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 Ms. Federica De Medici, investor relations and corporate communications. Please go ahead.
Thank you, Sherry. 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, who will be presenting the 2022 first and nine months 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 a Q&A. I will now leave the floor to Rob. Please go ahead.
Thank you, Federica. I'm happy to say that quarter three results were extremely strong, confirming the strong momentum across both our businesses. This, on the back of continued recovery of our markets and also outperforming basically the relevant markets where our portfolio competes, resulting in year-to-date revenue and EBITDA ahead of expectations. Net revenues for the first nine months of 2022 were +19% versus prior year or on a like-for-like basis, +10.4%, where we have adjusted for the newly acquired EUSA Pharma and for the ELIGARD 2021 accounting. Our SPC business continues to grow at a high single digit ahead of relevant markets, driven by continued strong sales of flu products, our cough and cold range, GI, the OTC, and strong performance of ELIGARD.
Our legacy rare disease portfolio showed double-digit growth, with strong growth of both endo and also particularly strong performance of the metabolic franchise in Q3, led by PANHEMATIN and CYSTADROPS. Also very resilient sales of CARBAGLU with almost minimal impact of the generics in the US. Our new rare oncology franchise contributed in Q2 to Q3 with EUR 91.1 million revenue, and this is nicely ahead of our expectations. EBITDA of EUR 560 million is up 15.2% versus prior year, with a margin at 37.5%, which remains strong thanks to multiple proactive actions taken to mitigate impact of inflation and despite dilutive effects of the hyperinflation accounting in Turkey.
The strong free cash flow generation of EUR 346.3 million is in line with last year, despite high non-recurring expenses with net debt just below 2x EBITDA, confirming the ability of the group to integrate acquisitions quickly and deleverage. As you already know, I will let Luigi spend a bit more time on it and give more details. Starting from first half of 2022, our reported results are impacted by fair value IFRS 3 adjustments related to EUSA Pharma acquisition by non-recurring expenses and some FX volatility, which impacts the reported operating profits and the reported net income. Adjusting for the non-recurring costs and purchase price allocations, adjusted net income is plus 13.5%, absorbing higher financing expenses and FX losses recorded in the first half of the year.
We've also achieved two important milestones that are going to help with our growth platforms. One is the new ELIGARD device approved by the reference member state, Germany, with national registrations and transition planning ongoing. The device will definitely create positive momentum around ELIGARD. Second, the transfer from Novartis of our production steps, key for us, SIGNIFOR LAR. We've successfully completed the production transition into our hands. There's also good news from the ESG side. Our effort to continue to be recognized by MSCI rating, A confirmation, and an upgrade to robust level in rating provided by Moody's ESG Solutions in September. Before I hand over to Luigi, I would like to also give a little bit more detail on two of the key rare disease franchise performances.
On the next slide, you will see both franchises, endo and oncology, are growing very, very nicely. You can see the strong growth for both endo and onco franchises, fully in line with plan and on track to deliver for the full year of 2022, with respectively EUR 160 million-EUR 180 million for the endo and around EUR 130 million for the onco franchise. For endo, the growth is 40% in the first nine months of 2022. At a constant exchange rate, this would be 30%. We see continuous double-digit growth for SIGNIFOR and also almost a revenue doubling for ISTURISA. We're really on track to deliver for both products.
Also oncology, I'm happy to report, continues to grow nicely at 13% year-on-year, ahead of our expectations, with particularly strong performance in LAC and EMEA. The full revenue for this year, and I remind you that's only nine months or three quarters, is gonna be close to EUR 113 million. The interaction with the FDA on QARZIBA U.S. clinical development and the regulatory pathway ongoing, with a target signing in 2024, as previously communicated.
Both franchises are on track to deliver our long-term ambitions, with the endo franchise in combined EUR 400 million-EUR 414 million for SIGNIFOR and ISTURISA, over EUR 100 million for SIGNIFOR and EUR 300 million-EUR 350 million for ISTURISA, and EUR 250 million for the oncology portfolio as a long-term peak. There's additional potential upside from additional indications under evaluation, particularly one for the potential post-bariatric hypoglycemia, the indication that we're exploring for SIGNIFOR. With this, I'd like to hand over to Luigi to take us through the financial figures.
