Good morning, ladies and gentlemen, and welcome to Hypera Pharma's conference call, where we will be talking about the second quarter of 2022 earnings. We have with us Mr. Breno Oliveira, CEO, and Mr. Adalmario Couto, executive director of investor relations or IRO. We'd like to inform you that this event is being recorded, and you may watch it on the company's investor relations website, hypera.com.br/ri. We'd like to inform you that all participants will be in listen-only mode during the presentation. Afterwards, we will have the questions and answer session when further instructions will be given. Before we continue, I'd like to underscore some of the information mentioned in this conference call may refer to projections or statements about the future.
They're subject to risks known and unknown and uncertainties that can lead them to not come to pass or differ substantially from what was expected. Now I'd like to give the floor to Mr. Breno Oliveira, who will begin the presentation. Mr. Oliveira, over to you. Good morning, everyone. Welcome to our conference call for the second quarter of 2022. I'm going to begin this presentation, speaking about our growth on slide three. This quarter, our organic sell-out grew above the market by 25% or 6.5 percentage points. Our leading brands in our portfolio made a huge difference once again, and we gained market share for the seventh consecutive quarter across all business units. Our highlights were our power brands, the more traditional ones from Hypera and the ones we've recently acquired.
Besides the performance of our leading brands and accelerated launches, our internal raw material inventory policy and our finished products with our clients have been very efficient and have contributed towards our sell-out growth. From the beginning of COVID, we decided to operate at higher inventory levels for our main raw materials from China and India, and we kept healthy levels of finished goods with our clients. This has ensured that we have a good supply of most of our products in pharmacies and distributors, and we've managed to grow across our main products, especially during the time in which we had less availability of pharmaceutical products. We continue to innovate to strengthen our market share in the Brazilian pharma industry even more.
This quarter, we've invested over BRL 120 million in innovation, research, and development, and we've had important launches, which I will mention on slide four. We launched the patented estrogen-free contraception drug, Iumi, which is a milestone for Hypera Pharma going into a category that represents BRL 1.7 billion. Besides that, we launched Epocler Todo Dia, our first extension of the power brand Epocler line, and Buscofem Hot, the first line extension for Buscofem since its acquisition in 2020. We have over 100 products that will add BRL 1.6 billion to our gross revenue when they reach peak sales in five years. The company continues to invest to boost its sell-out growth and to go into new markets. In this quarter, we reinforced our medical board with Dr.
Fernando Bacal, who is the Director of the Transplantation Group at InCor, and Dr. Yana Zogbi, who runs the oncology center at the Hospital Sírio-Libanês. They will help us in developing our innovation pipeline for the institutional market and also for prescription drugs. We continue to invest on our growth, and we maintain our commitment to our business's sustainability, paying our shareholders and well-being for our stakeholders, which I'll mention on slide five. This quarter, we advanced our strategies to the institutional market. We had a net revenue of BRL 1.8 billion, a growth of 25%, with immunoglobulin providing additional returns. We are still firm on our initiatives to gain participation in our market. Expansion capacity for injectables, as we mentioned in 2021, will be concluded this year and will add our capacity or production capacity next year.
We continue to advance in our R&D area exclusively for this market to support our innovation pipeline. In the second quarter, we declared interest on own capital of BRL 194 million or BRL 0.31 per share. This was published in our 2021 annual report, showing our main highlights and initiatives in environmental, social, and economic standpoints, including our emission reduction plan, which will add value and help people to live longer and better. I'll now pass the floor to Adalmario, who's going to give us some more details on these results. Thank you, Breno. Good morning, everyone. This quarter, our net revenue was 26% higher than the comparative period. An organic growth of the company's brand portfolio, and then the recently launched products, which had a significant contribution, nearly 30% this quarter.
We also had contributions from sales to the institutional market, which were above BRL 128 million this quarter, and a contribution from the net revenues from the brands acquired from Sanofi. Our gross margins were 64% versus 65.5% in the second quarter of 2021. This is a consequence especially of a higher share of products in the hospital channel from our product mix. We also had some specific inputs at higher costs due to a higher demand during this period. This impact we received from the gross margin in an institutional market does not affect our EBITDA margin much, considering we have a lower relevance there in marketing investments and in sales in this market versus the retail segment.
