Day, everyone, and welcome to Grifols Business Update Conference Call. We are very pleased to host this call today, and thank you for joining. As we have already explained, we want to increase our engagement with the capital markets and with investors. This is a testament to our commitment to enhance our communication. The call will last 1 hour.
There will be a presentation of something like 30 minutes and then we will follow with the Q and A session of well, to complete the hour or if you have no questions, we'll finish earlier. Today, I'm joined by Steve Mayer, our newly appointed Executive Chairman Raymond Grifols and Victor Grifolsdale, our co CEOs and Alfredo Arroyo, our CFO. The materials of this call are already available on the Investor Relations section of griffos.com.
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then, well, our forward looking statement Disclaimer, I'm here for this business update. We undertake no obligation to update or revise any of these statements. And This is the forward looking statement refers to the substantial risk and uncertainties. And with that, I will turn the call over to Steve. Thank you.
Thank you, Nuria, and thank you for Everyone for joining the call today. Since I am new to the Griphol's Executive Chairman role, I would like to begin the call by emphasizing a Few high level points before we turn to the specifics of our business update. Many of my friends and acquaintances have asked me why I elected to take on this role at Grifols at this point in my life. The answer is actually pretty simple. Grifols is a great company with a clear mission And a long history of improving the health and well-being of people around the world.
It also has very strong fundamentals in place, Irreplaceable assets supporting a long term strategy and the challenges that you recently faced can and will be overcome. I've recently read a few reports that have questioned whether in light of the fact that I've been on the Grifols Board for several years, There will be any real changes in the offering. In response to that question, on the one hand, I can refer you to my long private equity career That was focused on being a change agent and helping companies that we own realize their potential. On the other hand, I also Fully recognize that words are not what matter. Our execution and our performance will ultimately tell the true story.
I ask that you judge us on our strategic, operational and financial performance over the coming months, which is how we will be judging ourselves. If you check out my personal background, you will also know that I'm highly competitive and driven to win with a lot of experience in team sports. While I am now ultimately responsible for delivering, at the same time, you should know that this is one team and we will align as a single unified team Behind our goals. In that regard, we are as a team laser focused on our top priorities. First of all, Creating an organization with a performance culture that will be efficient, effective, data driven, agile and decisive.
We're already implementing a renewed emphasis on planning and execution. Again, if you look at the investments I led at Cerberus, will see that in most of them improved operational performance was at the heart of their success. That improved performance comes from a disciplined approach The planning, project management and rigorous execution against the plan. I also believe strongly in the principle of accountability. Everyone in the organization will be accountable using measurable indicators, starting with me.
We will also be much leaner and more cost And while this will improve our margins, just as importantly, it will enable us to move faster and serve patients better. Our next priority is to meaningfully improve our cash flow and expense profile. We have been making and expect Which as you know is characteristic of our industry. We are also focused on reducing fixed and semi fixed costs throughout the organization From delayering, better spans of control, organizational streamlining, facilities rationalization and capacity optimization, Outsourcing certain non core functions and better use of technology and data. We're also making further effort to reduce working capital and CapEx cash use.
And very importantly, we are implementing a zero based budget process For 2023. A third and very important priority is debt reduction. Right now, We are evaluating a variety of levers. And although we have nothing to announce today, it is clear that the company has highly valuable assets throughout the world. And therefore, we have a range of attractive deleveraging alternatives under consideration.
We do, however, believe that the company's stock meaningfully undervalued today. So issuance of equity in today's trading range is not a favorite option. We firmly believe that by year end 2023 and very possibly before, concerns about leverage will be substantially mitigated. Our 4th priority is capturing commercial opportunities with certain of our existing products that we believe are under penetrated currently. For example, our subcutaneous IG product, which commands a higher price than IVIG, Represents only a single digit percentage of our IG sales compared to 40% for CSL.
In addition, we continue to see opportunities for our high margin Alpha-one product, Prolastin, through ongoing efforts in patient identification. We'll be mentioning a recent favorable development in that regard later in this call. Our final top priority to mention today This is the effort to unlock the full value of BioTest. We at BioTest are dedicating resources to accelerate integration And the recognition of both cost and revenue synergies. As you know, we also believe that the approval, Commercialization and successful launch of the new BioTest proteins are likely to have a substantial impact Grifols financial profile.
Of course, any initiative that's dependent on regulatory approval and successful commercialization and market launch inherently involves uncertainty. But we continue to believe that fibrinogen and IGM are a matter of when, not if and that ultimately, they will be very significant In addition to these five key priorities, we plan to continue improving transparency enhancing our communications with the capital markets and with investors. Today's call is evidence of this. We also expect to schedule meetings with individual investors We have progress to report on the priorities I've just walked through. I look forward to meeting many of you in person before too long.
Before turning the call over to Raymond and Victor, I do want to state that it is highly important to me to ensure that we deliver on all of our goals, Well, we remain true to Vifor's core values and sustainability. Raymond, to Victor.
Thank you, Steve. Thank you all for being in the call here today with us. I would like to start by highlighting the 2 recent leadership appointments that commenced the recently announced reorganization. We have appointed Pierre Dovano To lead our biopharma business unit and Jordi Balsays to lead our plant of human business unit. Pia Binck's with her 29 years of experience in healthcare, particularly in biotherapeutics, Including tariff consultancy roles, internal management, multinational companies like Sanofi or Novo Nordisk in the U.