Thank you, Rob, and good morning, good afternoon, everyone. I am guessing most of the interest will be on discussing our full year outlook, so I'll try and go quickly through our usual slide deck, providing a bit more color on what I hope everyone will recognize as being a very strong set of results for the quarter and the first nine months of the year. Picking up on slide four with the sales of our main products and franchises. Hopefully the slide will really sort of show three things. Number one, once again, the group confirming its ability to sustain and even grow the revenue of mature products post loss of exclusivity.
I think we're particularly proud of this achievement this year, done whilst at the same time refining our go-to-market model for the specialty and primary care organization. It highlights obviously, as in part already mentioned by Rob, the strong growth of our new franchises and also the continued rebound and growth ahead of relevant markets of our other corporate products, particularly cough and cold, gastrointestinal and OTC portfolio. Just very quickly touching on the highlights.
You see the stability on the mature portfolio, ZANIDIP, ZANIPRESS franchise down by 4.7% but as you can see recovering some of the decline in the first part of the year due to the loss of tenders in China which is in part offset by growth in many of our direct markets. Revenue of the Metoprolol franchise essentially flat with growth across many of the Central and Eastern European markets, offsetting single-digit decline in some of the Western Europe markets. Both silodosin and pitavastatin returning to growth following a loss of exclusivity in 2020 with actually pitavastatin growing double digits. Both of those driven by you know growth in Russia, Turkey, Switzerland, Portugal and other markets.
Once again, I think a key strength of the group in sustaining these products. Obviously, ELIGARD adding over EUR 18 million of revenue in the first nine months of the year. On a like-for-like basis, growth is around 12% or EUR 8.4 million with the products having not just stabilized, but starting to grow in a number of our markets on the back of our promotion, notably in Spain, France, Italy, Turkey. We hope to see other markets now following the trend in the next months.
We're also very happy, as Rob had mentioned, that we hopefully will see new momentum and further momentum on ELIGARD next year, with the introduction of the new device. Other corporate products growing by 16.5%, as I mentioned, driven by first and foremost the growth of our cough and cold portfolio, products like ISOFRA, POLYDEXA, the HEXASPRAY spray franchise. These products have now pretty much gone back to pre-pandemic levels. In fact, in some markets are ahead. We also saw very strong growth of our gastrointestinal franchise, CITRAFLEET, CASENLAX, ENEMA CASEN, probiotics, REAGILA, and a lot of OTC portfolio, including local OTC products.
With regards to our rare disease, obviously Rob already talked about the endo and the oncology franchise, their growth in the period, which remains strong. Pleased to say that also our metabolic franchise is showing growth north of 10%, with strong growth, particularly in the U.S., behind PANHEMATIN and CYSTADROPS. And the CARBAGLU revenues remaining resilient despite first generic entry beginning of this year. Nice to also see the growth, continued growth of our broad rare disease portfolio in some of our international markets, Mexico, Brazil and Japan, to name a few.
Very broad-based strong momentum in the business, which as you will see on slide five is now over 30% represented by drugs for rare diseases. OTC overall is 16.4% of the business, growing double digits, and local product portfolios is now below 13%. Moving on to slide number six and looking at revenue by geography. Really all markets are benefiting from those same drivers that we touched. Obviously also the addition of the EUSA portfolio. Nice to see and potentially an historic moment.
The U.S. is starting to be neck and neck with Italy for becoming the number one geography for the company, with, as already commented, obviously U.S., which is focused on rare disease growth of close to 50%, part benefiting from the strength of the U.S. dollar. Really driven by broad growth of all of our franchises in U.S. Italy at EUR 206.8 million, growing by 5.6% with strong performance and growth again here of our seasonal flu products, AIRCORT, REUFLOR, some of our OTC portfolio, particularly Magnesio Supremo, plus probiotics, and obviously growth of rare disease, that's partially offset by slight decline in some of our cardiovascular drugs.
I won't go through all markets. Dynamics are pretty much the same. I will call out Turkey, where you'll see, you know, revenue growth of 12% in euros at just under EUR 60 million. Growth really driven by volumes both on SPC and the rare disease business with a very sharp devaluation of the Turkish lira essentially offset by equally significant level of price increases, which were awarded by the authorities over the course of the year. Russia, CIS and Ukraine, revenue up close to 40% at close to EUR 89 million.
