Good morning. Thank you for waiting. Welcome to Blau Farmacêutica's Q2 2022 Earnings Conference Call. Today we have with us Marcelo Hahn, CEO, Rogério Ferreira, CFO and IRO, and Bruna Gambôa, Head of IR. I would like to remind you that we will have a Q&A session at the end of the call, and everyone is welcome to ask questions through the chat at the webcast. Our call will be held in Portuguese with simultaneous interpreting into English. Also, the webcast is being recorded and will be available on our IR website. Now, I would like to turn the floor to Marcelo Hahn to start the presentation.
Good morning, everyone. Thank you, Bruna. Welcome to our conference call to discuss Q2 2022 earnings.
First of all, on slide two, I would like to present the company's new administrative structure with two new executives joining, Rafael Barrientos, Vice President of Operations, and Lucilene Scurato, People Management and ESG Officer. We are very happy with their arrival. Rafael has more than 20 years of experience in the industry, and Lucilene has worked in human resources for over 25 years in the pharmaceutical, healthcare, and retail segments. As announced a few weeks ago, as of August 15, Douglas Rodrigues will take over as CFO and IRO, replacing Rogério, who will stay with us until August 14. For those of you who do not know Douglas, between 2018 and 2021, he served as CFO and IRO at Blau Farmacêutica and previously worked in the finance department of important companies in the pharmaceutical industry. I would like to take this opportunity to welcome Douglas, Rafael, and Lucilene.
We also had a change in the role of Roberto Morais, who since the beginning of the year was already been working on the M&A front and running the company's operations in North America. Roque Ocanha, who besides being responsible for new businesses, is also in charge of the international operations in Latin America that have been posting strong growth in recent quarters. Moving on to slide 3 of the presentation, let's talk about the main highlights of the quarter. We started our history 35 years ago, and year after year, we have been offering to the market products with a high level of innovation and technology to always be in the forefront of the market. We continue to enjoy consistent growth. In this quarter, we posted a record net income of BRL 112 million with a net margin greater than 30%.
Even in a scenario of political and economic uncertainties, we continue to prove ourselves resilient and innovative, and today, we are sure of the winning portfolio of products we have in-house. In Q2, we recorded the second-highest historical revenue of the company, BRL 365 million, and had important highlights, such as the units of biologicals and others, which showed strong growth of over 40% over last year. In addition to the success of new products developed by Blau Inventor and sold in the last 12 months, which accounted for 5% of the company's revenues of the period. Our biologicals unit had an excellent performance, reflecting an improved performance of Immunoglobulin, which posted strong growth quarter-on-quarter, as well as the delivery of Alfaepoetina to the Ministry of Health.
In the unit of others in Q2, we recorded an increase in sales of dermocosmetic botulinum toxin, by about 200% compared to Q2 2021, reflecting the return to normality of aesthetic procedures in a post-pandemic scenario, in addition to reduced supply by competitors in the period. Another important highlight was the foreign market revenue, not including the U.S. operation, which grew in foreign currency 34% over the previous year, reflecting the strong increase in sales of our Latin American subsidiaries. Specialties and oncologicals are still suffering the impact of strong competition, which ends up being greater in synthetic products, but we are confident regarding the performance of the two units in the second half of the year, since we expect a faster ramp-up of the new products which have better margins compared with the average of the company's portfolio.
Investments in R&D and I are part of Blau's strategic pillars and help drive our future results. In this quarter, our investments in R&D and I totaled BRL 19 million, representing 5% of net revenue. In the quarter, we submitted nine applications for product registration and product registrations and obtained the registration of 15 new drugs in Latin America. We also launched four products. In Uruguay, we launched ampicilina sódica + sulbactam sódico, and in Brazil, we launched letrozole, polymyxin B, in addition to Noxx biologic product developed by comparability, a biosimilar drug that is a new presentation of enoxaparin and has an addressable market of over BRL 900 million. We continue with the expansion works in our four plants to produce the new drugs that are under development by Blau Inventor.
Building B-210 is already in the qualification and validation process, and in August, we will start producing the first pilot batches. Our API plant, B-400, is also in the validation and qualification phase, preparing us to start clinical trials of the drugs produced with our API. I would also like to highlight that in September, we are going to officially open our office in São Paulo, and we will start the expansion works of Blau Inventor, accelerating even further the development of new products. The construction work at the Pernambuco Industrial Complex had a small delay due to land title legalization issues, but with no significant impact on the project's delivery schedule. Our forecast is to start the operation of our packaging lines in the first quarter of 2024.
