Alvotech Q1 FY2024 Earnings Call

Good day, and thank you for standing by. Welcome to the Alvotech Q1 2024 Earnings Conference Call. At this time all participants are in a 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 hand the conference over to your speaker today, Benedikt Stefansson. Please go ahead.

Thank you, and good morning or afternoon to everyone joining this call today. 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 first quarter results. Additionally, we have posted with the call and information for today's event, a slide presentation, which we will be referring to during today's call. Please go to the Events section of our Investors site to download the slide deck, if you haven't already done so. Our presentation materials and some of our 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 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, and thank you all for being here today. In our last earnings call, we outlined several ambitious objectives for this year. I will go over these goals briefly and discuss our progress. Our team will provide additional insights during today's presentation, which we believe will illustrate the significant advancements we have made so far. Our first initiative focuses on commercializing our biosimilar to Humira in the U.S. market. Our product is interchangeable with the reference product, and we were the first to achieve this interchangeability in a high concentration form of Humira, which holds a significant share of the U.S. market. We have exclusivity for our approved strengths and expect to maintain that exclusivity until May of next year. Since our last update, there has been substantial progress. Recently, we shared details on our agreement with Quallent, the private label unit of Cigna Group in the U.S., where Evernorth, a fully owned subsidiary of Cigna, announced that our product would be available at zero out-of-pocket cost. Additionally, over 100,000 patients are using Humira through Cigna Accredo specialty pharmacy. This partnership is beneficial for Alvotech, Cigna Group, and patients nationwide. We are witnessing a rapid evolution of pharmacy benefit biosimilars in the U.S., which we welcome. The introduction of private label as a strategy for commercializing AVT02 and the increasing shift from Humira to biosimilars reinforces our positive outlook on the Humira biosimilar opportunity. This development also suggests growth potential for other products in our portfolio, including Selarsdi, AVT03, and AVT05. Alongside the private label contract, our commercial partner Teva is making significant strides in formulary discussions, and we are optimistic about our position this year with our interchangeable product. The contracting on the formulary business is progressing well, and we anticipate details from the PBMs around July 1. I am pleased to share that we have secured binding purchase orders for over 1 million units to support our U.S. launch of the Humira biosimilar, and we have already begun supplying our partners with this product in U.S. markets. While we are enthusiastic about the Humira biosimilar launch, we are equally excited about the opportunities for our second product. Alvotech’s strategy is to offer a diverse portfolio in nearly every global market. The global launch of our second product reflects our long-term vision for biosimilars as we position ourselves as a preferred partner in this rapidly expanding industry. With AVT04, we have obtained approvals in all major markets and have already launched or are preparing for launches in various regions over the next 10 months. Our biosimilar to Stelara has been launched in Canada and recently in Japan, with a European launch starting in July this year and a U.S. launch in February 2025. While we focus on immediate commercial opportunities, we must also advance our pipeline to ensure consistent growth in the mid and long term. The upcoming year is projected to be the busiest in Alvotech’s history, with at least three additional filings in major markets. This pipeline success will not only generate near-term revenues but also contribute to our growth and diversification. As we look ahead, we are actively pursuing business development opportunities for remaining licenses. We are pleased to announce a partnership with Dr. Reddy's Laboratories on AVT03 for the U.S. and European markets. AVT03, our proposed biosimilar to Prolia and Xgeva, is expected to have its application filed later this year. This partnership will produce significant milestone revenues this year and secures a vital partner for our mid-term portfolio. Welcome to our growing family of partners, now at 19 globally, spanning over 90 markets worldwide. Finally, during our year-end call, we provided guidance for 2024 and 2025. Given our progress in commercial efforts and pipeline developments, we are raising our top line guidance for 2024 to $400 million to $500 million and tightening our EBITDA guidance from a range of $50 million to $150 million to $100 million to $150 million for 2024. With multiple launches and improved clarity on commercial and regulatory aspects, Alvotech is at a pivotal point, transitioning from an R&D-focused company to a full-scale global commercial biologics company, which has been our goal. We are extremely excited about the opportunities in the biosimilars market. Now, I will hand the presentation over to Anil Okay, our Chief Commercial Officer, to provide more details on our progress.

