So thanks everyone for joining this session of the Morgan Stanley Global Healthcare Conference. My name is Thibault Boutherin. I am part of the pharma equity research team based in London. Before we start, I need to refer to important disclosures. Please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. So for this session, I am delighted to have with me Ming Li, Chief Strategy Officer at Alvotech. So thank you very much for joining us today. I will kick off the Q&A. And you know, if you also want to ask any question, please do.
Before we start, Ming, maybe you would start with, for investors who are less familiar, a presentation of the business and maybe some of the key characteristics of your business model.
Yeah, absolutely. And first of all, thank you for having me. So, you know, Alvotech is here to try to solve a problem, or what we believe to be a problem, which is that over 40 cents of every dollar in the U.S. and Europe spent on pharma is on biologic medicine. So we think there's a significant need for biosimilars, which can reduce the cost of healthcare and the cost of biologics. We believe it's a global need. We also believe it's a long-term need, being that a lot of the originator companies have pipelines that are heavily weighted towards biologics, monoclonal antibodies. And so we believe this is a long-term proposition for the company.
In order to address that problem, what we have done is we've invested in infrastructure to do everything from early cell line development, which is the first part of a biosimilar life cycle, all the way through to fill finish production. What we don't do is sell our own products for many different reasons. The chief among them is that we want to be global, and we want to be global quickly, and there's also, of course, commercial risk that is mitigated by the partners that we've partnered with. So we have global presence, excuse me, on the commercial side, across over 90 markets. We've started commercializing our first product, I think, now in 20 markets. But we intend to build this infrastructure and utilize it solely for the purpose of biosimilars.
Okay, that's very clear. Maybe before we start to turn to the products, if you could talk a little bit about what differentiates your development process and your manufacturing facilities. So I'm thinking from technology standpoint, quality, ESG.
Gotcha. So, you know, I think the main differentiation about our infrastructure is that we have it, right? I think a lot of companies that are attacking the biosimilar space may be doing it on a virtual basis, through development partners or through a web of CMOs. Our thesis is that we need to have that infrastructure in-house and be vertically integrated, and all of those assets need to be targeted to biosimilars. So we don't have, you know, we don't have to weigh this against an originator business or a generics business. We want to be fully dedicated to biosimilars. From a technological perspective, you know, I think we, you know, we have a state-of-the-art facility. We've proven that we can develop biosimilars and get them approved in multiple markets.
From an ESG standpoint, you know, there's many ways to think of ESG, but if you think of it from a risk perspective, the facility is located in Iceland, where there is a significant amount of renewable energy on an isolated grid. And so almost all the energy that the factory uses is renewable. And in addition to that, you know, water, you know, we're not operating in India or New Mexico or California. It's something that's abundant, clean, hot, and also important in biologics production.
Mm-hmm. Very clear. And, maybe a typical question, before moving on to your business. You know, we've been talking through this conference a lot about the Inflation Reduction Act. So if you could give us your view on the way this reform could potentially impact the biosimilars industry, in particular, you know, could we see the potential litigation between originator and biosimilar companies allowing the progressive inclusion of biosimilars ahead of a potential inclusion of a branded biologics on the, you know, Medicare Part D drug price negotiation list?
So that's obviously a good question. You know, I think anytime there's major legislation like this that's passed, a lot of that is still up to interpretation, and the lead-up to implementation obviously means a lot to how it will ultimately impact the industry, pharma broadly, but also, biosimilars specifically. On your specific—and I do think it's a little bit too early to tell, but on the specific question about settlements, it certainly could impact the incentives that govern, you know, how companies, both originator and biosimilars, approach litigation and settlement. But again, I think it's a little bit too early to tell.
I think our goal is always to get on the market as early as possible, and if the environment in which, you know, changes around that, it would just change, you know, our approach to that.
Mm-hmm. That’s very clear. Looking at your product portfolio, you know, can you give us an update on the regulatory situation and your expected, you know, approval and timing of launch for your key biosimilar, HUMIRA, in the US?
