H1 19/20

Nov 5, 2019

Okay. All participants lines listen only. This conversation will be recorded. Good day, ladies and gentlemen, and welcome to the 1st Half Year 2019 20 Itflimid Earnings Conference Call. At this time, all participants I would like to introduce your host for today's conference, Mr. Thomas Cook, Head of Investor Relations. Sir, the floor is yours. Thank you. Good day, ladies and gentlemen, and thank you for joining us for our half year figures 2019, 'twenty earnings conference call. Joining me today are Simon Mitry, CEO and Nicholas Ramzaya, CFO. Our press release, report and presentation to cussing our half year twenty nineteen-twenty twenty results and financial year guidance are also available in the Media And Investors section of our website. With that, I will turn the call to Simon. Thank you, Thomas, for the introduction, ladies and gentlemen. It's my pleasure to commence our first half year results for business year twenty nineteen-twenty 20. There are three main messages: number 1, Dipsumet is on track in its transition phase. Number 2, we have a very strong YDS H1, with 10 product launches. We're going to show you that in detail. At number 3, we have a slightly weaker than expected H1 and YDC, because of currency effect and a slower start in Canada. With that, let me start and go to Slide 5 and talk about directly about our highlights. When we look at our main focus and this is a long term strategy, we focus on expansion And what are the main elements? As I mentioned, this phenomenal 10 launches of products number 1, our strong expansion into China and until end of the March, around 1200, 1200 users on its outcome. On the innovation side, we have signed with ISense, a second partner on VGM site, with virtual options for CGM, And very important, we have signed this gluco in order to have the collection, cloud to cloud connection in Europe, into all clinics, for the therapy management software. We have also started our SmartClue program in combination and together with the bakery Institute in Australia, we are going to shift the pumps before end of the year to start a clinical trial. And we have some concept start in our digital product line for smart pen, smart pilots, we're going to deepen that later on in the presentation. On our third part, where we focus operational excellence and our production site, we have a very important message that we are on track on MDR, This is not to underestimate as Europe is moving ahead, and we have moved our notified body from Switzerland Esquette to, not to suit and this gives us the freedom and flexibility to be operational long term and we are on track on that. Number 2, operational excellence, we have a clear commitment towards the circular economy. We drive this sustainability program towards 0 carbon footprint in the future. Going to deepen that in this presentation as well. And in August, we have officially opened our site in Sberim. With that, I move to the figures and then start with some key figures, we have a turnover growth on the continuing operations of 21 percent. So that if the business growth taken away all only by the fact, 21%, and this is the phenomenal element on the injection system side, a sales growth of 55 percent based on our own developed and own manufactured products towards big pharma biotech. On YDC side, we are focusing on it's a pump, as you know, we added 8000 patients year on year, And in combination, altogether, we have an EBIT growth of 71%, going to show you that in more detail right now. When you look at top line, of course, it's a lower year on year comparison on sales. But if you look at the continued business, we see a growth of 20.8 percent. This is taking away this 100,000,000 missing missing, top line, sales from, from indirect, partially out of this one time compensation and the last quarter of sales we have still in the first half year twenty eighteen-twenty 19. You see here on this slide, Both segments show a nice growth, 13.9% on the IDC, and then the 33.8% on its semestelivery systems with a slightly weaker on others, IPSotech. IPSotech is our metal company, which has a slightly smaller revenue, mainly due to the tough environment in automotive. When we go and move into more detail and look at the 3 segments, why do you see YDS and others, Am I going to explain you that a bit in more detail? So we see your Ipsapam 18% in fast, tire experts, slightly ahead, We have, a slightly lower revenue on Panmiedles. This is mainly because of Walmart, Laerica, slightly less deliveries into America. This is mainly because of Q4, they try to empty a bit their stocks. We expect larger orders again beginning of the new calendar year. Have around the same turnover in test strips, and this is very important now. We have a negative FX effect of around SEK 3,000,000 3,000,000. We have calculated and planned and guided, this half year in a euro to Swiss francs 1.17. The, the proposition of the banks and the content of the banks has been 1.19. We have then decided for 1.17. And as you know, we are now at 1 point 10. So a much lower this has this negative effect. And then we move on to YBS. We see a similar effect here of around CHF 2,000,000 So all in all, together, 5,000,000 currency effect from Euro to Swiss francs that we have here compared to our guidance. Now, when you look at YDS, where important I mentioned that 55% had tremendous growth on injection systems, We