Of that, revenue in Russia was around EUR 70 million, growing also on the back of obviously the strength of the ruble, which contributing year-on-year a tailwind of EUR 9 million. Revenue in Ukraine down close to 12% versus last year, just below EUR 9 million. Other ones I'll comment on, North Africa revenue growth of roughly 5%, with high single-digit growth of our subsidiary in Tunisia, Italia, partially offset by a decline in Algeria. Finally, our international sales in other geographies up 15% to close to EUR 177 million, with the contribution of our growing rare disease portfolio.
In addition, EUSA more than offsetting the decline of sales of lercanidipine in China. Again, also on a geographical basis, a strong performance across all of our markets. You'll see on slide seven that, you know, obviously our legacy market of Italy now represents just over 15% of revenue, not so long ago it was close to 20%, and U.S. now at 14%. Moving to the P&L on slide eight. As we said, overall revenue of EUR 1,277.5 million, up 19.1% or 10.4% on a like-for-like organic basis, adjusting for exchange rates.
Adjusted gross profit, which adjusts for the unwind of the uplift to the acquired inventory of EUSA of EUR 35.6 million is EUR 990.4 million, growing by 17.5%, and margin of 71.9%. With the decline versus last year being fully explained by the dilutive effect of both the transition over the course of 2021 on ELIGARD to direct selling and the effects of hyperinflation accounting in Turkey, which have added EUR 5.6 million to the revenue line and detracts some gross profit because of the revaluation of inventory and cost of goods by EUR 6.8 million.
SG&A expenses, and obviously other lines of the P&L, you know, obviously all growing, in part also due to the integration of EUSA. You'll see SG&A expenses remain, you know, pretty much in line with last year in terms of percent of revenue, just under 30%. With selling at 24% of revenue and G&A at 5.8% of revenue. With obviously, the benefits of the rightsizing actions that we took over the course at the end of 2021, and over the first part of this year. Offsetting, you know, the return to pretty much full-fledged activities in the field following the end of lockdowns and obviously the disruption during the pandemic.
R&D expenses of EUR 155.7 million, 11.3% of revenue. The growth includes EUR 19 million of incremental amortization, mainly coming from EUSA, but also from our other acquired assets. The expectation is of slightly higher R&D expense rate as a percent of revenue in Q4 as we continue to progress some of our R&D programs, in particular, real-world evidence study and non-interventional studies to support ISTURISA. The progression of MT8, an additional effort on the MT8 program to accelerate the recruitment and the initial preliminary activities on the potential new indication in post-bariatric hypoglycemia on SIGNIFOR.
Other expenses of EUR 31.4 million are, as you know, to reflect the non-recurring costs that we signaled at the beginning of the year, both related to the EUSA acquisition, to the tune of EUR 19.2 million, and relating to the continued rightsizing and improvements of the effectiveness of the commercial organization in SPC to the tune of EUR 11.1 million, with an additional close to 90 FTEs impacted this year. You know, mainly in Italy. We do expect these actions to deliver on a full year basis roughly EUR 19 million of savings.
These results in adjusted operating income and EBITDA of EUR 423.7 million, EBITDA of EUR 516.2 million, EBITDA margin of 37.5%, remaining very strong in current environment. Financial expenses obviously a significant increase versus last year. As we commented at the Q2, these reflect roughly EUR 18.2 million of FX losses, you know, incurred in the first half of the year, and compared to EUR 6.8 million of losses in 2021. These are all mostly unrealized and arising from the strength of the ruble and in part of the U.S. dollar.
Also included in financial expenses, a EUR 5.6 million net monetary loss due to hyperinflation accounting in Turkey. Bottom line results, net income of EUR 241.5 million and adjusted net income of EUR 355.9 million, once adjusting obviously for the non-recurring items and the unwind of the purchase price allocation. You will see in the appendix, we've added some tables to reconcile between net income and the adjusted figures.
As usual on slide nine, while accounting only for 31% of revenue, rare disease now accounts for over 36% of EBITDA and margins on both businesses remaining strong, slightly lower on the rare disease compared to previous year, reflecting the consolidation of EUSA, which, as announced, since the acquisition is running currently at a slightly lower EBITDA margin. We still expect it to be around 25-30% this year, but to grow in future to be in line with the balance of the rare disease portfolio.