Thank you, Robert, and thank you to those joining today's call. I would like to start by providing further details on our exciting launch of biosimilar to Humira in the U.S. market. As we have said on previous calls, our product profile has allowed us and our partner, Teva, to have broad engagement with the U.S. market. That engagement is starting to bear fruit. Having interchangeability with exclusivity to the dominant firms on the market, combining that with a premium auto injector that is also deemed as interchangeable and having dedicated manufacturing capacity for biosimilars, has put us in a position to address both private label and non-private label business. On the private label part of the market, we are very excited to have teamed up with Quallent, which is the private label arm for the Cigna network. In late April, Evernorth, a wholly owned subsidiary of Cigna announced that they will be making available Humira biosimilars at zero out-of-pocket costs through their Accredo specialty pharmacy, which supports over 100,000 patients currently utilizing Humira. It goes without saying that we are very excited about this partnership with Quallent and the Cigna Group. The changing environment in pharmacy benefit biosimilars is, in our view, a positive development not only for Humira but also for future pharmacy benefit products, of which we have a number in our portfolio. Because of the unique nature of the arrangements, which was not contemplated in our original partnership with Teva, we have mutually agreed to change the economics from a revenue share model to a cost plus profit share model, which makes more sense for these types of arrangements where the payer is actually taking ownership of the product itself. The program kicks off in June, and we have begun supplying our partner with product. On the non-private label side, we are excited to introduce with our partner, Teva, SIMLANDI, which is an interchangeable high concentration biosimilar to Humira. While I cannot provide specific updates on today's call, what I can say is there is positive momentum, and we expect substantial coverage in the market to include at least one large payer. These changes, once finalized, will take place on July 1, and we expect that an interchangeable biosimilar to the high concentration form can drive uptake in the second half of the year. The product is now formally launched as of Monday by our partner, Teva, and we look forward to providing updates as we move through the year. As Robert noted, we have exceeded 1 million units in binding purchase orders for our Humira biosimilars in the U.S. market, which shows the commitment by our partners to drive biosimilar uptake within the Humira market. Moving to the second objective that Robert mentioned earlier, we are very pleased at the continued progress with our biosimilar to Stelara. First, in the U.S. market, Selarsdi has been approved, which marks the second approval in the U.S. market for Alvotech and the second product to gain approval under our partnership with Teva. Currently, only Amgen has secured approval for a Stelara biosimilar in the U.S. We have a license date of February 21 of next year, and our commercial supply production has already begun. We expect to initiate supply of SELARSDI to our partner in Q4, which is the trigger for our revenue recognition. We also expect to gain interchangeability for SELARSDI and expect to get designation either at the end of this year, which would be in time for our launch date or shortly after launch. Timing of interchangeability designation hinges on the FDA's interpretation of the BPCIA and provisions that determine exclusivity timelines. In either case, we believe we are in a strong position to address this high-value market on a product that costs over $150,000 per patient per year in the U.S. And of course, as excited as we are with SELARSDI, we view STELARA opportunity through a global lens. We have launched our STELARA biosimilar in Canada, March of this year, under the brand name Jamteki. Our partner in Canada is JAMP, and currently, Amgen is the only other approval. In Japan, we have launched AVT04 this month through our partnership with Fuji Pharma. In Europe, we are approved in all markets and have planned launches commencing in Q3 of this year under the brand name UZPRUVO. We believe we are well positioned in all of those markets to be on the leading edge of the market formation, which puts us in a good position to compete broadly. We also feel, particularly in Europe, that the introduction of biosimilars can have a meaningful positive impact in overall growth of the molecule, as Stelara is a particularly high-priced product. Please keep in mind that Humira biosimilars helped contribute to four years of double-digit volume growth and we see that biosimilars may have a similar, if not more significant impact in ex-U.S. volumes for ustekinumab. Moving to the next slide, I would like to discuss the progress expected within our pipeline for 2024. Alvotech is a young company. And for the first time in our history, we have a visible schedule of multiple high-value launches across multiple products and