S. Head experience, expand global product launches, new product planning, establishing new businesses, heading marketing and sales, Business Development Activities, Strategic Planning and Analysis Development. She is an impressive executive And her broad experience with market launches of new products is expected to be especially helpful as we look forward to launching the BioTest in new proteins, for example. We have also named Jordi Balcells for the plasma procurement business unit. Jordi held various roles during his professional life with a special focus on retail distribution channels worldwide and global expansions.
His experience also includes building local teams and subsidiaries, developing relationships with the strategic partners, the volume of the channel and high-tech products. All this knowledge and experience in retail business We'll for sure reshape and evolve the way Greenfolds has historically approached the management of plant over procurement operations. I'm sure that this will move us to a more efficient and efficacious sourcing network. We are all looking forward to working with them. Now changing gears to the Q3 'twenty two highlights and the financial performance.
Let me start with revenues. And really, I am Proud to say that RefWorks delivered very strong operational performance in the Q3, leading to a solid Q3 year to date 2022 number, while operating all that in a very complex macroeconomic environment. Compared to Q3 'twenty one, global revenues on a combined basis were up 23% operationally, reaching 1.5 €1,000,000,000 revenue. On a reported basis, this growth represented a 37% increase due to the foreign exchange tailwind. Underlying standalone operational performance has been the driver, with revenues growing at 13.7%.
All these underlying drivers for the quarter is thanks to higher plasma collections in the first half for this year 2022. Driving volumes of key proteins, especially immunoglobulins, Together with pricing, upticks, product mix and the biotech contribution. Year to date revenues totaled £4,351,000,000 increasing by 9.5% at constant currency And 18.8% on a reported basis compared to the same period of 2021. With a standalone operational performance of +3.8 percent. Regarding Plasma Procurement, Following the latest update, Plasma Collection volume grew by 25% in the 1st 42 weeks of 2022 versus the same period of 2021, which we anticipate will underpin a strong sales growth in the second half of the year and onwards.
We will continue to build on this momentum in the coming future. Additionally, the lifting of the restriction for the Mexican donors in mid September has also started to contribute notably To filter increasing plasma donations, and we expect it to continue to do so. In terms of EBITDA, Volumes, pricing, operational leverage and cost discipline partially offset cost per liter and inflationary pressures To drive reported EBITDA to €927,000,000 representing at a 1.3 Margin on sales. Excluding BioTest, it stood at 22.2% of sales. Adjusted EBITDA was €899,000,000 with an adjusted EBITDA margin of 20.7%.
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excluding BioTest, it stood at 20.7%. Paramount in the industry is the balance between volume of plasma and its cost. As plasma collection volumes normalize, we are now focused on driving cost per liter reduction by driving lower dollar compensation, Optimization of labor cost and the rest of the fixed cost that are impacting in the cost per liter. Dollar fee is one of the key components of the cost per liter, accounting roughly to 35% of the fully loaded cost. And therefore, the one that has greater impact in the short term.
Since its peak in July This year, dollar fee declined more than 15%. Compared September versus January, It declined a total of 7%. At the same time, since volumes are sequentially increasing, The fixed cost portion of the cost per liter benefits from operating leverage. We firmly believe that this trend will be sustained, And we are confident on a future on a further reduction from now to year end that will positively contribute to profitability going forward. We will continue assessing the trade off between plasma collection and donor fee and balancing these two components to enhance our performance.
Moreover, our restrictions for Mexican donors were leased. There is a significant upside to further increase plasma collection, Which will certainly determine our decisions on the North Sea evolution. Regarding the leveraging, The reported leverage ratio declined from 9.0 times in the first half of twenty twenty two to 8.6 times in this last 12 months, September 2022. And it is expected to stand below 8x by the year end, Specifically, at 7.9%. As we are focused on driving down on fee reduction, cost optimizations And operational efficiencies, this is expected to trigger more of EBITDA and working capital improvements throughout 2023, Leading to a further reduction on the leverage ratio.
After 2 years of highly complex pandemic environment that has severely Severely, in fact, the plasma industry are now followed by its consequences in the midst of this challenging macroeconomic backlog. We see it from 3 different angles. On the one side, Inflation and the current challenging macroeconomic context are further driving plasma collection momentum, Which can potentially contribute to further cost per liter reduction. On the other side, macroeconomic backdrop It's impacting our labor cost to some extent, especially those in our plasma centers. And third, our exposure to interest rates hikes In short, how is limited as close to 65% of our total debt is tied to a fixed And to finalize these highlights sections, I will move to the integration pipeline.
Certainly, we continue to advance on our most advanced programs of our innovation pipeline such as fibulogen, IGM, Alumina Cyrosius and anti troponin 3 in SERC6 among others. But in this quarter, please let us highlight that we received FDA clearance for our Alpha ID at home product. The Phase 3 service for U. S. Adults to screen for the genetic risk of Alpha-one antitrypsin deficiency That doesn't need subscription prescription, sorry, from the health care professionals.
And now let me please transition to Alfredo, who will give us further details on the financial performance.
Thanks, Victor. Hello to everybody. Thanks for joining this call. Now let's review our P and L, starting with revenues. Geforce delivered very strong operational performance during the Q3.
