Thank you very much. Good morning, good afternoon everyone, and thank you for attending the Recordati conference call today.

I’m pleased to be here on the call by our CEO, Andrea Recordati; and Luigi La Corte, our CFO, that will be presenting our 2020 preliminary full year results and '21 target. They will be running you through the presentation.

As usual, the set of slide is available on our website under the Investors section. After that, we will open up for Q&A.

Thank you, Federica. Good afternoon, ladies and gentlemen, and thank you for joining our 2020 results, preliminary results conference call and the '21 targets same conference call.

So I would like to start by saying that I think that Recordati has delivered a resilient performance despite a challenging condition in an unprecedented environment. The revenue is slightly down by 2.2% versus the previous year and/or 0.4% up at constant exchange rates.

In 2020, our Group faced and successfully overcome various challenges, some of which were expected, such as a loss of the marketing exclusivity for two corporate products and the entry of a new drug competing with pandemic in the U.S. whilst others emerged during the year at the onset of the COVID-19 pandemic.

The decline in the specialty care and primary care reflects a loss of exclusivity of silodosin in Q1 and pitavastatin in Q3. Strong FX headwinds, especially on the Turkish lira and the ruble -- Russian ruble, and COVID-19 a second key market segment, particularly on the cough and cold and products linked to hospital procedures and more discretional items with product for chronic therapies holding us better, as you will see in more detail later in the call.

The development activities dedicated to the treatment of rare diseases was strong, recording an increase of 27.9%. Now this business segment represents 22% of total revenues.

Signifor and Signifor LAR reported double-digit in market growth, and we're very happy with Isturisa's launch uptake to date and the initial €12 million sales we booked in 2020. The U.S.

business was further strengthened with strong initial uptake of Cystadrops following its launch in Q4 and also with the Carbaglu indication for organic acidemia, which was approved by the FDA in January 2021. Despite pressure on top line, we were able to deliver solid operating performance.

EBITDA growth was up 4.7% to €569.3 million or 39.3% of sales, significantly above last year. Adjusted net income at €410.4 million, which was up 7.3% versus 2019 and equals 28.3% of sales from the 25.8% last year.

The Group continues to deliver a strong cash generation of around €350 million before milestones, net share purchases and dividends distributed. We have also further reinforced our portfolio, specifically in support of our specialty and primary care business through new licensing agreement.

The license agreement with ARS Pharmaceuticals for ARS-1 is such an example, and also, obviously, the late -- just announced agreement for the licensing of Eligard, in Europe, Turkey, Russia and other countries from Tolmar.

So thank you, Andrea, and good morning, good afternoon, everyone. So I will start as usual by giving a little bit more granularity on our sales performance and starting with sales of our key corporate products, which represents 69% of revenue.

Zanidip, which currently remains our biggest products with €134.6 million of revenue in 2020. We finished the year flat, marginally ahead of 2019 with growth in -- across several markets, but notably in Italy, Germany, Poland and Russia, offset by erosion in France due to new measures introduced at the beginning of 2020, famous Article 66, which we have mentioned a few times over past quarters and also due to the effect of currency changes, particularly impacting Turkey and international markets; 40% roughly of Zanidip sales are to our international affiliates.

The Article 66 measures in France also accounted for most of the decline in the combination product Zanipress, which, again, is declining by close to 18% for the year. Our metoprolol franchise, which is now our second biggest franchise for the group grew nicely at 7.5% with total revenue of €105.7 million, with broad-based growth, particularly in -- particularly strong in Central and Eastern Europe, and particularly in those markets, where we have set up a direct selling organization most recently.

Urorec reflects clearly the impact of loss of exclusivity. You'll recall generic entered majority of markets in February of 2020, impacting, particularly revenue in Italy, Spain, Portugal and Germany.

In fact, in most of markets, our Urorec sales held up better than expected. In fact, erosion was somewhat lower than we anticipated at the beginning of the year.

Some of that, unfortunately, offset by, again, measures favoring dispensing of generics in France issued in early 2020. Notably, Urorec continues to grow in markets where generics have not entered, Turkey, Greece and Switzerland, in particular.