markets. This is truly an exciting time for the company. But while these launches are crucial, the ongoing advancement of our pipeline is essential to ensuring our continued success in the years to come. 2024 is shaping up to be a banner year for our R&D team that has already demonstrated their ability to navigate the global regulatory environment with efficiency and purpose. This year, we are expecting three additional filings in major markets, starting with AVT06, our biosimilar to Eylea, a leading product in the ophthalmology space. Unlike Humira and Stelara, which are primarily pharmacy benefit products, Eylea is a medical benefit medicine in the U.S. The recent success of the LUCENTIS biosimilar in accessing the U.S. market, we think, is an important precursor to Eylea biosimilar adoption. We also expect to gain interchangeability for Eylea in a similar fashion as biosimilar LUCENTIS. Finally, it is important to note that we are also developing the high dose form of Eylea. While we are not expecting submission this year, it is again validation to the market that Alvotech remains nimble in our development programs and dedicated to biosimilars broadly. We believe having the high dose form of Eylea will differentiate Alvotech in the marketplace. This forward-looking message and commitment to future biosimilars, we believe impacts our current discussions in the market, and that applies to all global markets. We are also expecting to file AVT03, our biosimilar to Prolia and Xgeva. While it's the same development program, there are two distinct market segments here as both a pharmacy benefit product and a medical benefit product as well. On Tuesday, we announced jointly with Dr. Reddy's Laboratories that we have finalized the licensing agreement for the U.S. and the EU market. Dr. Reddy's is a multinational pharmaceutical company with a substantial presence in the U.S. and in Europe. We are excited to welcome Dr. Reddy's as our partner for AVT03 in the U.S. and in Europe, and look forward to further updates on the program. Moving on to AVT05. We recently announced positive top line results on our patient trial. This provides us significant confidence in the finalization of this program in 2024. AVT05 is a proposed biosimilar to both Simponi and Simponi Aria, which also makes it a combination pharmacy benefit and medical benefit product. Again, we intend to seek interchangeability for our biosimilar candidates. For this program, I would like to highlight a couple of very important points. First of all, there is only one other company that we are aware of that has registered the patient trial. Secondly, only a handful of companies can boast having Humira and Stelara biosimilars in their portfolio. Moreover, no company can claim to have a portfolio that includes Humira, Stelara, and Simponi. This is yet another example of our portfolio approach to the market, which we believe fosters a welcoming environment in discussions with customers, by both ourselves and our partners. Finally, I would like to add that all of the progress you see in our pipeline will lead to substantial revenue for the company, and we expect significant impact from the milestones in 2024 with a sharp increase expected in the second quarter. Moving to the next slide, I would like to briefly touch on our longer-term portfolio. With regards to AVT16, our proposed biosimilar to ENTYVIO, we remain on track to initiate patient trials this year. There is currently only one other registered patient trial that we are aware of, and this is for a brand that has been rapidly beating market expectations year-over-year. Initiation of patient trials for AVT16 should also generate milestone revenue in 2024. Looking longer term, we continue advancing a number of programs, including AVT33, our biosimilar candidate to KEYTRUDA. As a reminder, Alvotech aims to add one to two products every 12 months, which we believe is the optimal pace to sustain long-term growth for the company. Finally, I would like to close my portion of our prepared remarks by covering the fourth key priority that Robert mentioned in his opening statement, and that's regarding our ongoing business development efforts. I'm very proud of the fact that we have been able to build a global commercial presence through a network of sophisticated and knowledgeable partners that allow our portfolio access in nearly every market around the world. This has continued recently, as I have just mentioned, with the addition of Dr. Reddy's partnership into our network of various partners. We are extremely proud of our pipeline, which we consider one of the most extensive in the industry. Our next major target is to continue to partner our future pipeline programs, including AVT33, which is our KEYTRUDA biosimilar candidate. We remain in ongoing conversations with multiple parties for global commercialization rights, and hope to provide updates when progress is finalized. Outside of KEYTRUDA, we will continue engaging potential or existing partners for our long-term portfolio in markets, both large and small. With that, I would like to turn the call over to Joel Morales for the financial update.