We're looking at. Obviously, we're launching HUMIRA in other markets, but we're looking at the U.S. opportunity as a 2024 event. We have resubmitted our application, as we said on our previous earnings call. We're awaiting a BSUPA date, and we're also preparing for what would need to be an inspection, which is the only real hurdle to getting the product approved.
You know, if you... You know, when we look at the HUMIRA market in the U.S., or maybe, maybe for that, maybe if you could, you know, talk a little bit about the key points of differentiation of, of your product versus the offering of your competition, some of them are already in the market.
... So as you know, AbbVie has converted the market in the U.S. It's over 85%, a new form, the high concentration form. So we have developed that, but, but as importantly, we think, we've also are approvable, just pending the site inspection, for interchangeability. So it's the combination of those two elements that we find to be the differentiating factor, and we hope to be able to bring that to the market in 2024.
Mm-hmm. That's, that's clear. If you could just maybe spend a little bit more time on, you know, the kind of site inspection side of things. You know, you had an inspection last time in March of 2023. So, you know, what details can you give us on the remediation actions that have been taken in the context of your refiling and potentially, you know, future inspection to come as well?
Gotcha. So maybe I'll just take a step back and talk also, because we've had two inspections. The first inspection, we've cleared out all of the observations. There were no repeated inspections or repeat observations in the second inspection. We feel very confident that we've cleared out all the specific observations in the second inspection as well. I think a lot of the changes were process, personnel, but also culture. And I think that going into this next inspection, which of course is very big for the company, I think it's less about whether or not we've cleared out an observation or a deficiency that was observed, because clearly, you know, I think we feel confident that we have.
It's about being inspection ready at any time, and also just having a continuous environment of adhering to compliance, so sustainable compliance, if you will.
That's clear. Looking at the U.S. biosimilar market for HUMIRA in the U.S., as a kind of initial market formation, so you had one competitor launching around February here, then a series of other launches in July, so it's still very fresh. But when we look at the data in terms of volume, AbbVie, you know, seems to be still maintaining a very high volume share of the market. I mean, from the data we see, it looks like it's 99% market share. So if you could just give us some kind of insight into why you think this penetration has been maybe slower than for other biosimilars, and when do you think we could see biosimilars, you know, as a group, taking more share in the U.S. market?
Gotcha. So I think, you know, what's important in the HUMIRA market as of today is the position that AbbVie is on the market, how they've contracted and the fact that they are primary, right? The biosimilars that are on the market today are either low concentration interchangeable, or high concentration non-interchangeable. You know, I think that clearly as of yet, they've had a, it's been a difficult road to convert the market. You know, I think there's a couple of things. One, you know, we do believe that a high concentration, interchangeable product can be more efficient in a market such as this.
But having said that, you know, going into 2024 and 2025, the evolution of where HUMIRA sits in the formulary, and also the mechanisms with which the PBMs choose to, you know, to manage the market, I think, you know, are subject to change. So some of it is specific to us, but, but also, you know, for the broader market, you know, we, we should expect to see some changes as well.
Mm-hmm. And on the contracting situation in particular, you know, so you just touched a little bit about that, but what could prevent AbbVie from, you know, continuing the strategy of kind of locking contracts with payers for several years? So that, I guess, is the first part of the question. And the second part, when you think in terms of partnerships between payers and, you know, biosimilar providers, do you expect some kind of, you know, stable relationships going on with, you know, kind of clear relationships? Or do you think it's going to be a more dynamic market where we could see formularies changing year-over-year for biosimilar now?
Yeah. So obviously, AbbVie is going to have a strategy, as they had leading into the market formation of this. You know, but at the same time, you know, this is an open market, right? We believe there is going to be competition. We believe it'll come from us, but it'll also come from others, and that the environment can change over time. As far as you know, the existing partnerships, obviously, I don't want to comment too much on other company strategies. However, you know, a lot of the formulary positions are public, so there's certainly been contracting going on from the existing biosimilar competition. I think how fluid it will be, I think is very specific to specific situations.
