Welcome to Bora Pharmaceuticals' Fourth Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. You may type your questions anytime during the call. As a reminder, this call is being recorded today, March 10th, 2025. Joining me today for prepared remarks is Bobby Sheng, Chairman and CEO of Bora Pharmaceuticals. We also have CFO Alice Wang and Vice President Simon Chen. Before we begin, let me remind you that this call may also contain forward-looking statements related to our growth and future operating results, discovery and development of our drug candidate, strategic alliances and intellectual property, as well as other matters that are not historical facts or information.
Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements, and we refer you to our most recent annual report for detailed information describing such risks. Now I would like to turn the call over to Bobby.
Thank you, Nadiya, for the intro. We're pleased to announce the presenter of 2024 financial results and discuss our future outlook. 2024 had some great milestones and highlights for us. Our group revenues increased by 35.5%. Our group net income increased by 31.5% versus 2023. Our CDMO revenues compared to 2023 increased 30.3%, and our commercial revenues increased 84% year- over- year compared to 2024. Also, we secured sizable CDMO U.S. capacity to take advantage of a lot of the onshoring activities going on in demand. We've also expanded our CDMO offerings to include new modalities such as prefilled syringe, injectables, and biologics. We've also, on the commercial Rx side, launched Vigafyde, which really enhanced our position and increased our presence in the specialty pharma space, as well as increased our generics and our large margin generics, biologics potassium chloride to the market.
As well as, we've been able to maintain a leading position of DLS in the U.S., even though we've seen increased competition. Next slide, please. On this slide, Bora continues to deliver rapid growth in 2024. As you can see, year over year, over the last five years, we've seen a revenue CAGR of 60% and a net income CAGR of 30%. As I explained in the previous slide, we continue to show year over year rapid growth of 30+% on the bottom line. Also, we've continued to increase gross margins. Although our gross margins have been affected by acquisition costs and one-time integration costs, we've still been able to show an increase in gross margins and will be able to show better gross margins for this year as well. Next slide, please. This is a breakdown of our revenues from 2023 and our increases into 2024.
On the CDMO, we've seen double-digit organic growth. On the CDMO side, we still see strong demand, especially in our U.S. facilities and our North America facilities, as well as our Taiwan facilities, as we continue to ramp up to scale in those CDMO operations. On the commercial organization side, we've seen, obviously, expected competition from DLS, but also been able to maintain the price erosion to within forecasts. We've also been able to add on new products as well. We have seen less of a hit on our commercial organic. I would say 2023 was an anomaly, a very strong year for DLS. In 2024, we saw it coming back down to reasonable competition. Now, on the inorganic side, we've really had three large acquisitions. I'll share with you on the middle of these two graphs here.
On the inorganic, we have USL, which is the acquisition we bought Upsher- Smith. Now, this only shows six months of earnings, or sorry, three quarters of earnings. As you can see, we acquired them in the Q2 of last year. We have three quarters of earnings here. On Baltimore and Pyros, we only acquired them in Q3. There is only three months of Baltimore revenues here, as well as only two months of Pyros. Within the Baltimore, we had one month of shutdown. What I want to show here is really we had a lot of acquisitions in 2024, three of them here in the middle, and they only show an incremental increase in revenue. However, we did incur all of the one-time transaction costs and one-time integration costs. That is where you will see on the next slide. Next slide, please.
As you see here, even with those one-time costs, we've been able to increase our gross profits by 10%. On the top line here, obviously, as stated in the previous slide, we've increased our revenues by 35%. There is an extreme anomaly here on our operating profits. The quick explanation of that, like I said, in 2023, we had an exceptional year of dexlansoprazole sales with zero competition. Also, on the non-operating profits for 2023, as you can see, we have a payout of a revenue share with the previous owner of TWi. In 2024, you also see one-time transaction costs of three acquisitions annualized for the full year. That is actually in the operating costs. You are seeing a depreciation in the operating margin.