have a slightly lower revenue on contract manufacturing. This is our Sanofi business, the Solastar and 2 jail business, as you know, 10.1%, around 6% of this 10.1% is a currency effect as we charge in euro towards NOV and around 4% here is slightly lower sales, but this is just a month to month stock topic. So as you see here, both segments, with a nice growth. With that, let us move to the bottom line EBIT of continuing operations, increasing 70.8 spent to 9,000,000. This is a bit below our guidance. It's around $1,500,000 below our guidance. And that this is exactly the foreign currency effect. So the increase of sales in injection systems and the license income that we have had compared to the year before is offsetting the missing sales in Canada. I'm going to deepen that in a minute. And this loss of around 900,000 Swiss francs roughly 1,000,000 on IpsoTech. IPS for the other segment. So the increased sales and injection system is really offsetting it. And, what we see now here on the bottom line is in essence the currency effect out of the 5,000,000 less revenue on the exchange rate euro sales bank. With that, we, adjusted outlook. We, go from 415000000 to 400000000 This 15,000,000 reduction in turnover is purely FX. Currency effect, 5,000,000 H1, 10,000,000 H2, If we see a 1 to 11.10 currency exchange rate from Euro to Sysbank, so in total, 15,000,000 because we believe that a 10 business is offsetting the IPSA pump slightly lower off uptake in Canada, the delayed uptake in Canada and the lower result on its attack site. Also, of course, on EBIT, we are, adjusting. We are adjusting from 25 to 30 to 21,000,000 to 25,000,000 So we, make the band a bit narrow, a bit more narrow, but we take away this effect of roughly 4,000,000, Swiss franc, which is the currency effect for the full year. So is that we are more or less on track just a bit sad, Sabrina, you see this currency shifting here. Let me explain this once more on the next slide. This waterfall graph shows you a bit the history, you see the compensation payment here, the CHF 49,800,000, CHF 50,000,000, which has been a significant part of the EBIT from the past year. You also see the $12,000,000 contribution from the last quarter of Omnipop's distribution which led to this 11,400,000. You'll remember the continued business that we have delivered into the last business year. On top of that now, we see the $25,000,000 to $29,000,000 growth for this 2019, 2020 business year, And from that, we are deducting the uncovered costs, which been uncovered costs from distribution, from sales, marketing, which has been carried on by Omnipod in the past and are now are the burdened with carried by Ixupam. So as we deduct these 6,000,000, Then we have an expansion program. As you know, this Canada, Australia, Eastern Europe, mainly around roughly $5,000,000, and we see this currency effect, which I've just explained to you of roughly CHF 4,000,000, even to our new guidance of CHF 21,000,000 to CHF 25,000,000. I hope this helps a bit understanding where we come from. With that overview, ladies and gentlemen, I would like to move over to the business segments and see our starting with it's a meds diabetes care. And as you know, this is our 4 main product areas. It's a it's a pump, which is the center, it's a system, the center of the proposition, the app that Blackhawk was monitoring devices around and the software, which is an important integral part for patients and doctors, and we take the needles, the roughly 500,000,1010 needles along with it. I would like to remember what the Type 1 market is. We talk roughly worldwide on 15,000,000 Type 1 patients Only 10% are on pump. That's an important message. In Europe, we have a penetration of roughly 20, 21%. In America penetration of above 1 served. So when Europe is growing around 10 plus percent and America is slightly below, we see 2 increase in markets, which are, of course, important for us. And Europe is our home territory. This is where we are active in 20 markets, This is where we know how to operate, and we have to make the move now also to Northern America. And with that, I would like to move over to Canada. So what happened in Canada, we have received approval, as you know, but there's no real sales, a couple of companies we have on the product they have no real sales yet. And this is mainly due to, administration's missing approval for reimbursement. We have underestimated the situation there. We have had eventually the wrong team. We have exchanged the local CEO 2 months ago at now, a new, a new responsible person that we have kept the team We have changed the person there. We now understand better what we have to do. And our full focus is now on reimbursement gaining in Ontario, Quebec and D. C. These are the main provinces in Canada, which has to be looked at. So we have a rough delay of 7 to 8 months here. If we calculate all in all, that we see here. In the We have been convinced to launch the regular pump at the asset in Europe, so without CGM, but we understand now that when we look at Tandem, and Medtronic, Ameritize more and more into a combined product proposition. Found them as really pushing CGM as well, So we are convinced that we want to be its successor and want to spend the money on marketing and sales in our organization, own organization in the United States, we must have a competitive product. So that's why we are now working on the