Thank you Serena , and good afternoon or good morning everyone and thank you for attending this -- the Recordati conference call today. I'm pleased to be here with our CEO, Andrea Recordati; and Luigi La Corte, our CFO that will be presenting the 2021 first half results.

They will be running you through the presentation.

Thank you Federica. Good afternoon and good morning ladies and gentlemen.

Thank you for having joined us for Recordati's first half 2021 results investor presentation. So if you turn to slide 2 of the presentation please, we -- first half highlights.

So Q2 was characterized by a gradual easing of the COVID-19 restrictions, which resulted in a partial recovery of our main reference markets and a gradual return to the near normal operating conditions. The recovery of several therapeutic areas in SPC, the contribution of Eligard coupled with a high double-digit growth of our RRD franchise with both endo and metabolic performing strongly resulting in a 16.6% revenue growth in Q2, offsetting the 10.3% decline recorded in Q1.

Also to be remembered the revenue trend in both quarters was always distorted by China movements in 2020. Those are worth saying.

Net revenue in the first half of this year is €770.8 million, which equates to a 1.4% growth versus previous year or at constant exchange rate at 4.9% growth, reflecting the contribution of Eligard for €36.8 million and a FX headwind of approximately €26.8 million. Net of these effects the growth would have been flat.

Also considering the loss of exclusivity of silodosin and pitavastatin in 2020, which affected us some €19.8 million and the impact obviously of the pandemic of the cough and cold product sales. To be noted the significant growth of rare disease portfolio in the first half, which is a plus 18.5% is thanks to the continued positive progress of Signifor with €56.3 million of revenues versus €32.8 million revenues in the same period last year, but also to the growth of Carbaglu and Cystadrops in the US and Europe.

EBITDA at €300.5 million was margin of 39% of revenues. The slight decline minus 3.4% versus previous periods due to the very low level of operating activity in Q2 2020 due to the pandemic restrictions and increased investments behind Eligard's integration and promotion-related costs and activities to support also the end of portfolio growth.

Net income increased by 5.2% reflecting non-recurring tax benefits of roughly €25 million and of which I will leave Luigi to give you more color. As you will see later in more detail, in the first half we delivered roughly €205 million of free cash flow ahead of last year due to the lower absorption of working capital.

Okay. Thank you, Andrea, and good afternoon, and good morning, everyone.

Pleased to go into more detail into what was as Andrea has mentioned a robust set of results for Q2 with revenue in Q2 up 16.6% rebounding from the minus 10% of Q1, which as Andrea said and as we will go through in this slide, driven really by a very strong growth of our rare disease franchise, a good contribution of Eligard, but also initial signs of recovery across specialty and primary care, where we know the business was affected by stocking patterns across the quarters in 2020. So, looking there first at revenue for the key products on slide 5.

Zanidip and Seloken both showing a mid single-digit decline, reflecting mainly the impact of these two products having significant share of sales ex euro markets. It does reflect a roughly three percentage point FX headwind which impacts on the SPC portfolio.

But also is on the back of a strong quarter for Zanidip -- sorry strong half -- first half of the year in 2020 for Zanidip. Zanidip, you may recall in the first half of 2020 it was up by 16.6%.

And also, Seloken had a strong first half of the year in 2020 of 7.6%.

Thank you very much Luigi. So regarding the full year financial projections as I already mentioned guidance range for full year 2021 remains confirmed.

On the left part of Slide 13, you can see the 2021 target assumptions we have communicated in February. Whilst on the left side, the latest view -- on the right side sorry the latest view of behind in our kind of assumptions for the full year.

So basically, revenues remain on track with some headwinds due to a weakened cough and cold market like already mentioned. We have FX effects slightly particularly in USD and Turkish lira compared to our original assumption of minus 2%.

SPC is returning to growth in Q2. As said before, we have seen some weakness in the first half, as there is some uncertainty also in the second half of the cough and cold market.

Eligard transition is ahead of schedule. Like I mentioned before, with revenues of around €80 million expected for the full year compared to initial guidance of €70 million.

