Earnings Call: Q2 2020

Jul 27, 2020

Good morning. Welcome to Ethera Pharma's Second Quarter twenty twenty Results Conference Call. Today with us, we have Mr. Bruno Oliveira, CEO and Mr. Adelmario Coto, CFO and IRO. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. After their remarks, there will be a question and answer session for investors and analysts only and further instructions will be given. Please dial 0 to reach the operator. We would like to inform that questions can only be asked by telephone. If you're connected through the webcast, you should email your questions directly to the IR team @rihypera.com.br. Today's live webcast may be accessed through the company's Investor Relations website at hypera.com.brir. We would like to inform you that some statements during this conference call may constitute forward looking statements. Such statements are subject to known and unknown risks and uncertainties that could cause the company's actual results to differ materially from those set forth in the forward looking statements. Now I'll turn the floor to Mr. Bruno Oliveira, who will begin the presentation. Mr. Bruno, you may begin your conference. Good morning, everyone. Welcome to our earnings call for the 2020. I'd like to begin by talking about the conclusion of the efforts in the Independence Committee. In May 25, we communicated to Market that the committee's activities will be concluded. The board approved a payment term in which our main shareholder, without taking responsibility and understanding this to be the company's in the company's best interest as well as its shareholders, which should pay the company the remaining values of in undue payments filed by an internal investigation amounting to around 110,000,000 p r l. The independent committee also presented recommendations aiming to perfecting even further our internal controls in our compliance program, which have evolved significantly in the last years. These recommendations are being assessed and put into practice by our compliance team coordinated by the auditing committee. The company continues to collaborate with the investigations and is assessing legal alternatives to conclude this situation. Now we're going to talk about our operational performance on Slide three. Our net revenue reached 1,050,000,000 BRL in the quarter, 88% higher than the 2019. This was boosted by a strong growth in sellout in consumer health at the March, which did not impact the net revenue of the first quarter. And as a consequence, the search that consumers had in buying over the counter medications in the beginning of the COVID nineteen pandemic and also increased sales in generics over the 2020. Due to the challenges caused by the pandemic, we have been having more discipline in managing expenses and costs, which was resulted in an increased EBITDA margin in the second quarter, both compared to the 2019 and the 2020, even excluding other nonrecurring operational revenues. Social isolation have maintained has been maintained through the 2020, which reduced the number of people in pharmacies, reduced the number of doctor consultations, and in the reduction of prescription medication, especially acute use medication, which is a relevant part of our portfolio. This has led to a negative impact on the Brazilian pharma industry and as a consequence affected our sellout, which had a drop of 1.6% in this quarter. This was caused mainly by our performance in April when movement restrictions were stronger in the main regions of Brazil and our medical visiting teams were on furlough. In April, our sellout dropped by 10%. From May, we thought that social isolation was flexibilized in some regions, which led to a gradual recovery in the number of doctor consultations and increased the number of people at pharmacy. These factors then the return of the medical visits team and the merchandising team, as well as resuming our investments in point of sale and intensifying our investments in digital marketing has recovered our sellout performance. In June, we grew 7%, and based on preliminary data, July will also have a growth of seven to 8%. The generics category was the main highlight of the second quarter. Stella grew, especially boosted by generic medication and brands Duralgina, histamine, DroPD, and CitroTabs as seen on slide four. This growth was taking place especially in medium networks and in the regions that were further from the big cities, which highlights our distribution strength, which can reach basically a 100% of pharmacies in Brazil. In consumer health, the highlight was once again the vitamins and supplements segment, which has been underscored by the recent launches, Vidaseem, Panamerine, as well as Viltron, Cordura, and Vannakushina. We have to highlight that the anti fuel medication segment where we are market leaders have presented a strong drop this quarter, impacted mainly by social isolation and the winter in Brazil, which is the most important sellout period in this category. Prescription products were once again benefited by the Adderabad, which gained market share this quarter, and it's still benefited by recent studies which reinforce the importance of vitamin D to regulate the immune system. Besides that, recent launches such as Coflex and Orofswato also had an important performance this quarter. On the other hand, despite the gradual recovery we've seen in the number of doctor consultations after our teams have come back and after social isolation has been flexibilized, the quarter has been marked by a strong reduction in the number of doctor consultations because of the COVID pandemic impacting sell out negatively in some relative categories, such as dermatology, pediatrics, and orthopedics. In the second quarter, we have not lost sight of our long term objective, which is innovation. We've invested 7.1% of our net revenue in research