Welcome to the Second Quarter 2023 Earnings Call for Alvotech. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to introduce and hand the conference over to Mr. Benedikt Stefansson, Senior Director of Investor Relations and Global Communications at Alvotech. Please proceed.

Thank you. Good morning to our U.S. audience and good afternoon to our listeners in Iceland, Europe, and Asia. Yesterday evening, the company issued a press release that can be found in the News section of our investor portal investors.alvotech.com. The release outlines key highlights related to our second quarter results. Additionally, presentation slides that cover our call today have been posted on our website in the Events section of investors.alvotech.com. We will be referring to these slides during our presentation today. Our presentation materials and some of the statements that we make today may include forward-looking statements. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission and the NASDAQ Iceland Stock Exchange. These risks and uncertainties are inherently subject to risks, variability, and contingencies, many of which are beyond Alvotech's control and could cause actual results to differ materially from forward-looking statements that are made. With me on today's call are Robert Wessman, Chairman and CEO of Alvotech; Anil Okay, Chief Commercial Officer; Joel Morales, Chief Financial Officer; and Ming Li, Chief Strategy Officer. With that, I would like to turn the call over to Robert Wessman, Founder, Chairman and CEO of Alvotech. Robert?

Thank you, Benedikt. Thank you all for joining us here today. Allow me to kick-off today’s discussion by sharing some pivotal updates since our last public communication. To begin with, we have resubmitted an interchangeable BLA for our proposed biosimilar to HUMIRA, also known as AVT02. As a reminder, we have developed a high concentration formulation of adalimumab, which is the predominant form on the market today, and we have met all requirements to secure interchangeability. FDA teams are reviewing our application for both biosimilarity and interchangeability, subject to a positive reinspection of our facility in Reykjavik, Iceland. We aim to complete a satisfactory inspection during the review period for the resubmitted application and expect AVT02 to be a material contributor in 2024 if given final approval. Over the course of the past 18 months, Alvotech has undergone significant changes as we transition from a development stage company to a full-scale commercial operation. We have made and continue to make significant investments in our manufacturing and quality processes and have taken the feedback received from FDA inspections to focus these investments. We are confident that the changes that we have made at our site will put the company in the best position for our satisfactory reinspection. Our team has been supported by qualified expert consultants on site, and we have also been working closely with our partner in the U.S., Teva Pharmaceuticals, to ensure that we are putting the company in the best position to succeed. While that upcoming inspection is of critical importance to us, it's equally crucial that we maintain a continuous improvement mindset regarding quality and compliance. We will be able to demonstrate that culture during the next inspection as well as for future inspections. Next, I would like to highlight the recent business development progress we have made at the company. In late May of this year, we signed a new partnership with Advanz, which includes five biosimilar candidates. The transaction includes two previously identified proposed biosimilars, as well as three newly disclosed early-stage candidates. More recently, in late July, we expanded our collaboration with Teva, our U.S. commercial partner, to include two new biosimilar candidates as well as line extensions for two proposed biosimilars that were part of our initial agreement. Both transactions were executed after substantial due diligence on Alvotech's business and demonstrate the confidence that others have in the future potential of Alvotech. We continue to maintain an active pipeline of business development opportunities while completing the licensing of our existing pipeline and adding further opportunities to our portfolio. Additionally, in June of this year, we announced a settlement agreement between Alvotech and Johnson & Johnson concerning AVT04, our proposed biosimilar to Stelara, a leading immunology treatment globally. This agreement grants Alvotech a license and permits entry in the U.S. no later than February 21, 2025. With this settlement now in place, we have IP certainty for our second potential offering in the U.S. market. AVT04 is also filed in multiple markets outside the U.S., including Canada, Japan, and Europe, and we continue to seek the earliest possible entry dates in each country where we expect approval. Finally, we recently announced an additional capital raise in Alvotech, which allows us to continue investing in our broad pipeline of biosimilar candidates. Teva, our U.S. commercial partner, Aztiq, the leading shareholder in Alvotech, along with several other new and existing investors subscribed to $140 million of convertible bonds on the same terms as our last issuance in the fourth quarter of 2022. This transaction underscores the company's capability to access the capital markets and highlights the backing from both long-standing and new stakeholders that the company enjoys. As you may recall, last December, trading in Alvotech stock in Iceland moved from the First North growth market to NASDAQ, Iceland's main market. We noted at the time that this might lead to inclusion in both domestic and international stock market indexes. In February this year, MSCI announced the addition of Alvotech stock to the MSCI frontier market index. In June, Alvotech's stock was added to the domestic index here in Iceland, which includes the top 10 shares ranked by trading volume on the NASDAQ Iceland main market. On August 18, it was announced that Alvotech stock is being considered for potential inclusion in several of the FTSE Global Equity Emerging Europe Index, including the all-world large cap and total cap indexes. The proposed inclusion may be subject to revision until the close of business tomorrow. The final change will be known by the end of September 4, and the FTSE index changes will then become effective on Monday, September 18. Finally, we look forward to providing further updates as we progress through the year. With this, I would like to turn the call over to Anil Okay, our Chief Commercial Officer, to provide further updates on the business. So over to you, Anil.