Similarly Livazo, revenue down by 1.8% at close to €53 million, reflects loss of exclusivity starting in August, which offset the growth that we saw in the first part of this year for pitavastatin. Again, here, the product is still growing in markets where generics -- we don't expect generics, mainly Turkey, Greece and Switzerland.

Thank you very much, Luigi. So if you please turn to Page 12 of the presentation.

So the assumptions behind our '21 targets are summarized in the slide. Regarding the 2021 guidance, assuming that -- and this is very important, assuming a gradual recovery as our reference markets after the COVID-19, we expect this to occur in the second half of 2021.

So we still expect, obviously, some degree of uncertainty and volatility in the markets until the end of the first half. And obviously, also despite the continued adverse FX event of roughly minus 2%, we expect to achieve net revenue growth of 10% in 2021.

Our key assumptions are the following. So specialty and primary care returning to low single-digit organic growth, following silodosin and pitavastatin loss of exclusivity in 2020 and an assumed return to more normal market conditions, like I said, in the second half of the year.

Of course, please keep in mind that the Q1 of 2020 was mostly free of COVID impact. And in fact, reflected overstocking by wholesalers and was only partially affected by the loss of exclusivity impact on silodosin.

We expect Eligard revenues of around €70 million or over €70 million, I should say, subject to the exact timing of in-market distribution as already highlighted. High double-digit growth of the rare disease business, driven by continued strong uptake of the endo franchise.

Signifor and Isturisa net revenue is expected to be around €120 million to €140 million over year with further growth also coming from Cystadrops, Ledaga, Juxtapid offsetting the PANHEMATIN decline in the U.S. We expect R&D costs to remain around 10% of revenue, reflecting the incremental investments to support the endo franchise and the amortization charges related to the recent asset acquisitions.

Assuming partial normalization of activities post COVID-19, EBITDA margin will be above 38%, reflecting as well the transition costs on Eligard. Financing costs of around €22 million to €24 million are expected with no FX gains/losses assumed on this item.

Tax rate to be around 20%, reflecting also €12.9 million of nonrecurring ACE benefit from the reverse merger transaction. To be noted that no new undisclosed acquisitions or business development initiatives are included in our 2021 targets.

And last but not least, dividend payout policy is confirmed at 60% of total net income. Please switch to the last slide of the presentation, Slide 13, which sums up the 2021 targets.

So we expect to have revenues ranging from €1.570 billion to €1.620 billion, EBITDA in a range that goes from €600 million to €620 million and adjusted net income of between €420 million and €440 million. As previously mentioned, we also plan to provide an update to our 3-year business plan in May.

So this brings us to the end of our presentation, and I think we can at this point move to the Q&A. Thank you.

Operator, we are now ready to take questions.

Thanks for taking my questions. And I will start off with two, and I have a follow-up, if I may.

Just on the guidance, the consolidated guidance, the organic growth of around 10%. Thank you for the detail on the slide, but I’m just curious, what does this assume for Livazo and Urorec?

So these are losing -- are these losing exclusivity this year? And then second is just on EBITDA guidance.

At least sort of looking what this might be ex the Eligard and Isturisa, is it basically declining to flat in 2021? And if so, what's driving that?

James, so thanks for the question. So first of all, just to be clear, the overall revenue growth, which is quoted on Slide 12 of 10% is the total revenue growth, which does reflect the 2% FX.

You will see underneath it, we also mentioned the Eligard revenue. So just to be clear, overall revenue growth of around 10% is the total growth, and it's consistent with the range that we've provided for total revenue.

You asked about silodosin and pitavastatin for the erosion next year. We assume an extra €10 million for both with silodosin, obviously, being larger product, but having gone generic in the early part of the year.

With regards to Eligard, we are expecting an EBITDA contribution this year of around €20 million, which reflects this being first year also some transition costs. I'm not going to give sort of a detailed EBITDA number for endo.

So hopefully, that gives at least sort of answer to most of your questions.

And then just a follow-up, the €35 million of SG&A savings from COVID. How much of that is expected to return as normal activities renew?

And does your guidance assume any further price erosion in Europe, please?