But again, from our perspective, with an offer that we believe is differentiated, you know, we believe we can get the position necessary.
Mm-hmm. And, just maybe a little more specific on this, we are seeing these kind of innovative deals, at least innovative for the biosimilar market emerging, you know, with, companies, negotiating with PBMs to, for example, offer, you know, kind of, you know, biosimilar with very low, list price, a big, list price discounts, quite, you know, over transparency, which we are not used to see. So, you know, how are you thinking about this, innovative approach to the biosimilar market, and how it is impacting your own commercial strategy and thinking about partnering with PBMs?
Gotcha. So just at a high level, obviously, there's different parts of the market. Some parts of the market are more sensitive or more interested in low WAC. Some would like the ability to pass on value to their downstream accounts with higher pricing and higher rebates. I think it's hard for us to say anything commercially now. First of all, our partner is Teva. And also we're still awaiting approval, right? So obviously, we have a strategy that we would employ and we rely a lot on our partners here.
Yeah.
There is a dynamic where companies are trying to address different parts of the market.
... That's clear. So that's for the U.S., and if you could give us a little bit ex-U.S., you know, how the launch is progressing in different markets, maybe some key upcoming launches to come from HUMIRA ex-U.S.?
Gotcha. So as far as key upcoming launches, we're in 20 markets today. We're in most of the retail markets in Europe. The biggest launch to come this year would probably be Australia. That's our biggest one. Obviously, we're waiting on news and the ability to launch in the U.S., which we expect to be a 2024 event. As far as the launches, the most mature is in Canada. That launch is going well. I believe we're approaching a double-digit share there. In Europe, it's still early days for us and, you know, we're in the low single digits from a share perspective. But we expect to continue to ramp up, you know, in that market over time.
And I think even in the last call, we're increasing our scale on some of our drug product sizes and expect to see an increase in the second half of this year.
That's clear. When we think about the ex-U.S. opportunities for biosimilars in general, so not just HUMIRA, but, you know, the broader portfolio. You know, you have extensive partnerships in other regions. So where do you see the largest opportunities in terms of, you know, the different markets? Maybe some markets which are less mature today in terms of biologic presence, but that can grow with, you know, biosimilar introductions. And how do you expect your revenues to shape over time, you know, between U.S. and ex-U.S. regions across your overall portfolio?
Gotcha. So I think, as I said, we have a partnership model, and the reason why we, we chose that, one of the reasons, is because we can go global more quickly, right? Setting up this infrastructure in markets large and small, you know, comes with challenges and risks that are obviously difficult for a young company to navigate. And we think, in general, global is important. I mean, everyone focuses on the US, and it's roughly 70% of the biologics market. And it is, you know, the biggest opportunity, let's, let's be fair. But to go global in all of these markets, we think helps the durability of, like, an overall program, right? Not just focusing on big markets, but being able to launch in markets both large and small.
As you said, some of the smaller markets in biologics today are muted because of access and availability, and biosimilars have the potential to increase that. As far as how the US and rest of world split, if you know, if you call it 70/30 today, you know, our thinking is that it might be a US, non-US, that biosimilar market would be maybe a little bit more on the ex-US side, relatively speaking, because of the ability to grow markets. In Europe, I think the first years of adalimumab launch led to a double-digit growth just in volume.
Mm. That's very interesting. And another industry trend I wanted to touch on is consolidation, because, you know, when you think about a few years back, we had like, you know, a very large number of companies, you know, developing biosimilars, you know, some of them one or two biosimilar. And we saw a lot of players getting interest in the field. And then, actually, over the last two years, there was sort of realization that, you know, you probably need scale, you probably need some focus. And so we are seeing this consolidation move. So there was a BioXcel, Biocon, deals. You have the Samsung Bioepis, deals where, you know, the Biogen taking a JV.