Thank you, Robert. I would like to start with a business development update. Firstly, since our last public call in May, we have expanded our partnership with Advanz Pharma. The enhanced partnership adds five additional proposed biosimilars specifically targeted for European markets. These include the biosimilar candidates to SIMPONI and Entyvio, as well as three early-stage undisclosed biosimilars. This brings our total pipeline products to 11. The transaction brought an upfront payment of approximately $61 million, as well as additional potential milestone-based payments of over $287 million. The in-market revenue share is similar to previous deals that we have executed across other markets, which is 40% of in-market sales to Alvotech. The transaction was executed after significant due diligence by our partner, which demonstrates the strength of our programs and the company's overall capabilities as a biosimilar developer and manufacturer. Furthermore, it highlights our ability to leverage our platform and monetize assets even in the early stages of development, which we view as a key strength in a business-to-business model. Lastly, our business development pipeline remains active. While we have successfully licensed many of our products and territories, we are also in the process of seeking a commercial partner for AVT03, a proposed biosimilar to Prolia and Xgeva, alongside AVT03, a biosimilar candidate to KEYTRUDA. Both proposed biosimilars are in the oncology space, where we intend to expand in the future. We hope to provide updates as our business development progress continues. Turning to the next slide, we have also provided a summary of the recent expansion in our partnership with Teva for the U.S. market. Teva continues to be steadfastly committed to both the biosimilar market and its partnership with Alvotech. The recent licensing deal and investment in Alvotech serve to affirm Teva's commitment to both firms. The expanded partnership includes two new biosimilar candidates, which are both exclusive arrangements for the U.S. market. Alvotech may receive up to approximately $160 million in additional potential milestone payments from Teva, the majority of which will be due at the time of achieving significant sales targets, in addition to the customer revenue share of approximately 40%. The agreement also includes two line extensions for previously partnered biosimilars exclusive to the U.S. market. Additionally, there has been and will be increased involvement from Teva in supporting FDA readiness activities at our site in Iceland. We welcome this type of participation, and it only strengthens the company's results and confidence in meeting the criteria to support the approval of AVT02 in the U.S. market. Keep in mind that the only outstanding item prior to the approval of AVT02 is a satisfactory reinspection of the facility. Last but not least, outside of the licensing agreements, Teva subscribed to a $40 million investment into Alvotech in the form of subordinated convertible bonds. The expanded commercial partnership, collaboration around inspection readiness, and the direct investment made by Teva after significant due diligence demonstrates some of the strengths of having a B2B business model, with numerous stakeholders that have a vested interest in our success. Moving on, I would like to provide some more specific product updates, starting with AVT02 in the U.S. As Robert noted, we have submitted our interchangeable BLA for our biosimilar to HUMIRA. We expect to receive a new BsUFA date and will update the market once that has taken place. This is an important step as it shows the agency that we are prepared to host a reinspection which is required to support approval of AVT02. We anticipate the potential launch of HUMIRA in the U.S. to be a material event for the company in 2024. We believe that a product profile including interchangeability with a high concentration form of adalimumab, combined with the dedicated biosimilar manufacturing facility and experienced commercial partner are factors that will not only allow us to access formularies but also let us convert the market more efficiently. Together with our partners, we are exploring various go-to-market strategies and remain flexible in our approach. The recent news from