Hikma Pharmaceuticals Stock

So good morning, everyone, and welcome to Hikma's 2026 Interim Results Meeting with our CEO, Said Darwazah; and acting CFO, Areb KURDI; and we also have Susan Ringdal, and myself, Guy Featherstone, Investor Relations.

Before we start, I would like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's latest annual report.

And with that, I'll hand over to Said for opening remarks before we head to Q&A.

Thank you so much. So just quickly a few things to say. Obviously, so the results. Sales are up. I think what's very exciting is that EBIT and EBITDA are up by almost 8%. EPS is up by 5%. And what we -- when we met last time, we said we had like 4 targets this year. One is to stabilize the business. And we're talking about the injectable business. The other 2 businesses we're doing well. And I think this has been achieved.

We talked about making the company more agile, quicker decision-making. And we have taken tons of decisions and now the way the company is structured, I think very much supports this quick decision-making. It supports the senior management of the team to take quick decisions and to take quick actions and reactions when they are needed.

We said we will invest for the future. We have done a lot of investment in people, I think, is most important in talent and people. We have done investment in equipment and of course, R&D spend, as you can see, is up. So we are really setting up the company for the future.

So we hope that, again, we feel extremely comfortable to reiterate full year guidance. As we have seen MENA has done extremely well, exemplary good. I've always told you, this company has 3 engines to drive it. And I always said that even when one of the divisions or one the engines is facing some headwinds, the others can make it up and move it faster.

So MENA is doing extremely well, and we -- obviously, we have big ambitions for the MENA to continue. Injectables. We -- as you see that we have -- as we said, we have stabilized the business. And Rx is delivering very good margins compared to where it was just a few years ago. So these are like the background.

Again, I think we should always remember that this is a company that's been driven that has 3 businesses. And if you look at historically, we've always had one of the businesses push the company forward if the others were lagging behind.

And if you look at the CAGR over the last 10 years and of course, the first 6 half of this year, we'll see that every year, there has been growth, both in sales and in profitability.

I think CAGR for the last 10 years was 8% for sales and 6% or 5% for our profitability. We hope to start driving injectable business next year to start growing the profitability, top line and bottom line there as we continue to move the other divisions forward.

So with that, we -- Areb is here with me also, and we are ready to take your questions.

[Operator Instructions]

James Gordon from Barclays. The first question was on the branded business. So in terms of phasing, so you had a strong H1, both on the top line and the margin. And I think for the full year, you said you'll be at the better end on the top line. How much of the H1 strength was this one-off factor or the phasing factor and also how much of the costs. So what would H1 look like on a clean basis? How much more cautious do we need to be about H2? That would be the first question, please.

And then the second question was generics. I think although you reiterated the guidance overall, I think the margin before was around 20%, and it's now approaching 20%. So what if anything has changed there? And is that a big difference or just a minor difference, please?

You want to take that?

In terms of sales, James, this is the normal trend that we see every year. There is a trend in tender business. So there was many tender businesses delivered in the first half in terms of sales.

Also, we've seen some good demand, especially at the beginning of the wars. Some governments started to stock up, although we see this is -- this has normalized at the end of H1. But also importantly, we had many sales and marketing events and expenses that were either intentionally postponed due to the situation or we had to postpone them because there was limitations on the travel, et cetera.

So we will see those events happening in the second half.

Are you able to quantify those? Are you able to say broadly, how significant those are if we're trying to do like a clean model for H2?

So I would say H1 would be 55% weighted in terms of sales and more weighted towards EBIT in the second half.

Obviously, we're also taking in consideration that things haven't settled down yet and there's a lot of uncertainty in the region, which historically has been helpful to Hikma, but always it's wise to be careful about the plan for the second half.

The Rx division, we said that we would push the margins to where they are now. Sodium oxybate has done very, very well. We have seen a little more competition for generic Advair. But we also -- as we've said before, we do have big plans for CMO. We see CMO business picking up there. So any kind of headwinds that, let's say, sodium oxybate will face will be picked up by the CMO business.

Zain Ebrahim From JPMorgan. First question is on TYZAVAN. If you could provide us maybe a bit more color on how that's performing relative to your expectations. I think you said the 80% of Vanco Ready customers have now switched or partially switched on to TYZAVAN. So how does that compare versus your expectations at the start of this year? And what underpins your confidence in an acceleration in the second half of this year for TYZAVAN and into 2027?

That's the first question. Second question is on Rx launches. I think you've had quite a strong allowance so far with tapentadol. So more broadly, are there any other launches that we should be excited about in the next 12 to 18 months? And what's the latest on epinephrine nasal spray filing?

Okay. So for TYZAVAN, it takes a long time for the formularies of the different buying groups do to take it on. And even after they say we will, it takes some time for the different hospitals to start stocking and using it. So we have been seeing a pickup month by month, and we feel very comfortable that for the second of the half or the second half of this year that we will continue seeing this increase month by month.

I think the last 3 months of this year should be very indicative of -- to give us a full idea of how to be doing next year. So many of the hospital groups that we were trying to get them to take the product, have taken it. So we will be seeing the benefit of that. The second question was.

Tapentadol is going very well. I mean we're authorized generic on that, and it's just been a good launch. But I think more broadly, the question was around launches, the launch environment and then obviously, that then probably goes into epi nasal.

But for the epi, we have -- I mean the submission has been done. We're waiting for, obviously, for the FDA to accept the submission, and that would give us a clear idea of when we get the approval. In the meantime, we have approved the plan for the product.

Obviously, it needs a major investment in promotion and hiring people and so on. So we will start -- we will begin this as soon as the FDA accepts the submission.

Giang Nguyen from Citi. So I have 2 questions, please. The first one is in terms of the U.S. in injectables business outside TYZAVAN , could you give some comments on how the rest of the business has been trending? And especially, what are you seeing in terms of momentum carrying into the second half of the year?

And my second question is looking at your full year guidance, which you have reiterated. Clearly, first half performance has been very good, not only branded, but also the margins that you have got in injectables and Rx despite all the increased investment, et cetera. So what would you want to see to be able to increase the guidance for the year.

Yes. As we said, a lot of work has been put into stabilizing the business and hiring people across all levels, actually, it's not just senior people, but across all levels, including operators for the plants bringing in the equipment, making sure the bottlenecks are taken care of. We've invested heavily in supply chain, both internally and we brought in external consultants to help us.

And we are seeing -- actually we are seeing that we have now, as we say, safety stocks, though we haven't had safety stock for a long term. These are very important because they give us the ability to react to the market when there's a need when there's a shortage, and there's -- obviously, it's much more profitable selling those. So we have been started building up the safety stock. And I believe that all these measures that we are taking increasing the number of units that we are manufacturing. We've always had an issue of supplying the market. This hasn't been the issue of demand. So now I think we have much better supply for the market.

In terms of R&D expenditure for the injectable business, there is a huge increase there. We have a big team in Croatia, and we have been giving that team everything they need in terms of personnel, in terms of equipment or whatever they need trying to expedite things and move them as fast as possible for the submissions.

I don't know how many submissions if we've given out any numbers. But we will be seeing an acceleration of submissions there. And clearly, those submissions will be driving business '28 and further. So we're very optimistic about the future of the injectables business.

Beatrice Fairbairn from Berenberg. Certainly, I had a couple on the kind of CMO business. You noted that you expect CMO revenues to pick up in H2 for injectables. Could you just clarify what level of visibility you have on this?

And then on the Hikma Rx segment, the CMO side, you've obviously got your target out there for 20% CMO revenue contribution by 2030 for the segment. Could you give an update on where you're tracking relative to that? And what level of visibility you have?

And then just a quick one on cost inflation. You needed to absorb the impact of the cost impact in H1. What cost impact you expect from inflation in H2 and looking further out.

In terms of inflation, we've been able to absorb all the inflation that we faced so far. The team really has been doing really great and navigating the all the cost increases, and this is evident by the margins that we have. And we believe we will be able to continue to absorb the inflation in the second half.

In terms of the CMO Rx, we are trending well. We are doing good in terms of the plan. And we will start commercializing next year for the CMO.

In terms of the target that we said, we still feel comfortable that we can achieve 20% of the Rx revenue from CMO to 2030. So we have won, as we've talked about some of the contracts that we've won, but we continue to talk to new partners, sign new agreements. So we are we are gradually building that business.

There's a lot of -- again, there's a lot of demand. We're talking to many companies about that, and there has been some serious investment in the Columbus plant and serious expansion that is coming on board.

And as that comes, we will be able to take care of more of that business. So we still are very optimistic. That's the -- actually the only thing that we still haven't done from all what we said is hire a top CMO commercial guy. We still very much are looking for that. And we hope to have that filled before the end of the year.

In terms of the confidence in injectable CMO in the second half, -- it will be similar to last year. Last year, we had indicated that the CMO would come largely in the second half. That's really down to the timing of when we decide to fulfill that those orders. And so we will see that come in the second half. We have good visibility.

But as we had said at the beginning of the year, the CMO will be slightly lower this year than it was last year. So nothing has changed yet.

Victor Floch, BNP Paribas. So maybe 2 questions on my end. One on potential U.S. tariffs and one on midterm targets. So on potential U.S. tariffs, so you were quite keen to highlight your continued ambition to invest into your U.S. capacity a few weeks ago. So I was just wondering whether you've spoken to the U.S. administration since then.

One of your competitors, Endo, has been arguing yesterday that this tariff represented actually an opportunity for them even though they don't have local capacity in the U.S. So just interesting to get your take on that. Does it change anything in your strategy? And yes, if you have any feedback from the U.S. administration would be nice.

And the second one on midterm targets. So it looks like the business is doing well and you should -- it looks pretty much in track to deliver the guidance for this year, but we still lack midterm targets. I was just wondering whether you still need to see before being able to set up new mid-term targets? Is it other capacity, business trends, like help us understand the key moving parts there?

I'll take the tariffs and Areb, you can take the midterm guidance. I mean, on tariffs, we are one of the largest domestic manufacturers for generics in the U.S. So we feel that we are in a very strong position. We have invested a lot over the years in our U.S. manufacturing, and we continue to invest in U.S. manufacturing. So we feel that we have a strong position. We have very good relationships with legislators in the U.S. We are in Washington very often, and we believe very strongly in building strong domestic manufacturing in the U.S.

So we do think that we are well positioned there. And the majority of the products that we sell in the U.S. are made in the U.S. Rx is almost 100% made 90% in the U.S.

Rx is almost 100% made 90% in the U.S. And for injectables, we have -- obviously, we are increasing capacity in Cherry Hill, and we said in '28, the Bedford plant will come on, which is purely injectable also, so increased percentage.

We think about it seriously, there are -- I don't think there is any country in the world that taxes imported pharmaceutical. So tariffs become -- it's something that we've heard a lot, but we haven't seen it. And I really doubt that you will see it. This is my personal...

As Said and Susan said, we'll -- we have the foundation in the U.S. We invested in the U.S. We're committed to invest in the U.S. There is really no change to our strategy. We have already committed. Last, maybe Said, you can mention a few words about what commitment to Ohio, also state and we got some incentive...

Yes. We have met with the development agencies in Ohio state. I was there a few months ago, and I met with the governor of Ohio. And they are very pleased with the amount of investment that we are making, both in manufacturing and R&D, and we have committed that we will continue the expansion there.

So we received like $50 million of incentives from the state of Ohio. That will be something like $5 million over 10 years -- $5 million every year to up to $50 million. So this is the first time we do this kind of, let's say, PR and working with the states.

But I believe that Hikma because it has such a big made in the U.S.A. footprint. We have been invited actually to Washington, we invited to the White House. We -- I think we work with the committees there regarding pharmaceuticals made in the U.S.A. So our profile has really been significantly, let's say, more emphasis on that.

And actually, I joke, I was the first Jordanian to be allowed to have the global entry -- is given the global entry visa to the U.S.. And the ex-secretary of -- what was her name? The one that -- of security, Homeland Security. She actually came to Jordan personally to get to give me the big thing in Jordan.

It's just -- it's a way to show that Hikma's profile has been really much more now important than before. And obviously, also the very important news we had was the case here with the Amarin case, where rarely have you seen the -- all the Supreme Court vote in the same way. So that was also a big win for us and a big win also was good for our reputation. That was a big win for obviously, for the whole generic industry.

In terms of the midterm guidance, we want to focus on currency. We want to deliver on the current year, and we want to keep investing in the R&D and fixing the foundation in terms of the -- our commercial capabilities. So no change.

Again, the drivers for growth, it's very simple. We always say it's not rocket science. Having the manufacturing machine being well established and having well-balanced lines, and we have worked very, very hard on that. We have given the supply chain. We said last year, we had 90 million of products, slow-moving inventory, which we don't want to repeat at all if we just do the normal 40 million of those would have been profit. So we want to make sure we have the repetition of that. So supply chain, as I said, we have been working externally on improving that, and we see big improvement. That will be very helpful. Having the safety stocks will be very helpful.

And R&D, we are putting a lot of emphasis, a lot of effort there, both in terms of bringing in the right number of scientists and the right qualified scientists, which we have done. I believe we are very well there.

Again, we will be seeing how fast the submissions will be accepted. All these things will be indicators of when and how fast the business will start growing fast again. And finally, is acquisitions. I think we have to be a bit more aggressive in acquisitions in Europe. I think there are a lot of opportunities for company acquisitions. The U.S. is still very difficult. But in Europe, there is a lot of opportunity for company acquisitions.

And in the U.S.A, we should be more focused on product acquisitions to -- especially for the specialty part of the business, the promotion we have invested significantly in the promotion team. And TYZAVAN is just the first of those products ready to use. We want to also enhance that with other products. So these 3 things together will be very -- will be the engines of growth. That's for the U.S. and the injectable.

And the MENA, we always underestimate the MENA, the team is doing simply superb there. I keep meeting people where and wherever I go in the end and say, "Oh, we're using this product of Hikma, it's amazing. We're using that product. They have been launching products in almost every category.

And in oncology, we have become the #1 oncology in the MENA, both in terms of the products we manufacture and the products that we are licensing in. And so profile of the company there is really fantastic. And the MENA itself is growing very fast. Do you have any information how fast MENA is growing? The MENA is growing very fast. Saudi Arabia is growing very fast. Algeria is growing very fast. Egypt is growing very fast. So we are very well positioned to capitalize on that and to continue to grow in the MENA.

The Rx, as we said before, we believe the engine for growth, obviously, will be R&D like epinephrine and products like that. But also the CMO, as we said, will be a major part of that business.

