Good evening, everyone. Welcome to Bora Pharmaceuticals' second quarter 2025 earnings conference call. Joining me today to discuss our results are Bobby Sheng, Chairman and CEO, Alice Wang, CFO, and Tim Chen, Associate Director of Accounting. Our remarks will include forward-looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors, including those set forth in today's earnings press release. We undertake no obligation to update any forward-looking statements. During the call, we will present both IFRS and certain non-IFRS financial measures. The earnings press release and accompanying investor presentation will be available on our website after the call. I would like to turn the call over to Bobby. Bobby, the floor is yours.
Okay, thank you, Nadiya. I'd just like to start with thanking everybody for attending this conference or this call. I'll start with Bora by the numbers. Our market cap continues to be strong as of the last couple of days, It's about $2.9 billion US dollars. We have over 2,100 employees, exporting to over 100 countries, 10 manufacturing sites in total, and over $600 million in fiscal year revenue for 2024, 95% of our revenues are outside of Taiwan, and we are the number one pharma manufacturer, bio manufacturer in Taiwan.
Next slide, please. To give you guys some highlights of what happened in Q2 2025, as many of you know, we've had a lot of one-time operational, non-operational expenses. They are pretty much all behind us by now. Those are some adjustments that we've made that we've communicated to the investors over the last couple of quarters, and we successfully executed those non-operational expenses, and they're behind us in the last quarter. We see encouraging momentum at our Maple Grove site. We signed multiple clinical stage customers out, one tech transfer into commercial stage. We're definitely seeing a lot of momentum at that site, probably due to a lot of the Trump announcements, as well as the increased demand for volume just from our current customers as well. We are continuing to invest in DEE, which is developmental epileptic encephalopathies. That's really because of our leadership in the infantile spasm space that we've had with the Viagravitran franchise. We continue to invest in a market that we see as something we can really continue to show leadership in and continue to gain market share in as well, so that's something we can invest in. Finally, with a highlight on our commercial operations, we've successfully grown the Viagravitran franchise with our acquisition or with our current foundation of Viagravitran and our acquisition of Pyro Pharmaceuticals. We grew the Viagravitran franchise share by double digits in Q2 of 2025.
Next slide, please. Obviously, the market has been continuing to have discussions about the macroeconomic environment with tariffs and the foreign exchange. Our management team has been diligently and vigilantly managing through the process, and I want to give the shareholders and investors some highlights here. On the tariff side, we continue to monitor the current situation with our CDMO customers. I'm happy to announce that, as the last two quarters have been as well, our customers continue to be encouraged by the current market momentum despite all the tariff news.
We're still coping with the understanding of what the Section 232 tariff means, meaning currently it's still undecided on what the pharmaceutical tariffs may be, but w e continue to work with our customers and monitor. Most of them, I would say, if not all of them, have been very positive and said that there will be no change in their orders or in our partnership. However, we have been trying to give them multiple options if those tariffs were to be enacted. Also, for our current commercialization, we've been actively managing the supply chain to reduce any tariff impact on our commercial products. I will say we've definitely seen a benefit and advantage of having our dual engine strategy and having multiple options.
We've been carefully maneuvering a lot of our manufacturing and some of our detailed operations into the U.S., so we'll be able to minimize any tariff being imposed in pharmaceuticals on our commercial side. Overall, you know, having multiple sites in the U.S. and having the scale that we have, and also our recent last two years of investment into the U.S., we're really seeing a lot of benefits, and we're well positioned to leverage our strengths across the value chain to navigate these challenges. On the foreign exchange side, we've done two major maneuvers, I think, to really help to minimize currency fluctuation. We've just passed a board resolution to create a U.S. holding entity. As many of you know, the currency fluctuation is based on the amount of U.S. dollar cash that we have. We created a U.S. holding entity to hold the U.S. cash.
This is something that a lot of semiconductor companies, especially TSMC, are doing. We're following suit in that our cash position is large enough now that the foreign currency fluctuation matters. We've done that, but also we continue to maximize our natural currency hedge. I want all our investors to be aware that wherever our manufacturing or expenditures are, we continue to negotiate with our customers to pay us in that currency. We have a natural currency hedge. A lot of our customers, the majority of our customers are in the U.S, t hey pay U.S. dollar. A majority of our manufacturing now is moving over to the U.S., so there's a natural currency hedge there. A lot of our manufacturing in Canada, our receivables are in Canadian dollar. We continue to maximize the natural currency hedge we have to reduce the U.S. fluctuation. All right, next slide.