We see robust growth of our current portfolio across all regions with -- in rare diseases with the end of the contract, and we confirm the guidance for the Endo franchise between €120 million to €140 million. Going to EBITDA margin.

Again, we expect this to be on track with second half margins a bit below the first half margins. Since we predict and have planned for activities and still progressively returning to normality.

We have financing costs of about €26 million to €28 million. And the tax rate to be around 70%, reflecting also the additional Q2 non-recurring benefit of €13 million from Magnesio Supremo set up, which brings me to the end of our presentation.

So, I think we can move on at this point to the Q&A. Thank you very much.

Thank you. A couple of questions.

Looking at 2Q, very strong performance in the US, I wonder if you could tell us a little bit more about that. And in particular, if you could tell us a little bit more about your comments about the patient assistance program that seems to be at a higher level than you had anticipated.

And is these payers, making co-pays higher, so patients can't afford it, so that you have to provide more co-pay assistance for people who have insurance, or is this where you're having to take people who don't have insurance, so a little bit behind that? If you can tell us also about how we should think about the longer-term SG&A.

Your SG&A has bounced back to a level that it was before the pandemic. And I appreciate you've got new drugs to sell going forward.

But a lot of companies have been able to learn to do things in a different way more electronic more digital, just other ways to do things, which seem to be lowering their marketing costs. Your marketing costs are just high, and I'm wondering whether the current percentage of sales is appropriate going forward given how much you still have to deal with.

And then, a final question please just on the M&A background. It's clearly important to you to be able to make acquisitions.

Is there anything you can say about the pipeline of deals that you have whether you think there's anything that you would be able to conclude this year where the prices are good bad or indifferent, or whether there are people queuing up to sell things to you. Thank you.

Hi, Jo. I'll start with the last question.

It's Andrea. Regarding M&A, I mean clearly I'm not going to disclose anything, which has not been formalized at this moment in time.

As always, like I said, if you may recall that we have we always have a lot of deals under review and evaluation. I can tell you that the pipeline is extremely rich in opportunities at the moment, and I feel confident that within this year we should be able to announce something, but I have to leave it on that clearly for obvious reasons.

But yes, there is a lot of movement. There's a lot of opportunities out there.

So, it's actually the -- one of the most busiest times from the perspective that we've seen in some time. I'll leave Luigi to answer the other two questions.

Yes. I think, Jo, I think there were two parts to your first question on the US.

I think as Andrea mentioned, the performance has been really broad-based in the US in the first part of the year. We've seen renewed momentum on the metabolic franchise, which has been great.

And it's also fair to say, and I think we commented this in the past, community revenue was particularly affected at the beginning of the pandemic, and already started to recover in the second part of the year. And we've seen sort of continued acquisition of new patients on both Signifor and Isturisa, are very much in line with expectations which were built into the three-year plan that we shared in May.

I think as a result of the economic situation on the again US, we did see -- we have seen higher than expected number of patients presenting who are from sort of start have not had access to reimbursement and therefore staying on patient assistance program to start off on therapy for a bit longer than expected. And I think that is what is reflected in the comment.

In terms of SG&A, I mean of course, we're not going to give sort of -- we haven't given any sort of specific sort of SG&A guidance in the three-year plan. And we've given guidance on a, let’s say, EBITDA margin basis.

And so, we're not going to give that now. Certainly this year, we're seeing a combination of things.

We have transition costs to Astellas, which we've mentioned. Recall, we've mentioned, we were expecting this year in terms of operating income from Eligard, a level of margin, which is lower than what you'd expect from our average SPC products whilst we had expected again return it to those levels.

And of course, we're still investing behind the launch of the Endo franchise. There are also payments to Tolmar, including the royalties due to them.

So, there's a number of elements. And we did say at the beginning of the year that we would be reinvesting half of the savings, which we had realized in 2020 as a result of COVID into the business.

And whilst there has been a bit of restrictions still in place and a bit of an impact on the cost in COVID in particular, we still sort of expect to do that as conditions return to normal. And of course, we are looking at our digital and complementary ways to support the product alongside face-to-face promotion.

But we still believe face-to-face promotion will remain a key component of the marketing mix. I hope that addresses your questions Jo.

Thank you.