Thank you, Anil. I'll now provide some brief financial highlights for the quarter ending March 31, 2024. In terms of liquidity, we previously announced that we accepted offers for the sale of shares from Icelandic and other European investors totaling $166 million. As of March 31, we closed the period with $65 million of cash on hand, excluding $25 million of restricted cash. Regarding our operating performance, total revenues for Q1 2024 were $36.9 million versus $15.9 million in the prior year, an increase of 132%. This sharp increase is driven by milestone revenues generated from our CTA submission for the AVT16 program, our biosimilar candidate to ENTYVIO, and as a result of our achievement of European approval to market AVT04, our biosimilar to Stelara, under the brand Uzpruvo. Product revenues in Q1 were $12.4 million, down $3.4 million versus the prior year. This decrease was expected due to focus and resource allocation for remediation and inspection readiness for the FDA, which has ultimately led to the approval of two separate applications in the U.S. market. This was also partially driven by a heightened amount of production to support R&D that will support three submissions in major markets this year. Already in Q2, we have ramped up production and expect a progressive increase in product revenue throughout the year, in particular, as our commercial partners launch AVT02 into the U.S. market. We are also pleased to report that our commercialization partner in Canada launched AVT04 under the brand name Jamteki in late Q1. So our product revenues include some contribution from initial shipments to our partner. We expect revenues from AVT04 to increase throughout 2024, as we continue to launch into additional markets globally, such as Japan, Europe, and potentially from initial prelaunch shipments into the U.S. Our gross margin increased from negative $23 million in Q1 2023 to positive $17 million in Q1 2024, an increase of $40 million versus the prior year. This was driven by the timing of milestone revenues, AVT04 shipments into Canada, and lower production-related charges and other costs associated with FDA inspection readiness. We do expect our gross margin to continue to increase, as we realize increased scale of manufacturing while expanding on our launches. We anticipate that higher volumes will have a favorable impact on our margins, particularly as we increase absorption of our fixed costs. In Q1 2024, we reported adjusted EBITDA of negative $38 million, which represents an improvement of $27 million versus the same period in the prior year. This is largely driven by the gross margin contribution in the period, coupled with overall lower R&D and G&A costs on an adjusted basis. Please see the table provided in the appendix for a reconciliation of our reported to adjusted results. We closed the period with 277.9 million shares outstanding, including unvested earn-out shares. I'd like to highlight that during the quarter, 19.8 million earn-out shares vested, reducing the unvested portion to 19.2 million predecessor earn-out shares. This was the result of the performance of our stock during the quarter. Turning to the next slide, you will find our revised outlook for 2024. Given the positive commercial contracting updates for AVT02 provided by Anil earlier and the recently signed licensing agreements we've executed with new and existing commercial partners, we are raising our revenue guidance to between $400 million and $500 million. We are also revising EBITDA guidance to $100 million to $150 million, which is the upper end of our previously provided range. We expect EBITDA contribution for the full year to be relatively balanced between the first and second half of 2024. As mentioned on our last call, we expect this year to be lumpy in terms of our operating results. We previously guided Q1 total revenues to be lower than Q4 2023, and that adjusted EBITDA would be negative, for reasons I described earlier. That said, we did significantly reduce our negative adjusted EBITDA year-on-year, signaling the beginning of our transition to profitability. We will continue building on this momentum in Q2, where we expect to deliver the strongest quarter yet for the company in terms of revenue and for the first time in the history of our company, positive adjusted EBITDA. This will be driven partially by an increase in product revenues due to the initial launch of AVT02 in the U.S. and AVT04 globally. Milestone revenues will disproportionately contribute to total revenues in Q2, as we have good visibility in achieving a number of milestone recognition triggers in the quarter, such as positive top line results for AVT03 and AVT05, Teva's first launch of AVT02 into the U.S. market, and Fuji's first launch of AVT04 into the Japanese market and initial 04 launch quantities to our European partner in preparation for their commercial launch in Q3. Delivering our first positive EBITDA quarter and half year is a