We have some news that you know, Biogen might be trying to divest their SSR biosimilar portfolio. So it looks like we are seeing this consolidation happening. So what's your thought on this, and how do you think this industry is going to shape in terms of competitive landscape in the future?
Yeah. So one of the reasons why we wanted to invest so much in the infrastructure is because, obviously, we wanted all of this in-house, but we had the luxury of doing so as a private company, right? So most of our investment in our infrastructure and our pipeline was done privately. A lot of the companies that are in biosimilars, not all, but a lot of them, use different mechanisms to try to get biosimilar programs off the ground. And I think what you're seeing now is a little bit of a cleanup of that. Is that likely to continue? But I think that doesn't change our strategy at all.
That's clear. Moving on from kind of HUMIRA and the big picture and going through your product pipeline, you know, probably your next second biggest product is going to be Stelara. We are starting to see the timing of launches of different players, for example, announcements with Johnson & Johnson. And the public information seems to indicate that you and your partner, Teva, could be the second to launch in this market after Amgen. And I think so far, we have seen five biosimilar makers settling with Johnson & Johnson. So, you know, if you could just come back on the kind of key factors that could allow you to take a dominant market share on the Stelara biosimilar market. Yeah, I'll start there maybe.
Yeah. So we're very excited about the Stelara launch. I think generally speaking, some of the competitors that were in some of the earlier biosimilars, even ones in immunology, are not present in Stelara. So we feel very excited about, you know, the launch overall. You're right, we have the second date, but we are gonna be in the first wave, and so that's something we're extremely excited about. As far as the differentiation, I think, you know, the competition's landscape is a little bit different than HUMIRA. But also, you know, as a company, as we start to continue to build our portfolio, like, we're the only company that I'm aware of that could potentially offer HUMIRA, Stelara, Simponi, all three in the immunology space.
That's clear. And just maybe one specific question related to IRA. I mean, we've seen Stelara being included in the Medicare Part B drug negotiation list from 2026. So how do you think this could impact the market and the biosimilars market?
So similar to the previous question, you know, I think it's very early to tell on potential, if any, impact. The bottom line is we have a settlement that can get us out there in early 2025, potentially earlier. And so I think it's a wait and see for us.
... Moving on to biosimilar area, the competitive landscape is, you know, is also shaping up. We have three biosimilars already filed, maybe another four companies, giving up, this year to—for filing. So if you could remind us the status of your program, and, you know, kind of approximate timelines for filing in the U.S., maybe starting there.
Okay. So we have currently three products outside of Stelara and HUMIRA that are in the clinical stage. The most advanced one is Eylea. Behind that's Prolia, Xgeva, and, and Simponi and Simponi Aria. For Eylea, you know, we've completed the recruitment and the screening of all the patients, and it's just active, you know, clinical trial at the moment. We haven't put out a specific date on when we expect to file, so I won't, I won't say that here yet.
Understood. And, you know, any, like, key preparation of differentiation of your program versus the competition?
You know, it's not as clear-cut in our view as with HUMIRA. I mean, we're doing our best to develop the most relevant presentation, which is pre-filled syringe in the low dose. So we're moving forward with our program and making sure we have the presentations necessary.
Okay. And, you know, you just mentioned the dose. Obviously, Regeneron is starting to roll out the high dose, and the market is going to kind of evolve from there. So what are your plans on the potential high dose biosimilar?
So we do believe that there is a potential for a lower cost biosimilar on even on the low dose. But having said that, you know, clearly Regeneron will be moving the market. You know, we haven't said anything publicly on the high dose yet.
Understood. Let's maybe mention a little bit some of your additional opportunities. So, you know, starting with with denosumab here as well, you know, if you could come back on, you know, how, what... Like, the key characteristics of the products and how you see the market shaping and the place you could take in this market.