I'll hand it over to Nadiya for the Q2 financial highlights.
Thank you, Bobby. During the quarter, Bora recorded net revenues of NT$4,868 million and NT$9,347 million for the first half of 2025. That is a 9% sequential increase and a 28% expansion over the same period last year. Gross margins stood at similar levels during the quarter. While it does reflect a 6% difference to the first half of 2024, we expect margin profiles to improve in the second half, as manufacturing delays and capacity constraints in the Maryland facility and Zhunan site, respectively, caused a roughly 4% gross margin impact during the quarter. Based on current CDMO order visibility and operational status, we think that will not happen again. It is worth highlighting that OpEx was 15% below guidance, indicating a potential operational leverage in the second half of 2025. The second quarter basic earnings per share was NT$5.95, among which NT$1.81 came from discontinued operations.
Forex gave revenues a haircut of roughly NT$160 million during the quarter, but favorably aided operating margin by 4%. On the non-operating level, Forex loss impacts stood at around NT$2.4 per share. If we exclude all Forex impacts from operational to non-operational, core EPS would have reached approximately NT$8.05, which is the second highest on record after the first quarter of 2023, if we exclude all M&A-related non-operating gains. Overall, in the first half of 2025, we delivered basic EPS with a growth of 9% compared to last year, which we are very happy with as the company has maneuvered through geopolitical uncertainties as well as post-merger integrations. Looking at our sales mix, which we disclose here on the slide, including internal CDMO orders, meaning intercompany transactions are included for orders from our U.S market-facing drug products, CDMO accounts for 44% or roughly NT$5 billion for the first half of 2025. As mentioned earlier, the production delays have led to a lower percentage of sterile contribution of 10%. Overall, we continue to see accelerating sales and net income as we grow. Moving on to cash flow and balance sheet. During the quarter, we paid down around NT$370 million of debts, and thus gearing us back to a more disciplined zone. Our net debt to EBITDA is now at 1.6 times compared to 1.9 times in 2024, and net working capital as a percentage of revenue also went down from an all-time high of 38.29% in the first quarter to 28.09% this quarter.
Operating cash inflow increased by NT$3.6 billion compared to the same period last year, mostly from changes in account receivables and inventories, thanks to our consolidation work in the first half of 2025. To reiterate, our operational priority is to scale while optimizing internal efficiency. With a healthy cash position, we still plan to allocate, first of all, capital toward CapEx investments that will enable capacity expansion and operational leverage, and also to strategically reserve for potential M&A opportunities that align with our long-term goals. I will now hand over the call back to Bobby to address business updates.
Great, thank you, Nadiya. I'm going to highlight some of our activities in the CDMO and commercial side of the business. I'll start with the CDMO side. In Q2 and going into Q3, we're seeing our margin profile improve as synergies of high-value assets emerge. Continuing on the highlights of getting to economies of scale and integrating our acquisitions and realizing synergy values. Some of the highlights here on the right I want to focus on. We've achieved a historical high in project wins in the first half of 2025. As stated before, we've seen Maple Grove continue to win clients, first in the clinical stage, but also in some late stage as the need and demand for U.S. manufacturing has emerged as a high topic for a lot of our customers and a lot of our RRPs coming in.
On the Maryland side, we've been focusing on onlining the Flexpro line, which will see a dramatic increase in our gross margins, but also an increase in our production capacity. 47% of our newly signed cases are with this facility, so this facility is a high-growth asset for us. Also for Mississauga, we've seen a new anchor customer come in with topical demand as we've been focusing that site more for topical manufacturing and high-scale, high-volume topical manufacturing. The CapEx investment for that filler line, if some of you might have known, we initiated last year, is really paying off and we're seeing a high amount of customers come in, especially with this anchor customer that is asking us to supply them with global manufacturing. Next slide, please.
All right, focusing on our Camden facility, which is our aseptic facility. This site, as you know, we are continuing to focus this site on small to mid-scale injectable manufacturing. As we know, the aseptic market is very, very hot, especially with all the GLP-1 manufacturing requirements, as well as certain CDMOs, including Catalent, going sort of offline CDMO. We're seeing a huge uptick in demand for this, and we're definitely focusing on our CapEx into it. We have 20 near-term projects for new and existing clients waiting to onboard in the second half of 2026. We're expanding in capacity for isolator-based aseptic filling and directly addressing the market demand for these advanced technologies. Not only are we onlining our Flexpro, but with the AST line coming in, we'll see that onboard in Q1 of 2026. We're definitely seeing a huge demand for this site as well. Next slide.