significant milestone for Alvotech, and we will continue to be focused on operational execution to maximize the potential of our launches in the second half of 2024, where we expect product revenue to overtake milestone revenues towards the end of 2024, driving overall revenues and positive adjusted EBITDA. As I mentioned, adjusted EBITDA for the year is forecasted in the range of $100 million to $150 million. This includes continued R&D investment behind our pipeline as we advance three of our programs through final stages of clinical and transition our AVT16 program into the clinical phase. Turning to the next slide, you'll see that this guidance is driven by a combination of our newly planned product launches and significant development and performance-based milestones we expect to achieve throughout the year. We have begun to take all the necessary steps to successfully enable our planned launches in 2024. Upon approval of AVT02, our high concentration and interchangeable version of Humira, we filed variations with the FDA that will enable us to manufacture at an optimized scale. We have, in fact, already begun to manufacture at this scale for our rest of world markets as of the end of last year, and expect to be manufacturing at the same scale for the U.S. by midyear 2024. In the meantime, we have supplied our U.S. commercial partner, Teva, with initial prelaunch stock for commercialization, which has now started as we recently announced. Our revenue guidance assumes successful contracting on formulary with key payers with modest penetration, making a significant contribution to our top line. This year, we also expect to launch our biosimilar to Humira into several additional global markets, including Latin America and the Middle East. With respect to AVT04, our biosimilar to Stelara, we have already launched in Canada in Q1 and in Japan this month, followed by Europe in the third quarter of this year. All requisite regulatory approvals have been secured for these markets. With FDA approval already achieved, our launch of SELARSDI for the U.S. is planned for February of 2025. However, our forecast assumes modest revenues in late fourth quarter of this year as we start shipping prelaunch inventory. These launches are not only driving growth in product revenues, but also providing greater diversification in terms of our commercial product offering and geographic concentration. They are thus important cornerstones of our strategy to drive growth and profitability over the mid to long term. In terms of milestone revenues, as mentioned earlier, we are anticipating completing clinical development and submitting marketing applications for three additional biosimilar candidates in major markets this year, namely biosimilar candidates for Prolia, Xgeva, Simponi, Simponi Aria, and Eylea. Additionally, we plan to commence clinical studies for our AVT16 program, our proposed biosimilar to ENTYVIO. Commencing and successfully completing clinical phases of development and regulatory submissions of our biosimilar programs are key events that will continue to drive milestone revenue recognition. We're also expecting to recognize milestone revenues based on the achievement of certain performance-based targets such as the first launch of our biosimilar to Humira and Stelara into new markets globally as well as the achievement of cumulative net sales targets for these launched products. Overall, we expect milestone revenue contributions to be significant this year, as they could range up to 35% to 45% of total revenues in 2024. We're excited to demonstrate the continued advancement of our pipeline, which will propel sustainable long-term growth for the company. The last point I'd like to make is with respect to licensing. As noted earlier in the presentation by Anil, we have an active BD pipeline, which includes our AVT03 program in bone disease. Just yesterday, we announced a new deal for commercialization of AVT03 in the U.S. and Europe, including the U.K., with related upfront payment and near-term milestones. Our BD activity has also focused on our oncology and early phased assets, and we are actively pursuing licensing deals for these programs with strategic partner or partners, providing upfront cash and milestones over time. As we wrap up today's earnings call, I want to take a moment to reflect on the positive developments we've shared. Our recent successes highlight the strength of our strategy and the dedication of our team. In light of this positive momentum, I'm pleased to inform you that we have begun to proactively explore refinancing options for our current debt. Our objective is to reduce the cost of capital and extend any near-term maturities. This initiative aligns with our commitment to enhancing financial flexibility and sustaining long-term growth. We believe these efforts will position us even more favorably for the future. And with that, I'd like to turn the call back over to the operator for Q&A.

