Status Update

Oct 5, 2018

Slides

Good day, and welcome to the Johnson Mathew Health Sector Conference Call. At this time, I would like to turn the conference over to Mr. Martin Dunwoody. Please go ahead, sir. Good morning. I'm Martin Dunwoody, the Director of Investor Relations here at Johnson Mathew, and I'd like to welcome you to our call today. This is the latest call in our series giving you more detail on our sectors. And our strategy to deliver sustained growth and value creation. As usual, we will not be giving a trading update on the call. Today, I'm pleased to be able to welcome Jason Napster, Chief Executive for our Health Sector, which will be the subject today. We have about an hour. And with that, I will hand over to Jason. Thank you, Martin. Hello, everyone. I'm Jason After, the Chief Executive for our health sector. And today, I'm going to talk about our strategy for breakout growth in health. I'm going to give you a brief introduction, provide an overview of our activities and then talk through our strategy. Finally, I'll open the call to Q Hopefully, you can all see the slides on the webcast and you can navigate through these yourselves as I talk. Moving to Slide 2, you can see the cautionary statement. And now I'll move on to Slide 3. I joined Johnson Matthew at the beginning of March and haven't had a chance to meet many of you yet. So to give you a bit about my professional background, I've been fortunate to have had a wide ranging professional journey leading up to my joining JM. After roles in finance, business transformation, product management and corporate strategy and development, I led businesses in China, Asia Pacific, and most recently leading our global division at Millipore Sigma, the life science business of Merck KGaA through the post merger integration of Sigma Aldrich and Merck Millipore. I've worked in a number of different industry segments, including industrial Manufacturing, life science tools, and far more raw materials, both on the fine chemical side and the bioprocessing side. This has given me extensive experience in driving innovation, growth and operational effectiveness. Which I'm now excited to to deliver breakout growth with improvements to the existing business and expansion of the product portfolio. I'm excited to bring my passion for driving profitable growth to build a core growth platform for the group. I like the company's strong heritage in science And Technologies and the capabilities we have in health support both generic and innovator customers. Additionally, the strength of leadership and culture fits with my own personal philosophies and I'm really enjoying working with Robert, Anna, and the rest of the team. Turning now to Slide 4. Although I've only been at J. M. A the portfolio today and the opportunities we see for breakout growth. I wanted to start by giving a brief the past 40 years to provide value to our customers. Our entry into health was through PGM based molecules, which are used in oncology. And hinged on the group's expertise in PGM chemistry. We further expanded into controlled substances like opiates and ADHD which leverage our expertise from E and R in supply chain security and high potency manufacturing. We developed a global footprint through the acquisition of McFarlane Smith, the world's leading manufacturer of opiate alkaloids, which increased our scale and capabilities in API manufacturing and really established us as a global leader in controlled substances. At the same time, recognizing the need to better support our customers through development and scale up of their molecules, we acquired Farm Eco. This acquisition provided us with a business focused on development and clinical support solutions which enables us to help innovator customers commercialize new and novel therapies quicker. This complement of JAM's existing capabilities in materials development and characterization, which is how we work out to make a solid substance and really understand it at the atomic scale, and secondly, scale up of complex manufacturing with market specific application support to really grow our pipeline. These capabilities enable J. M. Then to start investing in the development of our generics pipeline as we were now equipped with the ability to develop and manufacture API for both Innovator and Generics customers. We further expanded these capabilities with the acquisition of far more fix, our solid phase design services, which provided us with a foundational building block in particle technology for pharma customers, further enhancing our development and scale up capability. These milestones have been key to our ability to solve complex challenges for both innovator and generics customers across the entire value chain and successfully support them in bringing their Our focus is on the development for both innovator and generics customers. We have 5 manufacturing sites across the U. S. And Europe, as well as 4 development centers in the U. S, Europe and Asia. Around 70% of the sector sales currently comes from generics with the rest from our Innovator business. Within generics, we separate our business between controlled substance, which is about 81% of our revenue and non controlled substance, which is 19%. We are a market leader in controlled substances and high potency APIs and through our ramped up investment in our new generic pipeline, we will grow our portfolio substantially with launches beginning in this financial year and delivering additional $100,000,000 in operating profit by 2025. In innovators, we separate our business between clinical development, which is 44% of sales, and this is where we work with customers through their preclinical and clinical development phases. The second part is our commercial API, which is 56% of sales, where we are supporting customers in the validation and subsequent commercialization of these new