Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Recordati conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Miss Federica De Medici, investor relations and corporate communications of Recordati. Please go ahead, madam.
Thank you, Sabrina, and good afternoon or good morning, everyone, and thank you for attending the Recordati conference call today. I'm pleased to be here with our CEO, Rob Koremans, and Luigi La Corte, our CFO, that will be representing the 2022 Q1 results. They will be running you through the presentation. As usual, the set of slides is available on our website under the investor section. After that, we will open up for Q&A. I will now leave the floor to Rob. Please go ahead.
Thank you, Federica. I'm proud to announce a very strong start of the year for revenues and bottom-line performance with continued strong cash flow generation. Overall revenue growth was 9% or 11% in constant exchange rate and reached EUR 419.4 million, reflecting continued post-COVID recovery and good underlying growth of both our businesses. SPC recovers in relevant markets, especially with regards to cough and cold and OTC products, and also with improved access to healthcare professionals almost returning to pre-pandemic levels. A very robust performance of rare disease, both the Endo and the metabolic portfolio in the U.S. and in Europe. In more details, Endo increased its revenues by 46.4% versus Q1 of last year, thanks to the continued new patients acquisition in the U.S. and in the lead European countries.
Isturisa is now reimbursed in Germany and Spain, and we keep pushing to get that in other European markets. We have a nicely increased contribution from Eligard, EUR 7 million up versus Q1 of last year, with stabilization of the markets in many countries, and actually in some we already start to see growth, which is a very big change from the product we took over with the decline. The new device filing has been accepted by the European Medicines Agency with a decision expected in the Q3 of this year. The EUSA Pharma acquisition closed on March 16th, and the integration is progressing really, really well. Also the business is tracking nicely ahead of our own expectations.
We've also had good growth in the quarter in Russia and Ukraine on basically on the back of a very strong cough and cold season, and also related to some of the advanced purchases that were made in both countries ahead of the conflict. We see that Russia has brought in EUR 17 million in revenues and Ukraine EUR 4.4 million in the quarter. What you should note as well is that Russia, the growth has been strong also because of strong destocking in the year before in the same quarter. Our financial results reflect strong top-line performance and efficiency improvements like the SPC rightsizing in our commercial structure and sales force, and also still very limited year-to-date inflation impacts on COGS and OPEX.
EBITDA, EUR 163 million or at 38.9% of sales, which is up 8.7% versus the Q1 of last year. Adjusted net income, EUR 116.3 million or 27.7% of sales and up 11.4% versus Q1 last year. Net income at EUR 96.7 million or 23.1% of sales, up 7.6%. We have continued strong free cash flow generation of EUR 110.3 million. Operating results reflect the impact of EUR 7.1 million of non-recurring costs, mainly related to the EUSA Pharma transition and organizational restructuring.
Our net debt of EUR 1.4 billion is around 2.2x EBITDA pro forma for EUSA Pharma, reflecting continued strong cash generation by the business and expected to be around 2.4 post-May dividend payment. Before handing over to Luigi, who will provide more details on the financial performance, I would also like to talk briefly about EUSA Pharma. The acquisition was driven by our desire to enter into this very appealing rare disease segment of oncology. Rare oncology is a beautiful growth opportunity and fits perfectly to our rare disease business, where we see mutual strengthening. The assets that we've acquired are very, very attractive, and we see opportunities to continue the strong growth and performance. Also we get people that are strongly committed, very capable and strongly committed to making an impact on disease and on patients.
That is what ultimately drives us in this business very strongly. 2021 revenues were just over EUR 150 million ahead of plan. As we also closed now a little bit earlier than expected, we can also update our expectations for this part of the business for the three quarters of 2022 that we consolidate quarter two, quarter three and quarter four. We expect for this three quarters contribution of over EUR 120 million in revenues and over EUR 13 million in EBITDA contribution in the last three quarters of this year. With a growing margin which is much in line with the rare disease segment. Non-recurring costs in 2022 and 2023 are confirmed to be around EUR 35 million, EUR 28 million of which will happen in 2022.
They're related largely to the ongoing manufacturing technology transfer for Sylvant and acquisition and integration related expenses. Total consideration of EUR 707 million with an enterprise value of EUR 750 million net of financial debt of the acquired business and of other adjustments. The financing via an existing liquidity and EUR 650 million of new debt facilities. On the right-hand of the slide, give a little bit more color to the integration. We have now integrated the oncology asset into our rare disease unit with three strong business units within rare disease, metabolic endocrinology, and the oncology assets. Like I said before, the integration is progressing really, really well. We expect to completely finish the integration still this year.
There's a lot to do around the new sets of products that we acquired. The performance is really fantastic. What we do with EUSA integration is much more than integrating assets. The key thing here are also really the people that we brought on board with all of their competence and know-how, which is very relevant in this attractive niche oncology market, in the rare disease oncology. With these people and with our own team here, we look at some of the assets where we see additional opportunities that I've indicated in the pipeline part of the slide, where we are currently looking at what are the opportunities and bringing the business cases for that.
Too early to comment on the size of the opportunity and timelines, but we believe there's something there that is really worth spending some time and money on, looking at this. To make all of this happen, people are key. The integration with users happening incredibly fast. We are very compatible in culture and it's very, very good to see how the teams are working together and basically work as one to help them drive our business further and serve even more patients in the time to come. With that, I'll leave the floor to Luigi for detailed financial review.
