Prepared remarks
Good day, and thank you for being here. Welcome to the Alvotech Second Quarter 2025 Earnings Conference Call. Please note that this conference is being recorded. I will now pass the call to Benedikt Stefansson, Vice President of Investor Relations and Global Communications. Please proceed.
Thank you, and welcome to our listeners. Yesterday evening, the company issued a press release announcing our financial results for the first 6 months of 2025. A presentation accompanying today's earnings call was also published last night on our investor portal, investors.alvotech.com under News and Events. We will be referring to individual slides during the presentation today. Our press release, presentation, and statements that we make on the call today may include forward-looking statements. Please see our disclaimers on Slide #2 of the presentation. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. Any risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. Presenting on today's call are Robert Wessman, Chairman and Chief Executive Officer of Alvotech; and Linda Jonsdottir, Chief Financial Officer.
We also have with us on the call, Anil Okay, Chief Commercial Officer; and Joel Morales, outgoing CFO. Robert will begin today's presentation with a summary of the first half of the year and quarter, including financial and business highlights. Linda will cover the financial performance in more detail. Following that, Robert has some closing statements, and then the team will be happy to take your questions. And with that, I would like to turn the call over to Robert Wessman.
Thank you, Benedikt, and thanks to everyone for joining us here today. I'm very pleased to have with me today our new CFO, Linda Jonsdottir, who joined our team in July. Linda has a background in finance and corporate leadership internationally. She has worked across different industries including transportation, banking, food technology, and health care, both as a CFO and COO and Chairman. At the same time, I want to thank Joel Morales for his valuable part in Alvotech's journey as a CFO. We are very pleased here today to announce our operating results for the first half of the year and this quarter. These results confirm our continuing momentum as a leading global fully integrated biosimilar company. Alvotech's strong growth momentum in the first half of the year can be attributed to strong reorders, successful product launches, development progress, and improved efficiency in manufacturing.
Among the highlights from this quarter, we saw good performance in major markets from our two marketed products. We signed significant partnership agreements for our early-stage pipeline. We increased our revenues in the first half of the year by 30% year-on-year. And we also delivered the fifth consecutive quarter of positive adjusted EBITDA. The cash flow of the quarter from the operating activities reached $77 million, which is an improvement of USD 161 million year-on-year. Product revenues in the first half of the year grew by over 200% and product revenues in second quarter 2025 grew by 77% year-on-year. Product margins were 33%, driven by new product launches, growth in revenues from existing markets, and increased product volumes. Linda will talk more about these financial results later in the call. Let's now switch gears and discuss the performance of our marketed products. Starting with our biosimilar to Humira, which is marketed as SIMLANDI in America and some other parts of the world and as HUKYNDRA in Europe.
In Europe, our partner continues to gain market share with HUKYNDRA, which has now entered its fourth year in the market in Europe. We are quite pleased with the solid performance of the biosimilars despite entering a fairly crowded market back in 2022. In the U.S., the Humira biosimilar market started opening up last year when our Humira biosimilar SIMLANDI was launched. As pharmacy benefit managers (PBMs) are starting to exclude the originator from formulary, we are now seeing an accelerated conversion to Humira biosimilars, which in July had reached over 40% share of the overall U.S. Humira market according to our estimates. This is in line with our expectations that biosimilar conversion could reach 50% in the U.S. Humira market by year-end. At the same time, I'm very pleased to say that Alvotech has the second largest market share as a biosimilar to Humira in the largest market in the world, the U.S. market.
We also continue launching this biosimilar in markets outside North America and Europe, and our partners are now selling a biosimilar to Humira in 33 markets globally, and we have gained marketing approvals in 67 markets total. And we are, therefore, continuing to roll out the product into new markets going forward. Our biosimilar to STELARA, AVT04, is marketed as SELARSDI in the U.S. and UZPRUVO in Europe. We were the first entrant in Europe, Canada, and Japan last year with very strong results. We launched with Teva in the U.S. market this February. UZPRUVO continues to outperform our expectations in Europe. Sales volumes are very strong, and we remain the biosimilar with the first or second largest market share in all the key markets in Europe. The uptake of the STELARA biosimilar in the U.S. is progressing as we expected. Biosimilar share reached over 20% of the overall STELARA market in the U.S. in July according to our estimates.