I will answer this one, James. So we expect basically 50% of operational savings that we delivered in 2020, that will be retained in 2021.

Thank you.

Thank you. Good afternoon, everybody.

My first question is on the R&D. Because in 2020, was 10% of sales, mainly because of lower sales.

So I suppose the total amount was more or less in line with your expectation. You are guiding for another 10% in 2021, which is a quite high level compared to the past few years.

Never achieved 10% for many, many years. So should we take this as a normal level going forward?

Or is it because of specific studies you are financing right now?

Yes. Thanks for the question, Martino.

I mean, the growth also in sort of 2021 will be in part, the additional amortization that comes from the Eligard deal. We are assuming 20-year sort of amortization and assuming that in both the upfront and additional milestone, which will be paid, we assume, over the course of 2021 with a little bit of additional investment behind the endo franchise but the majority really is the amortization, which is doing that.

But again, the forecast is for it to remain sort of flat in terms of percent of revenue. There is a little bit of studies, as we said, that will be continuing on the endo portfolio as well.

And we do have some of our programs, which are progressing , in particular. But again, the majority of it is amortization increase.

Okay. So we can take 10% as an indication also going forward or is probably declining?

We haven't sort of -- we are not providing for an updated plan today. But I mean it will depend a little bit also on the type of deal that we may do in the future, as always, which is -- and would they come with significant -- if it were to be an M&A transaction with a significant part of the purchase price allocated to goodwill, we won't have any amortization.

We won't have any kind of increase in R&D. If it's intangible, specific assets then -- which is why we sort of kind of shifted the emphasis on EBITDA and adjusted net income, which adjusts for amortization, if that makes sense.

Okay. The second question is on the 2021 guidance.

In the past, you provided the guidance, including acquisitions. I know I'm not asking you anything because it's impossible to predict.

But do you feel confident to reiterate the guidance, including acquisitions? Because I ask you -- because last year, I remember the M&A processes were a little bit slowed down because of the COVID pandemic and so on.

So probably, I don't know, maybe you are more confident today in either new license drugs or acquisitions. So just your feeling.

Well, I mean, I will answer this. I mean in 2020, we delivered on the acquisition side because, as you know, acquisitions are essential in business development, obviously, I'm talking about Eligard, which is a substantial business development initiative for Recordati and ended up reinforcing our SPC business.

There was a slowdown, but we did not perceive such a slowdown in 2020 due to the COVID pandemic, honestly. So things on the business development, M&A kind of front did progress.

We looked at various opportunities, but clearly not all opportunities pan out for a variety of reasons and different from one another. We don't give guidance in our yearly targets.

We give guidance in our 3-year planned targets. And we've always done this in the past, and we will keep on doing this.

So obviously, we will be building some sort of objective on the M&A target in our business plan, which we will present in May. Clearly, we have -- we continue scouting, and we have actually very kind of focused and intensive scouting activity, both in SPC and rare diseases.

And honestly, we're not seeing any shortage of opportunities. So obviously, the objective is to deliver also this year.

But as I said, you cannot kind of sell the business where you have the back. So we will give you some more outlook on this in the 3-year plan.

Sorry, one follow-up. I would sort of just realize that I hadn't fully addressed.

I think there was a third element to earlier question from James around profit evolution as implied in the guidance for 2021 ex the Eligard portion. Let's -- just to not forget in the context, we are still factoring in, in our guidance, a 2% headwind of FX versus sort of 2.6% of this year.

We are anticipating, and I think this is consistent across the sector, COVID still to impact, to some extent, the first half of the year. And obviously, as I said, the sort of detail of the loss of exclusivity impact on silodosin and pitavastatin.

So clearly, there's still a little bit of from that as we go into 2021. Operator, next question?

If I may, am I still online? No?

Hello?

Yes, you are.

Okay. Sorry, just very last question on Signifor, Isturisa.

Could you provide the split between the two like last year? And just to understand that Japan will be launched in the second half, but probably this year, it doesn't represent a significant contribution.

And for Eligard, is it possible to have a peak sales potential or €100 million is the reference point for the long-term?