Compared to the Q3 of 2021, Global revenues were up by 23% at constant currency, reaching €1,500,000,000 And a 37% growth on reported basis. Roche revenue growth was driven mainly by biopharma Keys proteins following increase of primer supply, positive product mix, positive pricing And very positive FX tailwind as well as significant contribution from BioTest 5 months circa 200,000,000 Gross margin was impacted by a high cost per liter from the plasma collected in the first half of the year Due to mainly higher dollar compensation and labor costs impacted by inflationary pressures. Additionally, it is noteworthy to mention the negative impact from the high margin diagnostic business Triggered by the end of the one off COVID testing and mandatory Zika screening, which largely Impacted gross margin by 180 basis points versus Q3 2021 and 250 basis points versus Q3 year to date, September 21. At the EBITDA level, we were able to offset the impact at gross margin level [SPEAKER IGNACIO CUENCA ARAMBARRI:] And delivered a sequential EBITDA global expansion, which was supported by operational leverage, cost savings and R and D prioritization. Inflationary pressures were partially offset at OpEx level as well.
Net income totals €118,000,000 profit, which reflects higher financial expenses The link with Biotech acquisition bond and high interest rates. Now moving to the Slide 9, revenue performance. Our main division, biopharma, revenues reached EUR 1,300,000,000 euros, EUR 1.2 billion excluding BioTest, during the Q3 of 222, Growing by 34% at constant currency and close to 50% on reported basis, Thanks to positive FX impact. As mentioned, several drivers were behind this strong performance, Including robust immunoglobulins, underlying demand, larger plasma supply, Prices increased and product mix. Especially significant were the sales of Sarqueva, our Sarcutaneous in Monrovolo, Thanks to higher demand and a favorable customer mix.
Year to date, biopharma sales stood at Europe close to $3,600,000,000 or $3,400,000,000 excluding BioTest. This represents a year over year increase of 16% at constant currency, 26% on reported basis. Excluding BioTest, Biopharma revenue grew by 8.7% at constant currency and 19% on reported basis In the 1st 9 months of 2022 compared to the same period of 2021. The sales performance reflects sequential accelerated growth of 21% at constant currency in the 3rd quarter Compared to 0.1% growth at cost and currency in the 2nd quarter and 7.1% Growth at constant currency in the Q1. The Diagnostic revenues declined by 20.8% At constant currency, €170,000,000 in Q3 2022, primarily due to the nonrecurring sales of our COVID test And the termination of the mandatory Zika virus test, which was partially offset by gross sales of blood typing solutions.
Diagnostic, record circa €500,000,000 of revenues during the 1st 9 months of 2022, Down by 21% at constant currency compared to same period of previous year. Excluding the one off COVID test and the Zika virus screening, the decline was just 3.5%, Mainly due to country mix and price. BioSupply reported significant revenue growth in the 3rd quarter, Expanding close to 30% at cost and currency, reaching €44,000,000 following the acquisition of Axis Biologica. The business unit grew by 5.% cost and currency during the 1st 9 months of 2022. Moving to the next slide to the margins.
Gross margin stood at 38.2%, representing a slight Sequential declined from 38.9 percent reported in the first half of twenty twenty two. This reflects a high cost per liter incurred in the first half of the year as a consequence of total compensation and labor cost inflation. Refos continued to expand and enhance its operations despite inflationary pressure. The company's effort to optimize cost and operational efficiency resulted in a stable cost per liter during the first half of the year despite the 8% 10% annual inflation in our regions of operation. On the back of solid plasma collection level, Vifor sees Focus on balancing volume and cost per liter to drive margin expansion with an emphasis on reducing dollar compensation And also optimization of labor and fixed cost.
The loaner fee, as mentioned, that accounts Probably 35% of the fully loaded cost, it fell by 7% from January to September And by more than 15% from its peak in July 2022. Additionally, as mentioned, it is important to Highlight the impact of the Diagnostic into gross margin due to the COVID and once again the Zika screening that impacted by 2 And 50 basis points, the 1st 9 months of 2022 compared versus previous year. EBITDA grew At up to €927,000,000 during the 1st 9 months of the year, with 22.2 percent margin And 21.3%, including BioTest. This represents an EBITDA growth versus previous year of 12.8%. As I already mentioned, RefWorks continues to apply cost discipline through its savings plan [SPEAKER CARLOS GOMES DA SILVA:] And the prioritization of R and D projects, which partially offset the inflationary pressures as well as Higher biotech expenses, particularly related to the BioTest next level project.
This accounts for the 5 months Periods were since the time that we acquired BioTest of €35,000,000 Adjusted EBITDA for the Q3 The year has proved to be in line with the first half of the year reaching close to €900,000,000 With adjusted EBITDA margin of 20.7 percent, here the adjustment basically are related to one off Restructuring cost as well as one off external gains. Excluding BioTest, it stood at similar levels of the stand alone company. Moving to the EBITDA Sequential improvement. As shown in the slide, in the second half of twenty twenty one, the EBITDA was low, Especially in the last quarter of 2021, basically, since due to Low sales because lower plasma product as well as certain restructuring and write offs took place in the last quarter of last year. Since then, we have been addressing both the main impact from COVID, Which were lower plasma collections and the higher cost per liter of plasma.
As mentioned, also the impact from Diagnostics division has been significant. We're able to improve EBITDA throughout 2022 through cost control, R and D permutation, Bringing a contribution of €70,000,000 savings in terms of OpEx. Also, the positive contribution from Access Forward integration, that includes a one off capital gain. This bridge also reflects what I've been mentioning so far, Mirroring the sequential improvement. In the next slide, as already explained, plasma collections increased by 25% year to date versus previous year and to larger extent in the U.