Thank you. Good morning.

Good afternoon, everybody. The first question is on the 2021 guidance.

You mentioned a weaker cough and cold market but could you quantify the magnitude of the impact on your account from this weak reference market. And second, if you could remind me what is the updated expectation for silodosin and pitavastatin in the current year.

The second question is more strategic, referring to the change in the CEO position. So how should we interpret this change.

Was it already pre-agreed, or who was the originator of this request? And Andrea, I clearly understand that you will stay involved in management but what will be your responsibilities?

Maybe I'll start with this one then. Look I think tried to give a bit of color at the beginning of the presentation on the first slide.

But as I already mentioned, I have been working for some time, and as you've seen we've introduced and strengthened the management team in recent years since the change of ownership of the company, which was always my intention else it will happen anyway had we not another family exit as a company. And it was honestly my intention from the beginning that at one point and eventually I would have had one point transition to a Chairman and step up to the Chairman position.

Clearly this was agreed also with the majority shareholders and with the Board of Directors. But it wasn't let's say something that was not agreed and which was also not meeting my kind of ideas of planning for the future and continuing to reinforce the strength of the organization.

And I felt bringing a new CEO on board with a wise experience like Rob is always beneficial for the company. So with this in mind, in any case of the practice I got with the Board have initiated some scoping some time ago to identify for a potential CEO succession candidate.

And in that context, we saw an opportunity to bring on someone like Rob, when he presented and came into the picture, due to his broad and deep experience in the sector and – in the business sector that we operate in. But actually and his experience also having a lot of similarities having worked in Serono, in Grünenthal and Teva, running Global Specialty Pharma division of Teva with our business.

So I thought it was the right time to bring him on when you find. So there was not a formal process that started let's say at the beginning of my tenure as CEO, but we're always keeping our antennas kind of maxing high to kind of if see anyone we deemed what could be a potential successor to myself will come on the market at one point or another.

As I said before, I'd like to retain the business as a Chairman of the Board and we look forward to obviously working with Rob in this capacity with Rob and the management team, contributing to the development strategy. I have a very kind of clear power that was confirmed and given to meet our Board, which kind of sees my involvement and contribution in the development of strategy and around all strategic transactions, whatever they might be from working also together with them in their future plans or contributing to positive discussions and obviously, the key strategic transactions around business development and M&A.

I remain invested. I'd like to remind everybody is in this venture in Recordati and so I'm not going anywhere.

So my involvement would be very, very, very present around everything, which is strategic, which we think is very important meets both my kind of needs but also those of the majority shareholder and the Board. And I plan to work closely with Rob.

I think that is – no more to say on this.

Okay. And Martino, thank you for the questions.

Actually the first allows me to put into the context sort of year-to-date performance sort of ex Eligard, ex FX, which we said is broadly flat. The impact on the cough and cold portfolio from the pandemic sort of meant a reduction in the first half of the year of around €20 million in terms of revenue and actually finally, enough roughly similar amount being reduction to date on pita and silodosin, we've not revised, we've not sort of given a sort of specific revised outlook for pita and silo.

They're pretty much broadly in line with our expectations. And yes, pita has one more quarter if you like to be sort of fully comparable.

But in terms of effect for the full year of LOE but there are markets, where we are continuing to also see pita grow like Turkey, like Russia and Switzerland. So our outlook hasn't fundamentally changed.

Erosion has been a little bit sort of more pronounced on silodosin in Italy. But all in all, we're not sort of changing our guidance on this.

But that's the scale of the impact that we've seen in the first part of the year. Hopefully, that addresses your question.

Thank you. Yes.

And just a follow-up on the M&A. Andrea you mentioned, there are a lot of opportunities around just to have an idea are you focusing more on geographies in order to expand your geographical presence.

And are you focusing on product portfolio on therapeutical areas. What's your priority right now based on the several opportunities that you mentioned.

Well, I mean like we declared in the – in our three-year plan, we will keep on doing what we've been doing until now. So we want to obviously look for licenses product opportunities in general even acquisitions for – to reinforce our rare diseases.

