Alvotech Q1 FY2026 Earnings Call

Good day and thank you for standing by. Welcome to the Alvotech First Quarter 2026 Earnings Conference Call. Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Benedikt Stefansson, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to our listeners. Yesterday evening, the company issued a press release announcing our financial results for the first quarter of 2026. Material accompanying today's earnings call, including a supplemental earnings report providing additional operational details and business updates and the presentation we'll be referring to on today's call were also published on our investor portal, investors.alvotech.com, in the Earnings Calendar section under the heading Q1 2026 Earnings Call. Our press release, earnings report, presentation and statements that we make on the call 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. Any risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. Presenting on today's call are Robert Wessman, Founder and Executive Chairman; Lisa Graver, Chief Executive Officer; and Linda Jonsdottir, Chief Financial Officer. Robert will begin today's presentation with a summary of our progress with the U.S. regulatory pathway and some key business highlights. Lisa will then present a commercial and pipeline update. Linda will conclude with a discussion of the financial results. Following the introductions, our team will be happy to take your questions. With that, I would like to turn the call over to Robert Wessman.

Good morning, everyone, and thank you for joining us. The first quarter was focused on three priorities: progressing the FDA resubmission, maintaining a high level of inspection readiness and continuing to expand our commercial business globally, including the launch of three biosimilars across Europe and other international markets. Last week, the FDA began a routine GMP surveillance inspection at our Reykjavik facility, which is currently ongoing. Routine surveillance inspections are a normal part of operating an FDA-regulated manufacturing facility and our previous surveillance inspection took place in 2024. We continue to engage constructively with the agency throughout the process and expect it to be concluded by the end of business day tomorrow. Since our most recent pre-license inspection, which took place in July 2025, we have implemented several important enhancements across our quality system and operations. The work to address the findings has been approached in a highly structured and disciplined manner and is well advanced. Importantly, we have deliberately taken additional time to substantially de-risk future operational and regulatory disruption and to ensure that when we resubmit, we do so with a package that fully addresses the agency's requirements and supports the long-term growth and value of the company. These actions have impacted manufacturing throughput, resulting in a slowdown at certain points during 2025 and the first quarter of 2026. But I'm very pleased with the progress the organization has made and the resubmission of our biologics license applications for our biosimilars to Simponi, Eylea, Prolia and Xgeva are now in the final stage of completion. As we complete the current resubmission process, we believe there is significant near-term value within our pipeline, which we believe is one of the most valuable in the industry today. We are approaching a number of important milestones across several high-value programs that will drive the company's anticipated strong growth in 2027. This includes submissions in 2026 of biosimilars to Entyvio and high-dose Eylea and the resubmission for biosimilars to Eylea, Simponi, Prolia and Xgeva. These programs target large and growing biologics markets and position us within the first wave of biosimilar entrants in their respective segments. Together with our leading pipeline of 30 biosimilar products, these submissions underscore the strength and momentum of our pipeline, which will support Alvotech's long-term growth. More broadly, we have built out one of the strongest integrated biosimilar platforms in the industry, combining research and development, manufacturing, regulatory capabilities and global commercial partnerships. With the platform now built, our focus has increasingly shifted towards execution, launches and converting our pipeline into commercial growth. Alvotech entered the U.S. market in mid-2024, marking the transition from an R&D-focused organization to a global commercial biosimilar company. Today, we have a commercial presence in over 90 countries and continue to expand patient access to biologics throughout the world. We believe the company is well positioned for its next phase of growth. And with that, I will hand the call over to Lisa.