S, expanding by 28%. Now that Planta volumes increase are normalized, we are focusing on cost per liter reduction, Driving donor compensation decrease as well as optimization of labor and fixed cost. There is an ambitious plan to keep reducing cost per liter with the aim to revise this cost per liter. Dollar compensation reduction will continue going forward. The addition, optimization of labor and fixed cost, Including some plumber centers, relocation, consolidation and also closing those less efficient.
This will support further reduction in terms of cost per liter. Jaime Secat will continue assessing the trade off Between plasma collections and dollar fee and balancing these two components to enhance our performance going forward. On the leverage, yes, we are laser focused on leverage. And basically, the main levers of the organic The leverage are in this order. 1st, EBITDA improvement, working on margin, plasma cost as well as OpEx already mentioned.
Optimizing working capital. This year, we have to build up inventories. Once last year, the inventories were exhausted As a result of the lower plasma collections. But for the next year, the inventory increase We'll be limited, in line with, I would say, normal times. Also, limited CapEx, no meaningful acquisitions, [SPEAKER JOSE RAFAEL FERNANDEZ:] Disciplined in capital allocation.
And since we are well invested, this business require [SPEAKER JOSE RAFAEL FERNANDEZ:] No significant capital moving forward. This is, as mentioned by Steve, this is in the opening remarks, It's a top priority. In Q3, we were able to reduce the 9 times as of June, that was the peak of the year, Down to 8.6 times. By the year end, expected to further decline and will be around 7.9 times. We will continue to evaluate also, as already mentioned, our global wide base of valuable assets for optimization.
Important to mention that Vifor's strong liquidity position at the end of the quarter totaled €1,600,000,000 including a cash position of circa €500,000,000 while there are no significant maturities until 2025. Victor?
Thank you, Alfredo. Now I will enter into more detail about the performance Of the business, Eunice. Myopharma, we are optimistic that we are seeing improved momentum evidenced by a strong 3 quarter across key proteins, especially IG, our flagship, which grew by 12% in QQC year to date 2022. As global plasma supply decreases, we're anticipating a strong growth with opportunities on core indications Such primary such immune deficiencies and CIDD. Demand has and it is expected to remain robust.
Many patients, even in top markets, remain underdiagnosed. Furthermore, even though incidences of the diseases Similar across geographies, consumption rates can vary very significantly from one geography to another. Actually, IG in the U. S, for instance, is still consumed at almost 3x the rate per head of population when compared to Europe. Not worthy to mention how new products continue increasing its contribution, driven by our Core plan to boost our subcutaneous franchise, CHEMBI5, to contribute to the revenues performance Going forward, in albumin, excluding the already mentioned facing in the Q2 of the year, Sales were flat versus the 1st 9 months of 2021, with lower volumes in China, partially offset by low single digit price decreases.
Looking forward, we anticipate volume demand in China to continue to grow At mid to high single digits. Alpha-one and Specialty proteins delivered a high single digit growth. Alpha 1 recorded mid single digit increase due to favorable customer mix and competitor supply shortages. Additionally, we delivered robust growth of our latest launches such as anti rabies, lymphoma formulation, tablets And Fibrin Siva. Due to it sustained higher demand, while other more regular products All in all, offsetting the Factor VIII tender pressures that we are seeing.
Moving to Diagnostics. Diagnostic performance has been impacted due to nonrecurring sales of the NIC technology to detect COVID-nineteen and the termination of mandatory Zika virus testing, which was partially offset by robust sales of Lost Typing Solutions. Excluding these two items, the business unit declined by 3.5% at constant currency in Q3 year to date 2022. As already mentioned, these two items impacted Consolidated gross margins by 2 50 basis points in Q3 year to date 2022. This, together with some country mix and pricing, We're partially offset by growth in the Chinese market and higher donation volumes, resulting in 35% growth in China year to date 2022.
Blood Typing Solutions division recorded a robust growth of 20%, supported by solid performance across EMEA and U. S. Regions and stronger geocar sales in Eastern Europe. As we all as well as growth in China and rest of Asia Pacific due to increases in donations and sales of gel cast as well as instruments. Recombinant proteins declined, primarily resulting from the joint business collaboration on a new R and D project.
Regarding Bio Supplies, reported significant revenue growth in the Q3, led by Bio Supplies Diagnostics, supported by Plasma for Supply Diagnostics, supported by Plasma for Diagnostics, Cell Media and Xero as well as with acquisition BioSupply Biopharma declined due to lower sales of non terabirte infused albumin and fraction of fire, We're partially offset to sell Couture Media revenue resulting from acquisition again of Axis Biologica. And now I give the word to Steve with his closing remarks. Thank you.
Thank you, Victor. I'd like to conclude by reiterating a few points that we've already made, but that I think they're repeating. And to be clear, my management style is to keep returning to the most important priorities in the business, both those that make us strong And those that need changing in order to ensure that our organizational and business priorities are absolutely clear And are driven to and then beyond the finish line. The Grifols Board of Directors asked me to join the company as Executive Chairman In order to enhance operational execution, financial discipline, business performance and shareholder value, We are going to do so initially by prioritizing operating efficiency and cost reduction throughout the organization, especially But not only in the cost per liter of plasma, by the improvement of cash flow and by debt reduction. These initiatives are already underway.
Standing back from the know, I am absolutely certain that the fundamentals of our business and our strategy are strong And that we are well positioned to capitalize on our highly valuable assets and platform for years to come. I'll be working closely with the entire management team to help Grifols focus on its key priorities and achieve its goals. We are creating a culture of performance and accountability and to be crystal clear, I will be accountable for delivering period. Recapping what you've heard about our recent business results, Plasma Collections have grown by 25% over the previous year, Which in turn is underpinning strong sales growth in the second half of twenty twenty two and onwards. The market remains strong and we aim to continue this momentum into Future.