Okay. Let me answer this.

Regarding the first question of a split of our guidance of €120 million to €140 million for the endo franchise. We will not be providing the product split for the 2021 estimate.

We have given a split of the 2020 results and an indication of the 2020 growth rates we have seen so far on Signifor with the sales achieved in 2019. Clearly, we also -- it's important to say that we also expect this to read into account for a significant part of the growth in 2021.

Japan, yes, obviously, you rightly -- correctly said, it's not going to be a major contributor in 2021. So no, I will reconfirm that.

And regarding Eligard, just for the moment, I think we will confirm that the €100 million sales -- full year sales that we mentioned before, starting from 2022.

Thank you very much.

Hello, everyone. Thank you for taking my questions.

I have a few modeling ones, please, and one big picture question. On the modeling ones, if -- is the €13 million tax benefit, the nonrecurring one that you have mentioned, will -- is that part of your adjusted net income guidance or not, please?

And second one, if I look at the M&A environment and the appetite from your side to do M&A, is it fair to say that we can expect some M&A in this year beyond what you have announced? Or is that not likely to be the case?

And the third one on Eligard. You've mentioned €70 million in sales and €20 million in EBITDA.

Assuming you get the marketing rights all transferred, that becomes €100 million in sales. What would be the right EBITDA number, please?

Is that still €20 million?

KC, thanks for the question. So first of all, in terms of adjusted net income guidance.

So to be clear, the €27 million nonrecurring one-off was a 2019 item, just to be clear. We have included in our guidance or in fact, as you know, adjusted net income is -- does not include the nonrecurring items.

So we mentioned -- we've mentioned it could have -- we have reminded you of the nonrecurring benefit from the reverse merger, so that if you're wanting to model net income, you know that we have that additional benefit, which doesn't go into adjusted net income. So again, the €12.9 million nonrecurring, that is the tax benefit from the reverse merger, would not be included because it would be adjusted in the guidance that we’ve provided.

On -- I think the Eligard one, expectations on EBITDA thereafter, I think you should model on the basis of a normal sort of SPC level margins, whether or not how quickly we get to that, whether that's already 2022, we will see, and we will provide an update when we do the 3-year plan. But the number that we are quoting for this year is very much reflective of transition.

And for M&A, in terms of expectations, for this year, I mean, all I can say is M&A remains an integral part of the .

I replied to that question before. I mean, it remains an integral part of our business development, at least in, say, growth strategy.

As I said, there's no shortage of opportunities that we are seeing. But again, until they materialize, it's difficult to make any projections and we are not going to give -- like we've never given targets for M&A for 1-year target.

We will give you an outlook on what we expect for the 3-year plan.

Thanks.

And so just to be clear, the targets we’ve read out do not include further M&As .

Thank you.

Thank you. Just a few, please.

On Isturisa, you told us that you're off to a great start in Germany. I wonder if you could just help us with the landscape in the rest of Europe.

Where you've got pricing, where you've got reimbursement, whether that reimbursement level that you're getting in other countries is coming in at the same level? I mean, in Germany, you can sort of choose your level currently for at least a year or so.

So just give us a little bit more of the flavor of the landscape, please, for Isturisa in Europe. Second question would be the trough level that we could get down to for Livazo and Urorec.

Now I know they're not your products, like Zanidip. Zanidip, years past patent expiry, is still an incredibly important driver for you.

I'm just wondering whether the €10 million of erosion that you talk about for this year is where new countries are getting some generics or whether you feel that has continued erosion? I'm just trying to get at the sort of level that we should be thinking of going forward with the level of support.

And I'm thinking particularly because you did so well with Seloken up 8% and again, is Seloken now do you think at a stable level? Or do you think that you'll be able to get some further growth from that product as you move it into some of your more peripheral markets?

And my final question would be about the savings. Actually now, I've got two more, I apologize.

The savings from COVID, you talk about €35 million of marketing savings. How quickly do you think that you will come back to spend that again?

I assume, not in 2021 because you told us that COVID will keep going for at least part of the year. But if we were to look further out and given the fact that you've got new more specialist products coming through, do you think we should be ramping up our SG&A?