CVS demonstrates that the story of retail biosimilars in the U.S. for HUMIRA, for that matter, is still developing. There is a long-term need for biosimilars in the U.S., and we believe that adalimumab represents a long-term opportunity for the company. Regarding competition, there are currently only three approved high concentration adalimumab biosimilars in the U.S. market today, none of which have an interchangeability designation to the high concentration form. There are three companies that have registered trials using the high-concentration form and have publicly stated that they are seeking high concentration interchangeability for the U.S. market. We maintain that this differentiation is a significant market advantage and hope that we may gain approval in advance of others as we prepare for the long-term adalimumab market in the U.S. Finally, we are commercially launched in 19 markets as of today, which includes two additional markets since our last quarterly update. We intend to launch in two additional markets before year-end. Next, I would like to cover AVT04, our proposed biosimilar to Stelara, another leading global immunology treatment. We are currently on file in seven markets with our approval pending in major markets such as the U.S., EU, Japan, and Canada. We intend to file globally and in some cases, need to wait for approvals or launches before we make submissions in some of the smaller markets. We view those opportunities as substantial. The global market size for the product based on the last four quarters ending June 30, 2023, exceeds $10 billion. Additionally, in June of this year, we announced that we reached a settlement agreement with Johnson & Johnson, granting us the ability, subject to regulatory approval, to launch AVT04 in the U.S. market no later than February 21, 2025. In markets outside the U.S., we continue to seek the earliest possible entry dates and actively work with our partners in each market on the best go-to-market strategies. Please note that as a B2B company, we realize revenues in advance of a commercial launch as we supply our partners in any given market. To wrap up on AVT04, based on public information, there are only three companies besides Alvotech that have filed their biosimilar versions for Stelara. We maintain the view that the significant absence of many firms involved in the development and commercialization of prior biosimilars, as seen in the HUMIRA case, creates a favorable market environment for those who can successfully develop a Stelara biosimilar and couple it with a robust commercial strategy. In closing, before we move to the financials, I would like to briefly touch on the rest of our portfolio. Currently, we have a pipeline of 11 biosimilars. In our last call, we unveiled the specific reference products for AVT16 and AVT23, bringing our disclosed number to eight. We are currently advancing three pipeline candidates in patient studies: AVT03, a biosimilar candidate to Prolia and XGEVA; AVT06, a proposed biosimilar to EYLEA; and AVT05, a proposed biosimilar to SIMPONI and SIMPONI ARIA. For AVT05, we note that only one other company has a publicly active development program in clinical studies for the target biology. As a reminder, AVT02, AVT04, and AVT05 are all leading immunology treatments. We believe Alvotech is one of very few companies capable of offering all three of these immunology treatments concurrently. We view the inclusion of all three immunology treatments in our portfolio as a strategic advantage. With respect to AVT16, we are successfully scaling our phase. We have seen limited announcements so far on advanced programs from other companies, and we view this as an exciting long-term opportunity for Alvotech. Overall, we believe that the global multi-product approach that utilizes our platform is the best strategy to be successful in the long term for biosimilars. As we transition from an R&D-only company to a commercial one, we are committed to not losing sight of our pipeline and portfolio focus. We do expect to add further products to our portfolio in the future and have several early development candidates that are being scrutinized at any given time. With that, I would like to turn the presentation over to Joel Morales, our Chief Financial Officer. Thank you.

