Good. Okay, great. Good morning, everyone, and thank you for joining us. My name is Matt Dellatorre, and I'm the Generic Pharma Analyst here at Goldman Sachs. We're very pleased to have Alvotech with Chief Strategy Officer Balaji Prasad. Balaji, maybe just to get started, could you give us a brief overview of the company and walk us through the Alvotech platform and just some of the key differentiators?
Sure. Firstly, Matt, let me thank you and the Goldman Sachs team for inviting us to the conference. It's a pleasure being here. What makes Alvotech different? Clearly, I think it boils down to three major factors, as you can think about, having been closely associated with the company, though I've been just with the company for a month, but I've also known them for more than a few years. I think, firstly, the very close integration between R&D and manufacturing is a very strong differentiator for Alvotech. It gives us competitive advantages in many, many ways that is long to list out here. Second, we have a very, very custom-built, purpose-built platform. We have invested over $2 billion, nearly $2 billion, into this over the last 10 years.
What we have today is a very tight, vertically integrated organizational setup, very close network, collaboration set between R&D and manufacturing, and large capacity, which really is a differentiator for us. Third, I'll also call out the management team. We have a management team which is, I think, exceptional in thinking and breathing biosimilars. Starting maybe with our founder, Róbert Wessman, whom many of you know from his many successes in the generics and biosimilar space. He's been instrumental in setting this up 10 years ago and taking it to where it is, where we stand currently as a company, potentially generating around $600million-$700 million in revenue this year, as we've said. At a very material inflection point, as we see in terms of revenue trajectory, EBITDA trajectory, and all of it.
I think he's been material in getting the company to this situation. I think these would be, if I were to say, the three major differentiators for us versus peers.
Great. Maybe, what are you all most focused on from an execution perspective over the next 12 to 18 months?
Sure. As I said, we are at an operating, at an inflection point in our career growth. Alvotech, over the last 10 years, has been largely in a setup phase and startup phase, right? Building up cell lines, building up R&D, developing these, tying up with partners. The last year was when we became EBITDA positive. We now have four successive quarters of positive EBITDA, and we have very strong EBITDA guidance for the year. At this inflection point, it is important to ensure that execution continues onwards. The whole team, management team, and the rest of the company is really geared on focusing on executing now. What does this execution translate into? Which is, one, continue to ramp up biosimilar Humira and biosimilar Stelara that we have launched in the U.S. and outside the U.S., nearly 25-plus countries outside the U.S., too.
Two, we have three major approvals coming over the next six months or so. Ensure that we get these approvals, launch them as successfully as we can, and continue our commercial trajectory into next year. That is two. Three, if I were to say, you would have recently followed that we acquired parts of Xbrane operations in Sweden. Integrate those R&D operations in Sweden along with the already well-established R&D platform in Iceland. There are multiple synergies that come out of this integration. Primarily, the one which is acceleration of our R&D programs into a number of platforms or programs that we expect to launch every year. Ensure that this integration goes smoothly. As a consequence, our R&D pipeline continues to build, notwithstanding the fact that we have the largest biosimilars pipeline amongst our peers globally.
Ensure that these R&D platforms continue to build into next year.
Great. As you mentioned, you do have one of the largest biosimilar pipelines out there. However, many of us are only kind of familiar with some of the Teva-partnered assets, including myself. What would you highlight kind of beyond those, and what has enabled you all to build out your pipeline so aggressively?
Sure. For the benefit of those listening in in the audience, I want to summarize our pipeline. We have currently two commercial assets. We have disclosed 14 assets in total in various stages of development. Beyond that, we have another 14 assets. We have 28 assets, as we have said, which is the largest biosimilar program globally. We also have to think about how Xbrane will contribute incrementally to this, right? What that takes us to is a very large R&D platform. Which amongst these is now key or material, as I said? I think amongst the ones that, apart from the ones we already launched, Humira, biosimilar Humira and biosimilar Stelara. We are also excited about the upcoming launches, which includes Eylea, the low-dose version.