Thank you, Rob, and good morning and good afternoon, everyone. Likewise, very happy to have this opportunity to provide more detail on what was a strong set of results in Q1. Starting with, as usual, on slide four, our sales for our key corporate products. What you will see, you know, reflect very strong growth of our rare disease franchise and continued recovery of relevant markets in specialty and primary care, particularly cough and cold and OTC. When it comes to the main lines on the sheet, Zanidip and Zanipress, our lercanidipine franchise, you'll see down by 18.7%. With both products are down in the quarter.
As anticipated and flagged, sales in Zanidip were down primarily due to sales to our distributor in China following loss of a tender and due to the fact that in Q1 of 2021, sales benefited from initial sales to that distributor. We don't expect to have further erosion on the franchise in the remainder of the year. Sales of Metoprolol broadly stable. You recall Metoprolol was down over 7% last year. We're seeing a return to growth in Central and Eastern Europe, which was offset by slight erosion in the Netherlands and Germany, predominantly, and also, in this case, don't expect further erosion for the remainder of the year. As Rob highlighted, strong contribution of Eligard in the quarter, with sales of just under EUR 24 million.
Thanks to the promotion behind the product, we have succeeded in stabilizing in-market sales and signs of return to growth in France and more importantly in Spain, which is the key market for Eligard, these being, you know, obviously great signs given the product's previous trajectory, in-market sales overall broadly in line with the last year, and the EUR 70 million increase being mostly driven by the transition to direct distribution. We had set expectations for 2022 that our other franchises, Silodosin and Pitavastatin, which lost exclusivity in 2020, would continue to stabilize and that's very much still the view.
You'll see in fact Pitavastatin returning to a slight growth, thanks to a growth of sales to our international distributors, but also in Switzerland and Russia. Some continued erosion on Silodosin being primarily though driven by effects in Turkey, and some additional erosion in Italy in particular. A key growth driver, several key growth drivers within the other core products. I'll call out some of our main cough and cold franchises, Isofra, Polydexa, the Hexaspray line in France, but also the core OTC portfolio.
Casenlax and some of our probiotics products together with Reagila, all of which contributing to sales of other corporate products, being EUR 72.3 million in the quarter, up close to 14% versus Q1 of last year. Some of these products, as you recall, particularly cough and cold, being impacted by a bit of de-stocking in the first part of the year, predominantly in Russia. Sales of drugs for rare diseases, EUR 106.1 million, growing by close to 35%.
As you can see, with growth really being driven by both our legacy metabolic franchise, but also the Endo portfolio, which has reached EUR 38.2 million in the quarter, EUR 17 million of which being contributed by Isturisa. We've seen in the quarter very little impact from recent generic entry in the U.S. on Carbaglu. We do expect a bit more headwind from that in the second part of the year. We do continue seeing dynamics on generics in the rare disease segment being very different from SPC and therefore with much higher, stronger ability to retain patients on current medications.
Finally, just for reference, obviously not included in these results are the Q1 sales of Isturisa, which in the Q1 were around EUR 38 million, an 8% increase versus previous year. As anticipated and previously communicated, we will be obviously consolidating the EUSA and results starting from Q2. Moving on to slide five. You see drugs for rare diseases account for now over 25% of revenue. OTC overall, which grew strongly at double digits in the quarter, account for 19% of Group sales, with local portfolios accounting for, you know, 14% overall.
On slide six, looking at revenues by key market, you will see in fact how broad-based the growth was. In fact, all of our key geographies are growing. You know, even Turkey, which is obviously showing a minus sign, is growing high double-digit, close to 31% in local currency. Just picking out some of the main themes, it's quite common in terms of our cough and cold, Eligard, OTC driving the growth of Italy and France at respectively 5.2% and 12.1% versus last year. In the case of Italy within OTC, we'll call out Magnesio Supremo, which grew strongly in the quarter.
In the case of France, it was really the Hexaspray and Isofra. In both cases, again, with good contribution from Eligard in the quarter. U.S. is now our second largest market, obviously dedicated to the sales of our rare disease product, with revenue of $52.6 million in the quarter, up 42% or 32.4% constant exchange rate, obviously with a tailwind from the strengthening of the U.S. dollar over these months.
Germany up by 5.3% with revenue of EUR 38.3 million. With the growth of Ortoton and once again strong growth of the rare disease franchise in Germany and a strong contribution from Eligard, which is also driving significant growth in Spain at EUR 33.3 million. Spain continue to see also a strong growth of our GI portfolio, products like Tysabri, Caldix, which have strongly rebounded since the middle of last year following the impacts of the pandemic with very similar trends driving the growth in Portugal as well of 11.1%. Turkey has come in local currency terms growing by over 30%.
This is really volume driven, with strong recovery of the market there. Obviously also, in this case, some contribution from Eligard for which we have now actually completed the marketing authorization transfer also in Turkey and therefore will be able to, you know, fully support the product. We do expect actually growth in Turkey to accelerate over the next months following price increases which were conceded to the industry in March of this year. I'm sure we may have questions on business performance and outlook in Russia, obviously, as in Ukraine. Obviously, as you will have seen, sales in that region are remained very resilient and in fact showing a strong growth in the quarter.
Once again, that is somewhat distorted by the destocking that we are seeing, particularly in Russia in the Q1 of 2021. That aside, obviously as we saw in the early months and early weeks of the year, a strong recovery of those markets, particularly of cough and cold, with and also in the weeks leading up to the escalation of the conflict. Some advanced purchases locally. You see that in local currency terms, Russia sales to Russia are close to 60%. Again, with the Q1 comparable being somewhat distorted by destocking, sales in Ukraine also of equivalent to EUR 4.4 million. We're up by 22% in the Q3 in local currency terms.