As Breno mentioned, our power brands had another strong quarter in growth, contributing to dilute operational expenses, especially marketing expenses, which went up 5% year-over-year. Above BRL 300 million this quarter. This also had a dilution from acquisitions, which continued to impact our expenses positively. There was a reduction of 3.3 percentage points on expenses versus net revenues. Expenses in sales represented 10% of our net revenue this quarter, which is similar to what we had last year. They were benefited from the dilution of R&D used during this time. This quarter, we also received a benefit of BRL 11 million from Lei do Bem.
When we include the amount capitalized as intangible assets and the total investments in R&D, they were 6.5% of our net revenue this quarter, or nearly two percentage points above the comparative period last year. These R&D investments consider all the efforts we're making to develop the product pipeline in the institutional market. As we said before, we've mapped over 70 projects with an addressable market above BRL 12 billion. In SG&A, we had a reduction, and this reflects the capture of the synergies captured in integrating the brands acquired from Sanofi. With that, EBITDA margin from continued operations, excluding the others, was 1.5 percentage point higher than the second quarter of 2021, reaching 35.6%. Net income of continued operations was BRL 455 million this quarter.
There was an impact from financial operations, nearly BRL 138 million, given that the company needed to take some debt for the acquisitions and debt now has a higher cost. Continuing with our cash flow and debt in this quarter on slide seven. We had record operational cash generation for a second quarter, BRL 535 million, even considering the initial investment of BRL 47 million for the working capital and for the brand portfolio acquired from Sanofi. This quarter, we invested 38% of our net revenue in working capital versus 36% in the second quarter of 2021. This higher variation in working capital was due to increased inventory days for raw materials, and this is in line with our strategy of having a higher safety inventory, creating a buffer for the most strategic inputs.
After the CapEx investments focused on expanding production capacity, a new lab and a pilot channel for the institutional, we had a free cash generation of BRL 364 million. We also had a net output of BRL 435 million in the financing cash flow with an amortization of BRL 230 million and the remaining for interest rates. Therefore, our cash position at the end of June was BRL 1.5 billion and our net debt above BRL 6.5 billion or 2.5 times the EBITDA considered in our guidance for 2022. We're also working in new ways of capturing funds to expand our debt terms and to keep an attractive and low spread.
With that, we maintain our commitment to the company's main financial goals, protecting liquidity, increasing cash generation to deleverage our balance, and reinvesting any excess cash to support our organic growth through our product pipelines, our production capacity, entering new channels, and our digital initiatives. That's it for me, and we'll now return to Breno, who's going to make his closing remarks. Thank you, Adalmario. To conclude, I'd like to restate that we're very happy about the company's results for the first half of the year. With the gain in market share that we had during this time, we became the biggest pharma company in the Brazilian industry. I'd like to thank our employees for their work and their collaboration, but also our clients, partners, and consumers.
For the second half of the year, we will continue focused on generating cash, integrating the portfolio we acquired from Sanofi and expanding our sell-out. We are still confident about the guidance as we set out for 2022. I'd like to invite everyone to our Hype Day, which will happen on September first. We will send you further details soon. Thank you. Now we will continue with the Q&A session. We will now begin the Q&A session for investors and analysts. If you'd like to ask a question, you can click on the Raise Hand button. If your question has been answered, you can lower your hand again. First question will be asked by Bob Ford from Bank of America. Mr. Ford, your microphone can now be turned on. Mr. Ford, you may now turn on your microphone and ask your question. Thank you. Good morning.
Congratulations, Adalmario, for your results. I'd like to ask about market share improvements during this quarter. How do you see your market share and how much should we consider for the future? If you could tell us a bit more about that. Finally, do you think the elections affect your sales, power brands, digital? Thank you. Hi, Bob. Good morning. Your audio was not very good, so we didn't get your questions. I think the first one was related to market share, and I'll answer that one. I think you might have asked about sustainability and market share gains. Then I'll ask you to repeat your other questions. Considering market share gains, we are confident that these gains are sustainable on the long term. We are collecting the results from the efforts we made in the last years.
