Earnings Call Transcript - GRFS Q3 2025

Daniel Segarra, Head of Investor Relations and Sustainability

Hello, everyone. My name is Daniel Segarra, and I serve as the Head of Investor Relations and Sustainability and Vice President at Grifols. Welcome to our review of the company's business results for the third quarter of 2025. Today, I'm joined by Grifols' Chief Executive Officer, Nacho Abia; the President of Biopharma, Roland Wandeler; and Grifols' Chief Financial Officer, Rahul Srinivasan. A few logistics before we get into the details. Today's call will last about an hour, including a Q&A session. As a reminder, this call is being recorded. You can find additional materials, including today's presentation, in the Investor Relations section of the Grifols' website at grifols.com. The transcript and a replay of the webcast will also be available on the Investor Relations website within 24 hours. Turning to Slide 2, please note that this presentation includes forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. These statements are based on current expectations and available information as of the date of the recording, and they are subject to certain risks and uncertainties that may cause actual results to differ materially from those projected. Grifols financial statements are prepared in accordance with EU IFRS and other applicable reporting provisions, including alternative performance measures or APMs, prepared under the Group's financial reporting as defined by the European Securities and Markets Authority. Grifols management uses APMs to provide financial performance as the basis for operational and strategic decision-making. These APMs are prepared for all the time periods presented in this document. Now moving to today's agenda, and I will turn the call to Nacho to kick it off. Nacho?

Jose Ignacio Abia Buenache, CEO

Thank you, Danny, and hello, everyone, and thank you for joining us. The results we are presenting today demonstrate the continued commitment to delivering on our value creation plan. The performance achieved in the first half of the year has carried through, resulting in solid operational and financial results for the third quarter. This quarter reflects the sustained underlying demand for our products, solid market dynamics, and disciplined execution, while we continue to navigate exchange rate headwinds and the anticipated impact of the Inflation Reduction Act. This progress also stems from the operational focus and financial stewardship we established in our roadmap at the beginning of the year, which remains the central pillar of our plan. Our core business continued to perform well through the third quarter, led by the immunoglobulins franchise. This top-line performance has supported margin expansion, while tight cost management and a focus on free cash flow generation have driven meaningful improvement in our free cash flow. While we acknowledge the challenges of the complex global operating environment, Grifols has performed with consistency and confidence. Our structural advantage, including scale, solid vertical local integration in key markets and a globally diversified footprint have enabled us so far to adapt effectively, mitigate external pressure, and sustain solid performance across key markets. Regarding exchange rate headwinds, the impact was reflected at both revenue and EBITDA levels, but it did not extend to our leverage ratio or free cash flow due to the significant levels of natural hedges within our business. In any case, we continue to implement mitigating actions and maintain vigilant oversight of evolving external conditions. As we track towards year-end, we remain attentive and measured in our approach. Year-to-date performance has been solid and in line with our expectations, reflecting disciplined execution and resilience. Looking ahead, we recognize that the external environment remains complex and dynamic, and we continue to actively manage the factors within our control. By leveraging our structural strengths and maintaining discipline, we remain on track to meet our 2025 objectives. Before we move on, I want to pause and take a moment to thank the entire Grifols team for their ongoing commitment, focus, and passion in executing our plan and advancing our mission. And with that, let's move to Slide 5. On a year-to-date basis, we achieved revenue of EUR 5.5 billion, representing a year-over-year increase of 7.7% and 10.5% like-for-like after IRA and gross-to-net adjustments, both at constant currency. Third quarter adjusted EBITDA of EUR 482 million built on a strong first half, bringing our year-to-date adjusted EBITDA to EUR 1,358 million, up 11.2% and 17.3% like-for-like, both at constant currency. Both figures are well ahead of revenue growth. Improved operational execution has translated directly into a positive year-to-date free cash flow pre-M&A and pre-dividends of EUR 188 million, marking a significant EUR 257 million year-over-year improvement. This ramp-up in cash generation highlights our sustained financial discipline, keeping this as a top priority. Finally, deleveraging remains a critical financial priority too. And at the end of Q3, our leverage ratios per credit agreement landed at 4.2x, representing nearly 1x improvement over the prior year. We continue to reinforce our structural foundation, and these year-to-date results position us soundly to execute our capital allocation priorities and continue strengthening our balance sheet, ensuring we can create sustainable long-term value for all our stakeholders. As we have mentioned many times, the core tenets of our value creation plan are guided by 3 key levers: commercial growth, margin expansion, and pipeline execution. Starting with commercial growth, we continue to build on the existing market demand and our robust commercial capabilities to expand sales across our portfolio. This includes deepening our penetration in existing markets and expanding into new geographies. Margin expansion remains a core priority, supported by operational leverage, optimized plasma sourcing, and manufacturing efficiencies. And through pipeline execution, we continue to drive the innovations that define and sustain Grifols' leadership in plasma-derived therapies, while our Diagnostic division advances its 3 cutting-edge platforms currently in advanced development. These levers are supported by 2 critical enablers: our plasma supply and industrial footprint and our innovation strategy, as highlighted on the slide. Our resilient, diversified plasma manufacturing network represents a decisive competitive advantage in the current global environment. It ensures reliable plasma supply and production capacity, allowing us to effectively meet growing global demand. Turning to innovation, I'd like to provide an update on our pipeline. We remain on track to launch fibrinogen in Europe by the end of 2025, with a planned U.S. launch in the first half of 2026. In the U.S., we are proceeding with the FDA biological license application for congenital fibrinogen deficiency, for which we expect a decision in late December as planned. For acquired fibrinogen deficiency, based on conversations with the FDA, we have decided to build additional clinical evidence before seeking regulatory approval. This will help us strengthen an even more solid case to sustain the market development efforts we envision in the U.S. market for the years to come. Roland will share more details on fibrinogen shortly, but I want to mention that this decision does not affect our current Capital Markets Day plan in any meaningful way, nor does this change our long-term strategy or the significant opportunities we see ahead. Other than fibrinogen, we are maintaining disciplined investment in R&D while advancing clinical programs across both life cycle management and new product candidates. Key initiatives, including SPARTA and alpha-1 with subcutaneous formulation, are progressing as planned, underscoring our commitment to sustaining innovation, patient impact, and long-term value creation. And with that, I will hand this over to Roland to expand on these and other market and business updates.