Clearly with a focus on what is already present, which offer a lot of therapeutical areas in metabolic diseases for example, but also in the endocrinology franchise. And we tend to look in that area for global rights and if we don't get global rights, we look obviously for deals which at least kind of are fit with let's say Europe, primarily but also for rest of the world.

It tends to happen in certain cases not always the case, that some of these products are sourced or come out of the US. So, those companies tend to want to keep or retain the rights for the US market and then find a foreigner for the rest of the world.

Established products are still a major kind of focus for us, as well to reinforce the SPC business. So, we are looking around at several opportunities also in that area.

And also, not -- we're always looking for innovation as well for SPC because we know that, it's an important kind of part of developing the SPC business going forward. So, we would like to find a balance between established products.

And what we call now affordable innovation. So let's say, innovation, but which is not specifically in the European markets where obviously we know market absent T&R is getting more difficult over time.

We tend to look for obviously innovation, but that we can be also affordable for the authorities and so forth and so make a sense for them. So, I can tell you that we have opportunities that we're looking at in all of these areas.

So established, let's call it affordable innovation and in rare diseases around the areas obviously that we already have a presence and a strong competence.

Thank you.

You are welcome.

Hello, everyone. Thank you for taking my question.

I have two please. The first one on seasonal flu products.

Can you provide more color on your geographic exposures? Is it concentrated in any particular region or in any particular country, or is the sales exposure of seasonal flu products similar to your overall group in terms of geographical exposure?

And the second one, on rare diseases, you've had a very strong sequential EBITDA margin improvement. If my math is right, you went from roughly 46% in 1Q, 2Q, close to 50% in 2Q.

I'm just trying to understand the drivers of this. Is this driven by better endo performance, or were there any one-offs in the quarter that we should be aware of?

Thank you.

Hi, K.C. So, your first question seasonal flu, it's really sort of focused or at least is significantly more pronounced in Russia, Italy and France.

In terms of the margin on rare diseases quarter-on-quarter, it can be a bit lumpy. I think we've always said, I mean, a rare disease is obviously a business with very high gross margin.

The additional sort of revenue in Q2 versus Q1, obviously sort of had an operating leverage effect. And as I said, in the quarter -- in the second quarter, we did have a very good performance of the metabolic portfolio in the US, which both because of being fairly sort of mature if you like portfolio, but also being in the US, does come with a higher margin.

I hope that makes sense. I would caution though against sort of taking a single quarter, as a key essence.

Got it. Thank you.

Yes, hi, thanks for taking my questions. Firstly, you mentioned some uncertainty in the cough cold market.

Just wondering, what kind of environment you're assuming in your plan in the second half of the year. Second question is, had there been any changes in the pricing environment of any of your key markets.

And then the third question is, we get a lot of questions around profitability and EBITDA margins. So, with second half lower than first half outside whatever M&A you might do?

Would you say this is the floor we can expect in profitability, or if not, why would margins remain where they are? Thank you.

Hi James, thank you for the question. So, with regards to flu products, you'll recall, when we set out the budget, we had said, we would expect the market generally including flu, returning to more normal conditions in the second half of the year.

And in Q1, we said that given the sort of continued rate of restrictions and an expectation that we -- particularly the use of masks would remain for longer. And we said, we would expect market conditions for flu to still be somewhat impacted by COVID in the second half of the year.

And if you recall in the three-year plan, we said that we do expect also there a gradual return to minority , but we said it would be a very small return if that makes sense. So the flu is the one part of the portfolio where since the start of the year, given the way COVID has been evolving, we've taken a view, which is slightly more cautious if you like than what was set out at the beginning of the year.

In terms of pricing algorithms, there hasn't been any sort of major change to our pricing in the -- so far this year in Europe, across any of the markets, where I may have mentioned pricing here and there. It's along the lines of what we've always seen, maybe one sort of country, one product that happens to have, something one year.

In this case, I think I mentioned Zanipress in Turkey, where there's a regular process of referencing to other markets. And there was a level of price revision from that.

But it's very much within keeping to what we said, when we did the full year plan. And finally, in terms of EBITDA margins, I did -- and I'm sorry, I'm not sure, if your question -- if you were saying, whether the bottom was what we've seen in the first half because, clearly I said, we don't that's not the case.