On slide 10, cash flow performance was also very strong, absorbing both the non-recurring costs incurred in the first part of the year, and some higher working capital due to the growth of the business. You'll recall we commented in 2021, cash flow performance being very strong and, you know, given the non-recurring, the one-off costs and the growth of the business, very pleased that we're able to sustain a free cash flow delivery very much and only marginally below last year.
Obviously on the bottom part of the cash flow statement, you know, showing the acquisition of EUSA, net of the cash required and relative financing and some of the other payments for intangibles being mainly EUR 35 million paid to ELIGARD earlier this year on the approval of the application for the new device, plus residual milestones on Novartis and EUR 10 million also included for clinical studies which meet criteria for capitalization.
Thanks to this strong cash generation and the operating performance of the group at the end of September, very pleased to say, net debt to EBITDA ratio is just below 2x, obviously on a sort of last 12 months EBITDA LTM basis. This is a very strong result. It demonstrates once again the ability of the group to quickly deleverage after doing the acquisitions, even significant ones like the one we just did, completed this year, with EUSA. Clearly is what gives the company ability to maintain a strong balance sheet and clearly the flexibility to continue making BD and M&A an integral part of the strategy.
Finally, to close, prior to opening up to Q&A, you'll see on slide 12, our financial projections for 2022. Very pleased that on the back of the strong performance to date, we are able to increase our targets on revenue and EBITDA, with revenue now seeing around EUR 1,860 million for the year, and EBITDA at around EUR 670 million. This on the back of the strong underlying performance across core businesses. The slightly positive year-on-year effects versus original assumptions effects was fairly neutral year to date with the strength of the U.S. dollar and ruble offset by the devaluation of the Turkish lira.
We expect it to turn marginally positive in the balance of the year, and proactive actions obviously to sustain our margins. EBITDA margin implied is 36%, reflects roughly 0.7 adverse effect or dilutive effect from hyperinflation accounting of Turkey. We expect application of IAS 29 to add roughly EUR 15 million to revenue, but detract roughly EUR 8 million at the level of EBITDA. It also reflects in Q4, which has historically always been, you know, slightly softer quarter in terms of margin. As I pointed out earlier, some targeted incremental investments, namely preparation activities to prepare the introduction of the new device in ELIGARD.
We are preparing for fuller, if you like, launch of ISTURISA in Italy. ISTURISA is already in the market in Italy, but we do now expect reimbursement to be approved in Q1 of 2023. We have initiated real world evidence and non-interventional studies to, you know, invest behind the strong momentum of ISTURISA, and are adding some resources to the MT8 program to accelerate recruitment.
We've also decided as other companies in current environment to foresee a one-off payment to employees on somewhat lower incomes as a contribution towards obviously a growing cost of gas and just inflation, and also as a recognition of the very strong performance they contributed to for this year. Financial expenses are now expected to be around EUR 60 million due to the enduring strength of the ruble. We said at Q2, we were expecting some of the FX losses to unwind. That no longer seems realistic. We also still foresee net monetary losses from IAS 29 to be in the region of EUR 10 million.
Finally, we expect adjusted net income to be in the middle of the target range at around EUR 460 million, with higher operating results offset by the higher financial expenses. With that, I will close the prepared remarks part of the call and open it up for Q&A.
Thank you. Excuse me, this is the Chorus Call conference operator. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Niccolò Storer of Kepler Cheuvreux.
Hi, good afternoon, everyone, and congratulations on results, which were very strong. I have three questions, if I may. The first one is on profitability. If I further adjust the gross profit for all the hyperinflation stuff in Turkey, I end up with a number which is closer to 74%, which is one of the strongest print over the past many quarters. Is this possibly a new base upon which building our estimates?
For the future. I add that these results have been achieved also notwithstanding inflationary pressure, of course, in countries other than Turkey, which were mentioned in previous calls. Related to still the profitability, maybe if you can quantify the one-off payment to employees you expect to disburse in Q4. Second question on Russia. I was particularly surprised by the strength of Russia. Last year we had a very strong second part of the year. In the nine months we are already at EUR 90 million versus EUR 100 million for the full year last year. Which are your expectation for the area, Russia, Ukraine, and the former Soviet Union countries for the year? Third question is related to your cost of debt.