therapies. That's the current business but as I've said, we have an exciting pipeline of new opportunities across both generics and innovators which is going to drive significant growth. And I'll tell you about that in a few minutes. So given where our journey and where we are today, why do we think health can win? 1st, let me give you some context on the overall process of making a drug. There are essentially two parts to this. First is the development and manufacture of the drug substance, which is the API. And then secondly, it's turning that substance into a form that is administrable to a patient such as a pill or an injectable solution. Our focus at JM is on the API side. We have key competencies that span across the value chain from API development through to scale up and commercial manufacturing. And it is our strength from the start of the process right through to the end that really builds the relationship and adds value for the customers across both the innovator and generic product value change. Specifically, there are 3 key stages of the value chain in which we play. 1st is the development phase, where we use our world leading materials design development and characterization capabilities and apply our complex chemistry to develop APIs at a lab scale. Next is our process chemistry and flexible manufacturing capability, which gives us the ability to scale up these complex chemistry processes quickly and with the confidence to as the specific chemistry and particle technology is optimized as we go through scale up. And our ability to partner with our customers to solve these challenges is what provides significant commercial scale manufacturer with higher reliability and that the quality and compliance standards that our customers and regulatory bodies expect. All of this is underpinned by our deep understanding of the needs of our customers and our regulatory agencies, which comes from the long history in this market, and our strong position in controlled and high potency substances. These capabilities drive success both in the innovator space and in the generics and we have a core development team that supports both. Additionally, much of this technical expertise in science is core across the whole of Johnson Matthew. And we both utilize and provide expertise to the rest of the group. In the development phase, we leverage the group's R and D capabilities to help us meet customer specific customer requirements, while also sharing expertise with other parts of J. M. For example, Some of the crystallization techniques used to develop our leading battery cathode material, ELNO, came from health, as these techniques are used to develop the API. In scale up and manufacturing, we utilize the group's expertise in supply chain security and high potency manufacturing, which are both important in E and R. With similar skills required in terms of the containment and handling of PGMs to the handling of high potent API substances. Let me give an example of how we've utilized our strengths through the value chain to help a customer bring a new product to market. In 2016, we successfully launched a federide with our partner Maine Pharma, and you can see the timeline for this in the appendix. This is a generic version of a product used to prevent irregular heartbeats. We developed a thorough understanding of the patent landscape, and then utilized our capabilities to identify non infringing chemical form and manufacturing processes that met exacting purity and particle requirements. We collaborated with our partner to minimize the development time with 180 days of exclusivity. And we continue that's the only generic in the market until this summer, well after the 180 day exclusivity period because our technical advantages in development, scale up and manufacturing took longer for others to achieve. Now moving on to the market. We see the health market as attractive. It's a large market with strong growth rate and the industry trends play to our strengths and give us a competitive advantage. Taking you through the key reasons. The global API market is worth $170,000,000,000, of which we estimate $40,000,000,000 is outsourced small molecule APIs. This market is growing at around 8% per annum, driven by strong fundamentals, and we First, our customers increasingly look to outsource parts of their value chain to reliable partners as APIs become more targeted and complex. This is where we can really add value, particularly for many small customers who might only have one drug in development and simply don't have the capabilities that we possess. Secondly, there are over 3000 off patent molecules today that have been either genericized or are in the process of being genericized. With the natural expiration of further patents, the pool of potential generics molecules will continue to grow. Development activities from our customers continues to increase and we are seeing more diverse customers. The market for outsourced small molecules remains fragmented and we have the scale as a company to put the technical horsepower behind our health platform. We also see positive trends that allow us to leverage our existing strengths to provide a differentiated customer experience. 1st, with more targeted medicine, there's increasingly more complex chemistry needed to solve our customers' problems. Which is exactly what JM is all about. We are seeing more targeted therapies, for example, in oncology with fewer side effects, delivering much higher survival rates than 10 to 15 years ago. Secondly, we continue to see controlled substances in high potency compounds allows us to navigate this landscape and provide confidence to our customers. And then finally, the continued need to enhance bioavailability and bio equivalence remains an opportunity to create value. Let me explain this: bio equivalence is where the generic must have the same biological profile or effect as the original branded product. And bioavailability is essentially the rate at which a drug is absorbed into the body to give the required effect. So from an API perspective, the solubility of the drug substance is a primary variable and through our particle technology focus, GM can provide customers with a broadening array of solutions to improve in these areas. So you can see our business is a position in an attractive and growing market, that offers opportunities for us to use We have a lot of growth opportunities and my focus is on 3 areas. 