And then we're going to go to the line before we take the second question.

Yes, Christian Glennie with Stifel. The first one would be actually come back to an earlier question around guidance. So to understand the weighting here. So you talked about on the revenue side, 2% to 4% full year. You're already at 4% for this half. You talked about it being slightly second half weighted. And similarly on operating profit, you did $405 million in the first half, you talk about it being broadly equal weighted across the year.

But yes, you've maintained your guidance at the 2% to 4% on the top line and you retained your $720 million to $770 million. So what is it that kind of implies that there's -- you're well ahead of -- you're tracking well ahead of that. So is it a question of being prudent at this point, maybe in the context of what happened previously? Or is there something other things to be aware of, particularly in the second half?

Yes, I think we've been very clear that investment will continue. A lot of investment will continue. R&D investment in the second half will be higher, promotion investment in the MENA will be higher. We still have, as I said, a few more high-profile people that we need to add to the business. But we feel that all these things will -- that we need to do this, and they will sort of weigh down.

I think, again, the business is doing well. Things are moving in the right direction. And that's why we feel fairly very strong to reiterate the guidance. And as I said before, we also feel very strong that the injectable engine will start to grow starting next year, we hope significantly.

Again, the follow-up would be sort of touch on capital allocation, particularly -- so 503B, you talked about divesting that in the last time we spoke, I think it sounded like there was quite a bit of interest. There was some sort of tangible thing. Any update on that process? And then as it relates to what you just said around opportunities that may be in Europe, what sort of things might be incremental to your business in Europe, just so we have an idea of what sort of things you're looking at?

In the past, we only looked at -- we were looking at increasing the -- let me again talk a little bit about Europe. So we have manufacturing, we have manufacturing in Portugal, and that's where we have been really investing the most, right, expanding continuously. Then we have manufacturing in Italy and Germany, which somehow we haven't been really investing in because we were always thinking that eventually, we will be closing those down and moving things over.

The reality is we are finding out that both those sites are extremely important for Hikma. We had the full European team can visit us a little while ago. We sat with them for about a week, and they're extremely excited. They feel that there's a lot that -- more that we can do just by expanding manufacturing capacity, expanding out footprint. So we have taken decisions to go ahead and expand as fast as we can. And Germany and Italy -- update the equipment, some of the equipment is a bit older, to updating the equipment, expanding there. And we feel that, that by itself will help us grow significantly.

We've also now said for the BD and M&A team, don't just look for injectables. Let's look for -- could be ophthalmics, could be ointment, could be some other things that we can add to expand because we feel Europe would be easier. It will not have the U.S., yes. in Europe. It's just there. So we believe that we -- and because we don't have other products, it's easier to do these things.

That's why we -- and as I said in the U.S., it will be probably more of product acquisitions. But also, there are opportunities for doing things like animal health or ophthalmics or whatever also in the U.S.A. So that is the -- so Europe expansion will be a big driver of that. The demand is there.

The profitability has been much, much better than we expected before. We see a lot of countries there adopt that not just prices that we want to look at, we look at prices, we look at quality. We look at the history of delivery, all these things that are coming into play. So -- and as I said, we are now the fourth largest company in injectables, and that's why we feel involved in that maybe we should be not just in injectables in Europe, but to go into other opportunities there.

To add to Said's also, a point, we are also expanding in different markets as well. So we're expanding in France and Spain. Those are still new opportunities, but they have really good growth. And 503B, we believe that when we started, we believe this was a good strategic fit. But we realized that this was a distraction for the rest of the team. Actually, it was by a small contributor. Actually, it was loss-making so far.

So we thought we want really the injectables team to focus. This was part of the priorities that's Said had to review at the beginning of the year and look into the like what improvements we can make to the injectables process as a whole.

The compounding in the U.S., you really have 2 providers. You have the smaller pharmacies, and we have seen -- actually, the FDA has given them more authority to compound the peptides now and so on. Then you have the bigger companies. When we first started, the regulations were much less or at least FDA had not been very involved in regulating that market.

But since we started, not just -- I mean, it just happened the timing, they have become much more active and the FDA is still trying to figure out how they're regulating. So you have seen a lot of warning letters go out. You have seen a lot of companies had to shut down or are not doing. And really the overall, let's say, big market of compounding hasn't really materialized.

So we figured that we would be -- we would need to invest a lot of money. It would be very distracting. We thought we'd be better off concentrating on the businesses that we have, especially since we know that by investing more in our manufacturing capacities and bringing in, obviously, the -- that plant will be very important. So that's why we sort of said, let's give it up.

And in terms of execution, it's according to the plan. We are unwinding the business, and it's up for sale. And we have -- we see good interest as well in terms of selling the business to other parties.

I'm just going to go to the line now. I think we have at least one question there. So I'll hand over to the operator, and then we can come back to the room.

[Operator Instructions] You have a question from the line of Kane Slutzkin from Deutsche.

Most has been answered. But just a quick follow-up on the injectable second half ramp. I'm just wondering how much of that is dependent on sort of TYZAVAN conversion versus sort of improvement in the broader underlying injectables business? And just on the CMO side, how is that pipeline sort of potential opportunities changed over the last maybe 6 months, particularly given growing interest in U.S. manufacturing capacity?

So again, as we said for TYZAVAN, there has been a lot of hospital buying groups adopting the product, taking it on instead of the older product. There was still a significant amount of supply of the ready-to-use vanco that, obviously, we had to -- the hospitals had to use.

And that's why we say we feel -- first of all, we see the ramp-up is going up now month by month, but we are much more optimistic that towards the last quarter of this year, we will be seeing some big strides as the new hospitals, the new buying groups that have been converted, will start using the TYZAVAN.

So again, I think by October, November, we will have a much clearer idea of how far and how big the product will be, but we obviously are extremely optimistic. We have invested significantly in the marketing and sales team there. I think a year ago, we were talking about 3 or 4 people.

Now we're probably talking about over a dozen people working there. We have brought in a new head of marketing and promotion, Head of Commercial for that team. So we've done a lot to make things go in the right direction. And obviously, we feel very comfortable that we will achieve that.

In terms of CMO for -- again, we have CMO for the 2 businesses for the sterile and for the Rx. The Rx, we said that there's a lot of -- there are a lot of demand actually for both businesses, there's a lot of demand. So it's really a question of our capacity and how fast we can be able to take in those. But we do have, I think, significant CMO for the injectables scheduled for the second half of this year.

Your next question comes from the line of Miles Dixon from Peel Hunt.

And sorry to labor the point and return to the guidance and the second half weighting, but there is a clear statement that says revenue and operating profit are weighted to the second half in the release. But I'm hearing -- certainly, I thought I heard said about the second half additional cost in R&D. What is it that I'm missing about the not even moving to the upper end of guidance on core operating profit for the full year?

So -- I mean, I think it's best to take it segment by segment, to be honest. So for the Rx segment, we feel very comfortable that we should see a similar broadly similar performance in H2 versus H1. The branded is what we've said even if you go to the top end of the range for branded, that does mean that it is much lower in terms of revenue and operating profit in the second half of the year.

And then that's offset by the increase in revenue and operating profit in the injectables.

So on balance, it is - it's going to be for the group, I guess, a slightly lower second half, if you -- primarily because of the branded business and the very strong weighting of operating profit for branded in H1 versus H2.

Also, let's bear in mind on the MENA and branded, the situation MENA is unstable and there's a war going on there. So we prefer to be cautious as well on our projections throughout the H2.

[Operator Instructions] There are no further questions on the conference flow. I want to hand back over to the Hikma team.

James.

James from Barclays. Maybe just a follow-on to your comment there. which would be -- I noted the comment about being cautious on H2 because of the situation in the MENA region. But so far, it sounds like at least for Hikma's business, it hasn't actually been a bad thing because actually, there's been some extra sales and less spending. So what is it that could be bad for Hikma's business as a result of this situation in the second half?

We said that there was a lot of -- usually when there is uncertainty, there's a lot of stockpiling. So stockpiling means that it will take time for it to be used. So the stockpiling has been made. So clearly, that kind of sales will not happen in the second half and then you need to reuse the stockpile.

So that -- there's always the issue of currency stability. There's always the issue of supply chain disruption. It's again real uncertainty, uncertainty. It's tough to plan, tough to plan for that.

But we've been in this region for decades. And we -- I think we're really well positioned compared to all our competitors to capture any opportunities that. And we've seen this in H1. So...

I think the big issue is the stockpiling because governments were buying a lot of...

Plus bear in mind that we're going to also spend more in H2 for the future growth as well. So that's the balance.

But then can you quantify the stockpiling a bit so that we can try and model that properly?

As I said in the beginning, we saw a stockpiling at the beginning of the war in Q1, but we saw this normalized towards the end of H1. So I wouldn't really put so much weight on the stockpiling. But our tender business is always H1 weighted. And the historical trend of our sales are always H1 weighted.

We could. I mean, we could do better, of course. Obviously, we would like it to do that.

Giang from Citi. And I have maybe 2 follow-up questions. One is a small follow-up point on the compounding business. Is there a timeline that you could communicate to us as to when this process you're looking to wrap up? And in relation to that, I think previously the guidance for Advair was to breakeven. And now with the compounding business being unwound, are we looking at better than breakeven for the year? So that's the first question.

And then the second question is in terms of buyback, you've made significant progress. Would you rule out for the buyback this year? Or do you need any further board authorization if you want to continue for a new program?

The buyback is almost finished, the buyback. I think there's very little probably $20 million like that left. So $230 million have been. So the buyback is almost done. I think so far, we've acquired about 11 million shares in the buyback.

Close..

Close to 12 million or 11 million? so it's almost done. So I think for this year, that's that. Obviously, the issue of the buyback every 2 years, there is a revision. We take a look at that and see, but we'll take that when it comes. The compounding. We are in discussions for somebody to take it over, should be fairly soon.

It should be soon. We have classified this as held for sale in the financials, which means it should be -- we expect it to be sold within 12 months, but we expect this to be very much sooner.

We've never -- I mean it was always put along the others when it came to sales. It wasn't put under anything else. And...

On the others, you're right, I think we will slightly -- we'll make, but I wouldn't allocate so much profit, but we'll make profit in the other segment.

Chris Richardson from Jefferies. Just a quick 1 again on the branded margin. As you mentioned, there is quite a material fall off in the second half. And even though there was a similar H1 weighting at top line in 2025, the margins stayed relatively sort of even.

How should we think about sort of mid-teens as an exit rate into 2027 if financial sort of S&M or sales and marketing expenses are staying relatively consistent H2 versus H1. How is that fall off happening? And how should we think about it progressing into the midterm?

Yes. Margins for the branded, as we continue to adopt more advanced products, the margins are better. But keep in mind that, most of those products are under license, and so you have to split. So I think -- I mean, the margins we've achieved this year, we are at, what, almost 30 -- they're quite high. And it would be -- I mean, clearly, we would like them to stay there.

Do I think there's a scope for improving? I don't think so because as I said, the more products that you license, the margins are -- will be around that.

But the business is growing, it's growing very nicely. So I believe that for the next few years, it will continue to outperform, and we'll continue to do extremely well.

So mid- to high single-digit top line rate with mid-20s margin for that business is sustainable.

Zain Ebrahim, JPMorgan. First follow-up is just on price erosion. Just if you could comment on what level of price erosion you saw in the injectables business and in the Rx business in the first half and how we should expect that to develop going forward?

For the injectables, I think it was relatively -- yes, it was relatively -- I think the FDA is being a lot tougher. They are really ramping up their inspections and they are sort of enforcing new regulations and new requirements that is forcing everybody to be level-headed when it comes to pricing. So we haven't seen significant price erosion.

I think for us, it's a question of ramping up our production capabilities. As I said, the demand is there. And we really, for the last few months, we really missed out on the opportunities, the shortage and so because we didn't have. So by doing that, we will -- the safety stocks will help us tremendously because they open opportunity. And it will open up the opportunity for us to do more CMO. Again, there is a lot of demand with CMO in the United States, obviously, but also in Portugal, there is demand. So by increasing capacity, it will help us.

For the Rx, the oral part of the Rx, I think everybody is suffering. There is still erosion...

It's probably mid-single digits, which is...

Our sales are becoming more and more inhalation, nasal and so on, which are suffering much less than solid dosage.

Makes sense. And then the other question was a follow-up on CMO. So you said that obviously Rx, I think there's going to be quite a significant contribution next year from the contract that you have, which sounds like it's ramping up well.

But how should we think about injectable CMO next year, given that you had the headwind from losing one of the big contracts at the end of last year and now you have that capacity available, and you mentioned the strong demand. Could we see you potentially backfill some of that capacity as early as next year or might it take a bit longer depending on tech transfer times.

I think we'll be seeing some increase in CMO next year, but obviously, the major increase will come when we have the Bedford plant operation, which will be in '28.

One last question.

Christian with Stifel. Maybe just check in on that large Rx CMO contract in terms of the status of that product, if you can say, and also a bit more sense for the 2027 potential tailwind or benefit from it. If you can articulate that a little bit more, that would be helpful.

So the things are on track. We have done a lot of work in terms of the preparation in 2026. And as a result, we've generated good service revenues for that contract and that meant that we, as expected, we're seeing a step-up from 2025 in terms of the contribution from that contract. We do expect that in 2027, we'll have a full year of commercial production from that contract. So yes, I would say it's going well.

I'd like to come to the others, again, sorry, to your question, Christian. We expect -- we guided towards a breakeven and we still expect it to breakeven. The 503B was really a small contributor to that.

Okay. Thank you very much.

Thank you. Thank you, everybody.

Thank you.

Good day, ladies and gentlemen, and welcome to Hikma Pharmaceuticals April 2026 Trading update. [Operator Instructions]. I will now hand over to the Hikma IR team. Please go ahead.

Good morning, everyone, and welcome to Hikma's analyst call following the publication of our trading update this morning. I'm Guy Featherstone, Investor Relations.

Before we start, we'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's latest annual report.

We have our senior management team on the call today. We're joined by Said Darwazah, CEO; Mazen Darwazah, Executive Vice Chairman and Deputy CEO, MENA; Khalid Nabilsi, Deputy CEO, North America and Europe; Areb Kurdi, acting CFO. And we also have Susan Ringdal, Investor Relations on the call.

With that, I'll hand over to Said for some opening remarks.

Thank you, Guy. Good morning, everyone, and thank you for joining us today.