If I'm not wrong, the debt you have taken on is mostly variable and not swapped into fixed. As interest rates are growing, what should we expect as pure financial charges for 2023? Thank you.
Thank you, Niccolò. I'll take maybe the first two and the cost of debt one. I think Rob will comment on Russia. Our gross margin, I think the calculation you're doing on sort of the single quarter, Q3. You know, I'd always be careful of taking a single quarter as a proxy for the future. Mature revenue on our rest of portfolio was quite strong in Q3, which contributed to the positive performance. As you said, we will see, and we are seeing, and we already see today a little bit of that sort of the effect of inflation coming through.
The good news is so far, some of the actions we've taken around pricing have helped offset that. No, you shouldn't take the single quarter as being sort of representative of a full year. In terms of the one-off payment, you know, assume that impacts the Q4 margin by, you know, less, you know, quite less than 1%. In terms of the cost of debt, actually we're closer to 65-35 in terms of variable versus fixed. You know, at the moment depending on the view you take on the speed at which Euribor may further climb, there's not that much of a benefit on the fixed from my perspective. We'll see.
I mean, I won't give specific guidance for 2023 today, but obviously you should expect that we're not going to. There's a big chunk of financial expenses in our P&L this year, which are related to the FX losses, which will not be recurring. I mean, we don't treat them as non-recurring items, but effectively they are one-off. We sold rubles at the wrong moment.
Yeah. Rob, on the Russia piece.
Yeah. Nicolo, on the Russia. What we said also in the last call, last quarter, is we do expect, and we are seeing a slight decline in volume in Russia. We've seen that clearly also in Ukraine with throughout the year. This is happening, it's less than 10% in volume decline. We've been able, at the beginning of the year to increase our prices somewhat, and at the moment, we continue to see the same trend. Nothing new in that sense coming from Russia. The business continues to do really well in that sense. Nothing else to add on that.
Cool. Thank you.
The next question is from Jo Walton of Credit Suisse.
Thank you. Three, please. The usual one that somebody always asks, I'll get it in now. In terms of opportunities for acquisitions, particularly for biotech-like products in the U.S., valuations are very low. Is that being transferred yet into people's expectations for doing deals? The success that you've had with the ISTURISA deal must be bringing more people to the party thinking, you know, you're a good steward of their products. Just getting a sense of, you know, the pipeline that's available there. You mentioned ELIGARD and how you've got the approval with the reference state of Germany. As you move through to the other countries in Europe, is there anything you would point out to us that, you know, maybe you were surprised on the label that you got?
Is there anything that you can do in terms of repricing this product? So just give us a little bit of, you know, more on ELIGARD. If you could also talk more generally, you've highlighted inflation, you've obviously got to pay your staff more in the fourth quarter. I'm sure they'll also need more money in, at the beginning of next year. What sort of proportion of your portfolio do you have some flexibility on pricing with? I appreciate all of your OTC, but you seem to have done incredibly well, to regain devaluation, pricing, et cetera, you know, in some of those markets. Just if you can give us a sense of, the price flexibility you may have to absorb some of the inflationary pressures that we would expect for next year. Thank you.
Thanks, Jo. Yes, we continue to look at deals, and you're absolutely right that there's. We were quite busy. Like I stressed a couple of times already, we maintain also our discipline. They're beautiful opportunities. We first wanted to really make sure that we had fully digested the acquisition of EUSA and integrated the company, which is, I'm happy to report, really almost complete. In reality, this business is running as one. It's now really our onco franchise, and we're very happy with our new colleagues in that respect. They found their place, and business continues to do really well.
Yes, we are able and willing to take on the next opportunity, but they will always have to meet with the same fairly stringent criteria as we did in the past, looking at ultimately the return of capital employed and looking at the opportunities. Clearly, I think for rare disease, where the biggest opportunities in the future will be, in the foreseeable future is in the U.S. That has our focus. But you might appreciate that I'm not gonna be more specific than this on any specific deals. On ELIGARD, I see this rather as positive news for the franchise. We have something really good to say about our products. It will improve the handling by nurses and patients. And in that sense, it's just a positive boost in general.