collaboration with one of the 2 CGM companies, we hope to be able to communicate that in the coming couple of months in order then to integrate the product over the coming 10 to 12 months into our system. So we can then resubmit by, Q4 2020. With an expected approval around 12 months later in mid-twenty 1. This is a bit disappointing, of course, But on the other hand, it gives us security. We know we will have a much stronger proposition. It gives us the focus to focus on Europe now. If you'll, of course, take a bit burden away from the bottom line in trends in the business year 2021, as we don't start in America yet, but it's important also to evaluate the right partnerships in America, the right connections the right sales success with the product that we're going to have, a real competitive proposition. So when we look now at where we are on Slide 19, I mean, we are still much faster than we have been back then in 2012, 2013 with Omnipoc. If you remember Omnipoc after 2 years, we have had around roughly 12,000 patients after 3 years, we had 19,000 patients. We are expecting now to have 18,000 after the end of the 2nd year being licensed Epsilon. So we are still faster. We are still ahead of the curve And I think that's normal, though. I mean, if you look in the history, you always need some time to explain the product to get confidence on doctors and professors that it's pushed. And we see some markets now, Germany, France, for instance, where they've been in from the very beginning, we see this uptake coming. And then we have the younger markets like Spain, Italy, Eastern Europe, where we need some more convincing, but that's normal. It's a trust element as well. And that's from that perspective, we are here not worrying at all. So we reduced a bit from 20,000, that's maybe deemed a bit to optimistically down to 18,000 users on the product by end of March 2020. The arguments are still valid. It's simplicity its size, its quality at our customer service. We have really few complaints only. It's a really robust product and the patients love it, it's small, it's cut screen, the prefilled cartridge from low over perfectly, and it's a real and a strong proposition towards an electronic product. So when we continue now on the My Life And In Discare portfolio, we have 3, 4 messages I would like to make today. For number 1, I talked about this initially, it's our partnership with Glooko. So Glooko, as you know, has acquired DiaZend, and DiaZend is the therapy management software here in Europe, It's mainly strong in Northern Europe and Germany, but it's an important product. If you do not have access to the gluco world, to the diet and world, we'll have a tougher talk to do to bring product into the larger clinic. So we are the first company to have a cloud to cloud connection here Telstra Cloud Connection that is exchanging the data directly from the pump to the apps into the gluco world So there's no cable connection required or special connections to Bluetooth wiring required in the clinic, which makes life, of course, much easier, much quicker for our doctors. On the glucose monitoring side, I mentioned that we have signed with ISENS, it is the leading South Korean PGM CGM companies. They are roughly number 4, number 5 in the world. It's around 2,000,000,000 strips per year. And have a very strong CGM program as well. So this is one of our 2 3 candidates in the future after a partnership to have an owned GTM eventually, if you think it makes sense. Today, of course, we believe that we must focus on a strong partnership with one of the existing CGM providers. I also would like to make an update on the SmartClue program, So as you know, we are updating it for pumps and open the product. And we are now starting with Baker Institute in Australia our first clinical trial with the open open product. So we open it controlled. It means that our partners can exchange data with our product. We access, give access to algorithms, to our pump, we give access to CGM, to our app and to our products so we can learn on individualized elements and also work like Dexcom is doing, like, a Nettronic is doing, like Phantom is doing, and we're insulated headings, to go and work on the closing of the time and range. So our objective here is A to learn and B to optimize the product So we have then a clear proposition towards Smart Loop and also to be ready for a regulatory pathway in around 2 years from now. The 4th element I would like to mention on the My Life side is a smart pen. We have been working on that product for quite some time on the concept development team. It's a separate program. We are basically using our existing server pen, which we are manufacturing for 8 years and set it quite successfully, China, Asia and other markets. It's a high value reusable pen, metal housing, and then adding digitization here to the product so it can be working in our ecosystem and this is a very nice example how we collaborate between the two segments. We see this conversion of the YBS segment and the YBC segment. So YBC, it's Met diabetes care is one of the first customers For for YDS, it's not delivered systems for that tenant. We believe this tenant has an own proposition in combination with the pump and the DTMC channel. It belongs into this ecosystem, it is a backup engine for a Type 1 pumper, it is an MDI patient who wants to deliver the data into the cloud, etcetera, etcetera. So