We have made an encouraging start to the year with all 3 of our businesses performing in line with our expectations. Demand remains robust across our core markets and our teams are executing well. I've been particularly encouraged by the energy across the organization following the changes we made towards the end of last year. Those changes are having the intended effects, and we feel well positioned going forward.

We are pleased to be reiterating our full year 2026 group guidance today, and we remain confident in our ability to execute our plans over the remainder of the year. In February, I set out 3 key priorities for Hikma: agility, stability and investment. I'd like to update you briefly on progress made against each of these in the past couple of months.

To start with agility. A key priority for me is ensuring that we allocate both capital and management attention to the areas where we have the strongest competitive advantage and that we can respond quickly to changing market dynamics. In Injectables, for example, we are taking a number of actions to improve agility across the business. These include strengthening our supply chain and reducing bottlenecks, enhancing our specialty commercial capabilities and service levels, improving manufacturing flows and reviewing and refining our R&D priorities to ensure they are tightly focused.

We are also being decisive on strategy. As an example, we have decided to exit the 503B compounding business. This allows us to concentrate fully on our 3 core businesses and focus our resources where we see the greatest long-term value.

The second priority I called out was stability. Reiterating our guidance today is an important signal, and we want to reassure you that this is a strong and stable business. I am confident in Hikma's future and in our ability to deliver consistently. A critical element of stability is having the right people in the right roles. Over recent months, we have added new talent and made important internal promotions across supply chain, commercial, procurement and quality. We are also in the final stages of appointing a new head of CMO, which will further strengthen our operational capabilities.

Thirdly, investments. We are making the investments necessary to strengthen both our operations and our product pipeline, supporting growth in the years ahead. We continue to make good progress on our capacity expansion projects, including in Bedford and Columbus in the U.S. and in Saudi Arabia, all of which will support future demand across key markets.

R&D remains a clear priority for the group. We're investing in complex and differentiated technologies. And during the period, we signed a device partnership to support our generic Ellipta development program. This reinforces our long-standing commitment to inhalation technologies and differentiated products. What we are doing today is about laying the foundation for consistent long-term profit growth across the group.

Our Branded business consistently delivered strong revenue and profit growth and remains a key driver of group performance.

Hikma Rx is performing in line with expectations with the base portfolio performing well and contract manufacturing emerging as an increasingly important growth lever over the medium term.

In Injectables, the actions we are taking give me confidence that the business can return to a higher growth trajectory. We also remain financially disciplined. We have a strong balance sheet, ongoing dividend growth and an active share buyback program, which together enable us to invest in the business while continuing to deliver attractive returns to our shareholders.

Finally, a brief word on the geopolitical environment. We continue to closely monitor developments in the Middle East. Demand in the region remains robust, and we are maintaining continuity of supply. While we have experienced some inflationary cost pressures, we remain confident in our ability to manage these through disciplined cost control, strong operational performance and resilient supply chain.

To conclude, Hikma is a strong, well-diversified company with 3 attractive businesses, clear strategic priorities and a long track record of delivery. We are focused on stability today, agility in how we operate, thoughtful investment and long-term sustainable growth. And we are confident in our ability to deliver on these priorities in 2026 and beyond.

Thank you. I will now hand over to the operator to open the floor for questions.

[Operator Instructions] Our first question comes from the line of Zain Ebrahim of JPMorgan.

Zain Ebrahim, JPMorgan. My first question would just be on the revenue growth outlook for the year. If you could comment on the phasing that we should expect between H1 and H2 revenue growth given that it sounds like Branded is off to a very strong start and Injectables is doing well as well and Rx in line. So just any thoughts on phasing, both for revenue growth and core EBIT growth through the year that would be helpful.

And my second question is on the decision to discontinue the 503B compounding business. Just if you could expand as to what led to that decision and where you expect to focus more strategically in terms of the launch opportunities you have ahead of you in Injectables or within the other segments as well would be helpful?

On the group revenue, we expect, as in prior years, to have more weight on the second half. And on the profit, we expect them to be equal, but on the -- when we look into segment by segment, we expect the second half for Injectables to have higher revenues and profits as well. On the Branded, as per prior years, we have more heavy on the first half in terms of revenue and profit; and with the Rx, it's more equal.

On the 503B, as you know, we entered into the compounding business in 2021; and till 2025, it remained to be small. It's a different model than our sterile injectable model. So -- and it's taking too much time to grow the business and causing some distraction. So the decision was to wind down and focus on our main business and allocating the resources into whether time, efforts, money into our Injectables business. It's very, I would say, immaterial for 2026. And even in the coming years, still a small contribution in our plan coming from this business. And now we are planning -- intending to sell the site, and we expect good price for it.

Your next question comes from the line of Christian Glennie of Stifel.

Maybe just on the inhalation device and the partnership. Just to maybe -- can -- would it be safe to assume this is obviously leveraging your Advair and the relationship with Vectura that that's -- you talked about it being an established partner whether that's the sort of similar pattern here?

And then just to clarify where you're at broadly with that program in terms of the need for clinical trials and/or any expectation around when this product might be reached in the market?

I just want to clarify. It's -- we are not talking about Vectura. We are not disclosing our partner. There's a new partner that we are working on. Still, it's in the early stage. So -- and it's -- the plans are moving very well. It supports our inhalation program across our Rx strategy. So -- and things are moving according to the plan, and we are expediting the execution on that.

Okay. And then if I could follow up on the 503B. You -- other revenues in the group broadly were tended to be around the sort of 10% to low-teens in revenue numbers. They did an increase. We got to $40 million in 2025. So what was the -- what would have been the proportion of that $40 million that was $503B-based revenues?

We never disclosed the revenue for the compounding business. It's a very, I would say, minimal, and it's included in the Others, not in the Injectables. It has some sales, but it's not significant to the group. And it's -- as I said, it's not a part of the Injectables. It's less than $15 million, and it's not going to have any material impact on a group outlook as a whole.

Maybe Christian, I could also just clarify that the Others line of our revenue includes revenue from smaller businesses, medical containers, IPRCs. So the total amount that we disclosed under Others wasn't fully attributed to the compounding business. So the compounding business was just a small part of that revenue line.

Your next question comes from the line of Victor Floch of BNPP.

Maybe just a quick follow-up on the 502 (sic) [ 503 ] wind down because I think I remember that at the time of launch of that activity, you had a specific facility attached to the 502B (sic) [ 503B ] business. So can you maybe discuss what you're going to do with that one? Are you going to use the capacity for injectables or like for CMO? Or are you just contemplating to potentially just like sell that facility at some point?

Yes. The plan is to sell the facility, so this is our plan. And we have some good price for it. So there are several interest in the site, and we are selling it at a site.

This business overall has been very immaterial to the overall group, and it required a lot of attention, regulatory and others because the regulatory environment has changed significantly over the last 4 or 5 years. So it will be -- it is a welcome move internally. And as I said, the business has been totally immaterial relative to the overall story.

Your next question comes from the line of Natalia Webster of RBC.

I have 2, please, both related to the Middle East. The first just around your revenue exposures. You're referencing robust demand there, but are you able to talk a bit more about this in terms of your exposures and performance by country? And then the second question on the cost inflation side. Are you able to talk more on what levers you have to manage the inflationary increases here?

Well, the Middle East, as you know, we have 18 different markets, and we have clusters. So we have North African cluster, which consists of Morocco, Algeria, Tunisia and then we have Egypt, and we have Saudi Arabia as a cluster, and then we have the Levant as another cluster. So we are balanced across 3. So the 3 of them make the total of the total amount of sales as a group. But for our largest market, it's the Saudi market after the U.S. And in terms of demand, we are seeing robust demand because of the situation and governments are asking us to stockpile on certain products, and they are asking to have a supply some of them up to 6 months according to the local authority needs. So we are well positioned. And as you know, we have manufacturing capabilities across these markets. So we are well positioned to supply the needs once they arise, and they are arising on a daily basis.

In terms of the inflation, we're expecting inflation. We're already seeing inflation, but we are confident that we can absorb this within the strong performance of the Branded business and also the close control of the cost.

Your next question comes from the line of Kane Slutzkin of Deutsche Bank.

Just a quick follow-up on the inflation story. I'm just wondering from a sort of inventory or a raw materials perspective, how many months do you guys sort of rebuy or forward buy and how much are you sitting on?

And then just on Injectables, at the sort of prelims sort of calculated sort of ex Xellia you were sort of -- you've gone backwards in the U.S. I'm just wondering how should we be thinking about that portfolio ex Xellia in terms of the growth there, maybe perhaps even ex TYZAVAN, which seems like it's seeing some good demand?

So for the injectable business, underlying business and the base business is doing very well in the U.S. or in Europe or in MENA. So it's in line with our expectation. Of course, Xellia product, specifically TYZAVAN is ramping up. We are seeing good demand. We're seeing customer converting. It takes some time, but it's in line with what we have planned at the beginning of the year.

In terms of inventory levels, we started the year with good inventory levels, and we have experienced team that are making sure that we have the right inventory levels and APIs and the raw materials across the group.

Okay. And maybe just one last one. Just on the CMO sort of deal, the '27 story. Is there any update on that or is that still the details behind that still discrete?

Still no change. We are progressing very well on the CMO even on the expansion. As we highlighted in prior occasions that we'll be starting producing maybe towards the end of this year, early next year. So it's moving well on the Rx. On the other divisions, no change on the Injectables, the same customers that we have, and it's moving according to the plan.

[Operator Instructions] Your next question comes from the line of Sebastien Jantet of Panmure Liberum.

Actually, most of the questions have been asked already, but I just wanted to ask one on the kind of Advair part of the business. There's been, I think, at least 1 new entrant coming into that market. I'm wondering how that market is panning out? And are you having to kind of give up anything for price in terms of maintaining your volumes there?

So far, Advair is doing very well. We haven't seen any new entrant yet. It's doing very well so far.

Your next question comes from the line of Beatrice Fairbairn of Berenberg.

So on the Injectables segment, you noted accelerating demand for TYZAVAN. I suppose, could you give us some more color about how you expect it to contribute through the year and whether or not you still expect to kind of see a stronger 2027 in terms of this product? And then on the Hikma Rx segment, could you just talk a little bit about how the sodium oxybate market is playing out? Is this broadly in line with expectations? And then my final question is just on the nasal epinephrine U.S. filing. Is this -- can you confirm whether this is still on track for 2026?

So TYZAVAN, as I said earlier, it's doing in line with our plans. So it's ramping up. We are seeing -- we are converting customers into -- [indiscernible] different forms into our ready-to-use. It's going to be more H2 weighted, so sales are ramping up, but we are going to see a stronger sales in the second half of the year.

On the epi nasal, we continue to see -- we have good discussions with the FDA. And we are planning to file in this year in the U.S. We filed in the U.K. last year, and we are planning to file in Europe as well in H1 of 2026. So it's -- there are -- of course, there is a delay in the U.S. filing because the FDA asked for clinical studies, but this is going to strengthen our file. And I think it's moving in the right direction.

In terms of sodium oxybate, we continue to supply our authorized generic. So we commercialize it as an AG. We are very pleased with the ongoing performance and there's, of course, several generic players. We are holding our market share as per our original expectation. And as announced by Jazz, the originator for whom the authorized generic is coming from, we extend our AG agreement with them till December 31, 2029, and can be, of course, terminated by the end of this year. And as part of the extension, the royalties by Hikma to Jazz was renegotiated.

[Operator Instructions] Your next question comes from the line of Beatrice Fairbairn of Berenberg.

Apologies, I had 1 more follow-up question. In the full year release, you noted that you expect the Others segment to be breakeven during 2026. With the wind down of the 503B business, I just wanted to check whether or not this still holds?

So the 503B was about to -- it was on the breakeven. But on the Others segment, we think it will be slightly positive, excluding the 503B.

Your next question comes from the line of James Vane-Tempest of Jefferies.

This is Chris Richardson on behalf of James. I was just wondering if you could quickly comment on the FX impact you expect, whether due to the Middle East or globally in each of the different segments?

We see -- we saw some depreciation in some of the North African countries during the breakout of the conflict, but now they're stabilizing. So we don't see a big impact. And we -- on the countries close to the conflict like the GCC or Jordan, all the currencies are pegged to the dollar.

Our next question comes from the line of Christian Glennie of Stifel.

Yes. Just thinking, I mean, the sort of usual question around sort of biosimilars and just some observations, thoughts there about any sort of rethink of the strategy. Obviously, there was an acquisition in the space up here yesterday talking about a golden era of biosimilars, of course, and we've seen others make some significant inroads there. Just I know the previous sort of commentary around the approach on biosimilars, but just wondering if there's any nuance here, any observations around what you think about that as a market and/or the sort of strategy going forward to take maybe a better share of that market?

As you know, we are very active in the biosimilars area in the Middle East and the MENA market, we were the first to launch with our global cooperation with Celltrion to start with, and then we followed up with new technologies. So we're still robust on biosimilars in the MENA. We are adding new product lines, and we're launching new ones, and we have alliances with other companies that we already announced about, especially on oncology biosimilars with Chinese companies. So we are very active in that domain. And today, we are the leading provider of biosimilars in the MENA in terms of dollar value.

Yes. For the U.S., biosimilars are very small contributor to us. So still, we launched some product at a very competitive price. So very little -- I would say, a small contribution coming from it. But we continue to look into biosimilar opportunities that would fit with our longer-term strategy. So still for us today, a small contributor, but we are evaluating.

There are no further questions on the conference line. I will now hand over to Hikma team for closing remarks.

Thank you, everybody, for joining us this morning. Again, we reiterate that we have started the year on a very good note, and we feel very, very comfortable that we will achieve our targets for this year, and we are all in a very, very up-mood and continuing to move this business forward. Thank you so much, everyone.

Okay. Good morning, everyone. I'm Guy Featherstone, Investor Relations. Before we start, I'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's annual report.

Thank you for joining this Q&A meeting for Hikma's 2025 full year results. Our pre-recorded presentation is available on our website, and this will be a Q&A session. We're joined today by Said Darwazah, CEO; Mazen Darwazah, Executive Vice Chairman and Deputy CEO; Khalid Nabilsi, Deputy CEO, North America and Europe; Hafrun Fridriksdottir, President, U.S. and Global Head of R&D. We're also joined by Jon Kafer, who heads up the U.S. Injectables Commercial Business. And we have Areb Kurdi recently appointed acting CFO; and Susan Ringdal, Investor Relations, also in the room.