There is Simponi and Simponi Aria, which we believe is going to be a limited competition opportunity and where we can differentiate substantially. Looking beyond that into 2027, we are also very excited about two particular assets. One is Entyvio, and the other one is Eylea high-dose. That is something that we are looking at as the third wave of our launches, for lack of a better word, which will come up in the 2027 to 2028 period.
Great, great. You mentioned this kind of operating inflection. You all recently raised your 2025 guidance. Could you maybe just remind us what this entailed and what led to the raise and what drives your confidence?
Sure. Going into the year early February, we had come out with a very strong guidance for the year. Post that, once we concluded the acquisition of Xbrane, for which we paid $21 million, we also got the asset Cimzia, yeah, regulated anti-TNF molecule, further boosting our immunology pipeline. What we realized as we acquired this asset is this is a truly differentiated asset. We got multiple inbound calls with partners wanting to partner on this particular asset. I think with the visibility that we had, we felt that there are going to be some partnerships that we're going to sign up. As a consequence, we'll also get some milestone income. That was one of the primary reasons. Then we had incremental progress in multiple other programs. Combining both of these, we thought it is prudent to increase our guidance.
We took up our revenue guidance by around $30 million, and then our EBITDA guidance by around $20 million to $200 million-$280 million. Primarily led by Cimzia.
Got it, got it. Then walk us through maybe kind of from a longer-term perspective, your 2028 targets from both a revenue growth and EBITDA margin perspective.
Sure. Where we stand this year is we have our guidance out for the year with around $600 million-$700 million in the top line and $200 million-$280 million EBITDA. For the benefit of those, this is a substantial revenue growth over last year. Last year, 2024, we ended with around $108 million of EBITDA. From $108 million of EBITDA in 2025, we are almost doubling EBITDA at the lower end of the range to $200 million. At the higher end of the range, substantially more than doubling to $280 million. From here, where we see, because of this operating inflection that I spoke about, is that we expect our EBITDA in, let me start at the top line. We expect our top line to grow from $600 million-$700 million this year to $1.5 billion in 2028. That is more than double.
Of this $1.5 billion, we expect product revenues to contribute around 80%-85% of this, approximately, let's say, $1.2 billion-$1.3 billion. And then milestone revenues between 20%-25%, which is, again, approximately $200 million-$300 million. So where is this coming from? As I said, we have two products currently which are commercial globally: U.S., Europe, Canada, Japan, multiple other geographies. And then we are expecting in the near term three material launches. We have also discussed prior to our 2027 and 2028 product launch opportunities. We expect that to take to the $1.2 billion range. Below that is milestone income. Milestone income for approximately $250 million, let's say, for 2028. What will happen from now to the next four years is every year we expect our milestone income to be approximately $250 million.
We will be generating $1 billion of revenues from 2025 to 2028 in cumulative milestone income, which is a phenomenal number to think about, right? We will be generating $1 billion of, expect to generate $1 billion of revenue, milestone revenue in this period. Trickling down from revenue to the EBITDA level, we expect COGS to be around between 35%-40% in terms of SG&A and some R&D of around 15%-20%. There is not going to be any material change there, which takes us to our EBITDA, where we expect EBITDA margin of 40%-45% by 2028. Of this 40%-45%, the product revenues would be around 60%-65% of product revenues. This operating inflection, as I said, comes because our capacity is set. Our costs are more or less fixed now.
We can start really building our EBITDA trajectory and also has significant impact on the cash flow that we expect to generate and the cash returns that we expect to generate over the next few years. Mind you, all of this is on CapEx that we expect to be limited or minimal. This year, we expect to incur a CapEx of $60 million-$70 million. Next three years, we expect to see CapEx of around $25 million annually. We do not need any incremental CapEx. We are well invested into, well set up into delivering on our commercial goals and launches with the existing infrastructure, which we think will carry us into 2030 and even beyond 2030. Very strong guidance, very strong target out there that the company is geared to or working towards delivering.
Great. That's super helpful. Stepping back and kind of just thinking about the market overall, how do you guys, how do you guys kind of think strategically about the current biosimilars market? What's your longer-term outlook on the space?