1st, is enhancing the performance of our existing business. Returning that to growth and improving the overall profitability of this business. Secondly, is expanding our new product pipeline to drive growth with both generics and innovators And third is building our capabilities to better support customers for the future. And I will go into each of these in more detail now. Moving to the next slide. Let's start with enhancing the performance of our First is new sales opportunities. We are finding that certain molecules in our existing portfolio are being expanded into new applications such as additional therapies. So we are developing and supporting new generic filings for existing molecules, modified to meet these new requirements. And we are also working with new partners. As an example of this an example of this is Cannabidiol, where we have recently developed a high purity synthetic cannabis for use in pain management and muscular sclerosis. We will also support sales growth through optimization of our manufacturing footprint. We have been expanding in Anin, giving us more flexibility and efficient manufacturing and sufficient capacity for growth. We have accelerated our industrialization of this facility, and over the past few months, we have shipped our 1st commercial batches. Secondly, is our operational efficiency. There are a lot of opportunities as we globalize further to increase our operational effectiveness and achieve more This includes, 1st of all, strategic sourcing. For example, in Annan, we've redesigned the process for our core coating product to start with a different raw material, which will deliver significant savings in raw material costs. And obviously the group global procurement program will benefit us by actions we can take to improve our manufacturing efficiency. So for one product, we have improved the yield by getting the process time down from 7 days to 3. And culturally as we move beyond highly valuable, restricted controlled substance space, we can make significant improvements in how we run our business. Now this is not an exhaustive list, but I wanted to give you a feel for how we're running the business better. We have plenty of sales opportunity and my focus is on making sure that we convert these into profitable growth. Slide 10 is the 2nd area I'm focusing on and it's expanding our product portfolio. This is important as we will see fall off in our existing generics products because of natural attrition and where certain products are in their life cycle. For context, we look at our business in 2 market facing business units, innovators and generics. To expand our portfolio, we essentially follow 2 regulated paths with our customers. The first are new drug approvals, NDAs, which are how our innovator customers introduce new and novel therapies to market. And can take as long as 10 to 15 years due to the need for regulatory approval after demonstrating success through clinical trials where they test the effectiveness of the treatment to a large sample population and monitor response. Which are a much quicker route to market and how our generics customers introduce new versions of existing drugs to the market, driving more competition to create better access and better affordability. Looking at our pipeline, the capabilities required for generics and innovators are very similar. So I consider the pipeline holistically. Both use the same resources and skills and provides a balanced approach to the timing of our investments as generics will deliver near term profits whereas the innovator pipeline by its nature is longer term. Taking each of these in turn and starting with the generics. In generic, not all are equal. We focus on molecules with more complexity where our strengths really add value for our customers. You're not going to see us involved in the stereotypical low cost, high volume, high competition products where margins are low. The overall pool and potential generic candidates is greater than 3000, which continues to grow with patent expirations. And we've screened 100 of compounds to narrow our focus to a small subset of molecules less than 20% of the total, where we believe JM could provide value. We subsequently screened these molecules for strategic fit and technical feasibility and selected an initial 40 to 50 API products that we felt confident to develop and work with partners to bring to market. Partners also come to us with good ideas. And of course, we're always looking to add more to that pipeline. We have a very strong and diverse pipeline that I'm confident we'll deliver the $100,000,000 incremental operating profit per annum by 2025 that we've spoken about before. And as mentioned, we have 40 to 50 products And so we're not relying on any one particular product or even focused on a particular indication. So it's broad and diverse. We expect 20 to 25 of these to launch over the next 3 to 4 years. We can model the $100,000,000 of additional operating profit from the pipeline with a great degree of confidence. We know the size of the branded market, approximately how many new generic launches there will be, and also the expected timing of the launches based on the patent expiry. The years of industry data shows the sales profile for each newly launched generic in markets of a similar size and