Got you. So on the two remaining that are in clinical trials that I mentioned earlier, the denosumab one is sort of similar stage as the Simponi biosimilar. That one is currently not partnered in the major markets. It's partnered in some of the smaller markets, and so it's a focus of business development for us to take the—'cause it's part, it's related to oncology and Keytruda, and it's part of our BD efforts today. On Simponi, you know, that's an exciting product for us. Again, another immunology product, but also one where there's only one known developer in phase 3, aside from us. So I think, you know, you might start to see companies target some of these products that are, you know, niche, for lack of a better term.
That's, that's clear. If we talk a little bit about funding, so, you know, if you could talk a little bit about funding situation today, how much cash runway you have, and what are the kind of key factors that could impact the timing and potential roundness of fundings?
Got you. So it's hard to think of it in runway, because, A, we have developing launches, we're launching new products, we have milestone revenues that at this stage are material to us. And in addition, we have a BD pipeline that can generate cash even at signing, right? So it's hard to think of it that way because we have those revenue streams. As far as commenting on future funding, it's hard to do so, either in form or even necessity at this point.
Mm-hmm.
We continue to invest behind our pipeline and continue to, you know, drive the business.
That's clear. And, maybe, you know, the question on the evolution of your revenue stream and the shape of your PNL in the long term. So we see biosimilar is actually a new industry. It's a bit difficult to, you know, think how revenues for biosimilars are going to evolve in the long term, because the moving parts you mentioned, volume going up in some markets, obviously price, we see, you know, continued price erosion, competition. It's a bit unclear now if we're going to see increased competition over time or, you know, consolidation in some markets. So, you know, when you kind of put all of these moving parts together, how do you think about the long-term kind of revenues and profits of each biosimilar opportunities, and then, you know, of your business as a whole?
Got you. So as of now, we've just started our commercial journey, so the milestone revenues, which will continue to come in over time, are much more material. But the goal, of course, is to build these launches on top of each other, and it's always going to be a staggered basis, right? So every market has an entry point that's going to be different from another, and that's another reason why we want to go global, so that we can create this idea where we have new things coming all the time. And once we start to layer in that, you know, that base of revenue, I think it'll be a little bit easier for us to predict.
And then, of course, we want to just pull through products as quickly as possible, right? So we wanna add new products, we wanna launch new products, and then the milestone revenues will be a much smaller portion of our, you know, our revenue going forward.
That's clear. Maybe one last question. You know, when you meet investors today, what are, you know, the kind of key elements of the Alvotech investment thesis that, you know, you want to highlight?
Yeah. You know, and I think some of it for us, it's, you know, obviously you had some questions about the IRA and the, you know, CMS and, and other things. I think longer term, globally, you know, we believe biosimilars should be well positioned, right? To take advantage of the need and the desire to reduce healthcare inflation. And so some of the specific questions are obviously important to answer, but a lot of what's the story of biosimilars, I think, is to be written, right? And so it'll be interesting to watch over the next 20 years what happens, but we believe that, longer term, the industry, you know, should and will be supported.
That's very, yeah, interesting. I think I don't have more questions on my side, unless there is in the room. Sure, of course. Can we bring the mic?
Just a logistical question on HUMIRA contracting in the U.S. If you launch in mid-2024, does that lock you out or limit payer negotiations for the year, and then we don't expect much uptake until 2025? Or I guess said a different way, what would timelines for payer negotiations look like? How quickly could you get on formulary, and do payers reevaluate formularies during the middle of the year?
So here's what I'd say, is that we obviously have been through the last year, right? Where we've had a delay as a result of the inspection status. Even during that time, there was open, transparent discussions through our partner, Teva. And I think what allows us to have that is product differentiation. And even in 2024, we believe we have differentiation amongst a significant portion of the market. So that helps us engage in that conversation. So we feel confident that should we gain approval, that you know, we could be in a position to have, for us, a material commercial event.
I think, I think we conclude the session. So again, thank you very much for joining us today and for participating.