Welcome, everyone. Thank you for standing by for Bora Pharmaceuticals' Third Quarter 2025 earnings conference call. We have here with us today Group Chairman Bobby Sheng and CFO Alice Wang. At this moment, all participants are in a listen-only mode. After the speaker presentations, there will be a question-and-answer session. To take a question during the session, please enter your questions directly. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on our current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our annual and financial reports, including the risk factors. We undertake no obligation to update any forward-looking statement. During this call, we will present both IFRS and non-IFRS financial measures.
A reconciliation of IFRS to non-IFRS measures is included in today's presentation, which is distributed and available to the public through our website. I would now like to turn the conference over to Bobby for an opening note. Bobby, the floor is yours.
Good evening, everybody, and thank you all for getting on the call today. First, I want to sincerely thank all of you, our investors and our analysts, for your continued support this year. The first three quarters of 2025 have been affected by many internal and external factors that led to some fluctuation in Bora's share price. In addition, the confusion of U.S. tariffs and drug pricing, and our own personal merger product rationalization, has left many shareholders a little anxious about Bora's future. I deeply appreciate so many of you have stayed focused on our strong fundamentals and our management team's ability to execute through adversity. Over the past decade, Bora has evolved from a Taiwan domestic pharma player into a regional leader with diversified manufacturing capabilities that service clients all over the world. After the post-COVID landscape, the pharmaceutical supply chain has changed.
We saw a strategic need to have our facilities closer to our clients and their patients. With most of our clients being in the U.S., establishing a meaningful presence in the U.S. was essential and critical for long-term competitiveness and collaboration. In 2024, Bora completed three acquisitions within a single year, including two manufacturing sites and one specialty pharma company. This was an ambitious undertaking, one rarely seen amongst Taiwanese listed companies. In fact, since the 1990s, fewer than 20 listed Taiwan companies have acquired U.S. businesses, and fewer than five of those involve full-scale manufacturing capabilities. These acquisitions for Bora added large-scale new technologies, over 800 employees, and have doubled our annual revenue. More importantly, they have given us a solid foundation for future growth in 2025 and beyond. However, these three acquisitions also increased the complexity and the timelines of our integrations.
Thus, in the last three quarters, we've seen a lot of integration adjustments and rationalization. While these post-acquisition adjustments seem lengthy and sometimes unpredictable, we remain confident that these adjustments are the correct ones to maximize the value in the long term. In today's call, we'll go through some of the highlights of our Q3 results. We are pleased that we have completed most of the product rationalizations and have a very, very clear visibility on our long-term strategic goals. Our CDMO usiness just completed a record quarter in revenues and backlog. Some of the highlights include resumed production on our injectable facility in Camden and increased demand for our semi-solid packaging in Mississauga. Under the Upsher-Smith brand, the specialty pharma business continues to show strong quarter-to-quarter growth led by the V igabatrin franchise.
Even though external factors still create certain challenges for us in the industry, we remain cautiously optimistic about our future and confident that we have strategically put Bora in a position to win. Thank you, everyone, again for your support. We look forward to sharing our results and the exciting future vision of Bora. Good evening, everybody.
Thank you, Bobby. We will move on with our financial report. First off, please allow me to walk you through the operational milestones during the quarter. Bora executed a record level of post-merger CAPEX investments in 2025, and we are progressing in line with our strategic plan. We have expanded our Maryland aseptic fill and finish capacity by approximately 10%, while solid and liquid dosage capacity in Minneapolis and Mississauga grew around 3%. The investments allowed Bora to increase our operational efficiency and to increase revenue per head count in the CDMO business by 30% during the quarter compared to the beginning of the year. September marks the strongest month for the CDMO and specialty pharma of our pharma sales business.
CDMO delivered its highest quarterly operating profit to date, driven by both scale and efficiency, and strong free cash flow of this business reflects disciplined CAPEX and margin uptake from improving technology mix, which successfully, if not consistently, expanded market share of the V igabatrin franchise since launch for another quarter. As a highlight, we also received approval of Deflazacort brand name during the quarter, and we do expect to launch branded Deflazacort tablets by year-end. From discontinuing legacy low-margin generics business and reinvesting in specialty pharma, the company released a cash flow of TWD 2 billion. Moving on to our financial highlights. This is going to take a bit of time. The company reported a quarterly basic EPS of TWD 5.09, with a loss per share of TWD 1.49 from discontinued operations.