with similar generic competition. Which gives us a great deal of confidence in what our pipeline will deliver. We are also conservative with our assumptions for the pipeline and do not assume we will be first to market for the vast majority of our product. There are a number of variables outside of our control though, which means the overall earnings of the pipeline can be lumpy until we reach scale. This is why we're building a diverse and large portfolio The innovator side of things is something I was positively surprised by. It's only 30% of our health sales at the moment, but I do see significant potential here. As targets become more specific, drug design is getting more and more complicated, and that complexity demands better capabilities in material characterization and particle technology. Which moves into our sweet spot. We work in a fee for service model that allows us to generate value during the long development time as we help develop the API and then subsequently support our customers to scale up through various stages of This customer intimacy allows us to continue as their partner through the commercial scale if the drug is eventually approved. It's a great business because we are with our customers from the very early stages all the way through to delivering a therapy to the patient. The commercial business is very sustainable because of the high barriers to entry due to the regulatory approval. The key risk we need to manage in innovators are attritions of drugs that fail in clinical trials, hence a larger and more diverse pipeline will help with that portfolio effect. Our Innovator business has been successful in the past 4 years with a doubling of sales, we have a lot of potential going forward with currently around 20 projects in preclinical clinical trials and late stage commercialization. The third area I'm focusing on is building our capabilities to better support our customers and cement our position as the technology partner of choice. Customers choose to work with JM today due to our strong capabilities we have across the value chain, but there are specific areas we can continue to build on. Innovators today is largely driven in the U. S. And we are working to globalize our development capacities, for example, with solid form sciences in Cambridge, UK. Particle technology is also important and used in generics to work around patents and in innovators to improve functionality and efficacy. So we're building our capabilities in that area too. We're also working to improve our understanding of formulations and the technical challenges with Acipients so that we can better be a better technical partner. Most of this work will be through an organic investment. But once we've improved our base business, and are well on the way to delivering our pipeline of new products, then we can consider selective value creative M and A to enhance our capabilities and add new technologies. So moving to the last page and to conclude, I'm delighted to have joined the Johnson Matthew team. It's an exciting time to have joined with our clear strategy combined with investment in recent years positioning us well to deliver strong growth in the medium to long term. We do expect that this year to be a year of transition with operating profit down as we've already guided to. Particularly in the first half as the business rebases. However, I'm looking forward to delivering the strategy we outlined at the Capital Markets Day and have confidence that our existing generic product pipeline will add $100,000,000 per annum to operating profit by 2025 and the sector as a whole will show double digit operating profit growth beginning in 2019 to 2020 and margins reaching the high 20s thereafter. So We will take our first question from Tom Rigglesworth from Citi Bank. Please go ahead, sir. Hi, there. Thanks very much, Jason, for the presentation. A couple of questions, if I may. Firstly, in terms of the is there a margin difference or between generic and the innovator's sales performance? Secondly, Obviously, you're talking about the if your portfolio is running today, how long would that portfolio run to until revenues were 0? I, what's the line, the natural decline rate in the portfolio as you kind of as the generic drugs kind of drop off or come to end of life? You give us some kind of sense? And then how that would then relate to that 100,000,000, what would be that 100,000,000 net or some kind of guidance around that? And then third question, how do you win business? What is it that J. Maxx U. S. P is Can you help differentiate that? Because a lot of your pitch, you know, I understand from a high level, but I, you know, if I sit down with Lonza, they have exactly the same kind of pitch. So I just want to know what you're seeing in the what you think you're seeing in the market is doing better than your competitors? Thank you. Thanks, Tom. So let me start with the first question. When you look at our business model between innovators and generics, from an innovator's perspective, we're generating value throughout the development cycle as a fee for service and then obviously working towards the late stage commercialization. And on the generic side, what we're working with is on the development of the molecule then partnering with partners to help with the formulation. So we have an interesting model where we take a profit share on the drug product as we've helped our partners create that. So really when you look at the profitability of the two businesses, because of the the 2 different models. They're very similar. I'll move to the second question that you had, which is the port the run rate of the portfolio, And so when we talk about decline and I think it's interesting on the generic side. So drugs are not necessarily going away, right? And so the attrition is more that either they're genericized. So there's more competition, which