However, because of our ability to acquire high-value assets at below market rate, we're able to accrue negative goodwill and still deliver positive net income year over year for our shareholders, which is very important for us. Next slide. We also continue to have capital efficiencies that drive long-term growth. We've been able to show outsized return on investment and return on equity. Also on the cash flow side, we've been able to maintain a very, very strong cash position, as well as, as you can see in 2023 versus 2024, we continue to increase and strengthen our equity base for our shareholders, but we continue to have various options to pay down the debt. Now, you'll see an increase in debt in 2024, but that's because we closed a very large convertible bond in the Q3 of 2024, which shows up as a long-term debt for us.
However, we have proven year over year on a consistent basis to have ways to repay the debt with the acquisitions we have and the cash flow we generate from our revenues. We continue to do so with the financials here as well. Next slide. This slide, I just wanted to show we acquired Upsher- Smith in April 2024, and we acquired Emergent in August 2024. Continually with our previous acquisitions, we continue to show that we have success in our acquisitions, especially on the site acquisition side. On the left side here, we showed what we've done with the previous sites, and we've shown high return for those. We have the same expectations for Upsher- Smith and the CDMO arm of Emergent.
On the Upsher- Smith acquisition, we continue to split the CDMO and pharma sales business, and we will continue to transform that CDMO business model. We'll scale and upgrade technologies. We are rationalizing low-margin products, as you will see. We did that last year, and we'll continue to do that for the first half of this year with removing some of the low-margin products, as well as a shutdown of the Plymouth site. They have two sites at Upsher-Smith, and we're shutting down the lower production one, as well as building customer-facing know-how for CDMO.
On the Emergent side, we continue to scale and upgrade technologies and also transform that business into a CDMO business and make that an offering, an end-to-end offering, now that we will have large molecule drug substance, as well as large molecule drug product in the fill and finish for large molecule, as well as fill and finish for small molecule. Some of the CDMO highlights, as we've really become a true end-to-end CDMO in 2024. If some of you have been on the call in the previous years, we've been able to want to finish out and actually become an end-to-end CDMO. We did that in 2024, especially we've been looking into the injectable space for a very long period of time. We found a perfect acquisition for us and added the Emergent facility in 2024, as well as a fast, rapid-growing CDMO biologics facility out in San Diego.
We continue to do the CDMO business with best-in-class figures as well. Our on-time in full rate is best-in-class at 94%. We're right the first time at 95% and a very, very impressive yield-to-batch success rate of 99%. These are best-in-class industry-leading figures. Also, always to focus on the unique competitive advantage that we have is we have large pharma quality, as you can see with these figures, but we are a customer-centric culture. You'll see many results of that in the next oncoming pages. Some other highlights of the CDMO business, we've manufactured 2.8 billion doses. We've had 16 launches for a total of 96 commercial products. We have seven commercial MSAs signed, and we have 40 new molecules delivered in 2024.
On the customer-facing scorecard, we have a best-in-class again six days to turn around a quote time, and that's really focused on our customer-centric focus, as well as a less than two-week time to onboard, which is also best-in-class. Finally, what shows that we are best-in-class is that 32% of our revenues are from world top 20 pharma companies. That's really hard to achieve in this industry, but we've definitely done so. Next slide. I also want to highlight here, in the last couple of years, we've really been focusing on a North America footprint and North America manufacturing strategy. In 2024, it's the realization of that strategy in our Plymouth acquisition, our Plymouth Maple Grove acquisition in Minnesota with the USL facilities, our Baltimore, Maryland injectable facility, and our biologics facility through strategic acquisition of Tanvex, now renamed Bora Bio.
Now, this is very impressive for us in that we actually started—previous slide, sorry. We've actually started the strategy post-COVID because we saw a huge demand to onshore. Based on what our customers need to be closer to the clients, we really started our onshoring and our manufacturing footprint in the U.S. Obviously, with the current administration in the U.S. and the tariffs that are being administered, we are in a unique position to take advantage of the increase in demand for production within the United States. This is a great opportunity for us. Next slide. In this slide, it really puts us in a prime position to fire on all cylinders in 2025. Here are some basic numbers that happened in 2024. On a small molecule side, we had 140 project wins and repeat business from 30% of our customers.