Moving on to slide four. I will quickly go over the main financial highlights of the quarter, and then Rogério will explain these in more details to you. As I have already mentioned in the previous slide, this quarter, the company posted a strong improvement of results compared to first quarter 2022, demonstrating a recovery since Q3 2021. In the quarterly comparison, net revenues grew 17% with net income expanding by more than 80%. We posted record net income of BRL 112 million, and even if we exclude the positive impact of the currency hedge and foreign currency cash from our financial results, still, adjusted net income would have reached BRL 97 million with an adjusted net margin of 27%, one of the highest levels in our history.
Looking ahead to the coming months, we have good opportunities to capture and bring even more substantial revenues. On slide 5, we show the pipeline of new products that will be launched. We currently have a pipeline in Brazil with an addressable market totaling BRL 7.7 billion, considering projects developed internally by Blau Inventor and partnerships under development. In the first half of the year, we launched 4 new products in Brazil with a total addressable market of BRL 460 million. Historically, Blau captures on average about 27% market share in the markets where we operate. On slide 6 of the presentation, we provide more information about MROs. The U.S. plasma collection operation continues to expand. In June, we recorded the highest volume collected since the opening of our first center, reaching 41% of its current capacity.
This quarter, we recorded an increase in collected volume of about 10% over Q1 2022. Construction work on the second center was briefly interrupted during the second quarter due to a one-time delay in obtaining the fire department permit, but this has been solved, and construction was already resumed at the end of the quarter, with operations expected to start in Q4 2022. The locations of the third and fourth centers have already been defined both in shopping malls in Florida, and both are in a contract negotiation phase. The second, third, and fourth centers are located in areas with low competition, which should further accelerate the ramp-up process of these centers. With the approaching economic recession and rising unemployment rate in the United States, these centers should benefit from people's increased interest in donating, which serves as an income supplement for much of the population.
Moving on to slide seven, we present our main ESG and innovation initiatives of the period. In addition to constant investment in important projects such as the digital information packaging insert, augmented reality product, unitarization and serialization and traceability throughout the production chain, we remain committed to the best environmental, social, and governance practices. From the environmental point of view, we highlight the zero landfill program in which Blau no longer sends its waste to landfills, but to recycling. We also offset the carbon emitted by our commercial fleet and use electric trucks for the distribution of medicines in the São Paulo city region. In the social pillar, we support sports and reputable institutions that also believe in and contribute to the mission of transforming society around them. In this quarter, we expanded our internal project of approaching social entities that support the elderly and youth with intellectual disabilities.
Lastly, in line with the best market practices and reinforcing our commitment to transparency and ethics, in July, Blau published its second annual sustainability report, prepared according to GRI guidelines in which we remapped our materiality matrix and involved more than 500 stakeholders from different segments. In the material, we present the main achievements and environmental, social, and governance initiatives achieved by Blau in the year of 2021. For Blau, ESG is a journey that has already begun. We have already evolved a lot, and we will continue to work at this space. Now I turn the floor to Rogério Ferreira, our CFO, to present further details of our financial performance. Thank you very much.
Thank you, Marcelo. Good day, everyone.
Please go to slide 8, where we present our detailed net revenue, which reached BRL 365 million in Q2, up 17% quarter-on-quarter and down a slight 1.5% year-over-year. I would like to detail the performance of the specialties and oncological units, which continued to be pressured by the fierce competitive scenario. In specialties, it is worth highlighting the resumption of activities at Blau Goiás with an increase in the volume produced by the unit of about 10% in relation to Q1 2022. We also highlight the performance of new drugs launched in Q1, which accounted for about 12% of specialties revenues this quarter. Looking at the chart at the bottom of slide 8, just like in Q1, about 25% of this quarter's revenue came from the public sector.
Compared to previous quarters, this expansion was one-off and related to the sale of Alfaepoetina to the Ministry of Health. On slide nine, we present the quarter's gross profit and EBITDA. In Q2, total company costs represented 54% of net revenues versus 48% in Q1 2022 and 48% also in Q2 2021. Gross profit totaled BRL 167 million in the period, up 3% quarter-on-quarter and down 14% year-over-year. Gross margin reached 46% in the quarter, a retraction in both the quarterly and yearly comparison impacted by the unfavorable mix, inflation, and competitive dynamics in the specialties and oncological units. We ended the quarter with an EBITDA of BRL 121 million. The third consecutive quarter of growth with an EBITDA margin of 33%.