And with that, I will hand over to Said.

Thank you very much, and good morning, everybody, and to my old friends, hello again. The decision for me to take over as CEO again was not really a very easy decision, giving up the beach and the sun and the good life was difficult. But I really felt very strongly compelled to do this, okay? I remember before we IPO-ed, we were discussing the ideas of IPOing and not IPOing and my father saying my worry is that one day, the team we lose sight of the long term and start looking at short-term and short-term wins. This is the only thing that I'm worried about. And frankly, in many ways, this is what happened. I think the company had sort of started looking at short-term wins and fixation on modules of the injectable and so on and really lost track. So that's why I felt very, very strongly about coming back again. And as you know also, I had to -- I decided to give up the Chair position to concentrate 100% for the next 2 years on the CEO role.

I want to also remind you that last time when I came in, we had a similar situation with Rx business, the generic business was also doing not very well when I had to step in back again. And for a long -- for a period of a year or so, everybody was on us saying get rid of this division, it's weighing you down. Why are you keeping it? But we said we will do what's required. We set reasonable targets of GBP 100 million to GBP 130 million in EBIT, and we said we will fix it. And here we are, a few years later, we're looking at that business, and it has margins of close to 20% and EBIT of GBP 200 million or so.

So we've done this before. And we feel -- I feel, we feel that we know exactly what needs to be done. It really is not a complicated formula. It's a simple formula. You need to do the right investments. You need to get the right people, the right talent, and take quick decisions.

So as I've said this morning, my focus is very clear. So number one, you want stability. We want this 2 years where people can relax and focus on what is required for them rather than worry who is going to come in and what's going to happen. So we're reassuring our people, our stakeholders, our investors. This is -- Hikma is a very, very strong company, and we have a slide that shows the CAGR of the last 5-year growth. This company has consistently delivered growth and quite good growth. Also, I'd like to remind you all that we have EBITDA margins of 25% while many of our competitors are striving to get to 22%.

The second thing is agility. We want to implement a structure of quick decision-making and to allow people across the Board to take these decisions. We don't want the decision-making to be centralized with one or a few people or the executive committee. Rather, we need to empower people across the Board to take decisions. I've always said companies that empower their youngsters, their under 40 crowd are the ones that will be here tomorrow, those that do not will disappear. So we'll be focusing on empowering everybody across the business so that we take these decisions.

And the investment, we have to accelerate the investment. We have to take the investments that we need to do. So one of the first things we've done is we've taken the R&D budget out of the segment. So the segment heads cannot play with R&D budget to achieve their targets. It's now a corporate decision. We have a budget for it, which is an aggressive budget. We have spent last year building the team. As you remember, we acquired a great team in Croatia. Hafrun joined the company 2 years ago now and Hafrun has a long, long track record in R&D, and she is directly in charge of the R&D team.

So the other things we need to do is hire the right people. Again, Jon took over as Commercial Head of North America or U.S. injectables and immediately said we need to hire so many people. Well, what are you doing? We need to -- somebody said, Jon, go ahead and do it, and he has already hired so many people and added to the team. We also hired a supply chain. We have now a fantastic supply chain team in place that will be working to make sure that we don't have bottlenecks across the group. And we are still looking to hire some more people like ahead of CMO. We are interviewing now. We want to hire somebody that has a lot of experience in CMO because we feel very strongly that Hikma is well primed to be a major CMO supplier.

And finally, what I started by saying the fear of my father when we went IPO-ed, long-term growth, focus on the long term, and that's what we are doing now. We are focused on the long term. We are doing the right investments. We are adding, as we said, the R&D budget is much higher than it was before. I think we're targeting 5% to 6% now to spend on R&D. Hiring the right people. Giving the plant managers the decision to buy the right equipment when they needed, not waiting for central engineering to come before they can buy that.

So all these changes that we are taking, all these changes we are implementing, I think, will be excellent for the future.

Then I think we have to look at the structure that we are saying, why this new structure? Some people have said it looks too complex. In my opinion, for me at least and for the team, it's a very simple structure. The MENA team is a fantastic team, strong team that has been doing an excellent job for the last 40 years. Hikma this year was #1 company in MENA among all companies, this is a big deal. And it's the MENA team that has delivered this. Mazen and his team have been doing this. So it was a no-brainer that the injectables and the MENA report to them instead of being a distraction for the whole team.

And then Europe and, let's say, North America, U.S.A., they share many plants, and they share the products. So although doing businesses in Europe is different, but it's the same products and the same manufacturing teams. Khalid has been with us for quite some time now, and he has shown to be doing a great job. He understands this business, and we believe that it was time for him to step up and take a strong P&L position. I am very comfortable that he will do a great job. And Hafrun since she joined the company, has just [indiscernible] us all. She has done such an incredible job with Rx, such an incredible job with the R&D team and hiring the right people and getting the right things in place and at some point, we will be sharing a clear R&D strategy for everybody. We are more than comfortable that with the help of Jon and his team and the Rx team that has already proven to be an extremely effective team, we are very confident that this is the right way to go.

So we believe it's an extremely good company. We're in a very good position. We have a strong track record, a very strong record of growth. We will be investing heavily in the next 2 years. And we know that we will go back to the -- moving forward, we will go back to much stronger growth than what we have shown. Although what we have done is still quite good. We believe that we will do much better than that.

It's James Gordon from Barclays. Maybe first question, just on the organizational structure you mentioned, and I do follow the logic about having people in each geography running the geography. But then at least your reporting, I believe, is still injectables, Rx and branded. So might you actually just change the company and make it by the 3 geographies rather than the 3 types of division. Because ultimately, who is ultimately responsible for injectables now because it seems like lots of people have got responsibilities is the first question, maybe if I break them up.

Well, we said that for this year and maybe for the foreseeable future, we'll continue to report the injectable results because we didn't want to say, why are you running away from that? But reality from a management point of view, when you look at Europe and the U.S.A., it's 90% of the injectable business. And as I said, it is very different from the MENA injectables. The MENA injectables, there's a lot of products that are in-licensed and brought up from outside while the U.S. is much more focused than Europe on manufacturing. So Khalid, Hafrun, obviously, but ultimately Khalid is in charge of the U.S. and Europe and will be in charge. And of course, myself, I will be working very, very closely with them. So I think this gives us the opportunity to really focus on the business rather than -- I think just forget the tail end, which is the MENA injectables. And as I said, I'm very comfortable that the MENA team will do a much better job than before. So the bulk of the business now, there is a clear focus on it. And we will be reporting geographically as well as segmentally for the foreseeable future.

Maybe just the second question would be, so what is the outlook now for injectables as in what's going to make it grow faster? And is the idea that now you've reset the margin to the level of this year, but you'd have a similar growth rate on the top line as you were previously hoping for?

First of all, as we said, the amount -- the budget for the R&D is much bigger than it was the year before. So actually, if R&D growth was similar to the years before, then the results will be much better. But we said, no, we have to do this. We have to take this decision now. We have to invest. So again, it's investing. There's really -- it's not -- you have to invest in the right people. And as I said, we have hired many, many people and there's still more to come. The R&D team, and we will be sharing more about R&D moving forward. And we believe that Hikma is extremely well positioned for CMO business. And we are in the process of recruiting a Head of CMO in addition to the CMO team we have. So all these things will be working together to achieve, let me say, growth in the midterm to long term for the injectables.

So James, just on the outlook for the injectable business. We know that this is not something that we would like to be growing. It's we have challenges at '25, and this is something that we know that and '26. There are different reasons for this. It's -- as I said in my presentation, is reduced CMO. One of our main customers want to do a domestic manufacturing in the U.S. So we have a reduced contribution from that. This is something that we cannot offer until we have Xellia up and running in 2028. We are less optimistic on, let's say, the biosimilar that we have, although it's a very small part of our business and liraglutide. And one of the product launches -- main product launches has been pushed. So of course, going forward, we are going to go back to return to very good growth for the injectable on top line and in terms of the EBIT. So any company, any business goes into challenges, '25, '26 was a challenging year. I think from here, from '27, we are going to see a different outlook for the injectable business, as we used to see in the past.

And just some examples. So of course, TYZAVAN is an important product for us. That will drive some of the growth that we achieved this year, but we expect that to do even better in 2027. So that will be an important growth driver. Some of the products that we expected to launch this year push to next year. So that will be, again, another growth driver for '27. We've got, of course, continued expansion in Europe. That's been an important growth driver for us. That will continue. MENA has been also a good business. We signed 6 new biosimilars in MENA. So there is -- there are a lot of opportunities to grow, but I think as Khalid said, this is sort of a reset.

So the challenge is, obviously, as you right point out with the injectables and what we're doing with it. But I'd also like to remind everybody, this is a much bigger company than just the injectables, right? We have 3 very strong divisions. Two of them that are doing extremely well. The MENA is growing at a very fast rate with very good margins. And the Rx as I said, has done much better than anybody anticipated 2 years ago, if I told you we'd be doing 20% margins and this kind of EBITDA, people -- why did we keep on pushing you to sell it? So we -- there will be a lot of focus. There will be a lot of investment and we feel very, very strongly that in the medium to long term, this business will -- it is already, in my opinion, one of the best businesses. If you compare our margins to our competitors yesterday who upgraded from 18% to 19%. We are way ahead of them. Again, other competitors saying we want to be at 22% EBITDA, we are at 25% EBITDA. So this is a very good business. It's driven by 3 engines. And as we said, the focus is on long-term cost and total profitability growth in earnings per share rather than just focus on -- keep on focusing. And I think this is what really hurt us the last few years. The over focus on the margins of the injectables where people are saying, don't sell anything less than 32, don't accept anything. If I can get $300 million worth of orders opportunity and 28%, I shouldn't take them. Of course, we need. So that's why the focus will be on top line growth and bottom line growth rather than margin.

If I may add a little bit about that, how we are going to grow the injectable business moving forward. I don't know if you had the opportunity to listen to our presentation this morning. But I mean we talked -- at least talked a lot about the ready-to-use platform. And even though, of course, the first product is TYZAVAN, as Susan mentioned, but we have multiple others in the pipeline and -- but those products that will be launched probably in early '28. So do you not see short-term, I mean, growth because of those products, but we have multiple products in the pipeline and I talked about, I think, 15 ready-to-use product in our pipeline. And so of course, moving forward, we will see the revenue and we will see the growth from this platform, which I'm very excited about. So I just to revisit, I think it's a really good business.

Zain Ebrahim, JPMorgan. So the first question would just be a follow-up on the previous answer in terms of what you described on the CMO challenges from one of your customers wanting to switch the manufacturing from Europe to the U.S. So how do you see that risk going forward for the rest of the injectables CMO business? And just broadly, how do you see outlook for CMO overall from here, I know you've got the -- there's the small molecule contract in Rx contributing this year, ramping next year. So just to remind us how you're seeing that outlook?

Well, the first thing we did, we looked at our plants in the U.S.A., for instance, we looked at the Cherry Hill plant. And see -- so what were the bottlenecks, what was needed. Many times, it's a small thing that you need to do to increase capacity. So working on increasing capacity significantly at Cherry Hill and that will help us with the CMO business as more and more companies want to manufacture in the U.S.A. Of course, we'll talk about the Rx later CMO because they already have a lot of orders in business. And then we acquired the Bedford site specifically for this. And it's a big site. It has a lot of equipment in it. It needs to be reengineered in a more modern way. We're working on that diligently, sometimes new lines take a bit long to get -- you need to order them it takes 1.5 years to 2 years for the lines to be again. After they come in, you have to install, qualify and get FDA approval. So it's a bit of a long process, long-winded. That's why we're guiding to '28. But with most of the CMO, the big business you get the order and the expectation as you deliver 2 to 3 years down the road. They don't expect to deliver tomorrow because it's a process of moving products and so on. So that's why we feel very strongly about hiring ahead of CMO, somebody that has already strong experience, has well good knowledge of the industry and has good contacts with the companies that want to have CMO business. So we're very confident like in '28 and forward for the injectables will have a very strong CMO business. For now, we will be showing that the Rx already has very strong CMO business. So overall, it will become a quite significant part of our business, let's say, 3 years down the road.

Very helpful. And second question is on R&D. So an increase of 5% to 6% of group sales. Are you now comfortable with that as a ratio in terms of thinking about that level going forward? And I...

You ask me or you ask her? If you ask her, she says, no, we need more. If you ask me, it's enough.

And when do we say pay off from those investments? Because I know you mentioned '28 for the ready-to-use but you started something increase in R&D last year. So just to...

Yes, of course, we slightly increased the investment in R&D last year, but that was I mean, really a slight increase. But we also reorganized R&D organization. So now we have a global R&D organization. And we also moved activity from U.S. into Croatia. So of course, that is clearly helping significantly on the injectable business, but we also have a very strong team focusing on inhalation, semisolid and liquids in Columbus in Ohio and then, of course, our team in Jordan is focusing on solid oral. So I strongly believe that we have the right team in place. Would always like more money for R&D, yes, of course, I would, so Said is correct there, but I feel very confident with 5% to 6% of the revenue in spent of R&D. I think that's just in line with what our competitors are doing.

And we are going to see these returns coming into the coming years. Some of it will come in '27, some of it to come in '28 or '29 onwards.

Yes. Of course. R&D takes time, everyone knows that.

Beatrice Fairbairn at Berenberg. You discussed the focus on long-term growth. I mean one of the targets out there is this kind of GBP 5 billion 2030 revenue target. My question really was does it still stand? And would you be able to give some color in terms of what is needed to get there and how that looks like over the coming years? And then just on your delay systems timing of some of the product launches and injectables, do you feel like the new time line that you've got are realistic and kind of how confident you that you're going to be able to launch these products on time.

Why don't you take this first part about the GBP 5 billion?

Yes. So the GBP 5 billion, when we set the GBP 5 billion target, we said that this was -- it was an aspirational target, but we felt that it was very achievable with the business plan that we had and our business model, which has been to do bolt-on acquisitions as a matter, of course. So we still do feel comfortable that GBP 5 billion is within reach. It is -- we have -- we definitely see an acceleration of growth after 2026. And I think today, it would require a bit of inorganic growth, but yes, it is very much within the reach.