creates penetration, penetration shifts in that in the market. But the other decline that we have is that profit shares eventually expire. Hence the reason why, we've got the new pipeline. And I don't, we don't necessarily have a rate for that per se. But we always look to take those existing model fields and even go into new applications. And then Tom, if you wouldn't mind, I didn't quite catch the last question that you said, Jay Matt, USB, but essentially were you asking about our value proposition? Yes. And how that's different from your customer base? Sorry, sorry, your customer base, how you're different from your competition, because from without any expertise in this area, really, it's it's hard to differentiate what it is. I mean, obviously, I get that you do these, that you've got the security measures to do these, opiate drugs. And the cannabis, etcetera. But beyond that, on the technical side, what is it that, J. Matt offers above and beyond the competition? Yes, I think it's very clear. So I think the first area that provides us a competitive advantage is our focus. And so We have stayed very focused on what our core is all about. And that comes into complex chemistry. And so I think that and as I spoke about on in the three areas of the value chain. So we talk about development scale up and manufacture. We have chemistry expertise in all three areas. And then I think the platform foundation of our Rx expertise in particle technology and the materials characterization. The depth of expertise we have in this area provides us advantage. And again, as I talked about with Focus, we aren't distracted with other areas and we have very deep expertise in our selected niche. Okay. Thanks very much. That's helpful. Thank you. We will take our next question from Ben Gorman from UBS. Please go ahead, sir. Hi, thanks very much. And just two quick ones from me. And in terms of the molecules that you don't currently operate in, you mentioned something like 20% or less than 20% that you do operate in. The remainder of the market, can you just give a bit more of a clear idea in terms of why you don't operate there? You mentioned that you can see your ability to add value proposition. Is that really because there's not much value in that part of the market or is that because your capability don't match that. Is that something you could move into? And then just in terms of the million can you give a bit of an idea about any upside to that? Do you think that that's really giving a fair example of the potential in either the generics or the innovation side. I'm just wondering whether you actually see, that's a cautious, estimate in innovation given you really don't know whether half the, drugs that you're working with customers on are going to get approved or not. So actually, that number could sort of jump one way or the other based on the innovation side quite a lot. Okay. Thanks, Ben. Let me address both of those. So first, let's first of all talk about where we're not playing. And so I think this is again, the core foundation of what we're doing is we're very focused on where there's complexity and where it's tough. Which naturally means there'll be fewer players in that space, because not everyone has the capabilities that we've got and the abilities to work through some of the complex fuels. So as an example, we are not going to work on aspirin and things like that that are and not that there's not a lot of value there. They're very high volume in that, but they tend that there tends to be more players in there and it tends to be less complex. Than what we would like to work on. So that hopefully that gives you a flavor of how of the things that we are working on, but specifically of things that we just wouldn't work on. Now let me talk about the $100,000,000. So again, just to be clear, the $100,000,000 we spoke of is from our generic pipeline. And so As we've said, the certainty that those molecules will or our generic sizes there. So we do have a lot of certainty on on the market. These are these are currently either branded drugs or even genericized stress. So they're existing molecules. So it's not a matter of if, it's a matter of when. And that's really that really where we've been guiding towards. And the innovator side, we haven't spoken about because of that fact. I think the fact that you mentioned is there is attrition rate. And so that's why we build a fee for service model so that we're not taking a risk in the development of something that may not come to market. Great. Thanks very much. Cheers. We will take our next question from Shitang Udeshi from JP Morgan. Please go ahead, sir. Yeah, hi, thanks. You mentioned the new pipeline of 40 products. Is there any 1 or 2 key products which clearly drive bulk of that $100,000,000 or is it equally spread across most of those different 40 different products or pipeline products? And second question, I mean, just to ask it a different way than your my colleagues try to ask PUC is, I mean, your current profit is there of 1,000,000, GBP 345,000,000. So are we to add GBP 100,000,000 on to it to get to 2025 number or this GBP 100,000,000 is to some extent going to replace some of the natural attrition in the existing pool, just to be clear on that. And last question is, you mentioned something about excipient And I didn't quite catch what your strategy there was. Thanks, Chitung. So let me address the first. On the pipeline, of 40 products? No. We're not dependent on any 1 or 2 products. It's largely spread across all of all of the pipeline. And keep in mind, we continue to add products to this pipeline as we're working through things. So again, there's a as I mentioned earlier, there's very low dependency on a particular product. Let me move to the 3rd question on excipients. For a second. But so to dumb it down, the pharmaceutical formulation is the point