Operating income reached TWD 1,063 million, and net income for continued operations came in at TWD 122 million, resulting in a quarterly EBITDA of TWD 1,283 million, well on track to reclaim our 2023 core P&L indicators. As mentioned earlier, discontinuation of certain generics portfolio left revenues more or less the same sequentially, but year over year, we still delivered a 15% growth for top line. Gross margin improved to 45% in the third quarter. While operating margin is set to recover to 2023 levels, Bora's improved product mix led by specialty pharma and CDMO provides a more stable, recession-resilient earnings profile. Discontinued loss per share reflected the sell-through of higher-cost inventories from Upsher-Smith's legacy generics, as internal supply transfer delayed by regulatory hurdles. These inventories are now near depletion.
The greater-than-expected pricing pressure across low-margin generics reinforces the need to accelerate Bora's transition toward higher value and branded specialty pharma products. A bit more color on the Upsher-Smith integration on the same page. Following the separation of Upsher-Smith's CDMO and commercial operations, the combined pharma sales platform of Upsher-Smith, TWY, and Pyros is one vehicle, bringing the total M&A deal size to approximately TWD 15 billion. The segment now accounts for roughly 50% of our consolidated revenue, providing significantly greater operating scale to what was previously just TWY. On top of that scale, the Pyros acquisition enabled us to rapidly establish a foothold in the U.S. specialty pharma sector.
When we only look at the pretty part of the cake, which is specialty and high-value generics, the investment payback period is still estimated at some three to four years on trailing and also rolling numbers. From an M&A standpoint, this return profile continues to justify the strategic value of these acquisitions. The core challenge relates to Upsher-Smith's long-standing legacy generics portfolio underperformance and its attempt to scale a viable CDMO business with two production areas. Acknowledging the complexity, we spent the first three quarters post-acquisition observing and conducting a full operational assessment before initiating restructuring. Unfortunately, in reality, the underlying issues proved more structural than expected. This year, with a discontinued unit kind of carved out, now you guys can see clearly the pain points we talked about: continued competitive pressure in generics, structural disadvantage of the Plymouth production area.
In full year 2024, before the carve-out, these issues were somewhere hidden in the consolidated results, showing up as unstable gross margins and persistent working capital absorption, and hence, weak operational inflow, both directly tied to the structural challenges we talked about. Overall, we expect the impact from Upsher-Smith's underlying structural issues to be contained within this year. Having said that, we'd like to also highlight that in the third quarter, September was actually a very strong month when both CDMO and specialty pharma are aligned in a strong direction. Gross margin was very impressive, exactly on point of where we expect it to be. We do hope starting next year, the business will transition to a renewed commercial strategy and an expanded CDMO development plan.
Continuing—sorry—counting in internal CDMO orders, if we look at product mix, meaning intercompany orders between our CDMO network and Upsher-Smith, CDMO expanded in the third quarter with a clear improvement from the contribution of our fill and finish facility in Maryland. Net working capital, as mentioned earlier, our integration effort has resulted in net working capital as a percentage of total revenues going down to 23.69%, exactly the direction we want our cash management to head to. Thanks to the revenue mix optimization, operating cash inflow increased by—sorry—TWD 2,050 million compared to the same period last year. We talked about establishing a centralized BVI vehicle for overseas capital deployment that is currently in progress. Our rolling six-month cash deployment priorities would be CapEx for CDMO brownfield retrofit and also near-term value-aggregative and strategic fit M&A plans of targets.
The board approved the issuance of a NT$3 billion convertible bonds eyeing at gearing management and also refinancing. If you do remember, starting 2025, we disclosed non-IFRS reconciliation numbers, which we call core EBITDA because we believe the numbers reflect more precisely our key operations and where we are in terms of actual growth. Overall, we remain an above 25% core EBITDA ratio, even though global multi-site integration proved more complex and resource-intensive than planned, basically impacting the timing of our synergy realization. Now on to our operational updates. We talked about our CapEx investments a few minutes ago. I would like to emphasize here again on the retooled efficiencies from these upgrades. Not only are the sites now more capable of handling advanced projects, Bora also maintains an optimal utilization rate.
In the third quarter, CDMO backlog climbed to $296 million U.S. dollars across 27 new contracts and more than 20 new molecules, anchoring this ability into 2026 with a 72% commercialized project. Last but not least, talking about the dual-engine strategy, we continue to leverage a unified CDMO network to enhance cost competitiveness for Upsher-Smith's generic portfolio while paving the way for selective in-house production of specialty assets of U.S. production going forward. Fueled by expanded capacity and new dosage forms, our CDMO business, including internal orders, actually grew 56.6% compared to the same period last year year-to-date, reaching TWD 7.3 billion and back to the sequential growth zone. External orders only, the business grew 19% and reached TWD 5.27 billion. As an indicator, Top 20 Pharma continues to represent our largest and most strategic client base, a token of strong partnership and trust.