and development, launching some extended product lines, which are important for the company. In prescription product, I'd like to highlight COFlex Trio, an extension of the COFlex brand to treat osteoarthritis, pain, and cartilage regeneration, and Gestamax Plus, an extension of the Gestamax supplement indicated during pregnancy. In Consumer Health, the main launch has been aligned extension of the sweetener ZeroCal brand with a new presentation based on Eritrol. Before I let Aldo Mario speak about the second quarter results in further detail, I'd like to quickly mention recent acquisitions, shareholder payouts, and some of the measures we've taken about COVID nineteen, shown on slide five. We've taken important steps in applying this coupon recently and selling new coupon. The contribution of Neocopad for our operations at the time 2019 was under point 5%. Besides that, we hedged all of our exposure to the US dollar in acquiring Takeda brands. We've maintained our shareholder payout strategy. We declared a 186,000,000 BRL in interest over our own capital or 29 Brazilian cents per share, a growth of 15% versus the 2019. We've also continued our expansion project in our solids plant, which should be concluded in September, and the new area should be put into operation in early twenty twenty one. With that, we'll have the capacity to grow, especially in generics and to produce VuzcoPan and Takeda brands products internally. Finally, we maintain our main initiatives to maintain well-being for our teams and the communities we relate to, such as reinforcing coronavirus prevention efforts in our site, home office for employer employees who are in the risk groups and for management teams. And we've also made telemedicine services available to all our employees and their family members. Moreover, we donated this quarter respirators and COVID nineteen tests for the Annapolis population, a region where we have nearly 4,000 employees. This quarter, we managed to expand our net revenues, our EBITDA, and our net profits, and we generated demand in some relevant categories for the company, such as fluid medication, dermatology, pediatrics, and orthopedics, And they've impacted our cell upgrades in the first half of the year. And as a consequence, our set goals for the this year in terms of net revenue. We have a robust cost reduction plan for the 2020 to mitigate the effects of reduced sales. And based on that, we've established new guidances for 2020, which are net revenue around €4,000,000,000 and a net profit of continued operations around 1,300,000,000. This guidance is already considering the expected results from Buscopo and will be submitted to the authorities still this week, but it does not include the brands acquired from Takeda. Now I know Mario will speak about other results this quarter. Thank you, Bruno. Good morning, everyone. Before going into the second quarter figures and further detail, I just like to mention that this has not been an easy quarter. It actually never is, but we have had very good results with all the challenges we've had, when we consider the overall economy and other industries. This crisis specifically highlights not only the resilience, but also the importance of the health industry, especially pharma in aiding and treating developing vaccines and also in the importance of prevention and the concern of the population with having a higher immunity. Now to speak about our results. We had a growth of about 8% in net rev net revenues led especially by increased volumes of five to 3% related to increased prices. Ladies and gentlemen, thank you for holding. We will now continue the Clicker Pharma conference call. Hi, everyone. Sorry for the issue. Just to continue, we were talking about the growth of our net revenue, which was about 8%. It was mainly boosted by increased volumes of about 53% versus price increase. Regarding price readjustments, we had a sixty day delay in readjustment, which was authorized by the government for monitoring medication. It was supposed to start on April 1, but it was enacted only on June 1. In our case, the impact was lower since most of our portfolio is in the free price category, and we have more flexibility in readjusting price. With that, Skin Health Medicant supplement prices with the rejust in April. And medication, especially in the over the counter portfolio, we've been cleared for May and the rest of the portfolio in June. The average readjustment was about 6.5%. We had a great contribution this quarter from consumer health led by our clients restarting their inventories after a strong demand in mainly all of the chart categories in March. There was a higher concentration at the end of the month and also acceleration in the demand for generics as well as the strong growth in revenue and volumes. There was a reduction in prescription products because of the impact of some categories that in which we have a higher concentration, such as pediatrics, respiratory, orthopedics. Now to talk about costs, we had an increase in our costs, especially related to exchange rates. The average exchange rate went from 4.24 versus 3.74 in the same quarter last year. That is a depreciation of 13%. We also had the impact of an effective increase in the dollar price inputs. An additional expense is related to COVID and shipping, which we had to change from sea transportation to air to increase the availability of inputs. With that, our gross margins was slightly below 66%, a reduction of two and a half points versus the 2019. Before we talk about expenses, I'd also like to mention that not only did we complete hedging to pay for the Takeda acquisition, as Bruno said, but we also hedged a 100% of our expected purchase and imported inputs for the rest of the year at a cheaper rate under five b r l. We also started a hedge for the CapEx forecast, especially related to