Our large base workhorse is the Canadian facility continues to show growth as our previous customers have re-signed on, representing a large part of the manufacturing base at that site. We are definitely seeing a return for our focus on dermatological products, and we have had a huge anchor client come on board for that site. We have an up to capacity of 40% now for that fill line, and we are definitely going to see more for that packaging line as we scale up for global expansion. Next slide.
We are continuing to see encouraged momentum in our Maple Grove facility. As we said before, we have filled that, we have signed on three customers for the R&D and clinical phase, and we are also continuing to sign on tech transfers for commercialized manufacturing, and also, definitely, I want to highlight that we are seeing a huge demand in RFPs, just requests for proposals from large-scale manufacturers and large pharma. We are continuing to have multiple site visits on a monthly basis, and we definitely see some positive momentum going at scale. We cannot really talk too much about it. We have signed a lot of NDAs, but we are definitely excited about the potential for that site. There is a lot of fallow space there. We have already approved some investment into that facility. We will continue to invest in the manufacturing of that site as we move forward. Next slide.
Finally, we continue to focus on our strengths. On this slide, I just want to highlight that our global locations, especially once again, our sites within the U.S. continue to show extreme value. Our value in the CDMO industry, as we have said before, we think there is a lot of potential growth in the CDMO industry in itself as it matures within the next 10 to 15 years. We are continuing to become a one-stop shop, which is really what the customers demand, going from OSD all the way to sterile nasal ointment manufacturing. Finally, our unique competitive advantage is that we still continue to have a very, very high percentage of on-time inflow, 92%, and right the first time of 94%. Next slide, please.
Finally, some highlights on the CDMO business. For us, really why over what, why over why compared to last year, we saw 69.5% growth compared to last year, and we are reaching more than $5.01 billion in revenues for Q2 of 2025. There was a quarter-over-quarter decrease, t hat's really due to a stock of production due to the integration phase of that site. Now, for the sterile facility, we're definitely in Q3, ramping back up into normal production quantities. We're definitely happy for that to be in our path. Top 20 Pharma continues to represent most of our strategic client base, and we'll continue that with our strong, a lot of requests going into Maple Grove again. Some numerical highlights or quantitative highlights: we've done 548 million doses produced, eight new clients, which is a record high for us in Q2 of last year, or sorry, Q2 of this year. We've seen a 32% revenues from our world Top 20 Pharma. We've added $138 million in backlog for the first half of 2025. That's really good for our production going forward. Highlighted by really a lot of our, over 50% of our clients are large molecule inquiries, whether on the sterile fill and finish side or for our new investment in our San Diego facility with Tanvex BioPharma or biologics now in San Diego. Next slide, please.
Some highlights on our Q2 2025 commercial operations: we are shifting to, you know, highlighted by our continued shift away from low margin assets into high-quality brand drugs. As you can see from this side, we are really decreasing our market share in the, purposely decreasing our market share in the generic space as we see that is becoming a low value, low gross margin industry. We've focused on high value complex generics. As you can see on some of the highlighted numbers on the right here, as our other generics, you can see we have a run rate decrease in the first half of 2025. With DTC, KCL , and some of these high value, high margin complex generics, we're increasing. Stabilization of dexlansoprazole, DLS, which is important to us, that was a high value product for us. We will see, we haven't seen yet, but we do anticipate, you know, competition in that space coming up soon. As highlighted here again at the very bottom, we're continuing growth on our specialty branded drug assets. As you can see from 2023 to 2024, we've seen a wide change of 1,282%. In the first half, run rate increase of 27% and $69 million in revenues. Next slide.
Also highlighting our focus on the Viagravitran franchise, the three combined dosage, we've seen a quarter over quarter 40% increase in revenues. We're having excellent payer coverage and reimbursement of 80% coverage of the top 50 accounts. Continued strong uptake in switches into the VIGAFYDE product and inpatient stocking as we continue to expand into hospitals. Hospitals is where we see a majority of our market share, and we continue to expand into hospitals. VIGAFYDE maintains consistently correct concentration compared to other treatments as one of our highlights into the VIGAFYDE product. Overall, the Viagravitran franchise is continuing to increase, continues to be a strong growth driver for us for now and into the future as we continue to show best-in-class product capabilities in this category. Next slide.