On the large molecule side, this is before the acquisition of San Diego. We had 25 project wins already from our Zhubei facility in Taiwan and repeat business from 25% of our clients. Now, with the injectable facility, the fill and finish facility, and the biologics facility in San Diego, we definitely had continued CapEx. Our CapEx criteria are 35-40% IRR threshold. Our phase one is to have short-term upgrades at the sites, and then phase two is to have a future five-year investment strategy. I also want to highlight our acquisition of USL is very timely, and we are definitely capitalizing on their major asset, which is the Maple Grove facility, which is one of the largest OSD facility sites in the United States and definitely well-positioned again for the onshoring capacity. Now, I wanted to highlight what we're doing at USL.
This is part of our integration strategy. This is definitely part of some of the one-time expenses that are happening, but we're really rationalizing and setting ourselves up for enormous growth in 2025, 2026. We're ramping down our Plymouth facility, which is the smaller, older facility, very inefficient production lines, and removing those to our sites, including Maple Grove, but also other sites within the Bora network. We're really maximizing the Bora network with this acquisition. The Maple Grove facility itself is a 612,000 sq ft facility, six times the size of Plymouth. It was built in 2023, but expanded by Sawai with a $60 million investment in 2022. It's equipped with manufacturing, packaging, QAQC, pilot test area, warehouse, and logistics. It's ripe to partner with many customers that are discussing with us now on their major US strategy and major onshore US strategy.
This is a prime time for this site, and it's a prime time for Bora to take advantage of the current trends in the market. Next slide. I wanted to highlight the importance of our San Diego acquisition or strategic investment into Tanvex, now renamed Bora Bio. We definitely saw an increase in demand over the last five years for monoclonal antibody, especially for antibody drug conjugates and multi-specific monoclonal antibody, which is bispecific or trispecific antibodies. With our San Diego acquisition, we not only have a development facility in Taiwan, but one of the few large molecule commercial site facilities in the U.S. When I say that, there are very, very few CDMO large molecule single-use mAb facilities within the United States, and we have one of them, and we are expanding on that facility as well.
Once again, really increasing our footprint in the United States to take advantage of current onshoring trends. Next slide. Previously, I was talking about our advantage in the space, and what we continue to prove that our strategy is correct is that we want to be the most valuable partner for our customers, and we want to be customer-centric. We just announced that we had an award that was given out by Outsourced Pharma, and we were awarded the best CDMO for small molecule and biologics. We will be receiving that award next week in New York as well. Now, the commercial side, it's equally exciting. As we acquired the USL facility Upsher-Smith, or we call it USL, the Upsher-Smith facility, we split that business into the CDMO business, of which I explained the value and the opportunities in the Maple Grove facility.
Simultaneously, there is extreme value in the 100-plus-year brand that is Upsher-Smith. After acquiring Upsher-Smith, we merged the TWI products into one brand under Upsher-Smith. That is the first thing we did. Next slide. Continuing on the Upsher-Smith name, as you may have heard before, we actually continue to focus our efforts on rare disease and specialty franchise. The two things that we are focusing on here for our commercial is to move into high-margin differentiated generics and also brand IP protected rare disease specialty franchise. As you can see here, compared to 2023, we have a large increase in specialty brands and also differentiation in our products in the generics to focus on the large margin generics. Next slide. Now, specifically on the specialty pharma side, I want to focus on one product that we are extremely excited about, and that is Vigafyde.
Vigafyde is definitely a game-changing drug. I think many of you have heard about it before, but in a summary, it's the only brand in the market that has a liquid form versus the original type of product, which was in a powder form. Now, what does that mean? Next slide. Previously, you would have to administer the drug to infants. This is a drug that's specific for infantile spasm. It is the only compound, is the only API that's used in the infantile spasm space. That is a non-hormone. It's only originally available in powder form, very hard to administer, very difficult to have compliance, and very difficult for safety. Now, with Vigafyde, it is the only liquid dose form of this product, of this brand, and available to the market.