Thank you. We will take our first question. And your first question comes from the line of Balaji Prasad from Barclays. Please go ahead, your line is open.

Hi, good morning everyone. Great to see the progress achieved till now and also the guidance raise. Quite a few questions, but I'll stick to two and come back later on. Firstly, on the guidance, is it fair to say that the majority of the guidance revision owes to the private label deal with Quallent? And also maybe I think I'm being reasonable in assuming that the 1 million purchase orders that you commented upon is all going to be booked in 2024? Lastly, on the question on guidance itself, did STELARA play any part in your guidance revision? Second question is on gross margins. Similar to what I asked last quarter, I understand that your revenue recognition and incurred COGS can vary also based on our milestones hit. But it looks like consensus is struggling to model gross margins accurately. So can you help us understand better the gross margin for 1Q itself as consensus has missed it by nearly 25%.

To answer your first question, I think you are correct. The guidance change was primarily influenced by the contracting outcomes in the U.S., particularly due to AVT02. Regarding your question on AVT04, there was no change in our assumptions about STELARA in the U.S. that would have affected that.

And on the 1 million units, Joel?

Yes. And it does include the 1 million units and yes, confirm the 1 million units are expected to be sold this year in 2024.

Great.

Further to your question on margin, we haven't provided any guidance on margin, just given the number of variables that we have, in particular, having significant swings in margin. We have multiple product launches into multiple markets. We also have a number of milestones, which also drop through at 100% margin in our outlook, meaning $1 of milestone revenue drops down to margin. But I will say that Q1 has a lower margin than we are expecting full year in particular because you haven't seen the full impact of the milestone contributions. You saw in our prepared remarks that we are expecting a more significant step-up in milestone revenues in the second quarter, which are going to drive our margins higher as we start inching towards the second quarter as well as the second half of the year. I will say in terms of our spend in Q1, you can maybe to provide a little bit more clarity, you can expect our Q1 run rate to temper in the second half of the year, in particular on R&D spend by about 20%. So those are the remarks that I can make maybe first half versus second half as it relates to margins. But surely, you can appreciate the number of variables here that we're trying to be transparent on.

Yes, I appreciate it. Thank you.

Thank you. We will take our next question. The next question comes from the line of Vineet Agrawal from Citi. Please go ahead. Your line is open.

Hi, this is Vineet from Citi. First, regarding guidance for 2025, do you still expect to achieve double the growth based on the revised guidance you shared earlier? Additionally, I would like to know about AVT06, your biosimilar for EYLEA. What are the launch timelines you are aiming for in the U.S., considering the IP litigation? Lastly, do you have any capabilities or plans in the GLP-1 space, given the promising market opportunities there? Thank you.

Hi, thank you for your question. This is Joel. Just on the first part of this. We have not changed our guidance as it relates to 2025, in particular, in light of our change to 2024 guidance. And so I would say that we're still targeting in the $600 million to $800 million range of revenues for 2025. I'll hand it over to Anil.

Thank you very much, Joel. Vineet, it's nice to hear your questions. Regarding AVT06, as we announced, we are filing our program within this year. So we will have the approval already within next year. In terms of launch timing, we have not guided the market on a specific launch timing. But what you are aware, of course, AVT02 and AVT04, we have made very strategic attempts on the IP litigations and securing early market entries in various geographies. So for AVT06 also, we have a strategy in play and we will, of course, deploy our strategy after the filing. On your last question, when it comes to GLP-1s. As a company, we have the capabilities to develop all these products. We also have a full play in motion here when it comes to different therapeutic areas, the technologies and everything. As of today, we do not have a GLP-1 in our portfolio. However, in the similar domain, we have multiple ideas in our long-term pipeline.