Other Central and Eastern Europe sales of EUR 30.3 million, up 9.3%, driven once again by OTC growth of rare disease. As commented, you know, return to growth of Metoprolol in several markets, coupled with obviously the addition of Eligard, which is driving also a significant part of the growth for Western European countries. Again, to call out here, you know, growth of pitavastatin in Switzerland and some of the smaller Western European markets. North Africa sales of EUR 10.1 million are up 3.1%, with sales from our affiliate in Tunisia, Opalia, up 8%, and with that growth partially offset by, you know, continued challenge to exports to Algeria.
Finally, international sales down by 8.5%, really being reflective of the dynamics of shipments to China, which offset the growth of rare disease and contribution of Eligard, you know, international affiliates. On slide seven, you'll see that, you know, Italy has a share of total around 18.4%. Obviously remaining our main markets with the U.S. now representing close to 13% of total. Once again, you know, showing a very diversified footprint for the group. Moving on to the P&L on slide eight. As Robert said, you know, margins remained strong. Very happy obviously with the financial performance in the quarter.
Gross profit margin at 72.5%, slightly below level achieved in the Q1 of 2021. A bit of mix there, but also starting to see a little bit of an increase in raw material cost starting to come through. We do expect a little bit more of that in the remainder of the year. SG&A expenses at 29% of revenue, up 7.3% versus previous year, with selling expenses up by 6%, up to 3.6%. G&A has been staying at around 5.3% of revenue.
The growth here, particularly in selling expenses, clearly being due to the restart of activities in the field, which have returned pretty close to pre-pandemic levels in most of our territories, with the exception of some of the Northern European countries. Obviously reflects also additional investments behind Endo and Eligard, which are offset by some of the efficiency improvement initiatives that we put in place at the end of last year and are continuing to deploy. R&D expenses at 10.4% of sales are up 5.3%.
Clearly, this is driven particularly by some of the measures we took last year to strengthen areas like market access, pharmacovigilance and regulatory as we took on the new franchises, and the progression of ongoing studies, particularly on the endo side, and obviously R&D. As usual, this line of the P&L includes amortization expenses to the tune of EUR 18.7 million in the quarter. Other expenses of EUR 7.2 million reflect, you know, EUR 5 million of non-recurring costs related to the EUSA transaction. I recall we said we expect from the transaction a total of EUR 35 million across 2022 and 2023, of which 28 is here.
Some additional costs to around EUR 2 million due to the ongoing right-sizing exercises. This results in operating income of EUR 131.3 million, a margin of 31.3%, and EBITDA of EUR 163 million, which is very strong, very much in line with last year or close to last year at 38.9%, reflecting the strong revenue, the cost discipline, and as I said, you know, minimal impact so far of inflation in year to date. Moving to the non-operating line of the P&L.
I mean, obviously, we have continued to see some FX volatility in the quarter, which results in some FX losses, but not quite to the same level as same period last year, which is behind the slightly lower financial expenses of EUR 7 million. The tax rate broadly stable around 32.2%, leading to a net income of EUR 96.7 million, and adjusted net income of EUR 116.3 million, which is up 11.4% versus Q1 of 2021.
You'll see on slide nine, both businesses holding strongly in terms of margins with rare disease around 47% and SPC at 36%, with rare disease now accounting for just over 30% of group EBITDA. We're obviously focusing on EBITDA, given the increasing distortive effect that amortization and other non-cash IFRS three adjustments will have on reported operating income, particularly starting from Q2, once we start consolidating EUSA. Slide 10. Cash flow, as Rob mentioned, continues to be very strong. You recall we had a very strong result in 2021. 2022 free cash flow in the Q1 of EUR 110.3 million is in line effectively with the previous year.
So once again on track for a strong delivery in terms of cash generation as well, with the incremental EBITDA being offset by slightly higher take on working capital, really being driven by the growth of the business. Of course, the cash flow reflects the consideration paid for EUSA of EUR 707 million. In the other financing flows obviously is the net debt which we acquired with the entity of around EUR 25 million plus the new financing that we took on to finance the acquisition.
Slide 11, as already commented by Rob, obviously our net balance sheet remains strong, with EUR 1.4 billion of debt, representing around 2.2x leverage, with or in fact, I should say without pro forma EUSA, with excluding completely the EUSA contribution and pro forma EBITDA would be around 2.3 or 2.2, once we include that. To close on my side, you see on Slide 12, we've provided a bit of a latest view in terms of some of the key planning assumptions for this year.
You may sort of recognize the bullet points on the left representing the assumptions we called out when the targets were set at the beginning of the year. Sort of the current view and you know, in summary, we believe we are on track to deliver on the objective that was set. We certainly feel the momentum on the revenue side is strong, robust. Of course, we expect a bit more headwinds, particularly on the SPC side, coming from a combination of effects, which will be most likely higher than the -1% as we forecasted obviously depends a little bit on what happens to the ruble.
Overall, aside from that on track with our growth ambitions and certainly on track when it comes to the key growth drivers being the Endo franchise and Eligard. You know what headwind that we may see on SPC arising from the conflict, we believe is going to be offset by the you know, slightly higher contribution of EUSA, which we will consolidate as of Q2. Obviously, we'll have the benefit for the full quarter, as Rob has said, delivering over EUR 110 million of revenue and over EUR 30 million of EBITDA for the period between Q2 and Q4. We do expect the EBITDA margin to still be around 37% of revenue.