machinery importation to expand our plans. Speaking about expenses, despite the reduction we had in travel and vehicles in the trade and merchant change, we had a slight increase versus the same period last year, especially because of a higher investment in r and d and, extension in our employees list and materials related to developing new products. With regards to marketing, where we allocate most of our investments, we optimize management, which has allowed our marketing expenses to be below 18% of our net revenue. We reduced our expenses with media by 17%, and we also had a lower number of medical events because of COVID nineteen. We also anticipated vacations for the medical visiting team in April, and it normally takes place between December and January. SG and A was in line with what we had, and we had an additional revenue of 107,000,000, which came from the damages agreement and payment terms between the company and its major shareholder. Depreciation was in line with the previous year. And with that, EBITDA reached 440,000,000 or 43% of our margin before nonrecurring expenses. That would be 247,000,000 adjusted with 33% of the EBITDA margin. This margin is higher than what we have in our budget due to a slightly higher gross margin, but especially because of the lower investment in marketing. Financial results were impacted by the additional leverage spread, which we took to reinforce the company's liquidity between the end of the first quarter and the beginning of the second quarter. And we also saw the positive effect of mark to market of the hedge related to the Takeda acquisition. Income tax expenses were about 3,000,000 after deducting benefits of interest over our own capital and its invention in the state of Goias. With that, our net profits for continued operations were 399,000,000 with a total net profit of 396,000,000. Let's talk about cash flow. The cash generated by the operation this quarter was more than enough for our CapEx investments, especially increasing our productive capacity and maintenance. And it also allowed us to improve our r and d investments to develop new products, generating at the end of the quarter a free cash flow of 239,000,000 BRL. As we had said in the previous call, we spent about 2,500,000,000.0 BRL in long term financing in Brutusco to pay for the Takeda acquisition and to make sure that the company had cash resources available. We also took 600,000,000 in additional financing to reinforce the company's liquidity. We with that, we concluded the quarter with a cash position above 5,000,000,000, which is more than enough to pay for the Usco Pan and Takeda acquisitions. Without considering that those acquisitions, the company still has net cash of 370,000,000. And even after paying for the acquisition, our leverage ratio should be below two times considering the combined portfolio with Usumana and Takeda. In our balance, the main variations were what we mentioned on the company's liquidity. We concluded the quarter at a comfortable position of over €5,000,000,000 in cash with an increase of our short and long term credit. Regarding the main ones impacted by our working capital investment, we have an increase of 300,000,000 in accounts receivable, which was reflected in the number of days from ninety five in the 2019 to one hundred and ten days. We also had an increase in the level of our inventory, which was offset by the increase in the average churn for suppliers. With that, our working capital investments as a percentage of net revenue was stable under 40%. Renzo will now get his closing remarks. Thanks, Renzo Mario. The Brazilian pharma industry has given once again that not only does it count with several growth opportunities in sales segments, but also it is solid and very resilient. This quarter was strongly affected by the reduction in the number of doctor consultations and the lower number of people in pharmacies. But as the main reason of this will resume its activities, our expectations are that the market will gradually go back to its historical growth level, especially given the aging population, which favors the increase of the consumption of medication. Combined with these factors, the strength of our brand and our distribution reaching a 100% of pharmacies across Brazil and the conclusion of the recent acquisitions will leverage our sellout growth in the next quarters and years. Thank you. And we'll now continue with the question and answer session. Thank you. The floor is now open for questions from investors and analysts. You have questions you can text on one on your touch tone phone at this time. The first question is from JPMorgan, Mr. Joseph. Please continue, sir. Hi, everyone. I'm sorry. I can't hear you very well, but my question here is on m and a. What is your outlook on potential acquisitions after the recent one you've had? I'm sure that given the current context, many companies have had troubles, you know, with the delayed increased prices and weaker sell out for the quarter. So my question is about your sell out. What's if are the main friends here for sell out so far and profitability? Thank you. Joe, we're hearing that the call is not having very good quality, so I'll try to speak slower. I can hear you fine now. Okay. So I'll answer your question. If there and if there are any problems, please let me know. So to answer your first question on m and a, our focus right now has been in integrating the recent acquisitions we have. I'm sorry. I can't hear your your answer. That's okay. Just give us a second, and we're seeing what we can do with our provider. So I'll try to speak slowly and we'll see if you can hear Starting M and A, our focus right now is to integrate the recent acquisitions we have, Husqvarna and Takeda. We're also focusing on organic growth innovation, which is the company's main focus. With regard to other