Moving on to slide 10, let's talk a little about the company's operating expenses. In Q2, operating expenses totaled BRL 51 million, or 14% of net revenue. In the year-over-year comparison, the increase in general and administrative expenses reflect a more robust structure in this post-IPO period, as well as expenses related to the ramp-up of the first plasma collection center in the United States, plus inflation in the period. We remain focused on our operational leverage, demonstrating the efficiency of our business model and accelerating investments in research and development to accelerate future growth. In the quarter, R&D and IT expenses were BRL 11 million, equivalent to 3% of net revenues, the same nominal level in both the yearly and quarterly comparisons.
Blau's total investments in RD&I accounted for in both operational expenses and intangible assets reached BRL 19 million in the quarter, 5% of net revenue. Moving on to slide 11, we present the financial result and net income for the period. As mentioned before this quarter, we had the positive impact of the BRL depreciation on the financial result of Blau, reflected in the line items of FX and unrealized results with derivatives. Since at the end of June, the company had cash in foreign currency and a contracted hedge totaling $54 million. With this BRL depreciation in the second quarter, we have practically offset the negative effect on the financial result recorded in the first quarter.
With regard to income tax and social contribution this quarter, we benefited from greater use of tax benefits from the Lei do Bem, the Good Law, and from the payment of interest on equity. We ended the quarter with net profit of BRL 112 million, with an effective income tax rate of 23.4% against 31%. In the past, net margin reached 31% in the period, up four percentage points year on year and up eleven percentage points quarter on quarter. Even excluding the positive impact of our hedge operation and foreign currency cash, we would have recorded an adjusted net income of BRL 97 million with an adjusted net margin of 27%, one of the highest margins historically, in line with the net margin of Q2 2021, which was an excellent quarter for Blau.
In absolute terms, we are BRL 10 million above Q1 2022, also normalized. We now move on to the analysis of the main accounts of the company's balance sheet, slide 12 of the presentation. As regards CapEx, we maintained the level of investments at around BRL 40 million, an acceleration of 15% compared to Q1 2022, and we continue on the growth path of the last 12 months. Here it is worth mentioning that we had a one-off delay in the start of construction of PE-1000, but without a major impact on the project's start up expected for Q1 2024. Because of this, we have revised the projected CapEx for this project to 2022, an estimated disbursement between BRL 50 million and BRL 100 million this year.
Looking at working capital, we had expected an improvement in this quarter already, but we ended the period with working capital in relation to net revenue at the same level as in the previous quarter. The customers line remained at the same level of days as first quarter, reflecting the concentration of sales and delivery of Alfaepoetina to the Ministry of Health in June. In turn, the line of suppliers posted an improvement in line with our expectations, showing the rebalancing of the payment terms to suppliers since in Q1 2022, prepayments were made to suppliers to take advantage of the BRL appreciation against foreign currencies. As regards days of inventory, DIO, despite increase in the total number of days of inventory this quarter, we had the lowest level of finished and semi-finished products since the beginning of the pandemic.
We had an increase in imports and raw materials. It is worth noting that a higher inventory level leads us to have no shortage of inputs for the production of our own medicines in a context of global inflation pressure. Moving on to the last slide of the presentation on page 13, we present a detailed breakdown of Blau's indebtedness. We ended the quarter with a net cash position of BRL 496 million, and our gross debt is made up of two debenture issues totaling BRL 303 million. Regarding the debt maturity schedule, we have maturities until 2027 at a very attractive cost of CDI + 1.09%. Thank you very much. Now we will open the Q&A session.
Our first question is by Gustavo Miele with Goldman Sachs.
Good morning. I have two questions.
With the competitive environment in immunoglobulin, looking forward, and mainly given this scenario of an Anvisa waiver for the sale of the unregistered drug, should we understand that this Anvisa waiver should be extended to stimulate competition? How are you thinking about the safety inventory level for the rest of the year 2023? Do you understand that a more conservative storage policy is good given the more challenging negotiation with suppliers? Would you intend to adopt this new storage or inventory level?
Well, Gustavo, thank you very much. Regarding your questions about the market and the competitive market of immunoglobulin and the waiver by Anvisa for the import of unregistered medications, this waiver has expired on July 31. We have no news that this is going to be extended.