Because of our leadership in infantile spasm, we definitely continue to invest in and focus on capturing this critical patient shift. As in the past, the pharmaceutical market has focused on drug-resistant epilepsy. Now, obviously, they see this as a bigger market. It's got more patients, but the cost of the treatment and the competition is continuing to, for generic companies, continue to increase. Really, we've only seen one new compound in this last decade. The market is definitely focusing more on what I said in the immediate slide in the beginning on DEE, which is developmental epileptic encephalopathies. These are smaller patient groups, but it's a much higher concentration of effective drugs that are being developed, and we're focusing on those. The cost per treatment is a lot higher, but obviously, we have six compounds approved in these limited cases. We see that as a market that we will continue to invest in. There's only a handful of companies focused in this space.
We do have market leadership and awareness amongst all the KOLs. We will continue to invest in multiple programs in this space already, and you'll see highlights of that in the next coming quarters and the next coming years in this space. Next slide.
A generic pipeline, as you can see, we're focusing more on the movement into complex generics and some 505B2 in the specialty business as well, highlighted by our GLP-1 project, Cyclosporin, and clarabutadine on this one. These are some of our focuses in the next coming quarters as far as approvals for our generic pipeline. Next slide.
In summary, we're going to focus on our second half blueprint. We're continuing to minimize potential tariff and FX impact. As you can see, our management team is vigilantly managing this process, and we feel very, very confident that we're proactively getting ahead of some of these complexities. Our CDMO sterile business is back on track and retooled for growth and some of the high demand that we see coming in, as with our new clients and our current clients as well. We've seen many new projects coming into that facility. As I just highlighted before, we're focusing on high-value generics, and we have a strong pipeline in those high-value generics. We're definitely optimistic for growth in both sides of the business. Our CDMO business continues to see attraction in our U.S. facilities. Our current client base is actively evaluating new programs to be inputted into our sites. We see definitely tailwinds going for this business. Also, for our commercial business, as highlighted before by our Viagravitran franchise and our refocus on specialty pharma and branded drugs, we see growth in both sides of this business. Next slide.
A little bit of highlight on Bora and what we've done for our community. Next slide.
We continue to focus on ESG. We think as leaders in Taiwan, but also knocking on the door of the top 10 CDMO and top 10 pharma services company, we want to lead as well in the ESG space. We continue to invest in these aspects, and we're seeing results of that on our TSFC Taiwan Stock Exchange corporate governance evaluation. Our ranking improved into the top 6% and 20% amongst listed companies. On the MSCI ESG rating, we have a grade A, and the FTSE Russell score, we're 3.5 out of 5, qualified for the FTSE for good. Finally, Bora North America CDMO operation is recognized as committed by Equivatus. Equivatus is definitely one of the most stringent evaluations, and we're very, very proud to have passed and become recognized as a committed company by Equivatus. Next slide.
That ends my presentation for today. Thank you, everybody, for your time. Once again, we are very happy to see the finalization of removing some of the under, I would say, not low margin assets, low value assets, and our reinvestment and shift towards high value assets, and we're definitely seeing a positive turn for Q3 and Q4. Thank you, everybody.
We will now take a one-minute break to take Q&A. If you look at your screen, you are able to type in the Q&A section directly. Hosts and Bobby will be on mute for now. We'll come back in a minute to take questions. Okay, we're back with the first question. Can you provide some general thoughts on the third quarter, assuming from the trends of your July revenues? Bobby, the question is yours.
Yeah, thank you, Nadiya. It's a very good question. We're very encouraged by the financial results in revenue, top line revenue for July. We've already seen them trending the right way in June. Based on our current indication, we see everything going as planned. A lot of the gross margins are continuing to increase. We'll see more realization of these synergies as we get into the later path of Q3 and into Q4. We're definitely quite bullish about our CDMO operations and our commercial operations. To give a little bit more insight into where we see the CDMO operations going, our continued CapEx and strategic CapEx investment in the Mississauga facility and our investments into the Maple Grove facility are starting to show good results. I think especially the Maple Grove facility, we are optimistic about the multiple site visits we've seen come from large pharma.
A lot of discussions that we're having with large pharma are going in a very positive way. Overall, there is a huge demand, as you might assume, from the current Trump administration and their consistent pressure, I would say, into the pharma community to move manufacturing back into the U.S. There is no larger facility that we know of in the U.S. for small molecule manufacturing with this much fallow space approved by the U.S. FDA than our site in Minneapolis. We're definitely getting a lot of that feedback from our current customers and our site inquiries and site visits. We're bullish about that. On top of the increase in demand that we knew was coming and that is coming to fruition for our injectable facility in Maryland and getting past the integration phase and the stoppage of production. All of that is definitely moving in the right direction.