opportunities, just as we have the these opportunities here, we are looking for opportunities that would make sense from a strategic point of view from a financial point of view, like, I don't Mario said. You know, despite the acquisitions, we're still in a very comfortable situation financially. We're expecting a leverage of two times the EBITDA or under even after the acquisitions. So to summarize, we're going to be looking for opportunities that do make sense from a strategic point of view, but this is not our priority. With regards to these challenge trends, And I said that this has been improving gradually and slowly. So we saw that the results were negative in April. In May, they were not even. And in June, we already saw some growth. And data from July are also showing high single digit growth levels. So we believe that as, social isolation reduces, demand will bounce back again, and our portfolio, which has been affected, especially influenza and chronic or excuse me, acute use medication will recover their demand. We believe that this is a one off. The second half of next year will not be related to this year, you know, assuming the situation with COVID nineteen is normalized. This entire trend will be reversed later on. We're looking at the situation on a monthly basis, and it has been improving, especially in these markets I mentioned. Another point to highlight here is the performance of the generics segment, which has been growing significantly. We expect this to continue to grow especially because of some factors. Income consumers are finding alternatives that come at a better cost. And also social isolation being reduced. I would think social isolation will be reduced in main season. I'm not sure if that is the an answer that you can understand that you could understand. Yeah. I have some trouble with the connection, but I did manage to hear most of your answer. If you could tell us something about your SG and A reduction. You mentioned marketing, but I just want to understand how that went on the corporate side. If you had, pay cuts, if you reduced your personnel. If you could tell us a bit about that. Thank you. Right. Before I answer, I just got some feedback saying that the connection is better on the webcast. So if you would if you can connect through there, I think it will make it better. So to answer your question, Joe, we did not reduce working hours We've taken some measures such as a hiring freeze. We've also adjusted some administrative expenses, but many of the expenses were reduced naturally, as of Elmerido said, by reducing travel expenses, from our sales team, the administrative staff, the merchant number, free samples distributed because everyone was on, leave April. They hold that. They have the sponsors event sponsor events were, held online. And with that, we also have a high level of savings. And there were some other measures in which we were able to contain expenses more rigorously, but we did not have to reduce working hours. Our focus was to generate demand, and that includes the medical, Disney, and the merchandising teams. And I think that's how we're going to be able to recover the demand for our products. Good morning, Freddy. I'm Omar. I you can hear me well. I can barely hear you. I'm going to ask you my question. The fact that you hired an investment bank for one of the bank the banks you're purchasing, does that Is that an indication that you're talking to the authorities? Do you think that process can be generated? I'm asking about Takeda. You mentioned that your guys have said your expectation was to complete this by next year. Is that what's the expectation we should maintain? And what did you learn from the crisis? What's going to be better in your operations? I imagine that we're going to see a permanent reduction in traveling and visiting. That could generate some savings. So tell us a bit about what you learned in the last few months. Thank you. So to answer your first question, the particular process is going according to our original expectations. So when we announced transactions, we mentioned that we expected to conclude, just to confirm, on the third quarter, and Takeda in the fourth quarter. So this is still our best estimate, but probably Takeda will be concluded by the end of the fourth quarter. Our goal is to have the authorities approving it still this year so that we can close it this year and have the results of these acquisitions from 02/2021. That's our best estimate right now. About the lessons learned and improvements, we think that technology is here to stay, especially in what concerns office dynamics of the home, not only our office, but many others. We adapted quickly to the new reality, and we think that this is your space. So travel expenses, for example, for the rest of the year, they will be cut by more than 50%. So, basically, we can save on traveling and have online meetings. This doesn't apply so much to the field team, but our own teams, you know, interacting with plants and all of the young Indianapolis, that was reduced significantly. Regarding medical visits, we also get the decision to stay. What should happen from now on is a hybrid model to generate medical demands. So reps can have personal visits, but we can also use tools to visit remotely. That can be used to visit doctors again to reinforce the first visit and also visiting doctors in regions we are not present or we don't have a local team. So that we believe is not just today, and we should see a reduction or that is an increased productivity in these teams by about 30%. This is what I can tell you. I think that's going to be the long term impact from the lessons learned about this moment right now. Thank you. In the first quarter, you mentioned you had made a partnership with Rappy, the delivery app. So what else has evolved in digital online sales? You mentioned an