where you have a pre formulation, which starts to look at the interaction between that pre formulation into a product that's administrable to a patient. And so our ability to understand the interact amongst that allows us to develop the API, the crystal form and even co crystallization forms with excipients better. So it's our understanding of how the interaction works amongst those three things, which is what we want we continue to build our under standing of so that again, we can create more efficient solutions from an API perspective. Does that make sense? So are you saying that in the future, you might try to do excipients yourself as well? I don't know whether you do already, but is that the next sort of route to your growth strategy as well? Maybe take some of the excipient development within JMAT Our growth strategy is really to focus on where we can apply our complex chemistry, particle technology, and our flexible CGMP capacity. So that's really our focus and we're not necessarily focusing on excipients or other parts, but really where we can add value through the capabilities. Understood. Now from a profitability perspective, I think again, when we talked about the $100,000,000 is for our generics pipeline. And obviously, that that as we grow the pipeline, as we explain, there will be some natural attrition. I'm not going to tell you how to do the math, but that's kind of how it works. And again, we also have our innovator business that we've that we have We will take our next question from Adam Collins from Liberum. Good, ladies morning. I had a couple of questions please, Jason, just to start with, just to follow-up on the last set of questions. You said you'd let us do the math, but just going back to the issues around the, the so called legacy business that generic for controlled substance, which as far as I can tell is about the 5% of the revenue base. So it really does matter. Would you mind spending a minute or 2 just talking us through what that looks like today. What are the areas that are threatened in particular by the issues in relation recreational misuse of controlled substance. What degree is that area related to areas that we need to worry about and to what extent isn't it? And then on a slightly less sort of difficult basis. Second question is on the guidance for increased margins longer term. I understand that this is to some degree, driven by the fact that some of those new product areas relate to profit shares as opposed to if you like Toll Manufacturing, would you be able to give us a sense as to the exposure to profit share in that portfolio and what you think are the main drivers as to why margins will go back to where they used to be in the division? Great questions, Adam. And so first, let me start with the controlled substance. So, yeah, controlled substance is a material part. Of our business. And actually when you look at it, it's a very nice niche. It's highly regulated even further through whether it's DEA or home office, regulations because of the controlled aspect to it. So it's got less competition and it's got extremely high barrier to entry. So it's a great business. And in that business, you mentioned the U. S. Opioid crisis and it's important to point out that we do not not all controlled substance products are created equal. And in the U. S, we are not positioned in what we call bulk opiate. Which is where the primary concern has been. So our exposure to from a product perspective, it is very limited in the U. S. To what the overall crisis is today. And in fact, what I find exciting about the controlled substances portfolio is in fact, we also have a specialist opiates line, which contains a few molecules which are used in anti addiction therapies for this. So I think some of these trends will actually play well to our controlled substance portfolio because of where we positioned it. I'll move on to the second question, which is on the increased margins and you asked specifically. So the large portion of our pipeline is targeted because of the value that we can bring because of the capabilities that we have, a large portion of that is targeted towards a profit share style of model, because we're working very collaboratively with our partners and they value the capabilities that we have in the background. I think it's upwards of 80 percent of that pipeline and of that $100,000,000 is in the form of profit share. So that obviously has a positive impact to our margins. The second piece of the margin expansion is really what I spoke about and really improving how we're running the business and making operational improvements. As I said, we've been controlled substances has been a great area. It's a great niche and it's highly high barriers to entry. And we've had lower competition, but because of that, it's also created when you have low competition, you're spoiled by being protected a bit. And I think there's some opportunities for us to really improve it and operate in a more competitive fashion, which will obviously enhance the margins for us as well. May I just ask one other thing? I know there's a lot going on in the UK business. In terms of reallocating production between the 2 factories. Would you be able to say a little bit about what the program involves? I'd love to. You know, it's I spoke about it really links actually Adam to both of your questions. So Our optimization of our footprint in the UK is the underlying driver behind that is capacity. We are we today, we have limitations on capacity in certain specialist opiate products. And so the focus of the program is really to optimize the capacity utilization. I mean, I'll give you an example of a product that we have, which is called buprenorphine. And again, that product is within is used within a number of anti therapies. But the complexity of the manufacturer, again, core to our strengths, we go through