[indiscernible] organic growth. It's not like we are talking about transformation, like more of a product acquisition. So we are very close to the aspirational target of GBP 5 billion. And if you look into the 3 businesses, like the branded is delivering very good growth and acceleration. If you look into the past, it was 5%, 6%. Today, we are guiding more at 7% to 8%. This is driving growth, high-value products that we are getting into the MENA region. If you look into the number of licensing deals that we've been signing over the past 5 years has increased significantly. And now we are becoming more and more the partner of choice. So this is going to be a key driver. Rx has grown with the CMO business. We are going to see more contribution coming in '27, '28, '29. So this is as well going to drive the growth. And injectable, of course, with all these RTUs and the products that we are working on, it's going to accelerate the growth for the injectable business. Remember, the injectable business has a large portfolio. So there will be always opportunities. There will always be shortages. Europe, we are seeing a very good growth. Great potential, especially that the market is lacking products. So we are being the, I would say, most reliable hospital supplier in Europe now. All hospitals are coming to us and governments coming to us, say, we want this product. The agility that we have in Europe, providing the products on time is differentiating us versus others. And this is why we've seen 23% growth this year in the injectable in Europe. Same for MENA. It's not just like the 6 biosimilar. We have many products that we have that we are going to launch in MENA for biosimilars. So this is going to be the growth driver and we are very confident of our ability to continue growing the business. As said, '25, '26 might look challenging for the business, but this is a business cycle. But from here, we are going to continue growing.

The short answer is yes, the GBP 5 billion is very achievable. We are extremely confident in our '26 guidance. And yes, the injectable launches that we'll be seeing in '28 and further will deliver the kind of growth that we need to be there.

Victor Floch, BNP Paribas. Maybe just 1 question on Rx. That one seems to be -- to go pretty well. And it looks like you have like even some room in terms of margin. You've been investing even like more than what you're using -- actively investing for injectables. So can you discuss like the different moving parts this year? I mean the base business, I mean, I think there might be some competition on certain products. On the other -- on the flip side, you have some service payment from your CMO partner. And are you expecting at some point to be able to update the market on was that CMO? What kind of -- what is the product? And what are the economics behind that? I mean, just have a bit more visibility on the CMO because it's a huge moving plant for Rx for sure.

Yes. So this year, the revenue from the CMO business will probably be around 10% of our business, but our target in 2030 is up to 20%, at least my target. So we are not going to share the name of our customers, but we are working with not only 1 big customer, but actually multiple and some of them were talking about contracts which have not been signed but are in negotiation phase and we will be signing within the next, let's say, next few months. So that's going very well. And you also asked about the base business. For example, a product like Advil has been doing very well last year, and we expect the same this year. Fluticasone, we are the biggest volume driver in U.S. for fluticasone, as an example or for nasals, so -- and that is a business which continues to do very well. And all our base business has been doing really well last year, and we haven't really seen any change at least for the first 2 months of the year. So it's quite -- it's more stable than maybe most people believe it is.

And I can just remind people that we have Jon who's the Commercial Head of Injectables on the line; and Mazen, Deputy CEO for MENA. So don't hesitate to address questions to them as well.

Certainly for Jon. You should really ask him questions now because he woke up very early for you.

Christian Glennie, Stifel. Again, not to belabor the point, but on injectables and the margin, just to be clear around it's been quite a dramatic shift, right, from mid-30s to high 20s now. There isn't something sort of -- well, combination, one is you talked about the extra investments needed implication potentially maybe that you were underinvested before to some extent. So the margin was sort of where it was at -- and/or is that fair? And then the second part is, is there something more structural around the market from a sort of pricing and competition issue that means margin has -- the direction of travel has gone.

Okay. So first one, as I said, I mean, clearly, we said we're taking the R&D budgets out of the divisions and putting as a corporate. So clearly indicating that at some point, division heads were sort of reducing R&D expenditure to get higher margins. So by taking that out and having it as a corporate with a fixed number that we agree on, I think that will -- there will be lower margins a little bit to start with. But we are very confident that with the investments they are making in R&D, the new pipeline, the expansion in the manufacturing and the CMO that we will be achieving higher margins mid- to long-term. Okay.

The second question was?

Structural something in the market because you've got [indiscernible].

There's always competition. There's always people coming in. You lose a few products. We lost 2 or 3 products that not lost. We have competition coming in 2 or 3 products that we're doing extremely well. And that's why when you have such a well-diversified portfolio and you have so many products, other products can pick up and the new launches can pick up. So the market has always been competitive. It's always been competition is coming in. Do we feel that there's more competition in some areas, yes, in some areas, no. But we are confident that with all the changes we're making, we are fine.

It's not like structural change in the market. It's the pricing is around, let's say, if we exclude the 2 top products that we have, it's 4% or almost less. So low to mid-single digit plus erosion that we've seen in this business. So nothing is abnormal.

And maybe if I may add. So I think over the last few years, the supply from third party has increased significantly. And third party, of course, is not as profitable as if you're making the product internally. So I think it has been going from 20% to 30% over the last few years. So that's, of course, affecting the profitability. But also, I mean, there are different part of the business, which has higher profit than other parts. Of course, while you are building the business -- injectable business in MENA, which is less profitable than the business in U.S. and in Europe, of course, that will affect the overall injectable profitability, and that business has clearly been growing as well. So those are at least 2 reasons in addition to...

If you exclude the MENA margins, both for the Europe and North America injectable business, the margin is not 30%.

Maybe the natural follow-up, I know you're probably reluctant to guide beyond kind of '26, but just to get a sense for that margin and is '27 to '28 the floor? And then maybe that's similar until you really get into Xellia and then margins to improve? Or is this...

And again, we're saying we're very comfortable that '28 and further margins improve. I think once we assess everything and we have the plan, the right plan in place. Are we going to be giving...

May I take this one. In a way we'll be guided to '27, '28. And I said in my presentation this morning, you can assume this is for the coming few years, but it's not like if we have an opportunity that is top 30, we are going to say no to it. So we don't want to be strictly held on these margins because we are going to focus on growing the profits and the EPS rather than just focusing on the margin, as I mentioned.

So you can't consider like this '27 or '28 to the next 3 years. But what has changed, just repeating to what I said earlier this morning. From the November, when we said the floor is 30% is literally increased investments in R&D. We are increasing GBP 15 million this year versus last year in injectable. You look into the investments that we are having, as I mentioned, fitting in sales and marketing, so -- and the CMO. This is why we are going down like 2 to 3 percentage points. It's not something structural in the business, but it's more investing for the future.

Just going to jump to the line for a quick question.

[Operator Instructions] Our first question comes from the line of Kane Slutzkin of Deutsche Bank -- Deutsche Numis.

Just -- sorry, could you just clarify, I missed the last point on the higher R&D in injectables. But could you just sort of clarify sort of lower guide as sort of those moving factors between higher R&D versus the lower CMO work like in terms of which has moved the needle more there? I assume it's the R&D, but if you could just clarify that.

And then just -- you're obviously spending some time doing the strategic review. I'm just wondering at what point do you think you will be able to sort of reinstate a midterm or a new midterm guide?

And then just finally, on the buyback, just I guess, why has it sort of taken so long to do it? And could we see a more permanent feature going forward if shares sort of remain where they are?

I think I can maybe take the R&D question. If I could hear him correctly. I think he was asking for the spending for R&D and the overall increase in spending for R&D this year compared to last year is around $45 million year-over-year. I think that was your question, but I'm not really.

Kane, could you just repeat your last question?

Yes, I was just wondering sort of in that lower guide, how much of it is sort of the lower CMO work you referred to versus R&D in terms of what's impacting the guide down?

Injectables margin guide, how much is CMO versus [indiscernible].

I think, Kane, it's more evenly split across R&D, sales and marketing and CMO. I would say those are the 3 biggest factors there of more or less the same magnitude.

And the buyback, I agree with you, is taking too long, but we have taken the decision to do that GBP 250 million this year.

In terms of the medium-term guide, I think we'll get back to you on that. We know that it's important for the market. We want to get it right. And so yes, I think we'll come back to you.

Thank you. There are no further questions. I'd now like to hand the call back to the Hikma team.

Julie Simmons, Panmure Liberum. Just on a more product-specific basis. I'm wondering with TYZAVAN. Clearly, you've just launched it. It feels like the sort of momentum is pushed out a little bit to '27. Are you noticing anything from the first sales in the market there?

This is Jon.

You're on mute Jon.

No, I am not on mute. Okay, great. Good morning, everybody. So we are an active launch mode for TYZAVAN. Let me just frame the market because this is important to understand because the RTU bag platform will follow a similar pattern. Vancomycin is a widely used product within the U.S., there's about 41 million grams of the product used in multiple forms from a very lyophilized powder to a frozen bag to obviously our ready-to-use bag. What we are selling is a system and a process change, which in large hospital systems and large hospital groups that by default, TYZAVAN would become the vancomycin of choice. So it is really more of a process change.

Now to put it in perspective, we have already converted 13% of the entire gram market with our existing vancomycin ready-to-use bag. So we have a platform. We will expand that. Within that network, there's about 22,000 sites of care that use vancomycin within the U.S., all forms, long-term care, hospitals and such. Our existing customer base on the existing bag product represents about 15% of those sites. So there is a very large universe of hospitals and health systems that have not used our historical bag. So there is a large opportunity there. So you have to think in terms of it as a process progression. So we're going to expand our existing base by expanding the usage of the product without restriction, and then we're also penetrating the customer bases that have been -- that have not used our bag in the past. So yes, this is going to be a progression into the back half of the year. But the momentum that we're seeing right now is very active and very encouraging.

And just following up on that from a sort of RTU perspective longer term. Do you think once a site has switched over to 1 RTU, it makes it easier to switching to another for a different product?

Yes. And that's exactly why the way we're approaching this first one is extremely important. We want to make sure we have the processes in place. Hospitals and groups, they have to reprogram medical -- electronic medical record systems, infusion pumps, SOPs, ordering patterns, storage platforms because you're bringing in a new form. So as we work with TYZAVAN as the foundational product, we want to make sure we fully integrate it properly. And I do believe that, that will help us going forward with the additional bags as they come to market.

Charlie Haywood, Bank of America. First one is just in our models, would it be reasonable to assume that a I guess, at this stage, mid -- 30% midterm injectable margin is off the table, given focus on profitable growth. And then I'll get to the second one in a sec.

Yes.

Okay. And then the second one is just on the midterm guide, which obviously since giving you, we've seen 2 cuts too. So first is, I guess, talk through the decision to issue the midterm guide if there were some underlying concerns on the spending, the short-term focus to give that?

And then secondly, sort of how can you reassure us and the market that this is sort of the last of the big cuts and we're back to something profitable. We can be returning some in growth from here.

Again, as I said before, it's not a complicated formula. You do -- you have the right people. You have the right equipment, you have the right facilities, you have the right R&D. All of these things, when you invest properly, you take timely decisions to take -- to move the business forward. This is a formula for success, and we've got this formula for 40 years. So we sort of slowed down decision-making. It became too centralized. We were not investing properly in the right places, and now we're reversing that. So that's why we feel very confident that midterm, we will deliver what we're talking about.

And this is why, as well, '27 is going to be a year where we -- '27 is going to be as well a year that we'll see a growth. So it's the bottom on the injectable. And from here, we are going to grow the top line and in bottom line. In addition to the other 2 businesses, they continue to grow, as I said earlier.

Just a third one if I may. You talked to obviously heavy investment in the next 2 years. How confident are you that this is a 2-year journey of heavy investment, and that won't spill into 3 or 4 as the investments start continuing?

The investment is -- it's not a short term. It will continue to be, but we will see that -- we'll start seeing the results of what we're doing now, 3 years down the road and will it further, but when we look at our 5-year CapEx, our 5-year R&D orders, all this will continue to grow.

Maybe just to add to what Said just mentioned. In terms of the R&D, it takes time to see results, as Hafrun said, in terms of sales and marketing, these are quick wins. So you invest today, it's not like going to take so much time till you get the returns. And this is what Jon is focusing on. So you will have these investments and at the same time, give you an example on the supply chain, having somebody now focusing on the global supply chain would reduce our inventory levels will reduce the slow-moving items, which it was very big this year, failure to supply, so the immediate impact will be significant improvement to margins. So this is why we are saying that we are moving in the right direction. And I think the results of this will come in the coming years, and we are confident about our medium-term outlook.

Christopher Richardson from Jefferies. A couple if I may. You lowered CDMO or CMO expectations, sorry, for the year as some customers require domestic production, which you said you can't offer. I was just wondering if there are any reasons for that.

It's -- as we said, in Xellia, our Bedford acquisition is going to be up and running towards 2028. So it's the same machinery, the same lines. It's replicate to what we have in Portugal. Now we couldn't offer because we don't have that facility up and running. So once we have that facility up and running, towards the end of '27, early '28, we'll be able to offer.

And as I said, again, the Cherry Hill plant and the other plants we looked at optimizing the capacity there looking at the bottlenecks, bringing in the lines that are required to up the manufacturing capacity.

And if I can add something about the Rx business because we are only talking about injectables and as I mentioned, I mean, we have this huge, I mean, of course, manufacturing site in Ohio, both for solid orals, for nasals, for inhalations. And that site has been getting a lot of attraction over the last year or so since all this discussion about domestic manufacturing started to happen in U.S. So there's a lot of interest in us in producing products for different clients. So I think this is going to be a big opportunity for us moving forward, both in the Rx and also in the injectable business.

Many times clients come in, let's say, for the solid oil, then they feel you're very comfortable with you and they open up and move injectables and other things to for you.

Great. And just the guide cut in November was due to equipment delays. I was just wondering what the situation is now and what caused you to walk away from '27 and whether the timing for Bedford has changed at all?

There's no change to the guide that we had in late November. So all what we said that we are going to ramp up -- start ramping up towards the end of '27 and the commercialization will start '28. So no change to our plans.

Great. And maybe just a quick follow-on. I was wondering if you could comment on the oral generics pipeline and the margins in U.S. Rx excluding any Xyrem impact.

Excluding, sorry?

The impact of Xyrem?

Sodium oxybate. Okay. So last year, sodium oxybate was dragging down our profitability so the rest of the business was actually compensating for the low profit of that product. We managed to negotiate a better deal, at least for this year and for next year. So we will have slightly better profit on that product. But -- so it will not be dragging down the overall profit for the Rx business. Is it helping this year? It potentially will.

Zain, some more.

Zain Ebrahim from JPMorgan. Thanks for the follow-up. So on CMO, you mentioned you're looking for a new head of CMO. So just the characteristics you're looking for in the Head of CMO in terms of the type of -- the kind of the profile that you're looking at and when we could expect the appointment? And does this mark a potential shift to making CMO like a fourth division that we source also about in the past in terms of strategically. So integrating the Rx and injectable team.