Despite the very strong performance in Q1, we do expect somewhat higher inflation headwinds in the second part of the year. Of course, just the sheer effect of consolidating EUSA, which is currently running at lower EBITDA margin than the rest of the group. Our expectation remains that it will align over time to the average over the segment. Finally, we do expect financing costs to be probably closer to the higher end of the range, because of the increase in interest rates and effects. No change at the current time, another tax rate or non-recurring cost, assumptions. You see on slide 13, effectively, you know, confirmation of the target that we've set at the beginning of the year, which just as a reminder, obviously include the contribution of EUSA.
Clearly the assumption that sort of continued operations in Russia in line with the current. With that, I'll hand over to Rob to talk about our priorities.
Thank you, Luigi. Clearly, our priority remains on delivering the targets for 2022. We're on track and confident that we can deliver. I also wanted to share with you some of the overall broader priorities that we see in our business. First, we will continue to drive organic growth for both our business units. We have our growth drivers in place in the SPC part of the business with Eligard, with OTC. In general, increase in demands. Our growth is volume-driven, on the back of a growing market demand, aging population, specifically for the area, having solutions for patients in this area in SPC.
We continue to see very good growth for our rare disease part, specifically on the Endo and on the oncology franchises with strong double-digit growth in this. We really want to continue to also explore what I would like to stress as affordable internal pipeline opportunities, aiming to reinforce our internal pipeline and also our capabilities in this field. For us, affordable innovation means that it's not only financially affordable in terms of cost, but also in terms of risk. Within our portfolio, we see good opportunities that we want to further explore to enhance our growth in a very nice and in terms of affordable and low risk opportunity there.
We keep also enhancing our growth through value accretive M&A activities, both in SPC, and that is focused on Europe and in rare disease, which is global. There will be a focus also on the U.S., because that's where the biggest earning and profit opportunities are in this business. We are committed to reinvest cash flow in the company to fuel future growth. We want to stay and our ambition is very clearly to sustain our position as a sector-leading business in terms of operating margins on EBITDA and adjusted net income. We will continue to drive for further efficiency on the commercial side, but also in our operations where we have programs in place to address the impact of inflation and also to leverage our vertically integrated supply chain.
Absolutely to maintain a solid balance sheet and a very clear capital allocation policy, as done in the past with very strong discipline. We do expect to continue to deliver strong cash flow generation to fuel our growth and also our dividend policy with 60% of cash flow. By the end of 2022, we aim for a leverage ratio around 2.2 x EBITDA, excluding any further BD or M&A. However, our cash generation profile, we feel, could allow us to go to close to 3 x if a high-quality opportunity of scale came along. Clearly, we would do so with a plan to come back to the levels of leverage that we feel are more sustainable and appropriate for our business. With that, I would like to thank you for your interest so far. End the presentation and open the floor to questions.
This is the Chorus Call Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Martino De Ambroggi on Equita SIM. Please go ahead.
Thank you. Good morning. Good afternoon, everybody. The first question is on the consolidation of EUSA, because you are revising upwards the contribution, but because of, let's say, one month in excess of what you expected. I noticed the EBITDA margin is a couple of percentage point higher. I don't know if it's just a matter of rounded figures or you discovered something more exciting than you thought. You didn't talk about 2023 guidance for EUSA. I just ask you if it confirm at EUR 150 million for sales and EUR 50 million of EBITDA.
A general question on the guidance, because if we remove EUSA from the consolidation, you have growth in terms of sales and EBITDA between 0%-5%. If we remove also the contribution of the Endo franchise, it's even lower. I could understand there is the Russia impact. I don't know if you can share with us what is your best estimate for the current year sales, Russia and Ukraine, together. I understand the forex is a bit worse than expected. Lercanidip and Zanidip, I understand, it's just an issue for the Q1 . Could you summarize what are the negative effects on a like-for-like basis that are impacting your guidance?
Sure, Martino. I'll try on the last one, though. There's a number of moving parts there, obviously, and also not clear if the sort of reference is the guidance or Q1. I think, in terms of your question, I think we said that we already at the start of the year that EUSA is performing better than, if you like, our sort of business case assumption. That's reflected both in, if you like, a stronger sales momentum, and also in a sort of, you know, marginal improvement in the sort of expected EBITDA contribution. Bear in mind also there is a little bit of.
I mean, when looking at the contribution for this year, we also had to make a call without having full visibility on the monthly phasing as to what exactly would be the portion that we would be consolidating this year. There's a little bit of that. To answer sort of maybe sort of more relevant question around 2023 expectation for EUSA, I mean, we're not giving today, right, sort of revised 2023 guidance. However, I mean, we have indicated that EUSA is running ahead of plan. I mean, it delivered just over EUR 150 million of sales in 2021.
It's currently running, I mean, if you do the math, with around a sort of 25% EBITDA margin in the second part of this year, we think it can achieve in excess of 30% for next year. Again, we're not gonna give a sort of specific, but it's certainly gonna be giving more than EUR 150 million of sales. I think you should expect an EBITDA margin contribution of that, you know, north of 30. Now, I think when you then start on taking things like Endo, you need to be a little bit careful, right? Because, I mean, Endo is an integral part of our business.