Thank you, Robert. Our primary focus during the quarter has been execution, both in relation to the regulatory process and in continuing to scale the commercial business globally. As Robert noted, with the FDA now on site, we remain highly focused on a successful inspection outcome and on resubmitting the BLAs; approval is now pending. We believe the actions taken to date strengthen not only the specific resubmission packages, but the broader operational platform supporting future pipeline execution. We will provide the market with an update once the inspection has closed. As we continue to leverage our Reykjavik site for global supply, we have also been exploring additional manufacturing capacity, especially in the United States. Last night, we announced a manufacturing agreement with Fujifilm Biotechnologies, covering multiple products within our portfolio. This agreement represents an important strategic step in further strengthening and diversifying our global manufacturing network, including expanded U.S.-based manufacturing capability. As our commercial portfolio and late-stage pipeline continue to scale, manufacturing resilience, supply reliability and operational flexibility become increasingly important. This agreement enhances our ability to support future launches and long-term commercial growth while further strengthening supply continuity for our partners and patients. Fujifilm brings significant technical expertise and manufacturing capabilities, and we believe the agreement complements the strength of our existing vertically integrated platform. We're in the process of initiating technology transfer activities and expect to begin supplying products for the U.S. market in the second half of 2027 as the transfer and qualification process progresses. This additional capacity will become increasingly important as we move into the next phase of commercial launches and pipeline progression over the coming years. With respect to the financial performance in the first quarter, we had sales of $106 million and adjusted EBITDA of $24 million. Both revenues and EBITDA were impacted by the timing of milestones and the slowdown in production related to facility improvements, which reduced product revenues in the quarter. We do expect improvement in product revenues as normal operations resume through the second quarter since underlying demand remains strong. Linda will provide more details later in the call. With respect to our marketed portfolio, we are seeing solid underlying demand trends and expanding adoption of biosimilars more broadly. For AVT02, our biosimilar to Humira, the U.S. market continues to evolve as expected with ongoing transition toward a multi-biosimilar market. Based on available market data, AVT02 has now become the fastest-growing biosimilar to Humira in the United States and achieved a 10% market share within the segment. In Europe and other international markets, AVT02 remains an important contributor to our commercial portfolio. We believe there is further opportunity for biosimilar adoption as the overall market continues to grow. For AVT04, our biosimilar to Stelara, Teva continues to expand Stelara's market through formulary and commercial execution, while in Europe, Uzpruvo continues to hold a leading share of the biosimilar segment in launch markets. We expect further biosimilar adoption and commercial growth across the ustekinumab market during 2026. For our biosimilars to Simponi, Eylea, Prolia and Xgeva, where we received approvals in Europe, the U.K. and Japan at the end of last year, our partners continue to progress launch activities. We remain optimistic on the commercial prospects for these products, particularly for AVT05, the biosimilar to Simponi, which remains the only biosimilar for a predominant presentation in the market. Taken together, these launches continue to diversify our commercial portfolio, strengthen our revenue base across multiple geographies and support the long-term value of our integrated biosimilars platform. With respect to long-term value creation, there were a few highlights in the quarter regarding our pipeline. Our portfolio strategy remains highly selective and focused on molecules where we believe there is a compelling combination of market opportunity, durable mechanism of action, high scientific barriers to entry, manufacturing capability and commercial attractiveness. Specifically, we are pleased to report that we have submitted a marketing authorization application to the European Medicines Agency for AVT16 and AVT80, our proposed biosimilars to Entyvio. Today, sales of Entyvio in Europe are close to $2 billion and growing. Our biosimilar to Entyvio represents a significant market opportunity in Europe, supported by strong underlying demand trends in inflammatory bowel disease. And we believe we are well positioned to be within the first wave, if not the first biosimilar for this product. Turning to the biosimilar of high-dose Eylea, AVT29, we are on track to submit a marketing authorization application with the EMA in 2026. In addition, we have enrolled the first patients in the pivotal efficacy and safety study for AVT29 in support of the submission in the U.S. in 2028. With this, we believe we could be the first to submit a biosimilar to high-dose Eylea in Europe and the U.S. Today, the combined low-dose and high-dose market for Eylea is approximately $8 billion, with $5 billion in the U.S. and $3 billion in Europe. Together with our biosimilar to low-dose Eylea, Alvotech is well positioned to participate in the future evolution of the global Eylea market as longer-acting dosing regimens become increasingly important. As we look ahead, our focus remains on disciplined execution across the commercial business, the regulatory process and the pipeline. With that, I hand the call over to Linda to review the financial results in more detail.

