picking up on your question about what's coming out of the pipeline in the next 12 to 18 months. There's some products that we've developed ourselves that are coming out, one in diarrhea, one for dog anal glands. We also have a new distribution agreement that we have with Orien, who, as you know, are important partners for us. We will be launching an emetic product for poisoning. Those are all coming through in the next year, 12 months. We also have some studies going on to extend the indications for Daxocox, including things like postoperative pain, soft tissue trauma, et cetera. Those will be coming out in the 18-month period. In a slightly shorter period, we will have some new forms of Daxocox and other oral tablets, et cetera, to extend the range to make sure that we've got the right dose for the different sizes of dogs. DispersinB? Yeah. I did actually write down. I'm going to ask Chris to answer that one. Yeah, I'll do that. You kind of choose for me. Yeah. DispersinB, Chris. DispersinB, so what we're working on is the cost of goods. It's not quite where we need it to be at the moment from a margin perspective, so we're working heavily. Martin, our Head Commercial, is working heavily on that with Kane. We are confident we'll get there. It's just taking a bit of time to work out manufacturing methodology, et cetera, to get us to where we need to be. It's on the list. It's a little bit like the kind of Veo-8-CB, which is taking more time than we expected, because there's some nuances around formulation there, but we're confident we'll get there. I can't give you a time yet on when we'll get there, but as soon as we will, we'll tell you. Great. Thank you. Okay. Helen, do we have anybody else with any questions? I am not seeing anybody else with their hands up, so that looks like it may be it for now. Okay. Couple of no. Okay. Well, in that case, thanks everyone for attending. Thanks Max and Mike for your questions. I am sure if anybody comes up with any questions after, we can funnel them through via Stifel, and we will do our best to answer them. Other than that, thank you all very much. Thanks, Helen.