Germany will be the first country where we'll start to do this, and I don't expect this to be before quarter two of next year, and you'll see it roll out through the rest of our countries. There's not a specific additional label or claim, and I also do not expect that this is an opportunity to reprice. It's really more giving energy and enthusiasm behind our products. What we've seen is stabilizing in some countries already growth of ELIGARD. I'm confident that with this, we can continue to see the very positive trend around ELIGARD going forward. On the pricing, there are some countries where we can increase our prices, and we have, and notably the U.S. on the OTC portfolio. We've done it in Turkey.
Traditionally, it has been a country where you can increase prices, and we've done it this year. I'll let Luigi also add his two cents worth of thought around the flexibility there.
Yeah, no, I think Rob has covered it. I mean, obviously we have flexibility also in the U.S. OTC portfolio. I mean, just to give a sort of indication, I think you have heard me in the past say that, you know, pricing pressure on Recordati on sort of normal years, i.e., outside of major interventions or loss of exclusivities, year-over-year can oscillate between +1% and -1%. You know, this year it's actually, even excluding Turkey, which, I feel like, is an outlier, we're running at around +1.5%. We've clearly done a little bit more this year, and you're seeing the benefit of that in terms of our ability to sustain margins. We're not gonna provide some sort of specific guidance for next year.
We're just starting to go through the budgeting process with the teams, and we'll see. So far, very pleased with how we've been able to also use that lever to offset the impact of inflation.
Maybe one word to add there, Jo. I think it's not just the pricing, but also the ability we have over 60% of our products we're fully integrated and produced ourselves, and that has helped us really to address this. We did report in the past, and we continue to look at commercial excellence in trying to increase and enhance the impact we make in the market. We're also doing that by using opportunities to be more effective and efficient. That has been able to also, like Luigi also said in his prepared statements, with fewer people, we are actually seeing that we increase our market share in all of our relevant markets for the business. This is not a program that is over. We'll continue to do a bit more going forward.
That gives us confidence going into the future.
The next question is from James Gordon of JP Morgan. Mr. Gordon, your line is open, sir.
Hello. James Gordon, JP Morgan. Thanks for taking the question. Just a question about profitability. The implied Q4 profitability using the updated guidance is about 550 basis points of sequential EBITDA margin contraction, which is quite a lot bigger than the normal contraction we see in Q4, which is about 200 basis points. I heard the comment about some one-off employee payments that you mentioned, but is some of it higher R&D spend, and is there anything one-off in the R&D spend, like one-off milestones? Yeah. How much of the extra should we put into R&D versus SG&A for Q4? Looking into 2023, you're exiting this year at about a 32% margin for Q4 and 36% for the full year.
I know you previously issued 2023 guidance, which suggested more like a 38% margin. Are there things you can do that means you are gonna see significant expansion next year, such as activities on pricing and some of the stuff that happened this year being one-off, or do we need to reset our expectations a bit in terms of inflationary cost pressures, et cetera, and investment plans, when we think about modeling 2023?
Thank you. Thank you, James. I'll have a first stab at that and then let Rob add on. Short answer is no, you should not be taking Q4 obviously as a sort of proxy for next year. As you've said, Q4 has always been a little bit softer quarter by about two percentage points. I'll talk to sort of the slightly higher step down that you're seeing now, but maybe just taking a step back. Beginning of the year, we set an expectation for 2022 of a margin of 37%.
The beginning of the sort of if you like escalation of the conflict and the spike in inflation, we said we'd probably see about an extra 50 basis points of pressure. Once you adjust for hyperinflation, which clearly was not in the sort of included in the guidance and we're not adjusting for, we're pretty close. We're pretty bang on line with that. You know, confirming once again that the group's ability to deliver on the targets. We're not gonna set a target now for next year. As always, we will do that, you know, early in 2023. Of course, we'll continue looking at, you know, pricing, right-sizing, you know, leveraging all the things that we've leveraged this year.
On the somewhat higher sort of drop of margin in Q4, some of it is phasing. I said, you know, Q3 was particularly strong in terms of the mix. We have the initiation of the programs and whilst they don't sort of strictly end at the end of the year, as you may know, particularly in R&D, there's a level of spend which you pay at initiation of the study, which tends to be a slightly more substantial part of the overall study cost.