Thank you, Lisa. I will now take you through the financial results for the first quarter of 2026. Unless otherwise stated, the figures I will go through are adjusted numbers. Reconciliations to the corresponding IFRS measures are included in our earnings materials, which have been published on our investor portal at investors.alvotech.com. Turning to the financial highlights for Q1 2026. Total revenues in the first quarter were $106 million, representing a 20% decline compared to the same quarter last year. As stated in our previous year's earnings call, we are still seeing impact on our financials from our facility improvements and the associated slowdown, and we are expecting Q4 2026 to be the strongest quarter of the year. Gross margin for the first quarter was 57%, an improvement of 6 basis points compared to the same period last year. This reflects the blend of product and licensing revenues in the quarter, which was equally split. Product margin in the quarter was 11%. Margins during the second half of 2025 and Q1 2026 have been impacted by reduced manufacturing throughput associated with facility improvements at our Reykjavik site. As manufacturing normalizes and volumes recover, Alvotech will be positioned to enter 2027 with a stronger margin profile. Adjusted EBITDA in the first quarter was $24 million, representing a margin of 23% versus adjusted EBITDA of $21 million, representing a margin of 15% in Q1 2025. We have recently seen changes in regulatory guidance from both the FDA and the EMA, including where comparable clinical studies can be waived. This places greater emphasis on analytical similarity for approval, which means we can demonstrate technical feasibility earlier in the process. As a result, certain development programs now meet the criteria for capitalization under IFRS under IAS 38 at an earlier stage. This has increased the proportion of development costs that are capitalized and the updated approach has been applied prospectively from the beginning of 2026. Further on revenues, about half of the revenues in the first quarter of 2026 come from product revenues, leveraging the continued commercial momentum. As we have discussed in the past, there is typically a timing lag between our partner sales performance and the recognition of revenue in our results. As a result, strong partner performance typically flows through into our reported revenue over subsequent periods as the year progresses. Product revenues for the first quarter were $51 million. The key contributors were our biosimilar to Humira, AVT02, and the biosimilar to Stelara, AVT04. Our three newly approved products, AVT03, which is biosimilar to Prolia and Xgeva, AVT05, which is biosimilar to Simponi, and AVT06, which is biosimilar to Eylea, also began contributing incremental product revenues as launches expanded across Europe, the U.K. and Japan. Licensing revenues for the quarter were $55 million. As we have noted on previous calls, milestone revenue recognition is inherently lumpy, driven by the timing of development progress, regulatory submissions and contractual milestones achieved with our commercial partners. Turning to cash flow. Cash at hand at the end of the quarter is $64 million, while operating cash flow is negative in the quarter by $25 million, driven mostly by working capital. As you can see from the cash flow bridge, other drivers impacting our cash flow in the quarter were net interest payments of $35 million per quarter following the transition from PIK to cash interest mid-2025, CapEx at $7 million in the quarter and was low in line with plans. Investment in intangibles is $39 million in the quarter, and we remain focused on achieving positive free cash flow in Q4 2026, which continues to be a key financial priority. Then looking into our balance sheet. I will start with briefly summarizing key items on the asset side of our balance sheet. We have a strong asset base, which has been supported by strategic acquisitions in 2025 and pipeline investments. From year-end 2025, non-current assets were up by $52 million, mainly driven by an increase in intangible assets and higher contract assets due to the timing of revenue recognition. Total current assets decreased by $118 million due to collections of trade receivables and reduction in cash to finance operating activities and debt service in the quarter. Next, a few notes on the key movements across equity and liabilities. Derivative financial liabilities reduced by $32 million, mainly due to fair value changes on conversion futures and earn-out shares. Trade and other payables decreased by $28 million due to investments and timing of orders in Q4 2025. Contract liabilities decreased due to recognition of licensing revenues as development milestones have been achieved. Turning to our financial outlook for the full year. We target revenues in the range of $650 million to $700 million, representing continued double-digit growth compared to 2025. Adjusted EBITDA is expected to be in the range of $180 million to $220 million. As a reminder, the lower end of our revenue guidance range does not include revenues from the approvals and launches of AVT03, AVT05 or AVT06 in the U.S. As we look ahead to 2027, we expect to deliver strong year-on-year growth driven by continued expansion of our commercialized product portfolio, contributions from our pipeline and associated milestone revenues. We also expect to benefit from increasing manufacturing output following the completion of the facility improvement and operational enhancements implemented since mid-2025. With respect to our balance sheet, the anticipated growth in 2027 will allow us to be in a position to deliver healthy leverage in 2027, which will open up further opportunities for us to optimize our capital structure. With that, I will hand the call back to the operator for Q&A.