On the scorecard side, on-time inflow in the third quarter was 96%, and right first time was 85%, which also we mentioned at the beginning of the call. Revenues per head count also improved 30%. We will now walk you through the three key CAPEX projects in 2025 year-to-date. The leading force of our short-term CDMO growth is—we've talked about that more than three times today already, I think—the Maryland fill and finish facility. As you're aware, with the completion of FlexPro line, we are looking into building an AST aseptic filling system in the facility. Soon, this state-of-the-art system will be installed and high demand from new and existing clients already seen. We expect engineering batches to begin by the last quarter of next year.
Moving on to our good old Canada side in Mississauga, the new Northern Filler line is the third filling line there, and it can produce 7-15 million units per year. We're happy to report that the expansion is our answer to the facility's highly recognized dermatology manufacturing demand. A new global medical dermatology client is currently in mass production with an advanced dosage form in evaluations for expansion. Looking at our investments in our home turf, we've confirmed to add liquid-filled hard capsule capability to our Junean facility to expand into high-potency molecules as to reinforce the facility's leadership in oral solids. A new operation area has been designed at the facility to support the expansion, which will address the growing demand for stable delivery of sensitive compounds and complex pharmaceutical ingredients such as oncology drugs or potent drugs.
Now we will talk about our pharma sales business, which has gone through a couple of months of fluctuations. First of all, specialty sales expanded above 2024 run rate, driven by the Vigabatrin franchise, and we do expect branded products to sustain the momentum into 2026. Declining other generics was from discontinuation of 15 products under tremendous pricing pressure. We also do hope optimization to continue. What everyone cares about, Exelon's DLS run rate declines, stays within management expectations, and our current market share still stays at around 40%. Overall, we're happy with the speed of ramping up specialty infrastructures and a strong channel feedback received every quarter. We would like to highlight that inpatient stocking that began in the second quarter is now at above 15 hospitals, more than 15 hospitals doing inpatient stockings. That's a 50% growth quarter over quarter.
We believe this line specialty pharma will continue to steer pharma sales growth in the fourth quarter. Market share of VIGAFYDE the three dosage forms, is up 30% sequentially in the third quarter. In terms of total patients, on top of consistent growth in 2025 every quarter, there is a very clear breakthrough in total patients in October. The approved Deflazacort tablets that was in the first quarter of this year will have its brand name launch in December. As we are preparing strong momentum in the latter part of the third quarter, sometime around August to September, it is very encouraging across unique patients and new patients for Deflazacort tablets. We will also take some time to address paragraph IV generics that is gradually entering maturity into 2026.
If you look at the three boxes here, while we're still waiting for FDA approvals, the developments of Cladribine, Aml litigation, and PatentSite have been tracking in line with our expectations. If the regulatory process moves in a parallel direction, we could take advantage of more positive scenarios where limited competition and better pricing can be possible. To sum up a forward-looking 2026 blueprint, we'd focus on three pillars. First of all, we expect to continue to deliver growth in our CDMO network in terms of scale and to increase global awareness of our operations. Critically, we would relentlessly maximize opportunities to capture U.S. demand, to increase capacity utilization from CapEx investments, and to realize operational efficiencies. Undoubtedly, growth, organic growth, and M&A will come hand in hand. The rare disease specialty pharma portfolio, which is in the middle of the slide with branded products, is also an area of focus.
Stable gross margin aggregative growth is what we like about this business. At the same time, we will advance high-value generics with favorable paragraph IV prospects. Lastly, building a stronger company access to global investors with our level one ADR issuance, which is a non-dilutive and non-funding-related infrastructure. Also, company-wide AI initiatives are both on the map. We will execute on expanding Bora's competitive advantage to strengthen our global exposure. Before we close, we'd like to update you on Bora's sustainability performance. Mostly on EcoVadis, with Bora Group score of committed level surpassing the outsourced partner's threshold of most top 50 pharma is our latest achievement, and we believe that positions us well as the dedicated partner to our clients.
On sustained analytics, our scores moved toward the lower zone of medium risk this year and a PR value of 81 among the global pharmaceutical sector. At Bora, we do believe strong ESG performance across global and domestic benchmarks reflects our unwavering commitment to sustainable world-class operations. That is all of the prepared remarks we have for today. Thank you. As a reminder, to ask a question, you will only need to type in the Q&A section. We will now take a break of around 20 seconds to take questions from you. We're back now with a question on the development or ramping up of Maple Growth. I believe the question is for you, Bobby, as we recall we have signed more than five new clients.
You will also see that while we continue to fill capacity at Maple Growth, uncertainty regarding the tariffs and drug pricing has lengthened our sales cycles and slowed down some long-term commitments to that site. While we remain very bullish in the long term, we do see some short-term headwinds for longer commitments for that facility. You will also—
thank you, Bobby. That seems to be the only question for now on Maple Growth ramping up, which is still in progress. We will wrap up the call here today. Thank you for joining the call, and have a good evening.