Meanwhile, Anvisa released the press control of immunoglobulin, and we believe that this is going to be normality in the supply of immunoglobulin by all manufacturers that have a registration for this in Brazil. I believe that the market will go back to its normality of medications with registration and with safety to supply the market. Also, a lot of these medications are paid by the health insurance and HMOs. Many of these do not accept to reimburse unregistered medications. They don't want to create this precedent of paying for other unregistered medications because this has happened in Brazil. The courts are making the insurance companies pay for these medications. In the market, they do not pay for any medication that is unregistered. Regardless of the waiver for unregistered drugs, the market resists to buy unregistered medications.
We believe that this will favor registered drugs and medicines in the market. Regarding a second question about the level of safe inventory for this year, in 2023, we have been reducing the level of inventory because we believe that the market is becoming normal again. The logistics is getting normalized again. Well, we're not seeing any lockdowns anymore. So the market, in our opinion, is going back to normal in the production of APIs. We understand that in the future we are going to have a reduction of our safety inventories so that we can have a better performance. Regarding this conservative inventory policy that you mentioned, you said that the market is challenging. It is exactly what I mentioned.
We believe that the market is going back to normalcy, and we don't believe we will need to increase our inventory in the coming quarters.
Thank you very much.
Next question by Vinicius Figueiredo with Itaú BBA. Could you elaborate on the environment for the sale of immunoglobulin past this exceptional import period for unregistered product in Brazil? Could you elaborate on that? And we saw a better working capital for the company. Could you elaborate on that? Hello, Vina. Regarding your question, I think that I kind of answered part of it in my first answer when I spoke about immunoglobulin. Again, stress. The company in the second half will have a great inventory. We already have product in our inventory in-house, so that makes deliveries and supplying the demand easier. Our product is standardized in large hospitals in Brazil.
We benefit from that. Our registered product is reimbursed by the HMOs and insurance companies, so that favors us. Overall, we understand that in the second half of the year, we have the necessary amount to supply the market and reach the expected results for the company. For next year, in negotiating with our supplier, we believe that we're going to have greater amounts of immunoglobulin than this year because this global lockdown problem, well, it's all going back to normalcy and we understand that supply is becoming normal again. For the coming months, we expect to have 100% normalcy. Next question by Leandro Bastos with Citi. Good morning. Could you elaborate on the sales trend of immunoglobulin for the second half of the year? I think we spoke about that. Could you break down between price and volume?
How is the competitive scenario evolving in specialties? He also asked for an update regarding a timeline and CapEx level for PE-1000. Well, good morning, Leandro. Regarding the question about immunoglobulin, I think it's worth pointing out that the company, through CMED, was able to get a price release for immunoglobulin and all registered drugs in the market, not just immunoglobulin. We understand that price will contribute to improve the company's results and have a greater amount for the second half of the year. We believe that we will deliver the expected results in the second half of the year. Regarding CapEx, I will turn the floor to Rogério. Rogério, you can answer that one.
Thank you, Marcelo. As regards CapEx, we have been revisiting our CapEx.
As I mentioned in the release, there were some delays due to land legalization issues, but we are starting the earth-moving works in Pernambuco, and we are detailing the whole construction work and working on the expenses. There are a lot of pieces moving. We have high inflation, higher costs that we are considering, and on the other hand, some benefits such as a more favorable FX rate than in the moment when we came up with our estimates. We're in the middle of a revision now. What I can say is that perhaps the total investment could increase a little, but not significantly. This is something that will have a more long-term impact.
It will not impact our short-term phasing, except for year one, where we provided an indication that we will spend slightly less than what we had considered for year one of the project. Thank you. Next question by Ian with BTG. I will skip the part of Immunoglobulin because we answered. The second question is regarding specialties. We see that competitive pressure continues. Do you expect this dynamic to continue? Do you expect that the launch of new medications will bring a relevant impact on specialties still this year? Do we see an improvement in working capital dynamics, particularly days of suppliers? Can we expect a normality of inventories for the next quarters?
Thank you, Ian. Yes. We see specialties facing competition, but the company has been launching new medications. In these new medications, we face less competition, and we have better margins.