You know, to look at first of all Q1 results, obviously don't have any contribution from EUSA. In fact, they have a EUR 5 million charge, as I read. If you like, the growth that you see in EBITDA for this quarter, you know, from our perspective is fully organic and for EUSA. Of course, if you start, you know, taking out from that all of the parts of the business which are growing, then of course, the balance will be declining. Perhaps I didn't fully understand the third question, but I think, you know, from our perspective, the. Actually EUSA so far we're growing and we expect that to continue.
Could you share your best estimates for Russia, Ukraine this year?
Yeah, I mean, Ukraine, obviously, you know, we had EUR 4.4 million of revenue in the Q1 . I think you know, what is remarkable and a testament really to the resilience of people in that country. I mean, we are continuing to be able to get sales across, and I think you know, people in Ukraine are trying to operate as close to normal as they can. We're still seeing wholesalers putting through orders, and even you know, paying invoices. Now, of course, we don't expect a significant contribution from Ukraine over the remainder of the year. Russia is different. I mean, Russia, we see the business continuing to perform.
Of course, we've said multiple times we're committed to continuing to supply patients wherever they are. I think it's more a judgment call as to where you think the ruble will be, which is a little bit difficult to call right now. We're not providing you know a specific full year estimate for Russia. You know, so far we see you know business there continuing. We may expect a little bit of demand softening later in the year if economic sanctions start to bite into spending power. You know, if you assume 73 on the ruble, which is where it is now, or 100, which is consensus, clearly makes a difference.
Yeah. Maybe also worth to stress, Martino. Of course, we continue to serve patients wherever they are to the best of our ability and do so within all the legal frameworks and the requirements coming from sanctions. We always said also the priority is safety of our people, both in Ukraine and Russia. This is an incredibly volatile environment where we really are very much on top of it. I'm glad to say everyone's safe so far, but we need to really make sure that this continues to be the case also in Russia. You cannot just pull out without at least also considering the potential implications for our people in Russia.
We continue to do business, and we work with the consensus ruble rate at the moment, but no one really knows where this will end. So far we really are very close on top. So far we've not seen any significant interruption of our business there or in Ukraine for that matter.
Okay. Thank you. Just the very last question on the M&A. I don't know if we can state it temporarily on hold because you need to digest the EUSA or because the debt to EBITDA is already higher than usual. Or back to what Andrea used to state in the previous calls, there are a lot of opportunities around and this will not prevent any announcement.
Yeah, I think I would go with Andrea's words. There are really some good opportunities around, and of course, we will maintain our discipline. I think that's been one of the key success drivers of Recordati, is being able to generate really good cash out of the acquisitions we do and have a good return on capital. So that is something we really look at very carefully. There will be opportunities going forward. EUSA integration is progressing really well, and the people are really very much part of Recordati at the moment. Any new deal, of course, we have to put in the light of the opportunity and we are very much aware of the fact that we need to finance it. We'll take all of that into considerations and keep the discipline there. If the right opportunity is there, we will not hesitate and go for it.
Thank you.
Welcome.
The next question is from Jo Walton of Credit Suisse. Please go ahead.
Thank you. I've got three real questions and just one modeling question. My first question is your ability to pass on prices ex-U.S. You've mentioned that you're expecting to see higher inflation in the H2 . Is that something that you'll be able to offset? I guess in OTC that's relatively easy. You have been given some price leeway. Perhaps you could give us the magnitude of that in Turkey and whether it actually manages to catch up with the devaluation. My second question would be whether you've seen the current very poor environment for biotech funding increase the number of deals that you are being you know offered.
I could imagine that there would be lots of biotech companies who are now no longer looking to try and commercialize things themselves because they may not be able to get that funding to do it. Is there a material uptick in what you're able to do? Perhaps allied to that, I was really intrigued by your slide where you talked about the integration of EUSA in your Orphan Europe business. That, you know, the two together is, you know, two and two may equal five, not four. Can you give us some idea of maybe the number of marketing people that you had in your rare disease unit? You know, what quantum that has gone up. Is there some sort of critical mass that you have now reached adding that business?
My final just modeling question is, I know you haven't decided exactly what the amortization charge will be for EUSA, but could you give us a number that we should use for the next three quarters? Presumably it's higher than the EUR 18.6 that we had in the Q1 . Thank you.
Thanks, Jo. Quite a couple of good questions there. Interesting questions. On prices, I think you're right. What we've done, yes, in the U.S., even if there's an opportunity and ability to increase prices a bit, although these things are also, I mean, you have to be careful on how to do that and where to do. OTC, yes, the same if the competitive environment allows for it. In Turkey, we've had the opportunity to really increase selectively some of our products because we could demonstrate to the Ministry of Health that the price increase really would really be justified, and they've approved that on top of a already over 30% price increase in general that became effective in March.
We've seen the ability for us to pass on some of the cost pressure to also increase our prices. Not everywhere and everything, but where it's possible and reasonable, and we believe it's the right thing to do, we obviously do that. On biotech, yes, I think where two, three years ago some money was swimming around the biotech, this is less the case. Yes, there will be good opportunities for companies like Recordati with a very good commercial footprint in rare disease globally, and a very strong footprint also in Europe, where some of these opportunities can actually also fit to SPC. This really helps us in future M&A. A bit to the point I was making before, we will maintain our discipline, right?
It's really important that we do the right deal with the right potential return and using our capital in a disciplined manner also for us is absolutely something that is needed, and we'll continue to do that. I'm optimistic about the possibility to do the right sort of deals. EUSA has absolutely strengthened our footprint in rare disease. I'm not gonna share the exact commercial footprint for competitive reasons. It's too sensitive. Before that, we really didn't have much of a presence in the rare oncology, and now with the EUSA people, and they're now Recordati people on board, we have a very good medical, commercial, and general ability to interact in this niche oncology rare disease oncology market, where there are a couple of good opportunities.