Sure. We are extremely excited about the opportunities in the biosimilars market. The way we saw this develop over the last 10 years, the market has come into some sort of maturity in terms of being we have seen the buy-and-bill oncology launches. We have seen the immunology pharmacy benefit launches. The market is really coming into its own now. If I were to take a step further up and look at the overall market development, think about this, Matt. Fourteen out of 62 biologic drugs that have gone off patent, only 14 have seen, as of today, some biologic launches. You still have literally, what is it, 48 biologics which are off patent, but no launches currently. Yeah? There is a lot of, just from this existing off patent, there's still a lot of scope for us to address.
If you think about where this next set of growth is coming from, again, if you think about the current clinical trials globally, around 60% of phase two, phase three assets are biologics, which means that even if I were to think about, let's say, what is my growth going to be beyond 2035 for even drugs that I do not know today that exist, there is going to be a long, long tail of opportunity, right? There is a long growth beyond that too. With our existing pipeline that we have said about, spoken about 28 molecules, we are targeting $185 billion of total addressable market. With just our existing pipeline of 28 drugs that we have in various stages of development, we have a very large ramp to grow with this $185 billion of TAM that we are targeting.
We're extremely excited about the biologic biosimilars market. We think it has phenomenal growth opportunities. We believe we are one of the best positioned, if not the best positioned company out there with our pipeline, with our integrator platform, with a team that's executing, and a very unique model in operations, which is our partnership model. I've not spoken about that before, so let me just address that too. As you know, we do not sell commercially front-end in any of our markets. We've chosen who we believe is the best player in each market commercially. We have partnered with these companies. We sell through these companies, right? Each of these companies are investing into it because they have paid us in terms of various milestone incomes. They have paid us royalties.
They are fully invested into our platform and into the program. When the drug is eventually commercial, ensure that they also generate the returns on their investment. This model has really helped us build a differentiated R&D program and an R&D program which is also self-sufficient or self-funding. Most of our projects have now basically covered their costs fully. That kind of acts as a positive or a virtuous cycle in terms of expanding our platform further.
That is what gives you guys kind of the margin profile that you have, which is.
Absolutely. Also, one of the factors.
Maybe kind of just, are there any key aspects of your strategy when you all decide what type of biosimilars to choose or go after? Just anything that you would highlight there in terms of the kind of foundations of your strategy.
Sure. Probably there, I won't think there's a secret sauce because ultimately the first step to developing a biosimilar program is to look at the size of the molecule and see if it is large enough for us to justify an investment of approximately $200 million, give or take $25 million-$50 million on either side, $200 million investment into developing a biosimilar platform. The drug has to be a reasonable size. The pathway has to be clear. I think in terms of technological capabilities, I think we've always been very confident of our ability to develop biosimilars. That has not been a big barrier. It has been a barrier for many of our peers. We have been in multiple limited competition ones where we are the sole biosimilars, at least as far as we know. Each of these comes into play.
We're able to develop these biosimilar programs.
Maybe touching on biosimilar Humira, walk us through how you all secured the private label for that program despite being one of the later assets to market.
Sure. As you know, the biosimilar Humira went off patent a couple of years ago. Where we're really fortunate was, again, our ability to have these differentiated assets. For us, biosimilar Humira was always a differentiated asset, our biosimilar Humira, in that we had the only high concentration citrate, phenols, and all of that, but high concentration interchangeable biosimilar Humira. What it meant was, though we came to the market late, we were like the eighth or ninth player. We were able to, because of the uniqueness of our asset, we had an exclusive interchangeable high concentration biosimilar Humira. We exclusively ran for 12 months, which ended recently. That really helped us to have a commercial edge and win the private label deals. Could that be relevant for in future biosimilar programs? We'll see. FDA is thinking revisiting its interchangeability stance.
That said, that was what helped us. If we had to take the technology further and think of future launches, will future launches see similar competitive advantages? Yeah, we have limited competition launches coming up too. We will be one or one or two players, and that will help us secure things too.
We touched on this a little bit already in terms of the margin profile, but how do you all think about kind of the profitability of biosimilars broadly? And then also, obviously, for Alvotech specifically, just given how you guys structure your terms.