We believe that these new drugs will be contributing to an improved performance of the specialties unit. The other part of the question will be answered by Rogério. This is Rogério speaking. Regarding working capital, as you could see, we have been trying to improve our working capital. We already expected to have an improvement in suppliers, which happened. In Q1, we placed some orders to enjoy more favorable foreign exchange rate. In the second quarter, we have gone back to normalcy, with an average day of suppliers more in line with what we consider to be a normal level. As regards accounts receivable, DSO, days of sales outstanding, it's kind of in line with the previous quarter. We expected a certain improvement, but we didn't see that. Haven't seen that yet. We have greater share of the public sector.
If we split DSO into private and public sector, in the private sector, we improved a little. In the public sector, we got a little worse. At the end of the day, kind of the same. We expect to improve days of sales outstanding in the coming quarters. Regarding inventory, we saw a very favorable evolution of finished and semi-finished goods, achieving the lowest level since the beginning of the pandemic. There was an increase in raw materials related to first quarter purchases and some second quarter purchases. In the second quarter, we had more favorable rates, so we have a slightly higher raw materials inventory, slightly higher than we planned. We have been focusing a lot in this metric of inventory and working capital, as Marcelo mentioned. We have been seeing a normalcy in the market regarding supply.
should favor a reduction of our inventory in the future. Next question by Stella Ujvari with J.P. Morgan. She says, "Good morning, everyone. Could you share the breakdown of the BRL 7.7 billion of total addressable market of the pipeline? How much refers to partnerships? How much refers to in-house Blau development?"
Hello, Stella. Good morning. Regarding the breakdown, we have in our report when we publish it, we disclose this, and we have a breakdown by area. That's the kind of disclosure that we're making. Bruna can send this breakdown to you directly, okay? Regarding the second part of the question, Rogério will answer. The breakdown between in-house projects and partnership projects is kind of 50-50, considering the volume for this period. That's kind of the split that we have, 50-50. Next question by Vitor Pini.
Good morning, everyone.
What is your sales expectation for the second quarter? Level of Alfaepoetina of BRL 70 million per quarter, is it recurring? Immunoglobulin, is it going back to pre-pandemic levels? What can we expect for margins? Are costs impacted by inflation? What about the competitive landscape? Well, thank you for the question. Regarding if Alfaepoetina sales is recurring. It's not recurring because this is a public bidding process, so we don't really know the result of the next bidding process because it hasn't happened yet. We don't know what's going to happen in the future. We know what is happening with the current contract. We have another delivery for this quarter. As for Immunoglobulin, we have more Immunoglobulin for the second half of the year, but it hasn't reached the pre-pandemic levels yet.
It is a sufficient amount for us to meet and execute our business plan in the second half of the year. Let me see the rest of the questions. Bruna, what were the other questions? The margins underwent a slight correction, and we expected to have margins going back to normal in the second half of the year because we had some price releases for some medications whose prices or whose margins were very, very tight. Just like Immunoglobulin, we had other drugs that had a price release by the government, by CMED, and this is going to contribute to improvement in the second half of the year so that we can bring our margins back to higher levels, improve our margins.
The last question by Carlos de la Rochette with Condor, he asks us to elaborate on the competition in oncologicals and specialties and whether we have been having difficulties in passing through cost to clients. Thank you, Carlos. Yes. We have faced more competitiveness in oncologicals and specialties. We are launching new medications, particularly in oncology, and the company's idea is that these new drugs, because they will face less competition, will be able to bring in better margins, and the same goes for specialties. We understand that this broadened portfolio with better margin drugs will improve the margin. We are now closing the question-and-answer session. I turn the floor back to Marcelo Hahn for his final remarks.
Folks, as you could see, and for those of you who have been following us for a long time, it is very gratifying to see Blau Farmacêutica's success and transformation over the last few years. Our portfolio remains robust and growing, and we're already reaping the rewards of our R&D investments with a diverse and promising future pipeline. In 2022, we will celebrate 35 years of history, and we are just getting started. We had a first quarter with a lot of competition and many products being sold without registration by Anvisa, being sold in the market, in addition to the strong competition we face in specialties and oncology. The results are here, and they show that in time, the market will have more confidence in the market where we operate.
We are confident that in the second half of the year, we'll have opportunities to deliver better results following our business plan. We have a lot going on. In addition to products recently launched, which are in a ramp-up process, we continue to work in all Blau's growth fronts, and we remain very attentive to possible M&As and partnerships. We remain focused on bringing promising results and generating value for our shareholders and stakeholders. Thank you very much for your time, and have a great day.