Historically, we used to the CMO as a fill-up. So we focus -- this is extra capacity, let's get products to fill it up. And then when we were approached or we found a client to come in and use the Rx side it was more of a long-term agreement. So long-term agreements require dedicated facilities, they require dedicated lines and sometimes dedicated teams, and it's a lot of investment to do that. And it takes time to come in and -- but it's a long term. So this is the right -- this is what we want to do, not just bringing in short-term fixes. So to do that, you need somebody that has been doing that for a very long time that knows which companies require CMO business. And also, I think more importantly, when you do the contract, when you're looking at, let's say, 5 billion tablets or something, $0.05 per tablet extra gives you $50 million in profitability. So having the right negotiation skills, the right contract skills all these things. So this is what we're looking at.

Now we have this but we think that getting a very senior person that has done this successfully is the right way to go. And as I said, we are interviewing, there are several people out there that are available with this kind of talent. And yes, it could be a fourth division very much so.

Just a question on the CMO headwind for '26. Is that -- was that 1 customer you lost, that's gone from Europe to U.S. I guess how is that conversation and how are conversations with the remaining customers to ensure that won't happen with someone else before the '28?

It was 1 of our customers. It's not like they are shying away completely. They still have business with us, but they decided to -- some of their manufacturing for their own benefits. They wanted to have it in the U.S. So it's not like the business is going down. It's to replace, it's going to take some time to get a new customer, but we are confident of our ability to continue growing the CMO business. So it's a matter of time. But when we have the Xellia, of course, up and running, and we will have much more clients, much more capacity to offer as well.

There's a lot of demand for U.S. manufacturing and I think the Bedford acquisition and what we're doing now although it's going to take a little time. But like I said, if you want to get a client that will work with you long term, anyway, it will take 2 years before you can move in the product. So now is the right time to get the clients and get the orders so you can put the processes in and do the submissions and all these things, the tech transfers and so on and so by '28 and more, you'll be ready to launch. So it's the demand is there, and we are talking to a lot of companies.

So what they are saying is that if we would have that capacity in U.S. to take on those products in U.S., we could probably potentially have kept that customer. So -- but we didn't have the capacity at that time. So I think that's -- but now we are building that. So moving forward, we are.

And if you remember as well, when we did this acquisition and we took the Bedford site on, it was because we were reasonably capacity constrained in our existing facilities. And so we weren't really very actively selling CMO business at the moment because we're pretty much and we don't have a lot of spare capacity for CMO without the Bedford site.

Christian Glennie. Thanks for the follow-up. Just maybe on Rx and just a couple of ones there on the I think you've alluded to a couple of other things around the moving -- the margin to 20% just to clarify the step-up this year to 20%? And is the 20%, again, another kind of the base for the business going forward, do you think?

And then just finally on nasal epinephrine, what's the update there? And obviously, it's been delayed. So what's the expectation around that? I think it had been seen as potentially quite a significant product for you. So just an update there.

So maybe first on the margin. Is 20% the best we can do? No, I think probably you will probably see some improvement moving forward as, I mean, in '27, even '28 as well. I'm not going to give you any numbers, but I think -- I don't think that's necessarily the top of the pie. With regards to epinephrine as I think we -- I talked about last time when they had this conversation, we -- there were some requirements from FDA to run some additional study. That study is ongoing and we are planning to submit in U.S. in, let's say, after a few months now. And we did file a product in U.K. last year, we will be filing in Europe as well. And we are actively discussing our licensing product in Europe. So that's -- yes, so that's the update. But because we have been working so closely with FDA over the last year or so on the product, I strongly believe that the review time will potentially be shorter than and maybe we thought in the beginning. So it will be an exciting product for us.

Somebody asked Mazen a question about the MENA. He's bored.

James from Barclays again. Just we're talking about margins, and we're talking about generic margin and an injectable margin?

Rx.

Rx, apologies. But then I've also heard effectively, you're going to centralize R&D spend and that we could think of the divisions as being a bit ex R&D. You're going to think about what that ex R&D performance is. So if we're rebuilding our models of today, is that how we should be thinking about Hikma now? And are you going to start giving us then what the margins are for these 3 divisions without R&D and then the central R&D line? What do we do with [indiscernible]?

Eventually, this year, we did not want to -- too much changes to you -- changing your model. But eventually, next year, you'll start seeing the margin without the R&D. With and without.

Bridge this year and then we do a rebuild for our next year. Yes.

Mazen, I think it would be great. Maybe I think 1 of the strengths for the business in the MENA in the past year has been all of the partnerships that we've signed. We have excellent momentum in terms of signing new partnerships. Maybe you could just talk a bit about why Hikma seems to be the partner of choice and MENA.

You are on mute. Mazen, mute.

No, he's not. The sound is just very low.

Looks like he's on mute.

Luckily, you didn't ask him any questions.

Okay. Next question till he comes back.

[indiscernible] Said for closing remarks at this point.

Sorry?

Closing remarks.

Well, again, it's -- first of all, it's good for me. I'm very happy to be back as CEO, and I'm very happy to give up the Chair position to be able to do this. We have an extremely good team. We work very, very well together. We have, I think, a very, very strong business. As we said, if you look at the last 5-year CAGR and the years before, you've seen how this business continues to grow. We will continue to grow. We are taking quick decisions. We are implementing a culture of quick decision-making. I also talked about the younger people in the company. So for instance, from now on, the executive committees and the leadership council and so on, we will have -- we will mix and match not only beyond seniority, we will be having more younger people join. There is obviously something we didn't talk about, a lot of focus on AI and seeing how AI can be implemented to move the business forward. So all in all, I feel very, very positive about this. This is a strong company that has been growing for a very long term, has very solid foundation as a strong leadership team and a lot of talent across the board. And I'm very confident that we will be delivering the kind of growth that we expect from ourselves and our shareholders expect from us. Thank you. Thank you, everyone. Appreciate you joining us.

Hello, everyone. Today, we announced our financial results, and I am pleased with the performance Hikma delivered in 2025, growing the business and delivering the results aligned with market expectations. We launched 84 products during the year, continued to sign new partnerships and achieved the important business milestone. And I am very proud to say that we became the largest pharmaceutical company in MENA by sales for the first time in the history of the company. We have 3 excellent businesses, all with unique strengths. To be clear, we also had our challenges. We have begun implementing changes in the business to address these, including to the leadership, and we have been taking a close look at where we need to strengthen the group, in particular, our injectable business.

Branded, our MENA business, is truly best-in-class. We are a leader in the region where we operate among the large multinationals. We have a strong team with local market expertise, a broad portfolio of world-class products, a wealth of manufacturing capabilities and excellent customer relationships. Branded is a consistently strong performer and a true backbone of Hikma's strength. Hikma Rx has become an increasingly important business for us in recent years as we have pursued growth in higher-value areas such as our more complex medicines and through offering CMO services.

I'm excited by the rapid progress we are making in Hikma Rx. We are one of the leading U.S. domestic producers of generic medicines, and we are proud of the positive impact this business is having on the U.S. healthcare landscape. For injectables, while our margins are very strong for the industry, we must continue to invest to achieve the full potential of this business. We are increasing our investment in R&D, in people and in CapEx to position ourselves for higher levels of consistent profitable growth.

We are entering '26 energized and focused on delivering our strategy. While we have had to adjust our expectations, I am confident that guidance we are providing for this year is realistic and reflects the investments we need to make. I am excited to show that we can deliver on this over the year ahead. Hikma has a rich history and a track record of growth. The work we do at Hikma is important, improving access to quality healthcare for hundreds of millions of people, and it is our talented people who make this happen. I would like to thank my Hikma colleagues for their hard work throughout 2025. Thank you very much.

Good day, ladies and gentlemen, and welcome to Hikma November 2025 Trading Update.

[Operator Instructions]

I will now hand over to Investor Relations for opening remarks. Please go ahead.

Thank you. Before we start, we'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikmas's latest annual report. And with that, let me hand over to our CEO, Riad Mishlawi.

Many thanks. Good morning, everyone, and thank you for all joining this call regarding our November trading update that we have published this morning. Before we come to your questions, I want to briefly cover a handful of key points in the update. Firstly, the business is performing well, and we are on track to meet our 2025 guidance. It is really encouraging to see all 3 businesses doing well. Secondly, we know that there is a key focus on the injectable margins. We have always achieved industry-leading margins and we are confident now that this will continue. But we have said this morning that we now expect the injectable margins to be around 30% over the medium term. I want to very clearly explain what is behind this change, particularly given that we have delivered margins over -- above the mid-30s in recent years.

There are 4 key reasons: Bedford, R&D, partnerships and geographical expansions. Let me take you into each one in turn. So first, Bedford. As a reminder, we bought this U.S. site through the Xellia acquisition last year. While this capacity will be a welcome addition to our U.S. operations, we have seen delays in machinery largely driven by global supply chain issues. This means that we now expect the site to be operational towards the end of 2027, with commercial production and revenue accelerating in '28. We will keep manufacturing Tyzavan as a third-party until this time.

Point number two is R&D. Our plans from 2026 onwards see a meaningful pickup in R&D spend. Today, we've announced a restructuring of the group R&D function. And we are now looking closely at R&D spend allocation and ensuring that we are positioning ourselves to succeed when it comes to the pipeline, part of this involving spending more than we had done in recent years. This is a great thing for us as the pipeline is crucial for our growth and with Hafrun running this business and the new facility in Zagreb, I'm really excited about what we can deliver in the future.

The third reason is our strategy of leveraging partnership, both in terms of commercialization and manufacturing. For example, Liraglutide. This is an important GLP-1 and has been a good contributor post launch. We partnered to launch this product, which really removed all the risk on us. But with shared economics with partnership, it means that the margin will come at a lower rate. The same will be in the case for our biosimilar products, important products, good contributors, but at lower margins. These are all complex products and partnerships help us bring those to the market more quickly.

The fourth point is our fantastic growth in Europe and MENA. They're excellent markets and our confidence in them has already grown in recent months. But again, the margins here are lower than the U.S., still very healthy. But the outsized growth in ex-U.S. will impact the margins. One final point on injectables as part of the broader restructuring, Bill Larkins has stepped down as President, and I will run it on a temporary basis until his successor is appointed. I'm excited by what I have seen. The business has exciting prospects for future growth that can continue to deliver strong, sustainable industry-leading margins. Finally, at the group level, we are revisiting our medium-term expectations today, primarily to reflect the shift in the injectable margins. Let me pass it to Khalid just to step through those details.

Thank you, Riad. Our 2024 to 2027 group revenue CAGR of 6% to 8% is now expected to be at the lower end of the range, which is in line with current consensus. 2024 to 2027 group core EBIT CAGR is now expected to be 5% to 7%. The EBIT revision is largely reflective of our revised expectation on timing of going fully operational in Bedford as well as our updated assumptions on the injectables margin as already set out by Riad. This will be partially offset by an even better performance from Hikma Rx, which is being driven by the strong base portfolio, a growing pipeline and our CMO offering. The margin for Rx could go up to 20%. This change to our group core EBIT guidance reflects a low single-digit percentage downgrade to consensus group core EBIT for '26 and 2027.

Great. Thank you, Khalid. I want to finish with a reminder that we are maintaining our target of reaching $5 billion of group revenue in 2030. This ambition is supported by our future confidence in the injectable business and the 4 specific points that I had made relating to that. It also reflects our leading position in MENA with our world-class branded business and the outlook here is fantastic as we continue to take share, launch products, sign partnerships and ultimately deliver profitable growth.

And this also takes into account that our Rx business remains on a strong footing. Products across the base business continue to grow well with more complex products in our respiratory and nasal spray categories underpinning our performance. So that's the summary. Let's stop here and hand over to your questions.

[Operator Instructions]

Your first question comes from the line of Zain Ebrahim of JPMorgan.

My first question is just on the overall for 2026. It sounds like you said low single-digit core EBIT but the consensus is what you're thinking for the next two years. So are you expecting to see profitable growth in both '26 and in 2027 would be maybe the first question. And on the second question, just in terms of Rx and the increased confidence in Rx margins over the midterm, how much of that is being driven by the updated agreement with Jazz over the Xyrem royalties? And how much of that is being driven by the underlying Rx CMO?.

Yes. For 2026, if we look into like even all the segments, we've seen a strong growth even for the group, in general, we will see a strong growth in 2026. So all 3 businesses are growing. Even the Injectable business, we are lowering the margin but still going to show growth. As I mentioned, the generic Rx is going to show a growth where margins are going close to 20%, which is a very strong growth. And this will continue in 2027. In terms of our medium-term guidance, the shift and as I mentioned, it's a low single-digit downgrade to the consensus. And it's like a result of shifting execution of some of the plans from 1 year to another. So this is what caused like you have some operational costs in 1 year, but the associated revenues will come on the following year, which is 2028.

So what's driving the growth in Rx? So we have a strong portfolio. The base business, we have a solid product. We have the pipeline. We have the CMO business, which we are going to get as well -- grow the business in '26 and '27. We have services that we are now doing for our CMO partner. So there are different, I would say, elements for growth for the generic business. And now it's a very, I would say, healthy business, providing healthy margin to the group as whole.

Yes. I think just to add to this one, I think the strategy of the Rx that we had designed a couple of years ago is now we're seeing the result of that. So we -- as we have mentioned before, we have talked a lot about that, that what were the strengths of the Rx and how can we capitalize on it. And one of them was, can we use contract manufacturing. And in this case, and we had told the market that we had signed a meaningful contract manufacturing. This is coming to fruition in the very near future as we speak, actually.

Again, we wanted to strengthen our R&D, and we had mentioned that the spend on R&D in this division has increased significantly. And in fact, from '24 to '27, we expect to increase close to 70% and we're also looking at the base business, and getting more equipment, getting more capacity just to make sure that we are responding to the demand that we have in the base business. So every element of this business has worked out, right? Every element has worked out exactly as we designed it. And this is what we're doing with the rest of the company. Each division has its own strategy and it has own elements of what we need to do, including the injectables and the branded as well.

Your next question comes from the line of Charlie Haywood of Bank of America.

Thanks, Charlie Haywood, Bank of America. I have 2 on the injectable margins, please. So just in terms of the updated outlook for the 30% midterm injectable margins, could you help us understand, I guess, why now is the time to update the market on this outlook versus, I guess, sort of prior earlier commentary around mid-30s. I think it's not entirely clear what has changed within your midterm versus, let's say, 6 months ago when you gave the midterm outlook there?