it is a new product that we are working on and, where we are quite motivated here to add more synergies in the My Life's diabetes care world. With that, I would like to change to the delivery systems environment. And as you know here, it's all around our plant system, all the injectors patch and check this at now smart services. And one of the key slides today is the next one. Here you see this wide platform array, the 10 market launches we can communicate over the past 6 months only. So this shows This graph shows that our platform strategy, where we are working on for roughly 8, 9 years, is now really paying off. Over the past 10 months, over the past 6 months, we have launched 10 products. It's the 2 open chapters for TSK and AstraZeneca, So it's the, Fazenda and Nucala asthma product. We have the AMAG Palestine product Here, launched now, we have the Octobrosis PTH launched for ATP Japan. We have the PTH Server pen launched for Kellyan Griske. We have launched the HTBT diabetes insulin glargine product For China, it's a low cost insulin pen. We are launching or we have launched 2 diabetes pens, uno pens, 1 for Russia, 1 for ACA Bangladesh and 2 other fixed spends also for TPH, one for Mosheeda, Japan, again, and war for Phoenix, Albert Chen, Europe and America. So what we showed you here It's really our broad spectrum. Our broad spectrum motivated through our platforms, both the injectors and 10 which is now really showing the proof from what we have, has started so long ago. Going to show you also the pipeline in a minute, but let me just explain you now a bit more detail what we are doing on your auto injector side. So this targeted personalized therapy is really something, where we see a lot of traction coming they have more, more new drugs for them to be injected at home. So they move from IV to subcutaneous medication to reduce costs in the health care system. And for that reason, we are investing in 2 further assembly lines. We have now 3 in place. 2 in Wortorf and 1 in Philippines, so 3 in Switzerland, and we're adding 2 more and install them in our new site into Irene in our new site in Northern Germany. So both projectors is a really critical product one of our key platforms that we are driving. What happens in China? China, you know, we are there for over 10 years. We have long term relationships and we can report that we are strengthening them we have signed another 5 years with Tongbao Group. They are signing, we have signed this with 5 other Chinese players They are all mostly in indolent. They are all now moving also into other drugs. And it's important to announce that we will soon be launching our first europens, dispose of hand in China. We are expanding our local team, especially in the regulatory environment. And you're also investigating that it will make sense to invest in a local production site, mainly for packaging, for the Chinese standard, to be quicker in the Chinese market on a regulatory level. So an important and very motivated topic. With that, I move over to our pipeline and this is a very impressive slide. It shows what happened over the past 12 months only. Basically shows our pipeline you have seen this graph before and here on the very right side, you see the marketed products. This is in total roughly 30, 35, 3410s and open injectors. This is what we are in the market here in dark wet and dark blue. We see roughly 10 products in the registration phase, registration phase, by our pharma partners. And then you see this large amount of products currently in the customization phase. Roughly ninety products and you see how many older chapters here. And then the pipeline over 90 products in our pipeline that are now moving into the tunnel into this pipeline. And so all in all, you are seeing 2 30 device projects here on the map. It's a lot of work ahead of us. But operationally, we have done our homework. We are ready with the production level. There's 2 more sites to install. We have enough capacity on europens, but we've got work to do now to move these products to the funnel. 1 or 2 out of 10, of course, we'll not see the end, but it's important to understand you have many options on PTH, for example, you work with a handful of customers, not only one or 2. It's Adalimumab Uveira as well. So we have different options, different partners. If one is more successful, we are the delivery device partner of choice. We will be successful. Doesn't matter who of the device partners of the pharma partners will be successful. Apart from the current pipeline of the current existing products, all intractors and pens, and introduced strictly mix of those on the main slide. And we have conducted a couple of studies So first of all, the user acceptance of our IPSodose is very high. As you know, there are about 10 customers who tried 10 tens of buyers who tried to move into this segment, So in essence, it's really BD and West. And Ixmed now that, I'm, will eat most of the cake. And this is a very interesting new segment. It's all about volumes 2 to 10 ml, so larger volumes that do not fit into an open injector. It's a new classic product. With Medics, medicines and drugs that have to be injected over a period of up to 30 minutes. We have done a couple of feasibility studies ongoing with large pharma clients, and we are starting our 1st clinical study together with a pharma company. So we are delivering the devices into a clinical study