We're laser focused on driving cost per liter down further. Donor compensation per liter has declined by more than 15% Since its peak in July 2022 and our objective is to realize further cost from decreases through a combination of continued donor fee management, Operating leverage as higher volumes absorb fixed costs and meaningful reductions in fixed and semi fixed costs per liter Such as labor and occupancy costs. Recall the characteristic of our industry, these lower costs will in general be recognized in our operating results 6 to 9 months after they are realized. We're also on track to meet our financial commitments for the full year 2022. We expect global revenues to finish the year in the €5,800,000,000 to €6,000,000,000 range, including BioNTest for about 7 months of the year.
Adjusted EBITDA margin for the full year is expected to remain in the 20% to 21% range. For the reasons we've discussed and with additional operating leverage, we anticipate margin expansion for 2023. Our leverage ratio is expected to decline to about 7.9 times by year end, a significant drop in the 9 times reported just 6 months ago. Also keep in mind that this leverage ratio does not include any pro form a results relating to the BioTest transaction. As you know, we forecast about €60,000,000 of synergies between BioTest and Grifols.
None of these synergies are included in the forecast ratio I just cited. And none of the deleveraging alternatives we are considering are included in that ratio either. As mentioned, the entire executive team is focused, and I mean focused, on accelerating the execution of the company's operating plan, On operational excellence, on cash flow improvement and debt reduction and ultimately, on increasing value for all shareholders. We look forward to communicating with you more frequently and transparently, including to your quarterly earnings reports and calls. Thank you.
Thank you, Steve, and thank you all for your time. So now let's So, as I said, we will be pleased to take questions from the sell side analysts that follow our company, that follow Please press star 5 to raise your hand, and so we will be progressively taking your calls. Just one thing, be conscious of also your colleagues' time in order to have time for everybody to ask questions. So let's start with Vinit Agarwal from Citi. Please, Vinit.
Hi. Can you hear me? Yes. Hello. Great.
Thanks. This is Vinit here from Citi on behalf of Peter. Two questions. So first of all, on 23, can you give some preliminary thoughts around 23? And if the trend you are seeing persist, Can you give us a sense of the scope of margin recovery you hope to see?
Could it be 22% to 25% or better? And second, How motivated are you to accelerate your deleveraging activities? Could we assume all options being considered, Including collapsing the dual share class structure, monetizing your Shanghai RAS stake and are doing something with diagnostics. Thank you.
Maybe I think your first question it was a bit difficult to hear you because there was maybe you were close to the micro. But I think your first question was on the fibrinogen and the timing associated to that is right, correct?
Now I was just asking if
you can give some preliminary thoughts around the 2023 margin progression. Could we hope to see 22% to 25%
margin on No, we cannot Sorry, The poor reception, Nelik.
Go to the second one.
All right. What was your second question?
I think the questions involved Margin progression during 2023, which maybe Alfredo can respond to. And the second half of the question had Deleveraging alternatives, which he mentioned a couple which I can respond to.
Okay. Thank you, Steve. So
To your first question, the margin progression, my comment is the following. The worst is already behind. So by focusing on the lower cost per liter, as I already mentioned, We see a significant decline moving forward. But remember that it will take time to flow through the P and L based on our Long inventory cycle. So that means that we will see meaningful, I would say gross margin improvement coming from lower cost per liter more in the second half of next year, so backloaded.
On the additional OpEx savings, yes, we will capture those since the end of the year. So that will help To improve our gross margin. But also if I move back to the P and L, the By increasing the share of Sarcue, which we will expect that will be meaningful next year, This will help us to improve the gross margin. Remember that there is a significant price gap between the regular IG And the subcu IG. So this is going to help quite a bit about the gross margin also starting next year.
So that's what I'm going to tell you now based on the gross margin as well as EBITDA margin. So the worst is sort of behind.
With respect to the deleveraging alternatives, we're going to wait until we have something to announce Before we give any details, but I'll just broadly state that Ripples has an extremely valuable, I would say, irreplaceable group of assets globally. We believe that there are opportunities to Capitalize on these to reduce leverage while continuing the overall long term strategy that Groupon has. With respect specifically, I think you asked about the consolidation of the 2 classes of shares. We've already said that we think that The equity is meaningfully undervalued today. That applies to both classes of shares.
So we're not Looking to a capital increase or equity issuance in today's trading range And that also applies to the consolidation of the 2 classes of shares as the stock price recovers to what we believe to be A better reflection of the value of Gripple's that will be one of the alternatives we consider.
Okay. Thank you, Steve. Now let's move to James Gordon, JPMorgan. James, please.
Hello, James Gordon. Thanks for taking the questions. One question was about the medium term target. Last year, in conjunction with Biotech Steel, it was target set. Can you hear me okay?
We can't hear you.
I would say that last year there were targets set in conjunction with the BioTest acquisition for revenues, EBITDA and leverage More than €7,000,000,000 revenues, EBITDA €2,800,000,000 and leverage below 3.5 times. I believe those targets were pushed out to 2025 At the CND, so should we still think that those targets could be achieved in 2025 or are those targets under review? Might it take longer To get to those targets, so a review on where we are in the revenue, EBITDA and leverage targets in the medium term. And the other question was just in terms of pipeline. So there were some previous plans in terms of investing in various pipeline projects things like Alzheimer's disease etcetera.