With our product marketed under the SELARSDI brand by Teva, we are on track with our internal forecast in terms of price and volume. As mentioned on our last call, pricing in the STELARA market is quite competitive with some of our competitors offering pricing that we believe is not sustainable in the long run. We are convinced that our strategy, by focusing on product margin rather than volume and market share, will prove more successful for all of our stakeholders in the long run. In the U.S., although we have not signed any private label, we have signed unbranded product deals with a few leading players through our commercial partner, Teva. We have marketing applications under review in major global markets for AVT03, our proposed biosimilar candidate to Prolia and XGEVA; AVT05, our proposed biosimilar to Simponi and Simponi Aria; and AVT06, our proposed biosimilar to EYLEA. Finally, our marketing application for AVT23, our proposed biosimilar to Xolair, is currently under review in the U.K. We also plan to file with EMA an application for AVT23 in the third quarter of this year.
We look forward to providing further information as we near the approval and launch stage for these products. As laid out at the beginning of this year, Alvotech has decided to ramp up its R&D efforts significantly, expanding the industry's most valuable R&D pipeline. In June, we completed our transaction of the R&D operation of Xbrane in Stockholm, and we also bought the rights to a biosimilar candidate referencing Cimzia. We continue to hire into our R&D team, both in Sweden and Iceland since then. The results of our enhanced R&D activity can also be seen in the recent partnership deals announced during the quarter. During the quarter, we expanded our partnership with Advanz Pharma, licensing European rights to four biosimilar candidates referencing ILARIS, KESIMPTA, Cimzia, and one undisclosed biologic. Advanz has shown great confidence in Alvotech by signing license deals for biosimilars referencing more than 10 different biologics.
We also announced our second partnership deal with Dr. Reddy's, a collaboration to co-develop, manufacture, and commercialize a biosimilar candidate to KEYTRUDA. The collaboration will allow us to diversify and mitigate development risks and extend the global reach of biosimilars. Shortly after the end of the second quarter, we completed our acquisition of Ivers-Lee in Switzerland. This acquisition gives us better control of the full value chain and increases our capabilities and flexibility in the assembly and packaging of our devices. Before I conclude, I would like to extend a special greeting to our many new Swedish investors as this is the first earnings call held after our official listing of Alvotech on NASDAQ Stockholm. After the initial placement of about 7.9 million STRs on the Stockholm market, the float on the Stockholm Exchange has continued to increase. Shareholders are now able to trade Alvotech shares on three NASDAQ exchanges in Iceland, the U.S., and now in Sweden.
The listing on the NASDAQ Stockholm further broadens our shareholder base and increases trading liquidity to the benefit of all investors interested in participating in Alvotech's exciting journey. In summary, we are very happy about the results of the previous six months and our momentum going into the second half of the year. And with that, I would like to hand the call over to Linda. So Linda, over to you.
Thank you, Robert. I'm very excited to join the fantastic team at Alvotech. And even though it has only been a few weeks, I can really feel the energy, the passion, and the drive of our people. And I'm happy to report that this is reflected in our numbers as well. So let's move to the key highlights for the financial results for Q2 and the first half of the year. Overall, our performance in the first half of the year was strong, both in terms of revenue growth, margin expansion, and continued cash flow robustness. Moving to Slide 9 in the deck, highlighting our adjusted financial results. Let me start with the revenues. Revenues continue on a strong momentum, and we're up 30% at $306 million compared to $236 million in the first half of 2024. Our revenue growth year-on-year was mainly driven by strong product revenues coming in at $205 million in the first half of the year compared to $66 million in the same period last year.
The key driver for the increase year-on-year was increased sales of our biosimilar to Humira and continued success of our biosimilar to STELARA in Europe and its launch in the U.S. in Q1 this year. Licensing revenues in the first half were $101 million compared to a very strong first half last year when licensing revenues were $170 million. This difference in licensing revenues was driven by the timing of development progress impacting R&D milestones. Revenue recognition of milestones can be lumpy. During Q2 last year, we achieved a number of significant development milestones. We do expect a similar dynamic to occur this year towards the latter part of the year. Looking at Q2 specifically, we recognized total revenues of $173 million compared to $199 million in Q2 last year and $133 million in Q1 this year. The split between product revenues and licensing revenues in Q2 this year was $95 million and $78 million.
After a very strong Q1, marked by the launch of our biosimilar to STELARA in the U.S., the second quarter benefited from increased demand for our biosimilar to Humira across key markets and our STELARA biosimilar in Europe. To further illustrate the inherent lumpiness I referred to earlier in terms of quarterly phasing, we do expect product revenues as well as milestone revenues to soften in Q3, followed by much stronger results in Q4. Moving to operational performance and margins. In the first half of the year, the adjusted product margin was 33%, which is in line with our previously stated expectations of a mid-30% range for product margin in the period. Adjusted EBITDA in the first half was $54 million compared to $64 million during the same period in the prior year. Adjusted EBITDA in Q2 was $18 million versus $102 million during Q2 last year. This is a function of the lower contribution of licensing revenues as milestone revenues transfer directly to EBITDA.