Thanks, Anil. I'll now provide some brief financial highlights for the period ending June 30, 2023. On our last earnings call in May, we reported that we were exploring financing options to raise additional capital due to the uncertainty stemming from the timing of the FDA approval for our BLAs for AVT02. Since then, and as Robert mentioned earlier, we have recently completed a private placement of subordinated convertible bonds for $140 million with a strong participation from a diverse group of Icelandic institutional investors as well as Teva, which subscribed to a $40 million investment and another investor for $30 million. In addition, during the quarter, we collected over $60 million in cash, primarily from the signing of the licensing deal with Advanz. We ended the first half with $60.5 million of cash on hand. Giving effect to the private placement we recently finalized, our pro forma cash balance as of June 30 is approximately $180 million, excluding $25 million of restricted cash. In terms of our operating performance, the company recorded $22.7 million in product revenue for the first six months of 2023 versus $3.9 million during the same period in the prior year. This sharp increase is driven by the timing of launches that started in the second quarter of 2022. Since then, our partners have continued to expand their share in existing markets, primarily in Europe and Canada, and we have also launched into additional markets around the rest of the world. Milestone revenues are negative for the period due to the net impact of licensing arrangements closed during the second quarter. We are actively pursuing additional licensing opportunities for our pipeline assets, as indicated by our most recent deal with Teva, and continue to advance programs in our pipeline, which we anticipate will trigger additional revenue recognition and cash collections in the future. As I've mentioned on previous calls, we expect to recognize most of our milestone and licensing revenue for this year in the second half of 2023. Keep in mind that the timing of when we recognize revenue differs from cash collections as a portion of cash collection is attributed to R&D development milestones and is recognized over time. Another point worth noting is that the cost of product revenue for the first half is disproportionate relative to product revenue due to the timing of new launches and elevated production-related charges, resulting in higher costs than the revenues recognized for the period. We expect this to normalize as we increase scale of manufacturing and expand our launches. We anticipate that this increase in volume will favorably impact costs, particularly as we improve the absorption of our fixed costs. In terms of liquidity, based on our current operating plans and the latest round of financing, we believe we have adequate cash runway to continue investing in our operations and pipeline. As noted earlier, we are waiting for an FDA response to our recently resubmitted AVT02 BLA, which will determine the timelines going forward. Marketing applications for AVT04 are also currently under review in major markets, including by the EMA, Health Canada, and Japan, which could reach regulatory conclusions in the second half of this year, potentially allowing us to realize revenue for AVT04 in certain markets before the end of the year. Additionally, approvals in various markets may lead to milestone payments and revenue recognition with certain partners. The exact timing and results of these events are currently subject to uncertainty. Also, as noted earlier in the presentation by Anil, we have an active business development pipeline that has more recently been focused on partnering with our oncology and oncology-related assets. The potential closing of business development transactions in 2023 is subject to timing uncertainty as well. Uncertainty about the timing and outcome of each of these positive events leads us to the conclusion that providing guidance based on the information available at this time would not be particularly constructive. As our business matures with more regulatory certainty in the U.S. and the base of business stabilizes with less uncertainty, it will become easier to incorporate ranges of outcomes on our numerous opportunities and become more specific and accurate with guidance. We will continue to determine the right stage to provide guidance going forward. On a final note, we closed the period with 266 million shares outstanding, including unvested earn-out shares. With that, I'd like to turn the call back over to the operator for Q&A.