And my final question is a big picture question. You talked about the new measures that came in, in France last year, which eroded some of your products more than you expected because the minute there was a patent expiry, it went to full genericization.

Given that European governments are going to be short of cash post COVID, are there any other markets where you have any visibility of the same sort of, let's use a true generic rather than a branded generic coming in that we might have to think about? Thank you.

Okay. Thank you, Jo.

I will do my best. A lot of questions there.

So I will start with the last one because it's a relatively straightforward one. No, we are not foreseeing sort of significant new measures being introduced across Europe as a result of the pandemic.

Yes, governments are facing significant budget deficits. But one, at least from our sort of vantage point, they don't seem in a hurry necessarily to claw those back.

And hopefully, they are working on a number of fronts in partnership with the pharmaceutical industry. And I think they've realized also the importance of a well-funded health care system.

So I think I've mentioned in prior calls with mention of a number of anecdotes where we see actually things going at the opposite way. So of course, it can happen, and it does happen from time to time, and it's been the history of the sector over the last at 10 years.

But we are not anticipating at this stage very significant pricing pressure or new generic measures across key markets. Isturisa and how it's growing in Europe.

First of all, my apology, I probably -- I put the emphasis on Germany. And of course, we are on track in Germany as well.

France is right now the market where the launch is most advanced across Europe, and that's on the back of the strong, early access program that was in place in the country, that also benefits from a more centralized management of these patients. But for -- so both France and Germany is where we are seeing a strong initial adoption.

We are anticipating Isturisa to gain endorsement in a number of European markets over the course of the year, but it will be later in the year. Currently, let's say, we are still in negotiation, pricing negotiation discussions across in France and in Italy.

Germany, as you mentioned, we are allowed to launch at our sort of set price and then initiating negotiations 1 year post. So that's still all to play out, frankly.

I mean, all I can say to that is that the product, as Andrea mentioned, has strong endorsement from KOLs. It has a strong endorsement from the European authorities themselves when confirming the orphan drug status.

So we have more reason to believe we will not be getting the kind of recognition of the value of Isturisa that we think the product deserves. Livazo and Urorec, just to be clear, sort of when I said €10 million sort of further erosion, that was €10 million on each of the two, and that's really just due to it being a full year impact more than anything.

In fact, we've started to see in markets where sort of generics have entered, for example, in the case of Urorec in February, early March of 2020, we have started to see that volumes stabilize. So I think those are more sort of full year effects rather than the reflection of significant further erosion to come on a market-by-market basis.

Seloken was a good growth driver, strong growth driver this year. We do still see opportunity for growth, as I said, particularly in those markets, Central, Eastern Europe, Nordics, Baltics, where we've set up our own direct-selling operations more recently.

I won't provide a sort of exact sort of number for that. But certainly, we do see an opportunity there.

And I think in terms of the savings on COVID, I think we've been quite consistent actually over the course of 2020 to signal that not 100% of the savings that we will be able to retain. But certainly, some we think are potentially here to stay.

I think inevitably, we all are in a position where we will get used to doing, particularly large -- where spend was linked to large events and gatherings, whilst hopefully, we are referring to face-to-face at some point, I don't think they will be at the same scale as in the past. I'm sure international travel will be restricted for a while.

So I would not be sort of ramping up. Again, we haven't sort of done a sort of 3-year plan update, we will do that in May.

But no, I would not be sort of foreseeing a sort of major ramp up of spend in the years to come. Hopefully, that has addressed most of your questions or all your questions, Jo.

Shout, if not.

Thank you.

Hi. Good afternoon.

Thanks everyone. Thanks for taking the questions.

I would like to have some color on the intangible amortization. I mean, in order to proper modeling the adjusted net income line for 2021, on what period do you expect to amortize the license regarding Eligard?

Is it fair to assume an overall €80 million amortization of intangible assets before taxes, I mean, €65 million for 2021 net of tax? And the second question is on the financial cost in 2020.

What is the detail on the -- this line? And the third one is on the vaccines.