I mean, we do expect and we've always seen. And thirdly, I think if you look at the composition of results of our business, we've always seen a slightly higher profitability in the first half relative to the second and we expect that this year as well.

And we're not changing the guidance that we've given in terms of margins set in the three-year plan, which we said we expect margins over the plan period to stay around 38%. Hopefully, that makes sense.

Okay. Thank you.

Sorry. While we wait for other questions, I think, Martino going back to your question and the answer I gave you before.

I think it makes sense for me to kind of clarify and give you a bit more color on what I means by a formal innovation. I'm talking about FCC now and established products, okay?

When I talk about affordable innovation, I kind of told you what I mean, but the focus will be in therapeutical areas where we already have a presence and confidence, okay, which are primarily uro, card and gastro. This is what we're going to look for products around affordable innovation kind of seen.

As for established products instead, that we see that our presence on the field, our robust presence on the field is a key driver in stopping the decline or even bringing back some of these products back to growth. We are actually PA-agnostic, because we feel there is stuff with very promotional effort.

We don't need to have a specific competence in the PA to be able to be successful. Regarding geographies, I can tell you now that we are in the process of entering China, okay, with the rare disease business.

This is obviously, China will require some few years to kind of enter in there, because of the regulatory kind of approval, P&L and so forth. But a project is underway to enter China and we have -- we will give more color on this in the next three-year plan presentation next year.

But this is definitely one of the main focuses for geographic expansion going forward. There are also other countries that we're looking to expand with rare diseases, but China is definitely the primary one.

As far as SPC, that unless a specific opportunity arises that allows us to justify and therefore basically like critical mass to enter new continents, let's say, -not the U.S. but let's say other opportunities, for the moment we're focusing only on reinforce and consolidating our presence in the countries we already present in and the regions we're already present in, which we know, is -- it is already quite expensive since it covers all of Europe the Mediterranean base and goes all the way to Russian CIS.

I think -- I thought that would be useful to kind of give you a bit more color. So any other questions?

Hi. Good afternoon, everybody.

A couple of questions from my side. The first one is on your top marketing trends and these are very healthy.

If I understood correctly from your comment, you see this trend as overall sustainable? I was just wondering if you can quantify the tailing from having just the margin -- the net margin booked from pita in the first semester of 2021 on your 73% gross margin.

And the second question is on working capital. Your free cash flow generation remains very healthy but working capital is now covering a little bit above the usual incidents outside for Recordati.

Can you just tell us if there is anything structural behind this trend, although, it is just driven by the current trading environment.

Hi, Isacco. I mean, on your sort of -- I guess there are two parts to your first question on gross margin.

Is it sustainable? I mean, it is driven by the shift in the mix.

So I guess if you say, if the sort of current level are sustainable, I would say, broadly, yes. But again we didn't give a sort of more sort of specific breakout of our sort of longer-term guidance on margin.

So I won't go beyond that. The question around sort of what is -- there is a little bit in the first half of the year of uplift from -- regard accounting, frankly, there was in the first half of 2020 from the accounting of Signifor.

Again, we're ahead of marketing authorization funds where we account for revenue on a gross margin basis as transferred by partners. I would put it to around 05 percentage point, but I'll come back on that.

Okay. Sorry, on the working capital question.

The improvement is also due to the fact that I think, particularly driven by stock and the management of stock last year. We did have an increase for two reasons.

One, it was just sort of taking on board of Signifor and Isturisa. But also in the midst of the pandemic we did ensure that we had the right level of supply.

So in a way, we have sort of clawed back or at least although the business has -- is obviously in the process of taking on a stock at the local level of Eligard when we started distributing. I think it's -- with the change versus last year is really driven by that.

Okay. Thank you.

Very clear. And just a very brief follow-up.

So I believe you do not have a guidance on net working capital, but in the long term there is a lever right now to assume that you would not revert to your pre-emergency incidence on sales, correct?

Yes. No, absolutely.

Absolutely.

Okay. Thank you very much.

Okay. Thank you very much everybody and have a good evening or good day.

Bye-bye.