Are all those plans still going on? Or might you change some of the pipeline priorities as well is the second question?
To the first question about the leverage, yes, by 2025, either and all will be a combination of organic and nonorganic. Clearly, our target is to be below 4x. So that's also remember that We need to go to the market, to the debt markets to refinance a portion of our debt. So clearly, it's a must To be at a very good, I would say, leverage ratio at that time. So it will be a combination of both.
Thank you. And James, can you please repeat the second one?
Sure. And sorry if I've got a bad line. The second question was, are all of the previous pipeline plans pipeline investment plans Still definitely going ahead. Or is Grifols also reviewing them? Could there be changes in terms of investment plans and pipeline?
Very difficult to understand you, but I think you're asking about the pipeline.
That's correct.
The pipeline? Yes. Okay. As we said in our Capital Markets Day back in July, we continue to believe very strong In the progress that we are doing in the different projects that we are undergoing, Very clear for Biotech Products, Fibre D'Oncen and IGM, they continue basically On track. Regarding the aluminum liver disease continues On track as well.
Secondary immune deficiency for our IG products continue on track and anti thrombincin sepsis As well continues on that. So overall, everything continues as we said in our last Capital Markets Day.
Okay.
Thank you.
Thank you, Victor. Now Sarita Kapila from Morgan Stanley, please. Sarita?
To understand how we should think about increasing competition in the alpha-one side, So particularly from INHIBRIX following the FDA decision to grant accelerated approval and given that the data we've seen today is quite encouraging. Thank
you.
Regarding Fagual, this is a project that needs still time To arrive to the market, if it is the case. Regarding platinum products, as we have said today, for instance, we are continuously developing Tools that can help our franchise to progress. In this case, it's the evolution of our alpha ID test. Now in this case, A home profile so that patients can self test and get the results at home from this new tour. And we continue to develop as well some life cycle management formulations for the better convenience of our patients.
So this is regarding Alpha 1, how we see the landscape.
Thank you, Victor. And now we have Guillermo Sampayo from CaixaBank Equities. Guillermo?
Yes. Can you hear me? Hello? Yes, yes. Okay, perfect.
Okay. So one question regarding the process for a liquefying Thank you of GIC in Biomat. How we are in this process and whether are you still counting on this To your leverage targets. And then 2 small questions on the results. So if you could provide some details on Shanghai's performance this quarter?
And if you could provide some color on the FX impact on quarter on quarter net debt evolution.
Okay. Regarding your question of DIC, Just to remind you that the aim of both parties and the rationale have been always and still It's that this is the financial instrument, which is an equity. So both parties, this is the understanding of the parties at the time of the agreement. As you all know, afterwards, the auditors, KPMG, they have some, I would say, Some insight talking. And finally, they came up with that applying the accounting rule that this is a debt.
The agreement is not expected to be modified in the short term. However, still, the door is open. So this is really where we are. But remember, this is a 20 years, I would say, term. So now it's hard to get, I would say, a debt for 20 years.
So as you can imagine, this is real equity or quasi equity. So that's as I said, debt is not undertaken for
us. Yes. And then on the FX impact?
The FX impact, overall, yes, this year It's going to be close to $100,000,000 at the EBITDA level because there is a significant Dollar devaluation, especially versus euro. And since most of our revenues and most of our ADA It's dollar driven. We're expecting and it's already bringing by the end of September, €74,000,000 of positive FX by the year, expected to be if the dollar trend remained The same around 100,000,000. So very positive this year and for the next year, If it continues at the similar level, we have also we'll see also a positive impact, less than this year, but positive Indeed.
Thank you, Alfredo. Emily Field from Barclays. Hello, Emily.
Hi. Thank you so much for taking my questions. Just a couple. Just on the divestitures point, Is there anything that is off the table? Because obviously between diagnostics and Shanghai RAS, I know that was kind of asked earlier, but there is some complexity.
So I just kind of was wondering if sort of anything on the table if a satisfactory price can be obtained? And then secondarily, you mentioned In the prepared remarks, a couple of times about fixed and semi fixed costs, I believe the company commented a few years ago about the split between fixed and variable costs And how that could be managed in the event of emerging competition? Could you just give us an update on how you see that split between fixed and variable costs and how much Costs, you would be able to shift in the event of emerging competition? Thank you.
So to the proportion of the fixed and variable cost, a significant component, obviously, is the labor That overall accounts for near 50%, let's say, 45% of our total cost. And some of the cost, Those calls are, I would say, yes, very well because you need certain people to run manufacturing plants, You need certain people to run operations and some in the back office. But clearly, There is a room for improvement. And the team up to now and moving forward is going to keep working on We've been off some of those savings. There are some low hanging fruit there, and both at the plasma cost Site as well as the rest of the cost across the whole organization.
So clearly, there is there are some upsides, Not only at Vifor's side, but also as mentioned by Steve at the BioTel's level, there are some synergies that can be catch.
Yes. And maybe on the first part of Emily's question, Steve, maybe you can take this one.
Well, I think the critical point with respect to what you described as divestitures, which I'm not sure I would employ that term, but We think we have this portfolio of irreplaceable assets. We also have a long term strategy. And obviously, as with any company, We're going to try to optimize that portfolio of assets in order to achieve both the financial objective of deleveraging, But also the long term strategic goal of driving shareholder value in the long term. And so when you say when you ask if there are sacred cows or if there Is anything off the table? Value aside, what's going to be off the table is something that we think would have A material negative impact on long term strategic and shareholder value, but we do believe that there are many different ways of achieving Our strategic objectives consistent with evaluating these deleveraging alternatives.