This study we made here, Vigafyde, compared to powder, it is much, much more accurate and much more easy to use and much more safe for the patient and the caregiver. As the caregiver is the parent and the patient is normally an infant, which is one to two years old. You can see on the right side, the dosaging and the safety and the accuracy of Vigafyde is far, far, far superior than the original vigabatrin. We see definite market dominance and ease of use and a differentiator for sure for this product in the market in the infantile spasm space and rare disease orphan space. Next space. To continue on that, we are going to double down on this pediatric rare disease market. As you can see, we have a combination of the Vigadrone, which is the original powder solution.
We have brand recognition in this space, I would say market-leading brand recognition of the Upsher-Smith brand name and our commitment to the key opinion leaders in this space, as well as adding now Vigafyde, we are definitely the dominant players in the pediatric infantile spasm. On top of maximizing and having access to a potential size of a $229 million market, of which we feel we can have a majority of that market share, we also see this as a platform to continue to invest in the infantile spasm space, which is a potentially $2 billion market size. We have three more molecules in this space led by stiripentol, which is going on in 2026 and 2027. Next slide. On the generic rationalization side, we continue to have outperforming generic portfolio, but we are also continuing to rationalize and focus on high-value pipeline.
If you really look at the right side here, we have market leadership in dexlansoprazole, which I was explaining for DLS. We have seen competition, but we still maintain 40% market share. On the potassium chloride, we are market leaders in potassium chloride, and these are both high-margin products for us. As you can see on the bottom of the left-hand side, we have 64.1% gross margins from a pure average of 49.1%. You can see we are definitely compared to our peers focusing much more on high-value, high-margin products. Even in our pipeline, we are very excited about our future pipeline. Deflazacort was launched in January of this year. We have multiple assets that are launching in this year, as well as 2026 and 2027. Next slide.
In summary, we're very, very excited about what we've done in 2024, but we're more excited about what we can deliver in 2025 with scale-up and integrating more intelligently. Our 2025 performance is to improve as we integrate our synergies. On the CDMO side, we're going to ramp down production of Upsher-Smith Plymouth facility, which will definitely increase our operating margins. We're shifting to a more cost-effective production site within the group, on top of not only the Maple Grove site, but our other sites within the group. Our Maple Grove CDMO business is going to begin in March. We see definitely an increase in that business, especially when we're talking to a lot of partners, including mid to large-sized pharma, and having that as a foundation for their US manufacturing platform.
We are also onlining a FlexPro line, which is an injectable line within the Baltimore, Maryland facility. That adds another 30% capacity onto already a very full capacity in our sterile injectable facility. That will be online in Q3 of 2025. We have 20 molecules signed already in 2025 in the first quarter, mostly new clients for many of our sites. On the commercial Rx business, we continue to increase focus on Vigafyde and the vigabatrin franchise and continue to make large investments in sales and marketing for this product. Like I said, we're extremely bullish about what we can have as a future for not only this franchise, but also our specialty rare disease franchise in the market going forward. We continue to discontinue low-margin generics. These are the rational things to do.
Sometimes these are very hard, but in our organization, that's what we focus on, is large margins and high returns for our shareholders. We continue to shift our R&D pipeline to high-value generics as well as partnerships. We think that's one of the very valuable things. We're finding partners all around the world that are developing high-value generics, but would like to have access to the U.S. market. That is our brand value. Upsher-Smith has a strong, strong, strong brand value and a very strong distribution channel within the U.S. for generics. Next slide. A little bit about Bora and our community. We're recognized by global investors in capital markets. As you can see, as we've grown as a company, we've gotten listed into many indices. I'll highlight in 2024, we got into the FTSE Taiwan Mid-Cap 100 Index.
We got in the FTSE Taiwan Eight Industries Index, TIP TWSE Market Capitalization Top 500 Total Return Index, as well as the TIP Customized Taiwan Market Leader Dividend Equal Weight Index. In this slide, I just really, really want to highlight the amount of diversity we have within our organization. We have 45% female managers. 50% of our employees are international employees. We have high-skilled labor focusing on 79% of our employees are masters or PhDs, as well as the total MSCI ESG rating of A, and we continue to want to improve that year over year. Next slide. Finally, we continue to be a world-class company and aspire to be world-class and industry-leading. On our commitment to sustainability, we want to achieve a net zero by 2050.