roughly 8 stage factoring time to make that product through various stages. And so the program in the UK, so it's very complex. So the program in the UK is really to take the complexity of that manufacturing and optimize the capacity so we can meet existing demand. Make sense? Okay. Yes, it does. Yes. Okay. So basic one plant is going to be more complex than the other and you're directing product towards it. That's going to deal with the more complex molecules? I think we have complex manufacturing at both sites. And the Anand facility, this provides us capacity to, again, to address increasing demand and allows us to modulate between the two sites. We will now take our next question from Charlie Webb Morgan Stanley. Please go ahead. Hi, Jason. Just a few questions on the pipeline. First off, what proportion of the pipeline do you forecast exclusivity? I know you said not many, but how many of the 40 in or 40 to 50, are you thinking that exclusivity is likely or at least the probability is likely? How many of the 40 to 50 generics do you have in that pipeline? How many are they targeting patents that will expire in the next 24 months? And then maybe circling back to this, I don't think it was mentioned, but just around the blue sky value of that pipeline, I understand, obviously, you need to risk adjusted we won't see that Blue Sky outcome. But just trying to understand between the kind of the best outcome possible and the worst outcome possible, where does that base case SEK 100,000,000 currently if you could give us kind of some sort of range, in 2025. I know it's very difficult, but based upon your model, that would be helpful as well. All right. So let me address those. So the first of all, from an exclusivity perspective, again, I think as I said before, we try to keep the assumptions in our pipeline conservative. And we do model the number of competitors and we're not modeling a lot of exclus or any exclusivity deals in that pipeline. We are a assuming competition, that that's going to be there. And we're assuming certain market penetrations, but we're not assuming best case scenario in any of our assumptions, which I think is an important thing. As far as the number of molecules that are coming off patent, of the 40, I would roughly say that probably a good majority of those our coming off patent in 24 to 36 months, I would say. And then on the range I would actually probably reference you guys back to the CMD where we actually showed the range of the portfolio. And then there's a really chart that you can reference that kind of shows where our ambitions lie within that range. And that range still stands. Nothing's changed to it? Yes, I don't think there's any material reason to change that. Okay. And just one last question. On the 20 API products in the Innovator pipeline, clearly, I guess there's far more variations in terms of what's going to get to market, what will not, what will be successful, what will not, But again, is it possible to tempt you to give us a sense of what that could be worth, further out, or is it just too difficult to say? It's really it's really difficult to say because obviously, again, the business model is we're supporting our customers' fee for service, though, through the development And it's really up to the approvals of those. But we do have some that are in later stages and we're monitoring those and partnering with our partners closely. Okay. We'll now take a follow-up question from Tom Wrigglesworth from Citi. Please go ahead. Thanks, Jason. Just a follow-up question about, helping me to understand capital intensity. And as you've alluded to with the restructuring of the UK, what your limitations are in terms of capacity, is there business that you have to turn away because it's going to be too too high volume, and how do you think about the investment around capacity given the growth of the underlying markets that you indicate? Good question. So I would say, I mean, that the capacity question, so we have been investing over the past few years in that capacity. And so that and that's part of my comments of where I'm excited to have joined the business. This is a great time because we've started to make the investments in the pipeline We've also been making the investments in the capacity. I will say that we have been limited and had to allocate on certain molecules, and that's been a limiting factor because of that in the past. And what we're excited about is to really open that through what we're doing. And our target is through this year as they really have that capacity in and fully capable and ready. How long sorry, I guess the underlying question was, how long do you can you keep going at these kind of growth rates without needing the next stage of investment? Understood. So if you look at our capacity model today, We do have a healthy balance between what we're using and then open capacity. And again, as we bring the NN investment on board, that will open up. And then keep in mind, we also have available room in various centers to make those investments. So I think we will be continuing to invest and grow our capacity as we would do normal course of business throughout and for generic, because again, we know what we want to make on the generics pipeline. And then again, the nice thing about the innovator model is we're working collaboratively with our customers all the way through So it gives us good visibility of when they need capacity. We can put it in for them with them. Okay. Thank you very much. This appears there are no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks. It's Martin Dunwood Deepak. Thank you very much everyone for joining the call today. If you have any further questions, then please contact us us, Investor Relations. But goodbye, and thank you for joining. This concludes today's call. Thank you for your participation. You may now disconnect.