The entire Hypera team, with all the investments that were made in R&D since 2017, where we invested more in research and development and in expanding production capacity. This is an effort we've been making. The decisions we started in 2018 and the investments we started in 2019. Now we're starting to collect the results of these investments, these initiatives, and also the acquisitions we made. As we said, since the end of the acquisitions, we have seen higher leverage in these brands in our go-to-market platform. That has led to concrete results. Our market share gains are sustainable. We often get asked about categories that were benefited by COVID, like anti-flu medications and drugs related to the respiratory system. What we see is growth across the board in many categories.
As I said, this was across all the company's categories, generics and similars, skin care, which basically is not impacted by this movement. Currently, the weight of these product lines that we depended most on in the past, like flu medication and vitamin D, considering the Hypera portfolio, they are much less representative than they used to be. We're very confident that the gains will be maintained. Does that answer your question? Yes, that answers it very well. Thank you. If you can tell us a bit about Buscopan and improved margins. Right. Considering the verticalization, it's a long-term movement. We have a process to transfer technologies over the next two years, but we really believe in improving our margins.
The most important thing we're seeing from this trend, you know, of having more raw materials available, is much more about ensuring that it will be available and avoiding ruptures, having more controls over the chain. This is what motivated us to acquire this plant and technologies. Right. There was a significant reduction in marketing expenses. Is that sustainable or was it seasonal? Bob, this is a reflection, a reduction of our marketing as a percentage of our revenue is a reflection of the mix change in our portfolio. By gaining market share, by expanding the generics and similars market, in the institutional market as well, it contributes. The main contribution for the dilution of these expenses, besides acquisitions, the acquisitions we made and that become more efficient, especially in fixed expenses, by diluting fixed expenses with a greater product portfolio.
There's another factor that contributes here, which are the line extensions we're making. With that marketing percentage, we can be more efficient in positioning it to have a better product portfolio under the umbrella brand. I think that is the reason why we have been able to dilute marketing expenses and maintain efficiencies in these expenses, which are all reflected in our recent market share gains. Yes, Bob, to add to that, although we see a dilution as a percentage of the net revenue this quarter, the investments we made in marketing were at record levels. The company has never invested more in a single quarter. We continue to invest more to support all of our power brands, making line extensions.
As Breno said, given our mix in some portfolios and some categories that don't have these investments that are also growing, we see a dilution and synergies also of the line extensions we acquired. We've made big investments. We're growing in digital. You know, a number of years ago, we had minimal investments in digital. Now about 50% of our media investment has been in digital as well. We can speak directly to our consumers and our targets. We want to continue increasing it. Great. Thank you and congratulations. Thank you, Bob. As a reminder, if you'd like to ask a question, you can click on the Raise Hand button. The next question will be asked by Joseph Giordano from JPMorgan. Hi, good morning, everyone. Good morning, Breno and Adalmario. Thank you for taking my question. I actually have three.
The first is about the pipeline of 100 products to be launched short-term. I'd like to hear about how that is split between retail and institutional. I'd just like to understand how fast we're accelerating this expansion institutionally. Looking at a product that you highlighted, the second question, immunoglobulin. I understand that you don't have a permanent registry for the product, but how is that being dealt with by the health authorities? Also, you mentioned inventory for raw materials, which I think is very important, but I'd like to ask about API prices. Has that been stabilized? Is the supply chain normalized now? That's it. Thank you. Hi, Joe. Good morning. To answer your first question, and I'll let Breno answer your other ones.
In this pipeline of 100 products, we have already launched nearly 30%, by July, and now we will have an acceleration in the second quarter. Most launches are for the retail channel. We have 95 launches in retail this year. Many of them are line extensions, but also going into new categories that we did not work in before. Breno had mentioned, contraception. Gynecology is also an area that we are very strong in, but we didn't have, contraception. Now we can come in with a new generation drug that is patented as well. We have a patent for the molecule at this concentration, and we will have it until 2031. There are many other innovative launches to come in the second quarter. Or excuse me, in the second half of the year.
We have seven launches in the institutional channel. We've had two by July, and we will have five more until the end of the year. I don't know if that answers your question. It does. Thank you. Joseph, about immunoglobulin. We do not have and we do not want to give any information on registries due to competitive issues, but obviously we're working on it so that we can get a permanent registry. It's an important product for the institutional segment, and we'll try to be a part of that market. With the temporary authorization, we've brought in products to support our sales for the second half of the year. We already have the product, and we should have additional sales and immunoglobulin over this year.