Thank you, Joel. With that, we conclude our formal remarks. We are now open for questions from the audience. And the questions come from the line of Carl Byrnes from Northland Capital Markets. Please ask your question.

Thanks so much for the question and congratulations on your progress. First off, can you reconcile the second quarter '23 net product revenue with that in the first quarter of '23, given that it looks like it's sequentially down?

Yeah, this is Robert Wessman. I want to take this opportunity to explain the revenue changes from the first quarter to the second quarter this year. In the first half, we focused on the FDA inspection and addressing their observations, which took some key resources away from our daily operations. More importantly, we have been producing a significant amount of finished goods, which we plan to ship in the third and fourth quarters of this year. Part of this inventory was used to validate our increased production capacity and to support our expanding regulatory approval in Europe. Therefore, during the second quarter, we allocated a substantial portion of our capacity to build up inventory that will be released later this year.

Great. Thank you. And then just one follow-up. Is it possible to provide any thoughts on anticipated filing timelines for 03, 05, 06 in '23? Thanks.

Yeah. We haven't provided updates for future filing dates, but the next one you could assume would be 06. It's the one that's the most advanced.

We are now going to proceed with our next question. The questions come from Thibault Boutherin from Morgan Stanley. Please ask your question.

Hello. Thank you for taking my questions. Just a couple on the U.S. market for HUMIRA and biosimilars. Clearly, ATP has been holding more volume share in this market than anyone expected and has had, from their perspective, quite a successful contracting strategy. So I just wanted to have an update on your view on when this market will open to biosimilars in terms of timing. So is it kind of H1 next year? Is it around the middle of next year? And is there a catalyst or something specific that could force PBMs to become more biosimilar-friendly, and see shares of biosimilars in volume increase over time? So that's my first question. The second one, you mentioned the innovative commercial models that we are seeing emerging in the U.S. biosimilar market. We've seen Sandoz forming a joint venture with CVS, which seems to focus on reducing the price discount to the list price. Do you expect this to be restricted to HUMIRA because of the competitive situation or could we see such deals becoming more prevalent in the U.S. biosimilar market? And is it impacting in any way how you think about your own commercial strategy in partnership with Teva for the U.S. market? Thank you.

Thank you, Thibaut. Anil here. Let me address your questions. You're correct that the conversion for biosimilars has been fairly limited. We believe that as long as ATP remains the primary option on the formulary, non-interchangeable products, especially the low concentration forms, will struggle to capture significant market share, even with their formulary positions. We have consistently communicated this perspective, so we're not surprised by the current situation. We maintain that a high concentration interchangeable adalimumab would be more effective in accessing the market, regardless of the current formulary status. Thus, we see adalimumab as a significant opportunity for Alvotech in 2024. Concerning your second question, I want to reiterate that the story of HUMIRA biosimilars is still unfolding. We believe the market will eventually support biosimilars, and within that context, differentiation will be crucial. There is potential for other types of arrangements, but I prefer not to elaborate on that right now. I can confirm that we have a strong commercial partner in the U.S. market with Teva, and we are exploring various strategies, although I won't disclose them at this moment. We remain engaged with the market and are focused on securing approval, which will come before we test our strategies. Thank you.

Thank you.

We are now proceeding with our next question. The questions come from Niall Alexander from Deutsche Bank.

Niall Alexander from Deutsche Bank. Two questions, please. Just wanted to confirm when we would receive FY guidance. I'm guessing we may not receive it this year, but would we receive guidance for FY '24 or can you give any guidance whatsoever this year? That's the first question. Secondly, it would be helpful to get your thoughts on potential pricing of AVT02 subject to approval in the U.S. Thank you.

Hi. This is Joel. I can answer the first question. I think as highlighted in my opening remarks, we have many positive items in our outlook which are still bound by uncertainty in terms of timing; this drives our decision not to provide guidance at this time. However, regarding the timing of when we expect to provide guidance, as you've heard from me in the past, the timing of U.S. approval, in particular, is a large driver. It is a material driver of both top line and bottom line for our company. I cannot tell you right now exactly when we'll be in the best position to provide guidance, but I think you can expect it to be largely connected to the timing of approval and commercial contracting, so that I can be more precise.

I can take the second question. In terms of pricing, of course, we cannot provide guidance. As I said before, we have the best commercial partner in the U.S. market. Teva has been very successful with both biosimilars and specialty products in the U.S. market. They have a clear pricing strategy regarding AVT02. Furthermore, we maintain good engagements with the players regarding pricing and different models. So we have good visibility regarding that but would prefer not to give guidance at this stage.

Thank you.

We are now going to proceed with our next question. The questions come from Andrew Baum from Citi. Please ask your question.

Thank you. Two questions. Number one, should I assume that CVS will now only be contracting with Sandoz for biosimilar adalimumab following the joint venture? And then secondly, obviously, there are two other major PBMs that work with CVS, covering 8% of covered lives in the U.S. To my mind, neither of those has yet to sign a similar deal. Are you in active discussions with either of them in a similar structure as Sandoz has entered? Thank you.

Thank you for the question. I would like to say, as iterated before, the HUMIRA market in the U.S. is still developing. We have, of course, through Teva multiple interactions going on with all the players you named and some of them you didn't name. So we clearly understand their expectations and we are flexible in our approach. However, we believe that AVT02 will still be a substantial opportunity for both Alvotech and us. Additionally, I would like to remind you that, as of today, Alvotech is the only candidate expected to bring the best product profile to the U.S. market with our interchangeability designation, our device, and all the other features that we have added to our products, which we believe will be appreciated by payers in the U.S. market.

We have no further questions at this time. I will now hand back to Mr. Benedikt Stefansson for closing remarks.

Thank you. On behalf of the Alvotech team, I would like to thank all the participants in our webcast today and those who participated in the Q&A. We wish you a good rest of the day and look forward to speaking to you all again. Thank you.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect your lines. Thank you.