Our first question will come from the line of Christopher Uhde from SEB.

Two for me, please, to start. So, the first would be on the Fujifilm partnership and its implications. So, is this just ensuring less scope for regulatory or commercial disruption from politics and so on? How critical was getting this partnership? And should we see it as having a tangible impact on your growth trajectory? And then perhaps you can put that in the context then of the consolidation we've seen during the quarter and after within the industry? And then my second question is, based on your comments, it seems like Simlandi is taking share in the U.S. looking at Q4 versus now, whereas Uzpruvo seems sort of flattish, possibly down somewhat in Europe. What can you tell us about market share position within markets? I mean is it stable or more fluid than overall position? And are there any factors that are driving those dynamics?

Christopher, thanks for the question. Maybe taking the Fujifilm question first. As we talked about on the last earnings call, we were in advanced discussions. It is very much a strategic move for us. Obviously, happy that we were able to bring this across the finish line as quickly as we did. It really is what we said it was: an ability for us to diversify our capacity across markets. Certainly having a presence in the United States gives us an advantage given it is one of our large markets. But I think from a perspective of timing, as we've said, we do expect to introduce product for the U.S. market specifically in the second half of 2027. So, all of this was really aimed at continuing to ensure supply chain reliability as we continue to see demand. And maybe heading into your next question, that demand is really being pulled through primarily in the U.S. with Simlandi. Teva has done a fantastic job continuing to grow that for us as well as just the natural evolution toward biosimilars in the market. I think we're sitting at about an exit share of 60% of the market being biosimilar in the U.S. now. So, it's a combination of commercial execution as well as overall growth in the biosimilar segment. Clearly, anything we can do that will continue to ensure that we meet that demand across our manufacturing platform is something that we're going to prioritize. In terms of ustekinumab, particularly in Europe, we are seeing somewhat of a flattening in Q1. I will say we still have three quarters to go. I'm not going to say today that that's the trend we expect. We are still seeing the Stelara biosimilar market grow in Europe as well as in the U.S. It's sitting at about 56% biosimilar now in Europe. So, I think there's still opportunity there. Certainly, we are seeing growth in Germany, not unexpected. Germany is one of the key markets for us across our biosimilar platform. So, I think from our perspective, growth will continue in the U.S. In Europe, we are seeing some stability through Q1, but I think we clearly have the remainder of the year to go. So, we're optimistic we'll still see some further top-line growth there.

Just a clarification on the first one. What sort of proportion of your U.S. sales should we think about as coming from Fujifilm in the future? I mean, is it a majority? Or is it a minority? Or any detail you can give there?

I think it's too early to say from our perspective what the split will be. We are going to leverage across our platform to ensure that we hit our markets. The Reykjavik site will continue to be a predominant player across the markets, but we will continue to look at ways to leverage both the Fujifilm site as well as our Reykjavik site.

Our next question will come from the line of Ash Verma from UBS.

This is Di on behalf of Ash. I just have to — sorry if I missed some of the conversation earlier. But I just want to check the FDA remediation. Can you briefly outline the remaining steps to file the three pending products by the end of Q2, I guess? And do you expect the FDA inspection— I think I heard Robert in the beginning, but I wasn't sure if it's happening now or what's the status on that? And then if there's an inspection required, are you guys still comfortable with the year-end approval timeline? And then the second question is just on the Q1 temporary production slowdown. I think that's due to the FDA remediation plan, so I just want to confirm, is that now fully resolved? And then is there any risk for it to happen again? That's all.

Yes. Thank you so much. As we discussed in my remarks earlier, we basically have catalysts coming up with the resubmissions and we discussed the Entyvio submission and high-dose Eylea. For us, it's very important that we clear all regulatory risk going forward. So we decided to prolong the slowdown, as I mentioned in my introduction — and we see that as a short-term investment to then reap the growth of the launches, which are coming, we believe, at the end of this year and, of course, going into 2027. And I think I mentioned that we expect to see a strong growth year-on-year. That's why we want to eliminate any future risk. But I'll leave the rest to Lisa to answer on specifics.