We haven't really highlighted on it, but we're also doing a lot of operational efficiencies and synergies at all of the sites to increase our capacity as well as decrease our operating costs in those facilities as well. We're bullish about the CDMO business as well as the commercial operations, the commercial pharma sales, you know, led by obviously the brand name of Upsher-Smith. The Upsher-Smith business we see is heading in the right direction. I would say we're very, very happy with how the Viagravitran franchise is performing. We've hired on best-in-class leadership, and we continue to invest in that franchise, in that line, as if, as like a large pharma company would. We are definitely seeing the results of that. We see a very long runway for that product as well, not only that product, not only that franchise.
As I've said, in the DEE space, we see we can continue to have leadership in that space. That will drive our move into more specialty branded drugs with more patent protection, as well as our investment with partnerships into complex generics as well. That is really our outlook for the rest of the year and into 2026.
Thank you, Bobby. We have one question that's close to what you answered, if you would like to dive deeper into tariffs. The question is from a covering analyst. If drug tariffs come lower than expected, would it impact large pharma's plan to use U.S. onshore CDMO capacity? Also, how would the tariff on Taiwan, I assume stress protocol, which is not relevant to pharmaceuticals, but if it's the same tariff for Taiwan export of pharmaceuticals, how would that impact our pharma sales business?
I think you're right. With regards to, we want to focus on, if drug tariffs came in lower than expected, am I correct, Nadiya? Nadiya is on mute. Yeah, if drug tariffs came in lower than expected, that's the first question, right?
Yes. Will that impact the willingness to move onshore?
I think, will it impact the willingness? Obviously, it would, but that's why we're being cautiously optimistic. We already had demand for that site before the Trump tariffs, and we are definitely, we've seen companies commit in the past. We've seen companies commit to government direction and get burned for that. We definitely want to follow our customers and what they want to do. You know, before Trump, we made the investment into Maple Grove before the Trump administration got elected. We do believe that there is a global trend for manufacturing to be closer to the patient. Overall, it's a, the onshoring was happening before the drug tariffs. As you can see, post-COVID, it actually happened post-COVID, where the governments were realizing that you needed onshore manufacturing because, you know, it was a national health issue, not just an industry issue.
A lot of large pharma were already being encouraged to move local demand to local production. That's what we were just following. We will see. Now, will there be as much demand? Probably not, but we definitely have not enough capacity for the current demand that we see. We're still encouraged either way if the drug tariffs came in lower than expected. The other question is, how would tariffs on Taiwan products impact the margins on the global sale business in the second half of 2025? The plain answer is we see an impact, obviously, but we see it as a relatively low impact on the current margins. Like I said, we've been adjusting the supply chain that we have for the global sales business for that.
The tariffs for our products, the commercial Upsher-Smith products and the TDY products made in Taiwan, we are actively, actively adjusting the supply chain in accordance with what we feel that the tariffs will impact us. Our customers, more importantly, have on the CDMO business, have told us that whichever way the tariffs go, they are not asking us to make concessions on our pricing. We have told them that we are FOB and, you know, they understand our position and none of them are asking us for any sort of concessions on our pricing. We see a minimal impact and we see actually our growth in the business should outweigh any impact from the tariffs.
Thank you, Bobby. A following-up question would be going to Alice and Tim, which is, can you recap the reasons that drag gross margin to drop quarter over quarter, and how should we gauge the trend for margin recovery in the second half if sterile injection production is back on track, back to normal, and Forex impact normalized?
For Q2 and Q1 margin rate, many things through the CDMO business shouldn't delay, and for Q3 and Q4, cannot set a fiscal production available like on Q3. Our view is Q3 and Q4 margin rate should be higher than Q2.
Thank you, Alice. A following-up question is on our operating expenses. The second quarter operating expense is lower than guided. Do you expect this to continue in the third quarter?
For Q3?
Yeah.
I think our production improvement for when still controlled OpEx. The Q3 and Q4 OpEx should be controlled very well, and the invoices can be lower than Q2.
Thank you, Alice. That wraps up the second quarter 2025 earnings call. Take care and have a good weekend.
Bye-bye.
Thank you, everybody. Thank you.