On the sustainability drug side, one of the reasons why we want to move many of our production sites to North America and a total overall movement of our sites closer to the patient is we want to make sure that we have no serious drug shortages or supply chain issues going forward. Drug sustainability and drug supply chain is extremely important for us as a company. Okay. Thank you.
Thank you, Bobby. Now we will enter Q&A session for today. Please enter your questions if you have any. We will pause for one minute here to take questions. We'll come back on when the questions are taken on the platform. Okay. Here is the first question. Will there be any impairment of the goodwill?
Thank you, Jane. No, there won't be any. We don't anticipate any impairment of goodwill for 2025.
Comment from Ms.
Lynn, is there any new M&A goals in the near future?
We did do an ECB in 2024, just so we are in line and capable to do more acquisitions in 2025. As I've always said, year over year, a lot of our growth is still driven, and our dependable growth is driven organically, but we are constantly and actively searching for acquisitions. We still feel like we are in our infancy in growth. We definitely have a lot of room to grow. I think acquisitions will be one of the tools that we can definitely use. We are bullish and excited about potential acquisition opportunities in 2025.
Thank you, Bobby. Comment from Morgan Stanley, how do we see the ongoing tariff developments for the U.S. impact on our margin outlook, both for the commercial operation and CDMO segment?
I would say, let's go backwards.
Starting from the commercial operations, the majority of our drugs are manufactured on the commercial side. The majority are manufactured in the United States. The ones that are not in the United States, the margins are very high. We see a minimal impact on those products. We also see a lot of goodwill from our suppliers to also minimize the impact of some of these tariffs that affect our commercial side. We are confident that the tariffs will be minimal, if negligible, on the commercial side of the business. On the CDMO side, it is even more simple. We are a fee-for-service contract manufacturer. Any increase in cost gets pushed down or gets pushed to the customer. The customer needs to deal with some of those.
None of our contracts are in any way delivered to a port with any sort of taxes or tariffs included onto them. We have positioned our company very well, and we definitely think we are in a good position to not be affected too much by these tariffs.
Thank you, Bobby. We have one more question from Mr. Reynolds on acquisitions. Do you foresee similar transformative acquisitions in 2025? Are there many targets in the market today? How do you factor in tariffs and onshoring noises from current administration in Washington in your M&A plans?
Yes. I think we do two types of acquisitions: transformative, or we say scale or scope. I mean, transformative acquisitions are always the ones we look for. The type of effort you put into a transaction, large or small, is similar in effort. We definitely are good at transformative acquisitions. We have done many before.
We still think we can and will transform into a much larger organization. Yes, those are the ones that are meaningful and are impactful and are very lucrative for the shareholder and the investor. On the tariff side, I'm sorry, what was the—you took away the question, but on the tariff side, do we see—
how does tariff impact our M&A plan targets?
Yeah. Like I said, we continue to analyze and reanalyze the tariffs, especially with more of the Trump administration. We continue to also analyze if there's going to be any reaction from other countries as well. Right now, from what we see, and we're very, very proactively looking at potential tariffs as well. Right now, we have high confidence that the tariffs will have minimal effect.
Thank you. We have a couple of questions surrounding 2025. Can you give more color on 2025 growth catalysts?
Will it be on CDMO or on commercial in the overall top and bottom line thoughts?
I think you're definitely going to see growth from both sides of the business. On the CDMO side, we're going to see realization of the acquisitions we made from last year, especially on the sterile fill and finish. We're very, very excited about the growth of that business. We're very excited about what we've been investing in for the last three to seven years on all the development projects we have. Many of them are commercializing. As you may know, development is the root of the larger side of the business, which is the commercial. As we have multiple development partners throughout the multiple years, these products will, through their going into phase two and phase three and getting approval, start getting commercialized.