accelerator investing in technology companies. So if you could tell us a bit about how that has resulted in score. Right. That's also an important point. I didn't mention it before, but we have been working on an online sales platforms, the ones belonging to our clients. So retailers have received investments from us. We have a dedicated team to online trade marketing for our clients. And we've increased our investments there, and we have been seeing the results. Our goal is to gain market share and to lead in our clients on my platforms. And we're also working on our own direct sales platform. We launched our own ecommerce platform in the second quarter, And it was only a pilot project with a few brands, but our intention is to work on both fronts, especially with clients. Some of our clients already have their own platforms, and they have a natural demand for these follow-up products. Great. Thank you, Bruno. I'm not sure if they announced my name, but I'll continue with my question. I just want to hear about how you are dealing with the demand in June and July. How do you see this dynamic in the in what you described in the release? Your media networks and the mess from areas that are further from big cities. Do you see that trend still? And the second question is how we should consider inventory and sell out and sell in trends and the gap, how that's going to be for the rest of the year. Thank you. Here, but to answer your first question, we saw this trend moving away from disease, especially at the beginning of social isolation restrictions. As that evolves, we're seeing that we're going back to normal as we had before, and this is happening gradually. To answer your question on inventory, for the first quarter, we finished with an inventory that was slightly lower than expected. As we said, we received a great demand at the end of the first quarter, now we see that inventory levels have normalized considering what we see happening in the second quarter, considering the growth we saw right now. So our clients and we ourselves have been getting ready for the demand levels that we expected for the second quarter. So the tendency is for this to normalize. So you're saying that channels are normalized. Yes. That's right. Our next question comes from Alishani Focal, HSBC Bank. Thank you for taking my question. Actually, I just wanted to talk a bit about commercial expenses and how you are repositioning the company for its recovery. If you could give us some more color on that, are you only redirecting expenses for the online channel to reduce expenses with points of sale? Or are you going to dilute your marketing costs? Thank you. You know, that's in the point of sales. It's specifically will not be reduced as a percentage of the revenue. We're adapting to the new revenue level that the company expects to have in the new scenario, but our intention is more to reality in this package. Our expenses for online initiatives. This is something that we were not focused on before the pandemic, and we now have by creating a specific team in the company. But the idea is not to reduce our total investments in points of sale as the percentage of the company's revenues. Right. If I could ask a follow-up question, does that mean that when you start adding more online sales or more investments in that channel, will you start looking not only at selling to your clients over this platform, but also providing logistics, or will that always be done by your clients? Well, as I said, we have a pilot project for direct sales. Especially some of the categories in our portfolio, such as cosmetics and vitamins. But we don't see this as our main channel. It's more of a learning experience so that you can understand how it works. What we need to learn from other others is that online sales will be a small share of our sales. Our main focus will be working specifically on reducing our advertising expenses and dedicating them to digital. But this will be especially directed towards our clients' ecommerce platforms. I understand. Thank you. Our next question will be asked by mister Gustavo Areyveda from UBS. Thank you. Good morning, Brendon. This is Mario. I have a couple of questions. First, about, promotional points. This quarter went up, but less than the revenue. This is helping in conversions. Can you tell us what your expectations are for promotional discounts in the future? Secondly, your gross margin. You've shown that about 50% of your lost margin came from the exchange rate. So I just want to understand where is the rest coming from. Is it the mix? And how do you think that will, do in the future? And as I said, I I just like to confirm. I think I don't mind. So that the average exchange rate for products sold were, 4.4 this quarter. I just like to understand if that's the same value, if I have the right value. Thank you. Hi, Gustavo. This is Bruno. I'll answer your first question about discounts, and I don't know why I will answer your second. So with regard to discounts, I don't know if you remember, but last year, as we focused on sell out, we were very aggressive, especially in some categories such as food medication. And this is done in discounts so that we could increase our sellout. Now for 2020, we also have a mix of the business that is much better balanced. So we're reducing discounts and increasing medical visits and also our assessments and points of sale. So that will be the type for the year as a whole. So what we expect from the second half is to maintain that. You will probably see more medical visits in comparison to last year, a reduction in commercial cost, and you'll probably see a sales agreement still up. I don't want to go answer your other question. So above gross margins, it has dropped by 2.5 this quarter. Exchange rates was the cause of 50% of that reduction, and the other half was basically the