When you sort of, you know, consolidate that in a single quarter, you know, obviously it can make, you know, more meaningful sort of distortion to that single quarter profitability, which is why we actually never focus on profitability of a single quarter. Things like, you know, preparation of the new device introduction in ELIGARD, ISTURISA launch in Italy, the one-off payment that we have discussed and previously decided we're likely to do, all add to that. But again, many of these are one-offs, or higher in the incidence when concentrated in a single quarter.
In terms of fuller guidance for 2023, you'll have to wait, as always, you know, February, when we'll give that together with the final results for 2022. I hope that gives you some flavor and some sort of more insight into the trend. Again, we feel very happy in terms of what we're delivering. You should not take Q4 as a proxy, and we continue to stay committed to sustaining what we see as being margins at the very higher level of the sector. Rob?
I have nothing to add, Luigi.
Thank you.
The next question is from Keyur Parekh of Goldman Sachs.
Hi, thank you. I have two questions for finance please. The first one is, given the increased revenue expectations for this year, how should we think about the trajectory of the revenue line as we think into 2023? Then separately, relative to your midterm guidance, again, kind of the same question, as we think about how much stronger the revenue line has been this year, when would be a good time for you to think about updating your longer term or midterm guidance? Thank you.
Yeah. Thank you. Thanks for the question. Like Luigi already stressed, we're gonna give a guidance for next year at the beginning of early next year, so probably do that early February. Our momentum continues to be good. Business is doing well. We are, throughout the business, both in the SPC and Rare Diseases, continued good growth and are able to translate that into high margins and we'll give you more updates at the beginning of next year.
We're obviously not very far, Kayur, from the bottom end of that guidance, right, for 2023 with this proposal, but we haven't set a date yet for the update, but it'll be in the first part of next year.
Thank you.
The next question is from Isacco Brambilla, Mediobanca.
Hi. Good afternoon, everybody. A couple of questions from my side. The first one is on top line organic growth. It is now at least three or four quarters you are running with organic growth, even excluding the switch of ELIGARD recognition in the high single-digit/low double-digit territory. Can you help us understand how much of this is a sort of pent-up recovery compared to last year subdued trends, and how much is sustainable growth, even looking forward? Second question is focused on the rare disease franchise. You reported revenues growing +13% in the nine months. If ISTURISA is kind of strong, posting the same revenues of SIGNIFOR this quarter and also the so-called legacy business growing double-digit.
Is there any non-recurring driver supporting performance of this portfolio during this quarter or is this trend sustainable? Thanks.
I think, first of all, in terms of that organic growth, you know, rare disease was not significantly impacted by the pandemic, as we've always commented. I don't see any need to do major adjustments to the growth rate there. On SPC, I would just point back to comments we've made in the past, where we said that, you know, we see the SPC portfolio having the potential to grow around mid-single-digit, low- to mid-single-digit. There's obviously an element of recovery this year and strong growth in a few markets. Again, without yet sort of giving sort of full updated guidance for the future.
You know, for us that remains a little bit the guideline for SPC. Of course, you have parts of the business that will grow at a higher rate than that we hope to see within the SPC portfolio continue to grow at, you know, high single digit, hopefully next year. We're not gonna give more detailed guidance on 2023 or beyond now. Jacob.
Maybe one on to what extent there has to be something which is a one-off in the current quarter sales. I think mostly it's been normal business, if you'd like, sustainable business. What we did have on the onco franchise, in light of the launch of SIGNIFOR in China, we've had shipments of that in oncology in China. And that is, yeah, in terms of loading the channel, that's a bit higher than what you would expect in a normal quarter.
It's not much. I think you know, clearly the metabolic portfolio performance in Q2 stood out. Q2 was a little bit weaker on the other hand. Again, I think it's you know, IPC, we stand by comments we've made in the past around seeing the potential to continue to grow at you know, around low- to mid-single-digit%, depending on the year and you know, with some part of the portfolio likely to grow more and some likely to grow less.
Very clear. Many thanks.
The next question is from Emily Field of Barclays.