We saw multiple commercializations of our customers' products last year, and we'll see an increase in commercialization for this year. On the CDMO side, we're excited about the commercialization of many years of investment with our partners on their development products. We're also seeing a realization of our acquisition of the USL facility and the filling of that facility, as well as the continued growth and the annualized revenues of the injectable facility that we purchased from Emergent as well. On the commercial side, we're definitely excited about the growth of Vigafyde.
Very rare does a drug company have the ability to have a best-in-class, one of the only products to be used in a therapeutic category, even if it is rare in orphan disease, and also have the ability to expand into TSC, which I didn't mention in the previous slide, but we are filing for an indication for TSC, which is a much, much, much larger market. We will also be the only liquid form in that market as well. That is very exciting.
Also, just to have the sales and marketing platform, the promise of support that USL offers to the key opinion leaders in this therapeutic category, not only in infantile spasm, but in the pediatric CNS space, we feel that there's a lot of potential for that platform being built, as well as rationalizing these generics that we have and focusing on large margin generics and really repurposing some of that manufacturing capacity and allowing that captive capacity now to be released to the CDMO customers and allowing us to have higher margin for the CDMO customers and eliminating these low-margin generics that seem to be going into low-margin countries to manufacture.
Thank you. One more question on Baltimore or the fill and finish site. How will the site add to your capacity?
Where is this question? Oh, the fill and finish facility. How will the site—[Foreign language].
[Foreign language] —yeah, I think it's—yeah, it's overall capacity. I mean, it's an injectable facility. The facility is a different facility than all of our other facilities. It has its own capacity, basically. When we purchased it, it was already 60-70% full in capacity. We know we're adding on the FlexPro line, which allows another 30%. We see a lot of potential to fill that site, which only increases our gross margin, but also increases our capacity utilization and lowers our operating costs for that site. One more question from [Foreign language] Investments. Can you describe your 2025 CapEx plan? On a larger scale, our CapEx plan, we're definitely reinvesting and focusing on three main areas. This is not including the large molecule, which we can talk about in the Bora Bio Tanvex shareholder meeting call.
In one, we definitely are investing in a high-speed, larger-scale packaging line in the Mississauga facility. We are upgrading and adding new technologies for our customers, which we can't disclose, but in the Maple Grove facility. We are investing in more production lines for the injectable facility, of which we see a lot of high demand for. That will equate to about $30 million in CapEx. On the maintenance side, each site has their own maintenance schedule. It is on par with industry. I won't go into the details of it here, but we do not see any anomalies on the maintenance side of the facilities. They are very, very new facilities and very well-kept facilities when we acquired them. We continue to maintain them and make the correct investments on the maintenance of these facilities. There are no lines that are getting too old for production.
I will say, as the FlexPro line goes up on the injectable facility, we are shutting down an older RABS production line, which was very small and outdated. As the FDA wants us to improve and have better lines, higher quality lines, isolator lines in the fill and finish, we continue to invest in new isolator lines that not only increase our quality and our adherence for regulatory, but also increase our gross margins and our throughput.
We have the last question also from Yahna. Could you give us more colors on a new generic drug to be launched this year? Yeah. We have a really interesting pilot with some partners. I will give you some ones that we definitely are excited about, the one I mentioned before, but also we have a GLP-1 product with a partner that we're launching this year, cyclosporin.
We are launching this year, and cladribine, cladribine, which is an exciting product we're launching this year. We look forward to four main products that we're going to launch this year that are much, much, much higher on the margin and should also increase our total product profile as well on the generic side. I will mention, and I don't know if we mentioned this before, but as we continue to rationalize products, as a company, we focus on what's most important for our shareholders and what drives more value for our shareholders. As we mentioned before, we will be rationalizing a lot of products. Does that mean that there might be a slight slowdown on the top line with some of our revenue as we maneuver into these larger high-margin products? There theoretically could be.
I want to make sure that the investor committee and our shareholders are aware of that and understand that this is planned for us as we expand and become a stronger company with better margins in 2025.
Thank you, Bobby. This concludes today's conference call. Thank you for participating. You may now disconnect.