Sure. When I spoke about our 2025 guidance and target 2028, you got some insight into how we have our operating profits are and how we expect to ramp up. Probably going a bit deeper into this to the extent I can, our partnerships are structured in a way, I think typically we tend to have like a 60/40 revenue split in favor of the partner, in favor of our commercial partner who is launching the drug, and 40%. Again, that drills down into product margins of around 60%-65% of EBITDA margins for us, despite just from that 40% of the cut. We are good. The partner takes on the commercial risks and everything else. For us, because of the capacity that we have, as I said, fixed costs, more or less fixed costs.
We expect each of these assets to be profitable further. The important differentiator that I would say matters, as we sit today, is we have launched two drugs which are primarily in the pharmacy reimbursement space, Humira and biosimilar Stelara. We will also be launching our next set of assets. We will be in the oncology and the buy-and-bill space, which are going to be interesting, which are going to be very different. The dynamics are going to be, channel dynamics are going to be different. We expect to be probably even more profitable. Some of these, as I said, Entyvio, Eylea, high dose, there will be ones where we are either first to market or we will be the only ones in the market for some time. That will help us. The profitability from that we could expect would be great.
We often hear about kind of the differences between the U.S. market and the European market and any of the other ex-U.S. markets. How do you all kind of strategize with regards to that? What do you see as kind of the key differences or long-term kind of outcomes there?
I'm glad you asked about the ex-U.S. market. We constantly reiterate that we are not just a U.S. growth story. The U.S. market opportunity is phenomenal. We are happy to be providing a low-cost biologic drug to the U.S. healthcare system. We see our opportunity as global. We are present in 90 countries with 19 partnerships. The margin profile for each of these varies ultimately because different countries, different ASPs, that's inevitable. Each of these territories or each of these countries individually are profitable for us. I will obviously not break down into what the profitability for each of these geographies are. You can assume that based on what we sell at and what we get, they are very profitable for us at a corporate level, at a group level. Yeah.
Great. How do you all think about maybe the ideal market size to balance kind of the competition level and then also the opportunity? Sometimes we hear the $1 billion-$5 billion range is kind of maybe the sweet spot. Would you think that's fair? Or do you guys look for something different?
I think that anything above a billion dollars I think is fair. We'll also have to see how the cost of developing a program evolves. What are the other things, other factors which can have an influence on somebody's ability or decision to invest in a biologic platform? If the cost of developing a biosimilar program goes down from $250 million to $100 million-$125 million, then could we see some of the below billion dollar biologic assets seeing programs in development? Why not? I would not be surprised. I think it's needed. It's needed. I think that's going to be one of the determinants for these programs, future programs.
Maybe given what we've seen so far in the biosimilar Humira market and then also the early days of the Stelara market, how do you see those two markets evolving? Do you expect Stelara to kind of just mirror Humira and then additional kind of large PBM-based markets to kind of look similar? Or just how do you guys think about what those will look like in a few years?
We have seen how, let me start with biosimilar Humira. As we have said, we expect, we ended last year with around 20% of the Humira market converting to biologics, to biosimilars, being a pattern. In 2025, we believe this could be around 50% of the market would convert to. We expect this to ramp into 2026. Probably at some point, this will plateau in maybe end 2026, it could plateau. At least for the next six quarters, we expect this to, the market conversion to continue to evolve. We have said that we expect to be in the low double digits market with biosimilar Humira. Moving on to Stelara, it is still early days in terms of market formation. Stelara, again, let me remind you that it is a story which is not just U.S.-focused for us. It is also Europe. Europe, we have seen U.S. launches gone well.
Europe has been a fantastic launch till now because in most of the countries, in every country that we are present in, we are either number one or number two in terms of market share. Our Japanese launch has gone on very well, where we have, I believe, low single-digit market share already. Beyond the U.S., we've had multiple successes in multiple geographies with biosimilar Stelara. Biosimilar Stelara will continue to ramp up into 2026, again, plateau at some point of time.
If you look at our target 2028 of $1.5 billion revenues that we are targeting, and if you look at that, biosimilar Humira and biosimilar Stelara still contribute a substantial chunk of our revenues, around 30%-35%, which means that they may plateau, but they are not going to fall off a cliff like most generic products would have done on day 181 after the exclusivity period. You have seen how they would go. That is not going to be the case at all here. We will expect to see some natural dynamics of the business compressing some prices and all. We also expect to see significant volume uptake too into 2027, 2028 too with these two assets.