And then the second one is the cadence of injectable margins from here to that 30%. Is it fair to think of around the 30% levels where we should think you will get to by 2027, and we're sort of straight line from 32%, 33% from here to that 30% in '27? Or how should we think about the cadence of that injectable margin development?

Yes. I think it's a good question. What happened in the last 6 months that would drive us to make that statement. I think several things, but the main thing about it is the Bedford facility. Bedford facility, we're counting on it. It was happening really at the border line in the medium term. So what was happening, the whole action was happening in '27. That's when the facility is going to start. That's when Tyzavan was going to be transferred to. We are going to be making a lot of products there. Contract manufacturing will be expanded into this facility. So there were many things happening in 2027 that we were counting on in the past.

We had been notified by the suppliers of the machinery that, that will not be possible. It would be a delay of 6 months. So that shifted into '28. So nothing really has changed in the plan. It's just a shift in the plan because the facility now is not going to be on in '27, which means all those benefits that we were counting on to happen in '27 will be shifting in '28. And this is why we are reiterating our 2030.

So we -- although there is some softness in the margins today, we still say 2030, we will be able to get to where we need to get. And that's because we believe in the '28 beyond that when we have everything online, our strategy is starting to pay off. Our spend on R&D is starting to pay off, all the stuff that we're doing now I think we will see a big acceleration there. Also, the other point is we really want to give the market the number that we are very, very, very confident that we can get. We want to make sure that we will do better than this number. But we want to give a number that we don't -- there's a lot of focus on this margins in the past years. The injectable margins has always been a big focus. And that's why we want to make sure that whatever number we are going to put against it, it has to be achieved, and we have to be confident that we achieve it and never come back and try to do better.

It's similar to what we have done with the Rx business in the past when there was some concern. I mean we set a floor of $100 million to $120 million of EBIT, and we continue executing and delivering and over deliver on what we promised the market. So the 30% is the floor, around 30% is the floor.

Going back to how the cadence is, I think we just need to follow what we are guiding. I think it's 30% is what we're guiding right now. Hopefully, we can do better. But I think this is where we want to be, and this is where we feel very comfortable of achieving. But of course, we will be really looking to do better. But for now, I think we want everybody to focus on the 30% which is, by the way, it is still very, very high margins for this business that compare to the industry standard. Sorry, go ahead.

Your next question comes from the line of Christian Glennie of Stifel.

Maybe just a follow-up there, specifically just a further clarification. Are you implying that for both margin cadence for both injectables and generics, Rx, is it 30% then for 2026 for injectables margin? Or is there a sort of 30% by '27 scenario? And does the Rx margin similarly step up to 20% in 2026? Or is there sort of more of a medium-term progression to 20%?

Yes. Actually, we are not giving guidance today on 2026. But I think we are happy to assume 30% margin for this business from now until 2026 on the medium term and a similar case for the generic business, but it will accelerate and hopefully, it will expand in the following years. But again, we are not giving guidance at this stage. But we are confident in achieving the 20% in '26 for the generic business close to -- sorry, close to 20% for the Rx business.

And then I guess in terms of R&D investment as it relates to injectables, just a bit more on that, what are some of these areas of investment and what's the sort of potential benefit of that in terms of margin?

When it comes to R&D, I don't think it is specific to the injectables. It's something that we had identified a while ago that we need to increase our spend in R&D in all divisions. So in all divisions, significantly in the Rx, for example, we have done, as I mentioned, if you compare it to what we're planning to do, it will be an increase of 70% in the medium term. So in the injectables, it will be around 50%. So this is a significant increase, but we believe that this increase is necessary. In fact, we believe that it's overdue.

I think we should have probably spent -- started spending money on R&D much more before that. But I think now we really believe that this is something that is needed for the business, is needed to continue the margins that we have, continue to the growth that we have. And it's not only the spend, it's also how you organize, how you are going to leverage the experience of others, how you are going to make sure that there is a program that is extremely rich in the company, and that's why we not only increased the spend, but also restructured the whole R&D. I think now R&D is one unit. We will benefit from all the experiences out there. The important part is, if you remember, the acquisition of Xellia added a very nice center in Zagreb with 80-plus people, scientists there that are very competent.

We want to build on that. So that's what prompted us to say, listen, let's just put the focus on R&D right now. Let's spend more money on R&D. Let's reorganize ourselves, let's get people that are competent and go after complex challenging products and not be satisfied with just going by the low-margin, simple products. And that's why the shift and the spend is there.

And maybe one quick final one on Tyzavan, just some expectations around obviously started to roll it out now, some expectations around that maybe for '26, both in terms of absolute revenue and/or the margin impact of Tyzavan specifically on the business?

Well, I can't give you exact numbers, but what I can tell you that Tyzavan is a very important product for many, many reasons. One, it is an important molecule to start with. This is something that hospitals depend on. There's probably over 40 tonnes of vancomycin that gets sold in major hospitals in one way or another, almost all of that gets converted from powder to liquid form before they're administered to patients. We are -- we have a product and is unique in the market. It's room temperature, that's stable for quite some time, 16 months. It's got all different strengths because vancomycin is administered to a ratio of body weight. So the ease of use of this product is fantastic. It is patented product that's very challenging to make and so forth. I can say a lot of things about this product.

So we're very excited about it. We are excited that we will be in a market where we can have the demand that we need. We already started with a similar product before which is vancomycin ready-to-use. This one is much more superior than that one. So we know the market well. We know how this market will play out. We hope the growth will be as steep as everybody is thinking, but we're very excited. This is a great product, and we're excited about it. And we're concentrating right now on a very healthy launch that will start as we speak today.

Your next question comes from the line of Victor Floch of BNP Paribas.

Victor Floch, BNP Paribas Exane. So maybe first question on the recent announcement from Hims & Hers to launch, they are planning to launch an oral testosterone next year. So I was wondering if you could discuss whether it might further increase the competitive landscape there? And my second question is the more a big picture question on the back of the recent discussion from the FDA to streamline the biosimilar development and basically have the development time and costs. I was just wondering, in that context, would you -- would you be able to comment on where biosimilars are going to fit in your strategic priorities. So now you are basically like working with partners, but could we expect that at some time you could move forward and become a bit more active in terms of development? Or is it like too far away for you?

Can you please repeat the first one? We got the second one, I believe you're talking about the biosimilar strategy, but what was your first question?

First one was on Hims & Hers plan to launch an oral testosterone next year in the U.S. And so I know that, that product in the U.S. has been quite under pressure lately. So I was wondering if whether like the new competitor might trigger like more competition in 2026 for you?

Let me start with the second question. I think from the biosimilar strategy, as you know, we have 2 biosimilars that have been approved in -- and the recent ones, I think. And we always knew that we will not be in the top 5 of those biosimilars when we launched. So our agreement with our partner considered the fact that we would have to have very competitive pricing in order for us to compete. And I think because we have looked forward for this and we kind of predicted this, we were doing well. I think we're launching right now. We have the demand that we need. Actually, we have asked for more units from our suppliers. So we -- I cannot tell you much about how this is going to pan out, but we know that we have the demand today, and we know that we have the right pricing for us to compete in. So there's not much to say about that. We are just -- we have just launched one and we're planning to launch the other one in the next few months.

About the ondansetron market, as you know, ondansetron is probably the largest -- one of the largest units when it comes to units in the U.S. So I think if I remember correctly, it's about 70 million units. The problem with this product is that it's a very, very low price. I think it's in the 20s, $0.25, $0.26, $0.27 right now. Competition is coming mainly from China, I think, Chinese companies through an agent, they're selling a lot in the U.S. We used to be -- we used to make a lot of this product, but we decided to make it more for capacity filler rather than the primary product in our portfolio. So it is an interesting product. It's something that we do well because we also make the raw material. So we're backward integrated. We're also forward integrated. We can make a lot of it easily in our integrated lines. But still, the pricing has gone down to a level where we only look at it as more of a capacity filler rather than a strategic product.

Next question comes from the line of Beatrice Fairbairn of Berenberg.

I had a few questions, if that's all right. So firstly, would you possibly be able to quantify how much of the injectable margins kind of guidance expectations was related to Bedford versus product and geographic mix as well as setting out what you're seeing kind of the MENA and European injectables market. And then secondly, could you just clarify the time line for bringing the other Xellia products in-house once the Bedford site is online and kind of what your expectations are there?

Do you want to take the first one, Khalid?

Yes. It's highlighted in Riad's note. It's part mainly the Bedford cost that are bringing the margins down, especially for 2027, as we said, it's shifting. But there are several reasons, increasing in R&D. We mentioned earlier this year that we have competition on some products like calcitonin and testosterone. The liraglutide, we're seeing more competition on it. But this is a part of the business. And as we said, we are setting the margin around 30% as a floor. So we are not breaking it down between MENA or the geographic mix. Both are growing. We are investing as well in these markets.

So if you look now, we have operation and plants in Morocco, in Algeria, and we are building one in Saudi Arabia. These as well are incurring some costs. So it's a geographic mix. It's bringing the margins down, but we are investing for the future. So it's all investment related. And we are very confident of this business that will continue to deliver higher than the industry standards margin.

Let me just add to this a couple of things. I think when it comes to the injectables, we had -- the injectables had always been very much dependent on manufacturing. Capacity is very, very important. Manufacturing complex injectables was very important. And historically, we had all invested in difficult to make products, and that sustained a very good growth for a long time. So when you are impacted with capacity, your plans are impacted severely. And in this case, this is exactly the situation in this case. We were depending on adding this capacity of better online because we had a lot of products that needed to be transferred to a new capacity.

We had -- especially when we're talking about a product like the vancomycin that we're talking about. So when this gets delayed, the whole shift gets delayed. But the cost continues. Your facilities, you need to hire the people, you need to get your quality systems going, you need to get your IT system. There's a lot you have to do to prepare for validating the facility and get it going. And all of that cost has to be prepared ahead of time. But when you have costs falling in 1 year and the benefit falling in another year, it shows a big difference. And this is our case here. We're going from 27%, which is our limit over the medium term to '28 and we're stopping on '27. So it shows that big gap there. But this really this big gap is that we are incurring a lot of cost without benefit in return. And we see this benefit very much in '28.

When we'll be having the Xellia products transferred? Again, Tyzavan is our most important product, and we are in the process of transferring that. It doesn't mean that will be ready for us. So of course, there's steps for it. So you transfer the methods, you transfer the manufacturing, you have to file to the FDA for approval. So all these steps we will take. We started with those steps, and we think that we should be able to transfer the most important product in '26. There are other products. There are smaller products, but we are all going to be working on the transfer in '26. In fact, we have about 40-plus batches of transfer products that will be made in the facility in the next, I would say, 10 months. So we are using that time to do the transfers, to do a lot of R&D while we are waiting for the rest of the equipment to come in and validate the facility and become commercialized.

A question comes from the line of Kane Slutzkin, of Deutsche Bank.

Just a quick clarification on the guidance. I mean you said you're not giving sort of guidance for '26. I'm just wondering the low single-digit cut you were sort of referring to, I guess, for '27, does that -- just to confirm, that includes you getting to sort of close to 20% in margins in Rx? That's the first one. And then just quickly on sort of post '27, I mean, I don't want to sort of look too long term, but you have sort of said you're still comfortable in your sort of long term.

I'm just wondering the mix -- in injectables, the mix story, the R&D story, I guess, that's here to stay, but the Bedford piece is kind of what you're calling out as the main driver. So assuming this is just pushing out the plan, I mean, do you see sort of long-term potential to get your margins sort of back up to where they sort of were? Or is it more a case of let's get the short- to medium-term guidance sort of on spot now and deal with that at a later date?

Well, we hope so. I think there is a -- we're doing a lot today to get us back to a healthy margin. But I think before we promise something that we can't get, we have to ensure something that we can sustain, and show some number that the market can depend on. And we -- our goal is to beat that number. Our goal is to accelerate this beyond that one. There is a lot that is happening in growth in MENA and in Europe. We like it. But again, it's taken away from those very, very high margins. But I think as we go on and grow the U.S. market as well and get into interesting products and get our R&D to start delivering, I think we will have very, very healthy -- hopefully, we can get to much higher than 30%.

But for now, I think we're going to stick to the 30%. We're going to promise that, and we're going to try to beat it every year. But there's no need for us to get to the 29%, 30%. We know that in 2030, we are going to say that $5 billion seems to be very achievable with this business. But exactly how and when and all of this, I think we'll leave it to when the time gets closer. Did I answer your question?

Yes. No, that's perfect. Just sort of a clarification on the sort of -- you're talking about sort of low single-digit cut. Does that include the sort of potential to get to 20% in Rx. I assume that does?

Yes, it does.

Perfect. And maybe just last one, is there anything to call out on the sort of competition you had for your 2 products in injectables? Anything that's sort of worsened or is it sort of just normal course of business, as you say?

No. I mean I think it was a big hit. It all happened. It was a perfect storm for us happening all in the same year, and this is why it was one of the reasons why we had to decrease our margins in August. But it's behind us now. We just have to manage it. This is the type of business headwinds come every now and then, and we'll have to deal with it. So it's behind us right now, and we're just dealing with it as we go..

The next questions if from the line of James Vane-Tempest of Jefferies.

Two, if I can, on injectables and I'll just come back for one on the generics business. So when we think about 2025, many people are concerned, at least thinking about the second half margin on injectables. I know you're not sort of giving sort of detailed numbers by quarter, but I just wondering if you could comment on the weighting of Q3 and Q4 and how dependent that is on the final quarter?

And then my second question is just on injectables margin. Raid, you gave sort of 4 points. I guess I'm curious, firstly, on R&D, sort of the step-up you're sort of highlighting on why that's different to what you outlined in detail at the Capital Markets Day so less than 6 months ago.

And also, I was actually wondering if there's a possible fifth reason which is potential pressure on the base business. You've mentioned previously China, some other kind of competitors. I was just wondering when we think about that longer-term margin, whether you're now assuming more aggressive competition in your base business, and then I'll come back for U.S. and generics.

Let me start with the last one. So competition is part of this business. You need to be aware of it, you need to deal with it, and you need to be ahead of it. So yes, we do have pressures. Yes, we do have price erosions. This comes and goes. But we have the strengths, too. We do have the muscles and the strengths. We manufacture very efficiently. We have large facilities. Our supply chain is simple. It is mainly made in the U.S.