Turning to the next slide, you'll find a summary of our cash and liquidity. During the first half of 2025, we generated $77 million of positive cash flow from operations, which is a net improvement of $161 million compared to the same period last year. In Q2, specifically, we generated $59 million of positive cash flow from operations, which is a net improvement of $73 million year-on-year. In terms of operating cash flow, Q2 2025 is the strongest quarter in the history of Alvotech and demonstrates the strength of our core business operations, which is reflected in high product revenue collections during the period and is accomplished while we are still building inventory in preparation for new launches. We've also taken a number of important steps in the first half of the year in terms of our capital structure. We closed the period ending June 30 with $1,139 million in debt and $151 million of cash on hand, which was positively impacted by operational performance and proceeds from our Swedish offering and private placement in June.
As per the agreement reached with our lenders in late June and on the back of our improved financial performance over the past year, we were able to reduce the rate of interest on our existing senior secured term loan facility to SOFR plus 6% with a maturity date in 2029, which will reduce our cost of capital and lower Alvotech's interest payments in the first 12 months by an estimated $8.2 million. In Q2, we completed the acquisition of the R&D organization of Xbrane in Sweden and a biosimilar candidate to Cimzia. The total purchase price was $28.9 million paid in cash by assumption of convertible debt and assumption of accounts payable. After the close of the quarter, we also announced the acquisition of Ivers-Lee in Switzerland. Both acquisitions are very important for our ongoing and future operations. In the appendix to our presentation, you'll find a table with a reconciliation of our reported to adjusted results.
Finally, over the past few weeks, I have witnessed the strong team at Alvotech and their dedication to delivering with a focus on operational excellence and financial performance. I'm excited to get to know the company better, both to identify and maximize the opportunities ahead and contribute to a sustainable long-term growth of the company for the benefit of all stakeholders. And with that, I would like to hand the call over to Robert for some final remarks. Robert?
Thanks, Linda. In closing, the second quarter was another strong quarter for Alvotech. We are expanding existing products into new markets and preparing for future launches. We will maintain focus on accelerating pipeline development going forward. At the same time, we are scaling manufacturing and increasing operational efficiencies.
Thank you, Robert and Linda. And let's now turn the call back over to the operator for Q&A.
Questions and answers
And now we're going to take our first question, and it comes from Christopher Uhde from SEB.
So I guess a few. I'll take them one by one, if that's okay. Halfway through 2025, you're not changing guidance, but the Q2 was clearly at least a lot better than the Street predicted. So what can you tell us about your confidence in the top line guidance going forward? And then, I mean, you've previously indicated if memory serves that you have very high 6-month visibility. So is it fair to say we should not expect a guidance raise in Q3 then? That's my first question. Can you hear?
Thanks for the question, it's Linda here. Let me start by summarizing the guidance. We see strong momentum in the Q2 numbers and the first half, driven by solid product revenue growth which is supporting good EBITDA results. Licensing revenues are affected by the timing of development milestones, but cash flow from operations remains strong. We have made significant progress in the first half. As mentioned before, revenue recognition can be uneven regarding milestone revenues. Looking ahead to 2024, we expect to see several significant development milestones, and similar dynamics are anticipated in the latter part of this year. That’s why we commented on quarterly phasing, as we expect product revenues from milestone revenues to be weaker in Q3, with Q4 expected to be much stronger. Additionally, we are launching new products and building up inventories in relation to that, but I would refer back to our previously stated guidance.
Okay. That's much appreciated. And then is there growth for SIMLANDI left from the Quallent channel in the U.S.? Or should we view that particular channel as maxed out?
I can take this question, of course. So we do have still a valid contract with Quallent. However, our focus on all two in the U.S. market is the value rather than the volume. So we do expect this business to be more challenging in the second half of the year. But we had a very good first half of the year volumes going to Quallent, and we do expect this business to continue.
Okay. Then on, I guess, AVT03, 05 and 06, I guess most investors would see FDA inspections as the most likely reason for a delay to ultimate approval if one were to occur. Assuming you agree, should we expect any press releases once FDA has given feedback on the inspection outcomes?