Okay. Thank you, Steve. We have next in the line, Tom Jones from Berenberg. Hi, Tom.
Good afternoon, everyone. I have two questions, one for Alfredo and one for Steven, if that's all right. Alfredo, just a quick housekeeping one. I was a bit surprised on the drop through in Q3 between EBITDA and net income. Was that Just a step up in interest rates that caused that or were there any significant large one off items that affected Q3?
I know the tax rate can bounce around and Occasionally you get a relatively large FX charge in there as well. So was there anything kind of a bit more one off in nature that meant that the EBITDA number didn't quite Drop through to the bottom line. And then my second question for Stephen, it's really a big picture one really. You obviously been on the Board Quite a long time and followed this company and industry for even longer than that. What would you say in your words, is it That's in Grifols that excites you that you think we as investors miss.
Investors do love to hate Grifols a bit. What is it that the market is missing do you think? And then maybe a sort of corollary to that is if you could just click your fingers And change one thing about Grifols, what would that be?
Well, First, not to be contrary, but we don't take the view that the market is missing anything because we respect all of our Shareholders because we think they're owners of the business and the market is probably smarter than any of us individually. So, we're not bemoaning the fact that the market has not awarded Grifols over the last year or 2. Okay. So, our goal is to drive performance and then to make sure that we're transparent and communicating with the market and So if I stood back And look in the biggest picture, at Grifols, I think it's a great industry, which over time has proved to have A lot of resiliency and growth characteristics. And globally, I think that growth will continue with a high degree of operating leverage And I think a return to the margin structure that prevailed prior to the pandemic.
Clearly, at Grifols, there has been a Maybe not as much a focus on execution and performance, operational execution and performance as we might have had. I'm not pointing a finger at the past, but that's what we're going to be laser focused on. So, we do have a long term strategy, but we also have a short to medium term strategy. And that short to medium strategy is going to be very, very execution focused. So if I could snap my fingers, I would advance 2 or 3 years and we would have a highly accountable, highly incented, We performance driven organization that was just Really, really focused on execution and on delivery.
And I think we need to reinstill that in the organization a bit. But when you look at the big picture and you look at the platform and the portfolio of assets that Ripples has and the long term strategy, I'm extremely optimistic. That's why I stepped into this role.
Tom, to your first question, The drop in EBITDA margin mainly is driven by lower biopharma Margin associated to higher plasma cost, remember that the time lag between The plasma cost increase and the time that flows through the P and L. So now in the second half of the year, so including Q3 and Q4, We're going to see biopharma margin decline due to the higher plasma cost. To the net income amount, The lower sorry, I said lower EBITDA level. To the net income, the drop is due to additional financial expense, Remember, which is associated to the interest rate hike, despite the fact that we have 35% only floating That we had an impact, no doubt. And that impact once the interest rate is announced, It takes around 2, 3 months to hit our P and L because that's we have the quarterly interest rates revisit.
So that's why now we see in Q3 and also in Q4, we're going to see a higher financial expense. So that explain Why the net profit for the Q3 is lower.
Okay. Thank you, Alfredo. Now we are We have 3 more questions. So if you want to stay with us, we'll take these 3 and so to complete and to get the possibility to everybody. So we have to everybody.
So we have Rosy Turner from Jefferies. Rosy, hello.
Hi, good afternoon. Thank you very much for taking my questions. Three left for me, please. Just thinking about your plasma collection volumes up 25%, I noticed that 42 weeks of the year. So does that include Mexico and the border reopening?
And kind of Are you able to approximate kind of how much of that is Mexico versus U. S. Itself? Then following up on Alpha 1 competition, I just can we just recap the level of penetration? I think is it 70% of patients currently going under diagnosed?
And then finally, just on that competition theme, just checking we're still not seeing any impact from the Anti FcRn competition in myastivious scrubbers, am I correct there? Thank you.
Okay. I take the questions on Alpha 1. If I understood correctly, is the Level of diagnosis of the disease, what we think is the rate today, it's 90% of the Potential patients are being not under diagnosed. And we hope that with, again, this enhanced tour with the diagnostic Alpha-1 ID at home test, we can improve the level of diagnosis. I think this was the question Regarding Alpha 1.
And the other one is FCRM competition in myasthenia. Well, for brief hold, And the Astellia accounts, I think on the 3% of our revenues today, We are not highly worried about that as we don't depend much on that. And we will see the progress of these new products, and we will compete with our franchise. But it's not a big threat For the support in this indication.
Yes. Thank you. And on the Mexican?
Well, the Mexican, Since September that now we can operate regularly our centers For the border centers, we are seeing an accelerated return of these donors to our network. And we are seeing every other week a move, a progression from the level of volume being collected at those centers. And as you know, in pre pandemic levels, those centers were roughly collecting Around 1,000,000 meters and now we are in this ramp up and we are seeing the trend that at some point we will hit this level of 1,000,000 meters for those centers.
Okay. Thank you. And Julien Dumas from BNP. Hi, Julian. I hope you're still with us.
I'm still with you and thanks for squeezing me in. Appreciate and I'm sorry, I have two questions. One for One for Victor, one for Alfredo, if that's okay. The one for Steve is that you made it clear during the call that one of your focus is to return to Pre COVID margin levels are close to that. But do you plan to provide margin targets for the period 2023, 2025 because Over time, there's been some misunderstanding between Grifols and the investment community and some disappointments on profitability.