I mean, are you interested in accommodating at your production plant, some production for vaccines by acquiring rights and sublicense in order to contribute to the speed up of the vaccine rollout?

Simple one. If I understand correctly, you're asking if we are doing anything with our manufacturing facilities to actually participating in the manufacturing of vaccines.

Yes,

Is that I understood.

Yes, yes.

Well, no, the vaccines, let's say, industry is a very specific one. You need special manufacturing facilities, which are very kind of -- adopt and designed specifically for the manufacturing of vaccines.

So no, it's not something that we would be able to be to set up, notwithstanding over regulatory approvals and so forth and the heavy CapEx investment. So it's something which is completely out of our core business.

Yes. Amortization charges for 2021, we are amortizing the Eligard upfront and first milestone over 20 years.

Of course, we start amortization on Isturisa sort of on a country basis as of the time when the product is launched in the market. You should assume an amortization after charge in 2021 of over €70 million, roughly, Giorgio.

Financial items.

Sorry, financial items for 2020, the gains from currency movements, we are in the range of, say, €6 million, €7 million to give you an indication.

Okay. Thank you very much.

Hi. Good evening, everybody.

Just a couple of questions from my side. The first one is on your, let's say, your new ambitions to the orphan drug portfolio.

I mean, Cystadrops and certain indications for Carbaglu. Can you remind us how we should look at these products, if we were to rank your statements for rare disease in terms of market opportunities?

And the second question is on your cash deployment. Arguably, the large acquisition in regards to license of Eligard drove an overall cash out lower than what we were expecting for acquiring €100 million .

Do you intend to redeploy this additional which we have now available? Thanks.

So thank you, Isacco. So Cystadrops in the U.S., we see sort of opportunity, which is sort of in terms of distributor scale below US$20 million over time.

The launch has started quite well, actually. In fact, if anything, it's ahead of our expectations.

So, so far, so good. But that is the indication.

It is a fairly -- it is a sort of quite rare condition. So it's great news for patients.

But yes, it's clearly sort of more limited in scale relative to some of the other more recent additions. And Carbaglu OA, similarly, I think it will contribute to the continued growth of Carbaglu in the U.S., but the indication is for use in acute setting.

And therefore, it's not going to be sort of a very material driver on its own. In terms of cash, I mean, clearly, when looking at our firepower, we don't just look at the sort of cash on the balance sheet, but where we are in terms of leverage overall.

And as I said, we are 1.5x EBITDA, which is very much in line with where we said we would be. We did say when the plan was refreshed that we will grow up to a maximum of three, but only if and when very specific opportunity of -- came about.

And so nothing has changed really in terms of -- from our perspective. We did a very significant deal in 2019 with over €400 million sort of cash outlay.

We've done this well now. And of course, we will continue to scout.

We are continuing discussions for same type of opportunities that we've discussed in the past, both on the SPC side and the rare disease side. So I’m not sure we see it as that being sort of very different position in terms of cash and leverage from where we thought we were going to be.

I think we're pretty much in line with where we said we would be actually from that perspective. I hope that makes sense.

Yes. So just one very brief follow-up, if I may.

In terms of market multiples, have you seen any kind of change because of the health care emergency or nothing really material compared to the past?

No. Honestly, I would say no.

We are not seeing anything there.

Okay. Thank you.

in market multiples due to COVID. Thank you.

Just a quick one on your share buyback program. Is that purely to offset expected share issuance?

Or does that have some element of you thinking that the shares are particularly undervalued and you haven't got anything else that you need to spend your money on at the moment, and therefore, you're making a deliberate share buyback?

Thank you for the question, Jo, but it is really a technical one. We have existing sort of stock option program in place.

Our programs actually do not foresee the issuance of new shares. So the programs that foresee that any exercises would be fulfilled through treasury shares.

And all we are doing is sort of making sure that we have what is required to fulfill any potential sort of shares vesting, which other -- are already vested or vesting between now and May. So no, it's not because of -- as we said, from our perspective, where we are in terms of net debt is exactly where we thought we would be in the plan.

Thank you.

Thank you very much. Thank you, everybody, for listening in.

Take care. Be safe.

Bye-bye.