Yes. I think, Robert here, thanks for the question. I mean, as a part of prior approval, if you will, we did have an inspection. And we believe that this is just as it is an ordinary course of business, if you will. We, of course, are seeing we have had in the facility both European health authorities, Japanese health authorities, FDA, and this is becoming just a part of our life. So we had already two FDA inspections last year. We, of course, sent out a press release on the first one when the facility got approved. The second one, late last year went very well. But I don't recall we did send out any press release around that. But of course, we will keep the market open and informed once we get approval on the products, if you will, going forward.
The next question comes from Ash Verma from UBS.
Congratulations to Linda, and Joel, we will miss you. I have a couple of questions I'd like to ask regarding the guidance. I noticed you didn't reiterate or make any specific comments beyond what you've mentioned for the third quarter. Where do you currently stand in terms of revenue for the first half? You've reported $306 million, which is about 50% at the low end of your previous revenue guidance of $600 million to $700 million. Should we assume that your guidance is still valid? Regarding EBITDA, you've indicated $54 million adjusted EBITDA in the first half compared to your previous guidance of $200 million to $280 million. Can you clarify where you stand? That appears to be around 20% to 25% of your EBITDA target for the first half. Are those guidance ranges still applicable? I'm trying to understand if we can expect to meet those despite the strong fourth quarter you mentioned.
Yes, Robert here. I think the best answer is we are basically in line with what we expected, maybe slightly better than the first six months. As Linda mentioned, there is some variability in the quarters. So like last year, we will see the fourth quarter being by far the strongest quarter of the year. For now, we are not changing the guidance. I would say overall, what we are seeing in the first six months aligns with our expectations.
Got it. Okay. Regarding the products you mentioned, for Humira, you're exiting 40% and expect to reach 50% market share by the end of the year in the U.S. Can you comment on the market share dynamics you expect to see in the next year? Also, for STELARA, where do you anticipate your market share will be by the end of the year from the current 20%?
Sure. Let me address that, Ash. Regarding AVT02 in Europe, we have successfully integrated Biogaran as a new partner in France, where biosimilar penetration is currently only 15%. We are actively working to increase this penetration, as France represents a significant growth opportunity for us. Partnering with STADA enhances our ability to capture additional volumes and improve pricing. We've observed a notable increase in market share in Europe, with a 30% growth compared to last year, indicating steady growth and stability in our volume market share. We anticipate further growth in these markets, particularly in France, with contributions from other regions as well. In the U.S., we've made multiple shipments based on purchase orders from Quallent and Teva, and we have a reliable forecast from both companies for the latter half of the year. As we receive their orders, we will continue our deliveries.
It’s worth noting that only three companies, including us, Sandoz, and Organon, hold a significant share in the adalimumab market, while the other seven competitors remain relatively inconsequential. We believe we are well-positioned to expand our presence in this market. As for AVT04, we're pleased with our strong position in both markets. In Europe, where we launched the product earlier, we continue to either lead or rank highly in different regions and are growing quickly. We are satisfied with our performance and ongoing market share growth there. In the U.S., we've successfully launched as well and have gained a few downstream and independent accounts through Teva. We expect our uptake to align with our projections outlined in our 2025 guidance, with no unexpected developments from the U.S. market concerning AVT04.
And the question comes from Carl Byrnes from Northland Capital Markets.
Congratulations on the results. I'm wondering with respect to the BLAs in the U.S. that you expect approval by year-end, do you have any concerns that any of them might slip into the first quarter of '26? Or do you still remain highly confident that you will see all of those approved as well?
Yes, Robert here. Thanks for the question. I mean, we have set BsUFA dates, and we are targeting those dates. We have not given exact dates. I think we gave months. So we believe that those are the dates we are still targeting. Typically, you are not seeing slippage on the BsUFA dates historically, I think.
Great. Going back to the guidance, if we look at product sales at the midpoint of $375 million, you've already achieved $205 million. That leaves $170 million for the second half of '25. You mentioned that the third quarter would be soft, then improve in the fourth quarter. Does that $170 million still seem realistic? Regarding milestones, the midpoint is $275 million, and you've completed just over $100 million, leaving about $174 million. I assume that much of that will depend on the timing of the BLAs and will likely be recognized in the fourth quarter. Are those assumptions accurate?
Robert here again. Overall, you are seeing many milestones being achieved through approvals and launches, along with shipments resulting from these approvals and launches. We faced a similar situation in the second quarter of last year with very high milestones. This forms the basis of our forecast and explains why we believe the fourth quarter will be by far the strongest of this year.
Dear speakers, there are no further questions. I would now like to hand the conference over to Benedikt Stefansson for any closing remarks.
Well, on behalf of the Alvotech team here in Iceland and all over the world, we want to thank you all for calling in, and please have a good day and evening wherever you are. Thanks, and goodbye.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.