Thank you.

Thank you. We will take our next question. Your next question comes from the line of Balaji Prasad from Barclays. Please go ahead, your line is open.

Alright, thanks for the questions again. Following up on your Reddy's collaboration. While Reddy's is a company I have followed for nearly 20 years, I still thought it was a difficult choice. Help us understand what you saw Reddy's bringing to the table and how different or similar are the economics for Alvotech in this? Are you getting better or favorable terms? And lastly, maybe if you could just sum up the expectations around the formulary changes expected on the first of July? And what do you think would be an optimal scenario for Alvotech?

Thank you, Balaji, for the questions. Let me start with Dr. Reddy's. First, we are very proud to have a long-standing partner like Dr. Reddy's for the U.S. and European markets. In Europe, we have a semi-exclusive arrangement, which means we still have one right available to strengthen our coverage, and we are actively working on that. We will announce this in due time. Regarding Dr. Reddy's as a partner, they have been one of the fastest-growing companies in the U.S. market recently. Their capabilities in the injectable and hospital spaces are strong, and they have a significant vision for the U.S. market. Denosumab, among our pipeline assets, is a highly competitive area, so having a partner like Dr. Reddy's, who is adept in both branded and generic sectors, gives us a substantial advantage. Additionally, for AVT03, we have an innovative, highly productive cell line that will enhance our competitiveness in terms of cost leadership. Our collaboration with Dr. Reddy's and the Alvotech product profile are significantly bolstering Alvotech's market position. Regarding your question about formularies, I can summarize that we will have formulary coverage in one of the large formularies, and our partner Teva will announce that at the appropriate time. All our current discussions are very positive towards our product. As mentioned, we disclosed having over 1 million units of purchase orders just for the U.S. market, which should reassure the market that we will be one of the leading adalimumab biosimilars in the U.S. market.

Thank you.

Thank you. We will take our next question. Your next question comes from the line of Ashwani Verma from UBS. Please go ahead, your line is open.

Hi, congratulations on the progress. Thank you for taking our question. I just wanted to clarify the 1 million units you mentioned regarding biosimilar Humira. Are those unit pens or PRA? I would appreciate this clarification. Thank you.

Thank you, Ashwani, for the questions. So yes, it is in units per pen, so we basically have POs over 1 million pens.

Thank you. There seems to be no further questions at this time. I will hand back for closing remarks. Apologies. We do have a question that's come through. Please stand by. Your question comes from the line of Vineet Agrawal from Citi. Please go ahead, your line is open.

Yes, thanks for taking my follow-up. I just wanted to check on the interchangeability. Just wanted to understand how significant that is in your view in terms of gaining market share because one of your competitors seems pretty relaxed, not having that interchangeable designation. And also given that there is a push from the FDA for more sort of general labeling. So I just wanted to understand there's sort of two different views in the market from two different players. How significant that is in terms of gaining market share? Thank you.

Thank you for the question. We believe it's a significant advantage, not only from the interchangeability perspective, but also the exclusivity that comes with interchangeability. As we have announced, we also have exclusivity on the leading presentation up until minimum May 2025, which we believe is a significant competitive advantage. We also believe that interchangeability is very helpful in reducing the friction of conversion. Of course, our competition might have different ideas and different positions. But in our view, having an interchangeability versus not having an interchangeability is a better position to be in the marketplace.

Thank you. There seems to be no further questions. I will hand back to Benedikt Stefansson for closing remarks.

Thank you, and thanks to all our participants in the call today and on the webcast. On behalf of the Alvotech team, I just wish you a productive rest of the day and look forward to speaking to you all again. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.