I think with this footprint, there hasn't been much of a commercial overlap, if you like, because the Endo, the metabolic, and the onco commercial medical teams are very different. But definitely these people can learn from each other, and the back office support functions is where we see a little bit more of a potential opportunity in synergies. But our footprint is now global, and I think a company like Recordati, for partners, is a fantastic partner where they don't completely lose their asset and lose themselves, can still feel what they do and the assets that they brought and then put forward with a lot of tender care. We really are a good home for the right ones. That I think is an advantage that we have. For your last question, I'll ask Luigi to comment on that.
Yeah. For modeling purposes, for those maybe Evan and also for others on the call, I mean, obviously, we're now going through the sort of purchase price allocation exercise. You know, if you start from the premise that we assign an enterprise value to EUSA of EUR 750 million, and assume that a large chunk of that would be assigned to intangibles, you know, you could expect a sort of yearly amortization charge of probably somewhere between, I'd say, ballpark EUR 25-EUR 30 million a year. Now, we need to be careful with that.
The reason why we haven't sort of yet sort of finalized that is because we're looking, we're making sure that we've also looked carefully at the fair value uplift on inventory as customary and as perceived by the standards. That work is ongoing. We will sort of obviously communicate the exact figures as soon as we've done that exercise. Sorry I can't be more precise than that at this stage, but the work isn't done yet. You know, obviously we closed the acquisition a few weeks ago. Inventory by nature is a bit of a moving sort of target beast.
Thank you very much.
The next question is from Harry Sefton of Credit Suisse. Please go ahead.
Brilliant. Thank you for taking my question. My first question is on the new Eligard device. Ahead of its launch, can you maybe give us an update on your expectations of approximately what proportion of the current Eligard market you would expect to switch with that new device? And then also, could you give us an update on the competitive advantage you expect for that new device, especially in light of some recent launches of other pre-filled LHRH agonists in that space? My second question is on Russia. You mentioned that you are still supplying in Russia, but are you still currently carrying out promotional activities in Russia, and would you say that supply is broadly normal? And then related to that as well, on Russian receivables.
While Russia may only account for a small portion of your sales, we usually hear that it takes longer to get paid from Russia, hence we see a higher proportion of receivables. Can you disclose your receivables in Russia and maybe comment on the current ability to get paid and take cash out of the country at the moment?
Maybe, Luigi, if you start with Russia, take that question first.
Yeah. Sure, Harry. I mean, we're currently seeing no issue at all collecting and remitting funds out of Russia and converting the rubles into euro. That's the sort of short answer to that. I mean, we usually our distributors in Russia work anywhere between 75 to just over 100 days.
Well, we don't sort of give a sort of a specific number, though. I think if you're looking at annual report, I think we do publish slides sort of total net assets, which are denominated in rubles at the year end, I think RUB 6 billion sort of rubles, with the year end being a particular sort of high moment because of the sort of fading of cough and cold. It's usually, again, anyway, between 75 to just over 100 days. We're seeing no problem at the moment collecting. By the way, we do also have insurance and guarantees, which we've always had actually. That's not something new on receivables in that country because of their long-dated nature.
Also in terms of shipments stock, nothing unusual at the moment in Russia. It's a bit more cumbersome to do some of the business there, checking all the parties involved and in terms of making sure that we really stick to all the required legal actions there and clearances. No particular changes in stock levels or anything in Russia.
We have maybe just to round off. I mean, you know, as you expect, we have sort of been operating, sort of trying to make sure that invoices out of Russia are paid on time and where possible in fact, sometimes a bit ahead of time. The business, our local affiliate in Russia has reduced, as others have done, some of the level of, if you like, promotion and advertising to some extent.
On Eligard, on the question, what we expect of this new device is that it's actually it will help to improve the handling for patients. It still is a device that you really need to explain to the patients and nurses and caregivers in general, medical professionals. What we've seen coming up from some of the tests we've had, this is really appreciated. We believe it will help to give a positive impact on it.
I don't expect that the huge percentage of patients all of a sudden is banging on our doors to shift, but we will start to shift almost all of the patients to this new device country by country, as the authorities will most likely request us to take back the old device the moment you have an improved version on the market. I do expect that this device will over time substitute for all of the not only new patients, but also existing patients on Eligard.
Brilliant. Just did you have any comments on the recent launch of a pre-fill syringe in the LHRH space, or would you say that that's just typical of the markets that you operate in?
Yeah, it is. I think if you've seen this market there's all sorts of alternatives in the market. We have factored them all into our plans. We do not see that this is gonna seriously impact our plans going forward. This was all factored in.
Brilliant. Thanks very much.
The next question is from Rajan Sharma of Deutsche Bank. Please go ahead.
Hi. Thanks for the questions. Just a couple of updates, actually. The first on the Cushing's syndrome regulatory path for Isturisa in the U.S. I think previously you commented that FDA discussions were expected in early 2022, and now that we're kind of into the Q2 of the year, could you provide an update on that and whether any discussions have been held? And then just secondly, an update on Sylvant, which is one of the newer products. Again, at full year results, you commented the performance of that product in particular had been particularly strong given the IL-6 market dynamics. I was just wondering if that's normalized now or does that demand remain elevated? Thank you.