We're going to be working on getting this as quick as we can because it's very important for the institutional market. Considering price dynamics and safety inventory, we see a wide price variation. Some APIs have significant price increases. We see some of them stabilizing or even reducing in some of them. Some of the ones that had relevant price increases in the last months. On the other hand, considering the lack of APIs and Anvisa in the last few years has made it much more flexible rules to register and include new suppliers. We have benefited from that. We're able to bring in other manufacturers, include them in the registry, buy from them, and promote more price competition among them for some molecules.
There's an effect of these two factors which generates a higher price, which is being offset by the increases due to higher inflation and higher price increases authorized by CMED. Net to net, we do believe that price has increased, but that will probably normalize in the next months. Great. Thank you, Breno. As a reminder, if you'd like to ask a question, click on the Raise Hand button. The next question will be asked by Mr. Gustavo Miele from Goldman Sachs. You may now turn on your microphone. Good morning, Breno and Adalmario. Thank you for that presentation. We have a couple of questions on our side. First, if you could give us an update on a drug that was very relevant last year, which was rivaroxaban. Do you see any relevant changes in the competition for this category?
Is there space for any kind of relevant extension for this drug, and how do you project it for the future? Its figure has been very robust, so do you believe it will continue to mature? Is there still space to grow? That's my first question. My second question is about updating the verticalization process that you had announced for Buscopan. Do you believe there is some room to ramp that up? Do you think that there's a possibility of having any similar movements for other drugs in the company? That's all. Thank you. Hi, Gustavo. I'll answer the first one. About rivaroxaban, we're very happy about the results that we've been having in the eight months we've been in the market.
As we said, we managed to be the first brand to promote the molecule as a prescription, and we're doing very well. In prescription and generics, they have been launched and they're both performing very well. We have some line extensions to come. They've been in for an association with rivaroxaban, and that make a lot of sense from the clinical standpoint, but we don't want to mention it too soon. It's a major relevant molecule, and we were very assertive in being the first to launch, and now we're collecting the results of being the first to launch. There are some other molecules, as we said before, that are losing their patents this year, and we believe we'll be the first to launch them. Some will be launched next month.
We're very confident in the fact that we'll be able to lead in this market. We mentioned this during Hype Day last year. We have a major pipeline of molecules that are no longer exclusive, and we're working a lot with our internal developers to lead this and to come ahead of our, the competition. There's a lot still to come in our pipeline. Considering verticalization of APIs, Bob had asked about this before. As I mentioned, it's an effort that we're beginning now, but to have results in a number of years. When we conclude the tech, the tech transfer and the API production, it should be by 2024. Our goal is to learn and maybe to use it for other APIs, especially phytotherapy. Brazil does not come at a competitive disadvantage versus China and India in producing these APIs.
That's something that we're looking at closely, but it can be applied to other phytotherapy drugs. Thank you. Great. The next question will be asked by Vinicius Figueiredo from Itaú Bank. Vinicius, your microphone can be turned on now. Good morning, everyone. Thank you for taking my question. This continues Joe's question. You had made a lot of growth in the institutional market. I'd just like to understand how reproducible this level of revenue is in this channel. Of course, you mentioned there will be a demand for immunotherapy that should continue, but I'd just like to understand if that can be recurrent. I'd also like to ask about your sell-out and sell-in performance. This gap was widened, so I'd like to know what your inventory levels are in this channel.
I'd also like to ask, you know, when you look at accounts receivable, it went down sequentially. I'd just like to understand if you are out of inventory in the sales channel, if there's any difference in the mix behind this change. That's all. Thank you. Hi, Vinicius. We also mentioned immunoglobulin when we talked to Joe, and I think it was an opportunity that was generated that we managed to take because we had the structure available for the institutional channel. We had the relationships with partners, and we managed to benefit this year in 2022. In the future, this product will depend on if we can get the definitive registry or if it's still in shortage in the market, which is what we're seeing. We'll see if the temporary authorization will be allowed by Anvisa.