Great. Great. You touched on this a little bit in terms of some of the next assets you'll be launching are in the medical benefit. Those could be more profitable even. In terms of kind of longer-term perspective, are there any nuances that you guys keep in mind across the different segments in terms of sustainability, medical benefit, pharmacy benefit, or different therapeutic areas that you think are maybe more or less promising?
I don't think we necessarily tend to think of it as therapeutic areas per se. Ultimately, biosimilars, we can have the capability to develop across therapeutic areas. It just so happens that our first two set of launches have been in the immunology space. Next, we'll have the buy-and-bill space in the oncology assets and some of the retinal assets coming into play, which is just the wave of path expired and everything else. I don't think there's any therapeutic area which necessarily restricts us. We don't think about it in that terms.
Got it. Got it. Maybe shifting gears to kind of policy considerations. At a high level, how do you see the IRA impacting the biosimilars market? What do you view as the pros, and what do you view as the cons?
This one is still, I would say, work in progress or evolving. I have had multiple conversations with other managements, with the FDA, with the regulators over the last couple of years trying to figure this out. The way we see it right now, I mean, IRA, I think some of the basic tenets is that there are going to be negotiated prices for those biologics which do not have biosimilars in development at all. Could this disincentivize future biosimilar programs? Possibly. What it does is, especially some of the smaller players, some of the smaller biosimilar players could be demotivated in developing these programs, which could mean that future assets could still be a limited competition opportunity for us. I think it probably plays well for the larger biosimilar companies out there. That said, there are not too many biosimilar companies globally.
We have probably around close to a dozen. Some of the smaller ones could really not have the ability or the financial wherewithal to invest into an area where they see policy uncertainty and regulatory uncertainty. That would not necessarily be a bar for us.
As you think about kind of, let's say, a drug, it's been Medicare negotiated. Obviously that segment of the market compresses a little bit. Do you view that as kind of having any real impact in terms of the market opportunity for you guys?
It's a very good question, Matt. I don't think so because ultimately, if the price of a drug goes, if a biologic drug or an innovative drug goes down, will it diminish the market time? Time, yes. But will, in terms of our ability to generate the return on cash that we would on the capital that we invest into a program, would it impact it substantially so that we don't invest into the program? Do not think so. I think it's still going to be a meaningful asset for us to work towards a biosimilar program. Ultimately, the company's goal while generating returns to our shareholders is also to provide access to low-cost, high-quality biosimilars to patients across the world. We are not going to forget that vision too while balancing this with our ability to, with our need to generate returns to our shareholders.
Okay. Lastly, just kind of shifting to tariffs. These have obviously been a big, or potential pharmaceutical tariffs have been a big overhang on the sector, both branded and generics and biosimilars. How are you all thinking about that risk at Alvotech, kind of maybe at a high level? Also for Alvotech specifically, how are you guys positioned?
Sure. Addressing both parts of the question at a high level and specifically for Alvotech, starting with Iceland. Iceland has one of the lowest tariff rates, 10%, because we have a trade surplus versus the U.S. We import more than we export to the U.S., which means that we would expect to face a tariff. Iceland would expect to face a tariff of around 10%. That puts us in a relatively comfortable position. To Alvotech specifically, our contracts are built or developed such that it is our commercial partners who take the cost of it from the moment they take the product, control the product from the shipping at whatever point in the supply chain. It is their responsibility to bring it to the U.S., pay any import duties, pay any tariffs, and sell it to the market.
We have put out our PR around three weeks ago where we have stated that we expect the impact of tariffs for Alvotech specifically because of these two points to be very, very minimal.
Oh, interesting. Interesting. Great. With that, I think we're all out of time. Thank you, Balaji, very much for joining us. Really appreciate your time.
Matt, thank you so much for the questions. Great speaking to you. Thank you for inviting us and to Goldman Sachs for inviting us to the conference. Thank you.
Our pleasure.