So do you plan to provide clear targets For us to build our models. So Victor, please, on the penetration for XemDefy, what Could you help us understand what you would do differently going forward to boost the penetration of this highly profitable product because it's been on the market for 3 years? So What can you do differently going forward in order to boost the penetration? And the last question for Alfredo is a housekeeping on net financial costs and following up on Tom's question. I think you had €200,000,000 in net financial costs in the first half of this year.
Is €400,000,000 as net financial cost for full year 2023 a good run rate? Or could it be higher than this?
Well, let me just start by addressing the first point, Which had to do with whether we're going to provide guidance in terms of EBITDA margins. Look, we're obviously in a Somewhat turbulent environment macroeconomically, other factors that will impact those margins, such as Synergies with BioTel such as the ability to continue to drive down cost per liter Plasma and when those costs will be realized through the income statement due to the capitalization into inventory initially and the long inventory cycle, Some of the other cost reductions that we're planning, the when exactly the new BioTest proteins will be approved Commercialized, even factors like inflation globally. So I think for us to Right. To provide long term EBITDA margin guidance is would not be prudent right now. I I think we'll revisit the question at least for 2023 in the coming few weeks or months.
But at the moment, We I don't think we'll be giving any kind of precise guidance beyond 2023 and even for 2023, I would ask you to be a little bit patient because there are a lot of factors that are impacting it.
Okay. Thank you, Steve. On the question regarding CHEMI5 franchise. As you know, we unfortunately, at the launch of this new product coincided Exactly. With the pandemic period, so during the 1st 2 years of the OpEx launch has been very challenging, not being able To be present at hospitals and meet customers and so on.
Said that, it's progressing nicely, The penetration of our product, the main characteristic that probably gives a competitive advantage is the Tolerability of the product for our patients. This is very well perceived by doctors And patience, of course. And we are progressing nicely. The weight of our Coutinho sales over the total IG is continued to grow. Now we are in the range of 3%, and we are targeting to move that Well, 5% proportion of IHS sales.
And in the mid future, we are developing the secondary indication for that franchise That will further improve the prospects of this nice product.
And then regarding the financial expense, I'm talking about the interest because within the financial expense, there are deferred financial Cost, there are FX, but just purely focused on the interest expense associated to our debt. Our quarterly run rate for this year is around $75,000,000 and expected to grow, as I mentioned, Because the impact in our accounts will be back loaded because the timing of the interest rate hikes, so expected that the quarterly interest Expense run rate will be around €100,000,000 Okay.
Thank you. And we have Alvaro Olenze from Alantra. Alvaro?
Hi. Thanks for hosting this call. I think that having this increased communication from the leadership is very welcome. Three quick questions. The first one is, you have announced several management changes over the last couple of months, whether you are now happy with the team as It is right now or we should expect any additional appointments?
2nd question is on cost cutting, whether you could quantify how much cost cutting you have identified And how much would you need to invest to achieve this cost cutting? Or if you are still working on these calculations and if you are still working, whether you will provide some Specific guidance on cost cutting once you have the plans ready. And the last question more philosophically on leverage. You Have historically targeted 4 times net debt to EBITDA as your long term goal, whether this could be a result. I know that there's still a long way to go to bring leverage Down to 4 times, but whether you could change this as a long term target.
Thanks.
Okay. Victor?
Thank you, Alvaro, for your questions. I will probably take the first part of your question, and then maybe Alfredo Ken, can complement. During the pandemic, and we have been announcing that and communicating that, we have been we have gone through several Kind of wide range of improvements of the operations of the company. We have closed the business units that were not profitable We're not going anymore for us in the case of Hemostasis business line, in blood bags, in Diagnostics division as well and certain hospital division assets. Now no longer the hospital division It's being reported isolated.
We have closed the facilities. We have gone to the Fit for Growth process in our Across the world. So many, many things to improve the operations of the company, the same for R and D. We have prioritized Or stopped and canceled some R and D projects as well. And subsequent to that, the final move As announced last Capital Markets Day was the reorganization of the company, now fully, fully accountable business units, And we needed specific presidents to run those business units.
Now we have Pia on board And Jordi on board. And with that, we feel that all this kind of reorganization has been completed with those two appointments. And now the organization is fully at speed with all the structure and all the talent in place To develop further operational improvements and to drive all what we have been talking during this hour call about improving the business overall.
Okay. To your couple of questions. First, cost cutting. Here, I will address Steve's initial comments. We're basically we're going to be focused on plasma cost, which is our main driver is where most of the costs are, I would say, in the company, including the company.
So this is very, very sedatives on driving the down the plasma cost, point number 1. Point number 2, The OpEx, basically lower fixed cost as well as higher efficiency, delayering And there are many, I would say, initiatives now ongoing. Let me not provide you with more color because now Steve just joined and this is one of our top priorities, which is in our table. So we are working on this and we will provide you more color later on. Regarding the leverage, as I already mentioned, we will use whatever it takes, both organic and nonorganic levers To be at the target, I would say, financial discipline level, which is 4 times But we know, especially, as I said, ahead of the 2025 debt partial debt refinancing.
Okay. And with that, we come to an end. Thank you, everybody, for joining. As always, the Investor Relations and Sustainability team will be happy to take any additional questions or any concerns or anywhere that how we can help and speak to you all soon. Thank you.