increase in input costs in US dollars. And, of course, there was increased cost of shipping and some additional cost that we had because of COVID nineteen. So hiring additional personnel to replace those employees who were on leave, buying thermometers, and other expenses that we had for prevention in our plans that also impacted our costs. Our mix was not impacted, although we had a higher sales in the generics category. Among our products, we also had higher sales and higher margin products. In our brands portfolio, we also have more products that have higher margins than the average of the company, such as Adera. And also the consumer health portfolio. So it was overall a neutral mix this quarter. And the exchange rate this quarter was really an average of 4.24. So that created two effects. First, if you look at the average exchange rate for the year, it was around 4.8, 4.9. But the exchange rate impacts our cost and our inventory. We accumulate some inventory over time, usually four to six months. That's our lead time. And we also hedge. So we have had a better hedging position from the beginning of the year. Up to June, we had hedged most of it at 4.4 to 4.1. And from now until the end of the year, we are also a 100% hedged. I'm not sure if that answers your question. It does. Just to follow-up on your answer. This increased cost of some imports priced to the US dollars. Do you think that's structural, or was that because of what happened earlier this year, you know, when companies were afraid they wouldn't have enough product. I think in China, they also had some issues with logistics to ship products. I think maybe their manufacturing capacity was also not completely used. So do you think this is gonna reverse? And also about the extra costs you had in your plan, how do you see these variables? Regarding additional cost, I think it will depend on the curve we will see as cases go down. But we know that in some areas of Brazil, especially Goias, we're seeing cases go up. While in some places like Sao Paulo, cases are going down. So it really will depend on the curve, when the curve will reach its peak, and when it will stop going up. Have taken several measures to take care of our employees' health. We've implemented more and more measures that have focused on that curve regarding inputs. What we've seen also is an increase in cost. In China and in India, this took place in different periods. In India, they had a full lockdown, and that impacted production. So we had a delay in their delivery, and this ended up generating higher costs, which were passed on to them for final price. So our supply team is doing excellent work to be able to renegotiate these prices. Although we had an increased price records, we also got better payments terms. So that makes things easier for us. We have some more days to work with, but we are working to reduce these costs that were increased in the second quarter. Our next question comes from mister Fred Mendes for Discord Bank. Please continue, sir. Good morning, everyone. I have two questions, and I apologize if I may ask a question that hasn't already been answered. I had some audio trouble. So I didn't call it for any chance if I do have something that's already been asked. So now we're seeing some pharmacies be more vocal about increasing their own brand penetration where they have inferior better margins. What is your opinion on that? Is there a better concern for you that would you create an impact? And there was a mismatch between sellout and sell in. So do you think that will impact your results for the quarter as well? Thank you. Fred, about own brands, this is a movement that we see retailers trying to make for a long time, especially starting with personal care. And now we see some categories of medication. From our point of view, in the medications category, it's much more difficult to do that. First, because the cheaper option already exists for consumers, which are the generics. So I think retailers will not have the competitive advantage in comparison to that. We see a slight increase in vitamins, but we don't see that that will that will be significant. It started many years ago, and it hasn't really become significant as it could be. Abroad, you see this clearly, for example, in The United States, but there's a difference because they don't have the generic market there. They have brand or reference market, which have a a media behind them, and they have own store brands, which basically cannot be done in Brazil in the same way it's done in The US because they basically copy. They have the same packaging as the reference product, and the law does not allow for that here in Brazil. So we're looking at that. We've been analyzing it, but we don't believe it will change how the market behaves radically. We're used to competing with generic versions of our products. We have our own generic line, and we compete in price. But we don't think that retailers have a price advantage because we know that medication is more complex. It's better regulated. Even these suppliers don't really have a competitive advantage in terms of price. To answer your second question, I think the second or excuse me, the third quarter will really depend on how sellout develops during the second quarter. We are expecting mid single digit growth in sellout. And if it's higher than that, we don't think it will have a major impact on our performance. Great. Thank you. We now turn the floor to mister Brenner for his closing remarks. Thank you for listening in, everyone. I apologize for the connection issues we've had, and we are still open. If anything was not made clear, especially because of the connection, we're open for further questions. Mario and I and the investor relations team to answer any questions on the results we discussed today. Thank you, and we wish you all good health.