So supply chain is much shorter. We can respond to the dynamics in the market at much better than any company 4,000 or 5,000 miles away from there. So we are in the market. We play in the market. We understand the market, and we try to predict what happens to the market. This is the name of the game. This is what you have to do to fend yourself against the competition, but the competition is not going to go away. And that's basically what happens with the competition. As far as -- your second question was about margins.

And in terms of the margins for 2025, if you look into it on a group level, it's relatively flat half to half. But as we said, injectables, it's going to be H2 weighted because timing of the CMO business, incremental benefits coming from new launches. So it's the same message that we had in the past. Branded, it's -- as we said, it will be H1 weighted, similar to 2024, but maybe not the same extent. And the same case for the Rx. So it's no change to our messaging on 2025.

The question was more, is it more Q4 weighted than Q3. Just to understand the bridge to essentially hit your guidance. Are you able to kind of comment in terms of whether the timing of deliveries is more Q4?

We have many launches that will come in Q4, which we announced like today, you saw we announced a biosimilar, Tyzavan. We are preparing for the launch, it will come. So this will contribute as well to the profitability. The business has been like month-by-month accelerating in top line growth, whether in -- across the 3 regions, whether U.S., MENA and Europe. So we are seeing increased level of sales. So some launches will come as well like in this month, November. So we are executing, and this is why we looked into every single product, and we are confident that on delivering on what we promised the market.

Yes. I think -- we talk about Tyzavan enough, but we are launching it in the third -- the fourth quarter. So you would imagine, this quarter would be stronger than other quarters since you add an interesting product to it. We also are adding some products that we were out of for a while that we had some -- we are waiting for some regulatory answer, and we are relaunching it, like lorazepam. So it is a progression. As you add more product to your portfolio, of course, you will get stronger. So there's always all -- many -- a lot of it is happening in the fourth quarter.

And then my follow-up question on the U.S. Rx business, again, a clarification question. Earlier on the call, you mentioned this segment margins will be getting closer to 20% in 2026, and this would continue into 2027. So I was just sort of wondering whether this is entirely driven by the new royalty payable to Jazz. And I guess if you're sort of saying it should probably continue into 2027. I imagine this assumes that the sodium oxybate business is relatively stable given the options you have.

I don't think that this is the biggest contributor. I think there are a lot of things that contribute to the growth of this business. I think the contract manufacturing business will be going well at that time. Our base business, we have added some lines. We had increased our supply. There's a lot of demand on some of the liquid products that we have. Advair is doing very well. We have few small products that we are launching. I mean, I think there's a lot of good factors that contribute to that growth. Of course, also Jazz and the agreement and the sodium oxybate is a contributor. But I wouldn't think that this is meaningful.

And just add to what Riad just mentioned, even 2027, we are conservative on sodium oxybate. So as mentioned by Riad, it's many factors driving this. This is now becoming a very solid business in all aspects.

It's got the right foundation right now. I think it's got the right foundation, it's got the right product and the future is very, very bright. We are developing very interesting product. We're focusing on inhalation respiratory. Interesting how to make products. So there's a lot in the pipeline as well. So beyond the medium term also, we see a very healthy business.

Your next question comes from the line of Sidhartha Modi of Barclays. Your line is now open.

Let's move on to the next question. Our next question comes from the line of Sebastien Jantet of Panmure Liberum.

Three questions, if I may, and apologies if some of these have been answered. I've had a few problems with my line dropping on and off. So just the first one is just around -- if you could just comment on the background for generic pricing and whether you've seen any signs of that kind of improving or whether we're in the normal kind of a price cut cycle there?

Second question is just around kind of your U.S. capacity and obviously, Trump's pushing to onshore a lot of manufacturing. I'm wondering whether you've seen an increase in inquiries around CMO contracts and whether you're planning to lean into those. And the third one is just around the kind of balance sheet. And obviously, shares are off today. I'm wondering whether you're considering doing a buyback to support the shares at this price.

Okay. Maybe we can start backwards. How about we start with the buyback? Khalid, you need to say something about it.

Yes, we don't do buyback because the share price is down. Of course, we -- the Board would like to invest in the business, and we still see potential to invest in the business. Now it's something that we would consider on an annual basis. But if we see that it's the right time to do a buyback, of course, the Board will consider this. Today, there's nothing on the table that we do a share buyback. But if the Board changed the outlook and we see that it's a good investment for us and nothing available for to do M&A, then they might consider this. So just to answer for you today, we are not announcing any share buyback.

And your second question is about U.S. capacity and U.S. demand and are we getting CMO. Yes, we have -- a lot of people are knocking on our door for CMO, not only for the U.S. also for our European facilities. We do have a good track record for CMO. We have good quality record. Our facilities are very automated. We're investing a lot in new equipment, always state of-the-art. So we kind of the people that we work with in CMO are very impressed and very happy with us. So we get a lot of questions if we can expand our CMO. But today, we can't because our capacity is really at a limit where we can't take any more clients. And this is why we're looking so much forward for putting Cleveland online because we expect that Cleveland will take a lot of our capacity into CMO.

We are expanding our manufacturing in the U.S. as we had announced. We will be spending a lot of money expanding our existing facilities and of course, building out the Cleveland facility. It's a big investment. It's not only Cleveland though, in Cherry Hill, we're adding more lines and also as well in Cherry Hill -- in Columbus, significant investment is going to be put there as we speak today. We're building new buildings. We're adding more equipment, both for our core business and for our new contract manufacturing client.

And also with Columbus having that capacity, we also attract small CMOs. We're taking on small opportunities with small CMO whenever we can. So everything -- I think everything is getting into -- getting together into the strategy of the Rx business in terms of their facility, their manufacturing and so forth. Generic pricing, in general, it's still as it was before, it's still not stable. It's still up and down really depending on -- are you talking about -- both I think the generic and the injectables they're kind of like a midpoint -- mid- to high erosion that we see. Injectables a little bit less, I would say, low to mid, but they haven't changed for a couple of years. This is where they are today, and we haven't seen a significant change.

[Operator Instructions] Your next question comes from the line of Sidhartha Modi of Barclays.

It's a very bad line. You try asking the question, Sid. If not, you can email it through me.

Moving on our next question comes from the line of Beatrice Fairbaim of Berenberg.

Thank you for taking my follow-up question. I just wanted to ask on the R&D structure change and how that kind of holistically impact the pipeline and product launches and kind of how do you expect this to evolve in terms of you going forward?

Thank you for the question. I think it's a great question because it's significant. It's a significant change. We haven't -- having all the divisions join together with R&D, we're benefiting a lot. We're benefiting a lot in terms of redundancies. Every division had its own regulatory, every division had its own labeling team. Every division had its own product management. We had redundancies in those. And I think putting them all under one roof, not only we save the redundancies, but also we reinvest that into the formulation, into the method development, into where it really counts. So that's the main structure.

We also benefit from the expertise of the team. There are some great scientists in one division that we can use it in other divisions. So -- but what motivated us the most to do something like this is 2 things. One, the fact that we really need to do something about R&D. R&D hasn't been delivering what we want to deliver if we want to continue the growth. So 2 things we have to do, one, to spend more money on R&D; and two, is structure ourselves that the money that we spend will be worthwhile and will come back with a lot of benefits. So structuring was number one and number two was spending. So this is what we're doing both things.

And we're lucky that we have Hafrun who has great experience in R&D and structuring R&D and leading global teams and leading the global team becomes very, very complex. She has great experience in this. She had to help putting that structure together, and we're very happy to have her help us do all of this. And maybe just to add, the Croatian facility that has been added to our network also played a critical role. Now we have a lot more than we had before. We have a lot of pipeline products that were really half finished that we have to spend money to get them finished. We have to organize ourselves to make sure they're transferred into the right facility. All that motivated us to say, listen, let's sit down and redraw it the way it's supposed to be, knowing what we have in resources and knowing how much money we would like to spend. So that's exactly what we did.

Your next question comes from the line of Christian Glennie of Stifel.

I just wanted to follow up on the Rx and the margin improvement to 20% next year. Just to understand because on the one hand, you're saying no real significant changes in terms of Jazz and Xyrem royalties, the new -- the large new sort of CMO contract. I think the benefit of that doesn't really follow. That's more sort of a 2027 story in terms of that being a meaningful contribution. So I'm still a little bit struggling on the margin improvement and expansion within Rx for the next year on what the key drivers are?

Well, I think as we said before, there are many, although the 2027 will be very meaningful for contract manufacturing, but that starts in '26 and it gets stronger in '27. So it's not only in '27, it's starting. So it does contribute to the revenues. As you know, there's preparation, the services that you need to do, there are some preparations of batches that you need to do, the stability that you need to do. So there are a lot of services that needs to be done.

The contract manufacturing itself, I think we are anticipating that will be in '27, but the preparation for that, which is significant, will be in '26. So that's one benefit that we're going to get. But I think we should underline that the base business is doing well, and this is important. We've seen good demand on our existing product. We're expanding some of the lines that we have where we added new lines, liquid lines. We will be adding another Advair line. So I think expanding in our capacity also is helping in this business. And of course, we do have products that we are going to be launching. They may be small, but collectively, they will be also contributing significantly to that. So as I said, it's not one that is working well. It's all of them are working together and that collectively they're contributing well to the business.

Maybe then quickly on the second half on the injectables as well on the margin, just to clarify that there isn't some -- maybe some OpEx restructuring saving here to help you deliver that 34% or so in the second half is implied by retaining your full year guidance?

No. I think the main important part is that we've always said that contract manufacturing, which is really the biggest margins that we have of was coming in fourth quarter, and that didn't change and that did deliver. Usually, contract manufacturing is the most predictable part of your business. You know ahead of time when you're going to make it because you promise your customer, your customer gives you ahead of time, the forecast and you manufacture accordingly.

So it was very predictable that we will be doing contract manufacturing later on. And as I said before, there were some products that we were out of in the market that we are relaunching in the fourth quarter and also new products like Tyzavan that we launched already, and we believe that this is going to continue picking up until the end of the year. So again, not one thing that we're contributing to, but it wasn't any restructuring or any significant thing like this. It's more had to do with the business.

Your next question comes from the line of Miles Dixon of Peel Hunt.

Forgive me if I missed it, but can I just ask on the specifics of R&D. You've talked about a 20% step-up in R&D spend in FY '25. Are we thinking about a similar kind of step-up into '26? And what's the internal expectations around when that additional spend might start delivering for the business?

Yes. R&D, I mentioned that before, is significantly increasing year-on-year. We restructured for this increase. We are hiring for this increase. So that has been planned. The portfolio is being picked and some of the projects that we are working on today, we are in the midst of execution. So there's not much guesses there. We have a plan. We have the leaders identified. We have the products in the portfolio identified. When will this start paying off? Some later than others and some earlier than others. So it really depends. There are some projects that are towards completion. There are some projects that are -- that needs a lot more time for them to complete.

But we will be seeing significant change, I think, '28 on. We talked about epinephrine, for example, in the Rx, we think that's probably around the right time when it comes in. That's a big product that required a lot of spending, a lot of R&D, a lot of technical knowledge as well as a lot of studies. And then there are a few other products that are in this category. So we are also -- we have also some products that we -- some of the pipeline R&D products that were in Zagreb when we acquired Zagreb that needs to be completed. So there are many of those products in different phases. But I think significantly, usually R&D takes 3 to 5 years when you see the results. So this is why we're saying '28 on, you should be able to see a lot of the effort that we're putting together coming to fruition.

Please note that Barclays has sent in their e-mail regarding their question. I'd now like to hand the call back to the Investor Relations for final remarks.

Just for the Barclays question from Sidhartha, 2 very short questions, Riad. Just firstly on biosimilar strategy and what the timeline is for our launches on denosumab and ustekinumab and any update on strategy there? And then on the Columbus CMO project, if there's any update on the branded product there, which we know is in Phase III. Do we have any updates there?

For the biosimilars, we have talked about the biosimilars. We are starting to launch the biosimilars. We launched one and I believe the second one will be launched in January. There is not very, very high expectations that those will be a big product. They will be meaningful. They will contribute to the growth of the business. But again, we are #8, #7. So it's not that we are going to grab and take a big market share. But the market is big.

We're coming in and competing on price. We have a good base for the price. We have good transfer cost from our partner. And we already have orders and we already are launching and selling products. In fact, we had asked our partners to increase what we had anticipated will be before. So we think it's going to be better than we expected. But again, it's not those big blockbuster products. It's just a good decent products, that's what they are. On the -- what's the other question? On the CMO?

Yes, if there's any comment at all around the CMO projects and on the products itself, if there's any.

I'm sorry, we can't talk much about. We are limited, but what we can say about the CMO, with just say that it's meaningful. We say that it's going well. A lot of the work has been really put into it. And we hope that this is going to be as we expected a very, very good contributor to this business.

There are no further questions on the conference line. I will now hand over to Riad for final remarks.

Well, thank you very much for joining us for this call. We want to reiterate 2 things. I think the first thing is we want to reiterate our -- that this business is a good business. We have done a lot to continue the growth of this business. In fact, a couple of years ago, we looked at the business and we looked at all the parts of that business, and we put a strategy for each of those parts. We looked at Rx. And as you remember, a lot of you have followed us before, Rx was extremely weak. We didn't know what the strategy would be with it. But since then, things have changed dramatically. This is a strong business. The growth is very bright. Future is very bright. The growth is very apparent. So we put the strategy together and we executed.

The same thing happened with the branded. We put a strategy together. We reshuffled the leadership. We put a lot of emphasis on BD, and you see the results they're delivering. The growth is very, very healthy. Injectables is the same. We did put a strategy together and that strategy was based on expanding our very much needed capacity, getting into interesting product, put more money in R&D, try to get some pipelines through both our organic R&D and through BD. And that also is in the works. So there's a lot that's been happening exactly with that. New facilities have been built in Algeria, in Morocco, Italy has expanded, Portugal has expanded. Cherry Hill new lines are coming in. And of course, the Cleveland facility with the new technology will be online very soon.

So we are in the midst of executing the injectable strategy. We will see the benefit of that very apparent in '28 on. During that time, we will be running a very healthy business at around 30% of margins. And I think we are going to be preparing for steep growth after that. So good business, and we just want to make everybody trust the numbers that we give out and make sure that we have looked at those numbers, and we are very confident that those numbers are achievable. And with that, thank you very much, and hope to see you soon.