Hi. Thanks for taking my questions, just two from me. You know, obviously with the debt-to-EBITDA ratio now falling below two, and you mentioned that there's still a lot of attractive opportunities out there from the M&A side, particularly in rare disease. Just curious, you know, if you have an upper bound in terms of a leverage ratio that you'd be willing to go to, just obviously given the broader macro environment, those are numbers that are being watched closely by the market. So just any color you'd give around that. I believe you mentioned in the prepared remarks that cough, cold, flu has returned to pre-pandemic levels. You know, some of the earlier data, particularly out of the U.S., indicates that we could see very high levels of influenza in particular this year.
I know it's a tough comp with numbers getting back up there, but sort of how are you thinking about this season maybe potentially offering some growth on top of that? Thank you.
Emily, thank you for the question. On BD and M&A, our sort of guidance is not changed on that in terms of you know us wanting to operate at levels you know not different from the current ones, but with the flexibility of going up to a maximum of 3 times you know if really a really compelling opportunity of scale came up. The good news obviously is the result that we achieved in this first part of the year with that leverage going very quickly down from 2.4 to just under 2 times, which similar to what we did already after the SIGNIFOR and ISTURISA deal, where it went very quickly from 1.9-1.2.
On the flu, yeah, we also see as you said the potential for this season to be a strong one, and that's reflected, if you like, in the updated guidance that we provided. One of the things that we have obviously more visibility on today, and one of the drivers of, amongst others, obviously the sustained performance, the resilience of our metabolic portfolio, the recovery in some of the markets that has led us to upgrade the guidance.
Maybe this is just both businesses. We want to continue to invest. Also on the SPC side, we're actively looking at potential things, and we will continue to pursue opportunities there.
Great. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your touchtone telephone. For any further questions, please press star and one on your telephone. We have a follow-up question from Jo Walton of Credit Suisse.
I'm sorry. The line is a little bad, so I may be asking you to repeat some of this. You talked about higher clinical trial startup costs, which would be impacting in Q4. I wonder if you could just tell us a little bit about R&D spending as we're going forward. I know that you keep a lot of your amortization charge, you know, within R&D, and that's expanding it a bit. Could you just talk a little bit about the underlying, the numbers of trials or what you're actually planning to do over the next few months, that might see the R&D as a percentage of sales increase? Thank you.
Hi, Jo. Yeah, I mean, I will reiterate what I said. I think, you know, first of all, you as you've rightly highlighted, of close to, you know, more than 40% of our the cost in R&D line is amortization, so. It is increasing on the back of the recent deals. In terms of the key programs that we're running, of course, you know, about the MT8 program in neurotrophic keratitis, where the phase II is running, has been enrolling. The pace has been a little bit slower than we would have liked.
We've initiated some new sites and also made some tweaks to the protocol to accelerate the recruitment. We have spoken before about the intent to complement the data package that we have on ISTURISA with real world evidence that should further support, you know, potential future application for the expansion of the indication in the U.S. We're also running a non-interventional study to help provide a physician with further experience on ISTURISA. We should also support the further rollout of ISTURISA in Europe as we progressively get reimbursement.
At Q2 you'll recall we talked about us seeing potentially new opportunities for additional indications also on SIGNIFOR post-bariatric hypoglycemia where we've seen there was some interesting data in a different population run by Novartis. We are currently discussing with the FDA what a potential clinical path for developing SIGNIFOR in that additional indication could look like. We haven't finalized this discussion yet, which is why we've not provided yet you know a lot more sort of guidance or set a lot more expectations on that. We wanna have those discussions finalized. We're also still exploring on SYLVANT potentially a new indication. We've talked about its potential use in patients with cytokine response in conjunction with CAR T therapies.
There's other things that we're evaluating. Hopefully that. I'm not gonna go into more detail than that in terms of obviously study by product or specific timelines. You know, I think we're probably more likely to do that when we give a broader update on the midterm outlook, if that makes sense.
Beginning of next year, yeah.
Yeah. Which again, will be at some point in the first part of next year. We've done it in May historically. We'll see, at least in the last couple of years, we still have to sort of finalize a view as to when is the right time to do that. I hope that that's okay for now, Jo.
Yes, thank you.
Once again, for any further questions, please press star and one on your touchtone telephone. Gentlemen, Ms. De Medici, there are no more questions registered at this time.
Okay. Thank you very much.
Thank you all for your time and interest, and looking forward to engage and continue to share our progress.
Thank you.
Bye-bye.
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