We had already been working on an innovation portfolio for the institutional market even before the business unit, which was created a year ago. We've been working on having a long-term pipeline. For next year, we'll have new products, new launches to compete in the market, and maybe what happened was that we had advanced growth, which was originally expected for next year. We managed to advance it with immunoglobulin, but we're working on it. I can't be certain for next year, but on the medium term, this business unit will be essential for our growth for Hypera. The second question was about sell out and sell in, right? Basically, what we saw during this quarter specifically, and I wouldn't look at this variation quarter to quarter, because this is a B2B market, so it's very dynamic.
Orders and variations are much higher than, you know, in retail. Retail has a much flatter demand. This is B2B. Basically what happened in May, demand was very strong. In April as well, you know, since prices had gone up in March. Sell-out was much higher, and we finished at a good inventory level with our clients. It was still below what we used to have, but, you know, in a matter of months or 45 days, it had been adjusted and resolved very quickly. I would advise you to look at this difference at a longer time horizon. Because it is quite balanced during this period. Sell-in and sell-out is quite balanced. Great. Just to try to understand this.
When we look at accounts receivable and inventory, there isn't a big difference from having a higher percentage of sales from the institutional channel, right? For now, the terms are very similar, and receivables and inventory are very similar to retail. Yes. Even, you know, the dates for receivables are much lower, but they're very small in comparison to the rest. So they impact the company's growth, but it doesn't affect the company's average time to receive. Most movements are related to the retail market. Great. That was very clear. Thank you. Thank you. The next question will be asked by Leandro Bastos from Citibank. Leandro, you may turn on your microphone. Good morning, Breno and Adalmario. I have a couple of follow-ups on points that you have already explained. First, immunoglobulin.
We understand that Anvisa's decision is valid until the end of the month. We've been following up on this. Immunoglobulin still seem to have some shortages. How do you see a possibility of it being continued? Also for Buscopan, you mentioned an extension until 2024. Why does it take so long? What happens in this process? That's it. Thank you. Considering immunoglobulin, Leandro, we still believe there are many shortages in the market. We talked to some professionals in hospitals. We believe that it's still at a shortage, but we don't believe that Anvisa will postpone this line extension to bring in products with no registration, but they are always looking at availability. We're looking at it closely. The second question, what was it? Oh, on tech transfer for scopolamine. Why does it take that long?
Well, first we need to conclude the business. We signed it, but it will be concluded in August, and then the tech transfer process will begin. That's when it starts. We'll need to have an API production. There needs to be a registration. We need to have a new manufacturing location, update the DMF for Buscopan, which is the Drug Master File registry. There's an entire process, and we need to wait for Anvisa to approve it, and that's why it takes a bit longer than you imagined. Thank you. Thank you. As a reminder, if you'd like to ask a question, you can click on the Raise Hand button. The next question will be asked by Caio Rocha from Bradesco. Caio, you may turn on your microphone. Thank you.
The point we'd like to ask was about the shortage of inputs in the market that favored the results you reported. So I'd like to understand a bit better if you have any visibility on share gains or how much it was due to this shortage of inputs, and if that still continues. Thank you. Hi, Caio. This was a recurring topic in the media, but in our case, we didn't have a shortage of products given our commercial policy of having elevated inventories with our clients and also the higher inventory of raw materials that we have in the company. We did have some one-off shortages, especially in the hospital market, but it was much more due to price than any issues with CMED. CMED approved the price of some products for the last month.
It was a shortage of some products, and these companies have lower levels of inventory for products with their clients. Given the demand, which was quite high, especially at the end of May and June, they didn't have enough time to react and resupply points of sale. We see that in July it has already been resupplied, and we still have a high demand. We don't see any shortage of any specific products in any categories now. We have been able to react and resupply all the pharmacies. Thank you. This now concludes the questions and answer session, and we'll give the floor to Mr. Breno Oliveira for his closing remarks. Thank you everyone for participating in this call, and I'd just like to invite you once again to our Hype Day, which will be held in person here in São Paulo.
With a webcast, so it will also be online. We'll be able to go into details on our growth plan for the next years in the institutional market and in our traditional market for retail. We'll bring in several executives from the company to talk to you, so you can write it on your schedules, September first. Thank you and have a great day. This concludes the company's conference call. Thank you for listening and have a good day.