The FDA discussions will happen in the next weeks. Actually, they're imminent. I don't think I should comment on the potential outcome there, but we expect to have that anytime soon now. On Sylvant, no, it's sort of normalized. There was a bit of an uptake at the end of last year because some of the potential sort of competitive products couldn't always deliver, and we took up some of that. It's really normalized now.
Okay, thank you. Just if I could follow up actually on one of the questions on the business development or on M&A outlook, given the market weakness. Obviously you talked about there being opportunity now. Does that potentially provide you with kind of the rationale to perhaps go to the higher levels of leverage that you've discussed, potentially kind of 3x or above, given that we are potentially in kind of a unique opportunity for yourselves?
Well, the 3 x for us is sort of hard. Like I said before, if there is a fantastic opportunity, and we see it all depends really on what the deal would be. If this is the once in a lifetime opportunity, we would try and make it happen. Because we do have this governance around the leverage, and we really take that serious.
I think I would just like on that, I think we'll continue to be as disciplined as we've always been. I think yes, there are opportunities being thrown up by the scientists and biotechs are finding it harder to potentially access funding. We're not gonna go on a wild spree simply because that's the case. We'll continue to apply the same sort of rigor to the approach that we've always applied, Rajan.
All right. Thank you very much.
The next question is from Giorgio Tavolini of Intermonte. Please go ahead.
Hi. Good evening or good morning, everyone. I had three questions from my side. For modeling purposes, in the past you used to provide the operating income breakdown between rare diseases and specialty and primary care business. I was wondering if you could share with us a similar breakdown also for this quarter. Secondly, I noticed that in slide three, you are mentioning two new pipeline indications for Sylvant within the EUSA Pharma portfolio and also for Signifor LAR. What benefits, opportunities do you expect from these new indications and which timing? The very third one is on the top-line trend.
I mean, you had an easy comp in the Q1 due to the stocking in Russia last year and the accelerated purchases this year. I was wondering if you could quantify this effect to extrapolate a like for like trend, and if we should expect in the Q2 a weaker top line momentum due to the normalization of this organic trend. Thank you.
Yeah. Thank you, Giorgio. Maybe I'll start with the two opportunities you relate to, and I'll pass on to Luigi to address the other one. The opportunity on Signifor LAR. PBH stands actually for post bariatric hypoglycemia, which is a fairly serious problem with a big unmet medical need that highly obese people undergoing surgery oftentimes face and can really have very serious medical consequences. What we have seen in some subsegments of patients doing trials with Signifor is that there could be a potential benefit there. What we're doing at the moment is trying to understand what it would take to get that indication approved and what it would bring in terms of a business case.
I think we will need a bit of time to really completely sort that out. I can't comment on what time we would need to really get it to market, because it depends really on the clinical program that we would need to agree with the authorities. We do have, and you might have picked it up, the European authorities do believe that this is really interesting and relevant, and we got an orphan drug designation for this indication in Europe. It's something we're really seriously looking at, and we would consider to do if commercially it makes sense to do this as an opportunity. Sylvant's new indications are really very much cytokine response indications that we look at broader.
We need to really sit, and we're sitting down with our new colleagues from the oncology franchise in the rare disease to go through all the opportunities, prioritize them and look at what are the ones we really wanna pursue. I'm optimistic that there's something really interesting and actually also quite significant in that respect. But I would rather really wait with a concrete plan with timing and peak sales expectations before I share anything with you on that. Giorgio, I'll pass to Luigi for the other questions.
Yeah. That's it. Yeah.
Yeah. Sorry. Giorgio, in terms of comparison to last year, I think last year we quoted somewhere between EUR 8 million and EUR 10 million, sort of being the stocking effect that we've seen on cough and cold, and particularly in Russia in the first part of the year. I mean, in terms of expectation going forward, I'm not gonna sort of give more precise guidance than the one that we've given, that being that you know, we expect to be within the range that we set. We've given the indication of where we think EUSA will contribute, and I think with that we can work out what kind of growth rate we can expect. I think in terms of operating income of the business unit, and just to make sure that there's no suspicion I'm wanting to hide anything. It was close to around 39%.
Adjusting for the EUR 5 million non-recurring item on EUSA. To exclude that, it was around 39% for rare disease and 31% for SPC. Again, the only reason why we think it makes more sense to focus on EBITDA going forward, as we started to do, if you recall, since some time as a global group, is that unless we decide to do a massive sort of bridge between reporting and core as other companies do, you know, operating income will start being a bit more distorted by the accounting of the non-cash IFRS adjustments which arise from the acquisition. So that's the only reason really why we're focusing on EBITDA. Again, it's around 39% on rare disease and 31% on SPC for the quarter.
Very appreciated. Thank you, Luigi. Thank you.
The next question is from James Vane-Tempest of Jefferies. Please go ahead.
Hi. Thanks for taking my questions. Just firstly on Turkey, I think you said you expect an uptick in Turkey with higher prices, but just wondering if you can give us a sense of what the channel's like, and have you seen stocking in Turkey ahead of price increases by households or distributors? And the second kind of related question, and just following up on an earlier question, it's interesting you're not seeing stock levels change in Russia that much. Some other mid-sized companies have talked about households stocking up massively in March. So I'm just kind of curious, why do you think that is, and how many months of inventories do you also have in Russia? Then my last question is typically we've seen, over the years you've updated a strategic plan at Q1.
I recognize this is unprecedented times, but just wondering what your latest thoughts are around that, when we might get a glimpse of what you expect for 2024. Thank you.