Just on the FDA piece. We are in an inspection now. The FDA is on site. It is a routine surveillance inspection that we do expect to close out this week. As Robert noted, we were well positioned and have been preparing to respond, and we are on track to respond to the call that was received last year. That will position us in the second quarter to resubmit the pending BLAs and the target remains the fourth quarter for approvals. Again, to emphasize, the work that we've been doing since last year through the first quarter is setting us up for that success, and we think we will be able to provide a further update once the current inspection closes out. We do anticipate resuming normal operations from a production standpoint this quarter. The underlying rationale was to remove any further overhang from the complete response letters we received last year, and we think we're going to be in a great position to do that this quarter.

Our next question comes from the line of Arvid Necander from DNB Carnegie.

So just picking up on what we said previously with Simlandi capturing meaningful market share in Q1 and prescription trends also looking pretty supportive for Selarsdi as well, could you provide a little bit more color here? What has changed commercially to drive this step-up when it comes to Simlandi uptake this far into the life cycle? If there's anything else that can be said on that? And then I guess, secondly, you mentioned the lag typically seen between partner performance and sales. Is this the main explanation why we didn't see a sharper increase in sales in Q1? Or does it also reflect any other dynamics at play when it comes to pricing strategy or any other factors?

To address the Simlandi uptake: this is really a factor of the continued erosion of the Humira originator product. We are seeing that exit share of biosimilars in Q1 being 60%. So that continued growth in the biosimilar market is just a larger addressable market that we, through our partners, have been able to take advantage of. I think we've also been, through our partner, very execution-oriented in growing that business in terms of taking advantage of both the branded and unbranded market positions. So I think it's a factor of both, and we're hopeful that we're going to continue to see that growth through 2026 and beyond. In terms of your second question on the contribution from product revenue in Q1, we have said in the past that we do see lumpiness in terms of how orders are placed and how product is pulled through in the quarter. So we have some degree of control over that, but it is predominantly driven by customer order patterns and invoicing. It is not, from our perspective, a pricing dynamic at this point. It is really order pattern, and we do expect to start to see that pick up as we go throughout the remainder of the year.

Great. Just the last one, if I may, on the Fujifilm partnership. Can you comment on what sort of investment commitment this comes with from your side? Any guidance on the costs associated with this partnership?

This is something we touched on in the last call. It has been part of our plan to diversify manufacturing capacity, whether through further internal investment or external partnerships. Because this is a technology transfer, we do expect that the batches at the end of the transfer and qualification process will be sellable batches by 2027. So it's an investment balanced with the ability to recover that through sellable batches when we hit 2027.

Our next question will come as a follow-up from the line of Christopher Uhde from SEB.

I was wondering a couple of things. Could you talk a little bit about the impact of reform in Germany and whether that could have a presumably positive impact on your business? How do you see that evolving as it's implemented? And then we also heard during the quarter and in reports discussions about immunotherapy products and Dupixent loss of exclusivity potentially being extended in comments by manufacturers. What is your thinking around the launch timing for those biosimilars?

On Dupixent, it's a little too early for us to comment on precise launch timings. It is in our portfolio and we're working toward it, but from a timing standpoint it's too early to be definitive. On the German reforms: we do think there could be opportunity and we are certainly seeing growth today. If the market moves toward a tender model, which has been under discussion for some time, we expect it will allow for multiple players. STADA is one of our primary partners and a very strong player in Germany, so we believe we have a good opportunity to position ourselves even if that market transforms into a more tender-like market. We expect it to be a multiplayer tender market, not a single-provider market, which positions us well given the strength of our partnerships there.

And I'm not showing any further questions in the queue at this time. I would now like to turn it back over to Benedikt for any closing remarks.

So on behalf of the team presenting today and all of us at Alvotech, I thank everyone who joined us for this webcast. We look forward to talking to you again and wish you a wonderful rest of the day. Goodbye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.