in a couple of months in Q1 2020. So a very interesting new platform here, patch injectors, each of those how we call it, and we will be, reporting on that in the future more and more. You can also try to show it and give pipeline graph in the future. The last slide for today in the area of Ipsenet Delivery Systems, it's the expansion of our smart services program, So apart from the IPSMA, so the product that is bringing the data from the old injector And the smart pilot for Ipsimate, which brings data for the old contract into the cloud, we're now introducing the smart pilot UnoPen. So also for indolent and gross hormones, we are going to be able to send the data through the phone into the IPSA cloud and from there towards the doctor, the patient or the pharma company, which has better means then to negotiate in a world where outcome based payment is more and more important to actually negotiate with the large insurance groups. I can tell you all big pharma are interested in that. It's a big topic. They are interested in data and they are at the moment trying to find out our pricing mechanism, how are we going to charge pricing in this world? A very interesting time you are in, and we'll definitely be able to report more in 6 months from now. With that, I hope I've been able to give you good overview on the YDC Diabetes Care business is our pump efforts, is our YDS, is our tremendous launch of new products. And with that, I move forward to a couple of Ethernet group topics. We are still hiring. This year in total, we're going to hire over 150 people again. We have hired so far roughly. They're up sixty six people in in Switzerland and a couple of people in our new site into Irene, and they're adding more and more people, especially in the area of software, growing the team in house but also through near shoring options in the future. We have decided to grow our sustainability program. As you know, we are not only focusing on the economical part. We are convinced that we can only be a long term success so that we can only drive the long term profitability if we also focus on our ecology and our society of responsibility. And for that purpose, we have decided to deepen the Circular Economy approach. Circular Economy approach has been explained by Arthur Institute at McKinsey about 4 or 5 years ago, and it basically shows how you can bring waste and carbon out of your organization. It's all about regeneration, sharing, optimizing processes, keeping products in the loop virtualizing certain elements, so no longer make physical, but virtual studies eventually exchange goods, exchange components, exchange, raw material to a more environment friendly sources. So for instance, we have been exchanging our complete a heating system in our main factory in Solipton, from oil to, using the heat that we use in our machines, that we generate our machines, now production machines, they're now analyzing bioplastics, not based on oil, for future products. We are trying to loop the trays. Many trays that deliver the products to our customers are only used once. That's insane. We have to reuse them. So many, many topics here we are looking at to, lower our carbon footprint which is a topic not only now is in spite of our future here in Europe, but due to the topic which has followed us for 3 years now. And the last two slides, it's about swearing. We have opened our new site. This picture here shows, shows the political, people here from from Germany, a health care minister, and the president of Metropolitan Ms. Shevesik, and you'll also see on the next slide, our new site, in Shireen, we are really motivated. We're going to offloads the movie in a couple of days. On our website, it's a 26, 37,000 square meter sized production side, we are clear enough capacity. At the moment, we are installing our orbit infusion set plan 10,000,000 infusion set line for Ipsapump infusion sets, then we are delivering the 2 Itimates or contract aligns we are preparing the space for it's a pot, our own patch pump, and then further further, the it's a mate or europens, product. So we've been off capacity here for the next 6, 7 years. This gives us seasonal salt and we can focus on the delivery of our product of our project. So when I summarize, ladies and gentlemen, we have had a spectacular half year on YDS, we have over 10 self launches ahead of us of new product in the coming 12 months. So YDS is the key driver for the bottom line, YDC with IPSA pump has shown that it's a product which is very accepted. We have had a slow start in Canada. We are, trying to make good for that again. We have decided to move America for 1 year, but in total, I think it's a wise decision to be a regular America as a good product is a competitive product, and this gives us time to focus on the European market. With that, I would like to end here and hand the word over to Thomas. Thank you. Thank you, Sanam. Thank you for your explanations and comments. Operator, please open the line for questions. Star 14, star 14, and we'll then open your line 1 by 1. Apparently, everything was very clear. Nobody has questions. Excellent. Thanks, operator. I think we can close the call. So today, thanks for joining, and we look forward, to our full year business earnings call. Thank you very much. The conference recording has been stopped. Dear participant. Your conference call has come to an end. Thank you for attending. Goodbye.