Yeah. James, I'll start with Turkey and Russia. I think Turkey, the price increases recur pretty much every year at the same time. Would sort of distributors try and advance some purchases just to have that edge, but it's a trend that we know when to expect and to manage. There was hyperinflation.
I don't think there's any sort of distorting effect of that, 'cause again, we had sort of even though it was a slightly sort of lower level, but still high double-digit price increases in 2021 as well. I mean, they do tend to trail a little bit. There's gonna be a question, do you trail a little bit the rate of devaluation, but you know, hopefully you catch up over some years. In terms of Russia, it's very, very difficult for us to gauge you know, stock levels at patient level. I think you know, we saw last year a pretty drastic destocking from what used to be around 13.
We estimated, and I'm talking here stocks at wholesalers level, around 13 weeks, down to eight, and then sort of it did get sort of maybe even, you know, slightly further, in Q2. Information we have suggests that we're staying at those kind of levels and that actually the distortion is from last year's destocking and the recovery of cough and cold, which across the region and however, particularly in some of the Central Eastern European markets, including Russia, was back very close to pre-pandemic levels. Based on the information we have, which is limited, and we're not going to be able to assess, you know, how much it is exactly in people's homes. We're not seeing a huge increase in stock levels.
No unusual patterns. If you look at the patterns, I would be surprised if there would be massive stocking at the household level.
There may have been some in the early weeks, but now that you know we're two months on from the outbreak of the conflict, I would assume most of that, if you like, panic buying to have been absorbed. Does that answer your question, James?
Yeah, thank you. Just the last one on your strategic plan. Thanks.
Well, I mean, the strategic plan that we would usually update it every other year. I don't think there's any sort of change to that intent. We'll see. I mean, hopefully by this time next year, the world will have sort of normalized a bit. You know, to do one now with so many moving parts, I don't think would be particularly helpful, James. I don't know what else to that.
No. We of course stay on top of the business. We look at opportunities and for any potential deals, we make a longer term view as good as possible. Every other year we'll do this strategic plan and you can expect one next year again.
Great. Thank you.
The next question is from Anna Murray of ICG. Please go ahead.
Hi, it's just a very straightforward one. I wondered if you'd give an update on the funding for the EUSA transaction. EUR 650 million, I think that's currently on a bridge, is that right? Can you tell us what the current cost of debt is, if there are step-ups attached to that, and if you have or if you intend to refinance that bridge in the near term?
Yeah. I mean, we took out a bridge for when we did the deal. It's quite a long dated one. You'll see, I think we mentioned already are the details for the report for Q1, where you'll see in the notes it's sort of 12 months plus six. We have a lot of time to decide the optimal way to sort of take that out. Of the original EUR 650 million, we already took out EUR 200 million with the current loan at the beginning of the year. You know, we'll sort of continue to evaluate options. We have multiple ones available for the remainder. Don't know there's much more to say on that.
No, I.
The line is quite bad. I hope I understood your question and responded.
Yes, you did. As a follow-up, I think you mentioned you think the financing cost will be to the wider end of your initial expectations. Can you give any guidance what that expectation now is?
Yeah. I mean, the range that we've given was EUR 31 million-EUR 33 million for the year. I said it would be at the higher end of that range.
Okay. Thank you.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Isacco Brambilla of Mediobanca. Please go ahead.
Hi. Good afternoon, everybody. I have a couple of quick questions. The first one is on raw materials inflation pass-through. If I recall correctly, during the previous calls, we were discussing about the potential headwind to the tune of 50 basis point in full year 2022 from raw material inflation. Is this still a sort of reliable expectation for this year? Second question is on Eligard. If I look at the slide four of your presentation, I see a 40% year-over-year growth, which I guess is a bit inflated from the fact that in Q1 2021, you were booking just net revenues for the product. If this is the case, can you disclose the sort of underlying growth trend of Eligard, say, net of this distortion?
Hi, Isacco. Yes, of course. This sort of raw materials impact, you recall correctly, the 0.5% sort of impact on gross margin. Now obviously that was sort of set before the you know events in Eastern Europe and the further spike in inflation and prices that came with that. I think right now, I'd say probably we'd expect an additional 0.5% on gross margin and so an additional 50 basis points. You've seen, I think that Q1 is 50 points gross profit with 50 basis points below last year.
I'd expect for the full year, another 50 basis points decline, but we'll continue to sort of work at, you know, efficiency measures obviously, to address that. As we've said repeatedly, in some parts of the portfolio we do have pricing leverage that we can use. With regards to Eligard, hopefully I said it, I think I said it, when I went through the product sales, but I'll reiterate it. You know, the EUR 7 million increase versus last year is predominantly an effect of the transition to direct sales across all geographies, which wasn't the case in the Q1 of last year, of course.
You know, from our perspective, at this stage of the process, stabilizing the sales in market where like-for-like growth is pretty much on par with last year was the objective. In fact, we're happy that we're starting to see you know, signals of growth in Spain and in France. Like-for-like, for now it's pretty much in line with previous year.
Okay. Great. That's it for me. Thanks.
I think, operator, we have time probably for one last sort of set of questions, if there are any.
Mr. Medici, gentlemen, there are no more questions registered at this time.
I'd like to thank you all for joining us today. Happy to share and proud to share the Q1 results and confirm our outlook for the year and have this discussion with you. Looking forward to meeting you on the next occasion. I wish you a wonderful remainder of the day. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.