Roland Wandeler, President of Biopharma

Thank you, Nacho. I am pleased to share an update on our biopharma business and highlight the key factors driving our performance this year. As we continue to deliver on our value creation plan, I am proud of the dedication, passion, and commitment our team shows every day to deliver for patients and drive forward towards the goals we set out in terms of commercial growth, margin expansion, and innovation. With that, let's turn to Slide 8 for our commercial performance. In the third quarter, our biopharma portfolio grew by 10.9%, lifting our year-to-date growth to 9.1%, both at constant currency. Our immunoglobulins franchise led the way, outpacing the market with 18% growth in the quarter and 14% year-to-date, both at constant currency. This performance was driven by GAMUNEX and XEMBIFY, with IVIg and subcutaneous Ig delivering 12-month growth of 13% and 62%, respectively. We remain confident in XEMBIFY's strong trajectory, supported by continued strength in the U.S. and expansion into new markets in Europe. I'll dive deeper into our Ig franchise on the next slide. Turning to albumin, third quarter volumes remained solid but were offset by ongoing pricing pressure in China as market demand slowed down in the face of government-imposed cost controls. This resulted in a contraction of 4.5% for the quarter and 3.9% year-to-date, both at constant currency. While these dynamics were anticipated, we continue to work with our local partner, Shanghai RAAS, on how to best manage market dynamics and sustain a strong position in China as the principal market for albumin. At the same time, we are working on strengthening our presence and unlocking additional growth opportunities in the U.S. and other markets in order to help us balance albumin with our IgG growth over time. Looking at our Alpha-1 and specialty proteins franchises, we continue to make solid progress. In the third quarter, revenues grew by 3.3%, bringing growth to 4.3% year-to-date, both at constant currency. These results reflect our continued market leadership in alpha-1 and HyperRAB. I'll share more detail on this franchise in a later slide. Now let's turn to immunoglobulins or Ig as the main growth driver of our business on Slide 9. Over the last 2 years, we saw an opportunity to use our strong Ig inventory position to accelerate Ig growth, build momentum in key markets, and win back market share in the U.S. We have since delivered on this plan. We have strengthened our U.S. organization and commercial capabilities, expanded subcu Ig penetration through XEMBIFY, and leveraged the strong profile of GAMUNEX as a leading IVIg to win share in strategic accounts. These actions have delivered clear results. Our Ig business has posted double-digit growth over these last quarters, ahead of the market and driven by demand as we regained share in the U.S. and Europe and thus reset our position in the Ig market. Looking ahead, from this higher base, we now expect to grow more in line with or slightly ahead of the market, consistent with the 6% to 8% CAGR range we shared as part of our value creation plan. The fundamentals for continued growth of Ig remain strong, as key indications continue to be underdiagnosed, and increasing global awareness of Ig as the treatment of choice in many conditions means that more patients get to benefit from our medicines with a long track record of proven efficacy and safety. Looking at our 3 main indications, growth remains solid in primary immunodeficiency, where increased awareness and better diagnosis are expanding access to therapy. In secondary immunodeficiency, the largest growth opportunity within Ig, demand continues to rise, driven by an aging population and an increase in immunocompromised patients. And in Chronic Inflammatory Demyelinating Polyneuropathy (CIDP), we are seeing continued growth, albeit at a lower level after the significant step-up in diagnosis last year with the entrance of FcRNs, which has helped expand this market. CIDP is a complex neurological condition with multifactorial origins, meaning the disease can present very differently across patients. This is precisely where Ig therapy stands out. With its broad and well-established range of immunomodulatory and immune-supportive modes of action, Ig can address multiple disease mechanisms and improve functional outcomes across a wide range of patients. As we build on this strong foundation, innovation continues to be a cornerstone of our Ig strategy. We're advancing next-generation products, new formulations, and expanded indications that strengthen our competitive position and enhance patient experience. In terms of next-generation Igs, YIMMUGO, our novel IVIg from Biotest, has launched in the U.S. in the fourth quarter of 2025, adding another differentiated therapy to our portfolio. XEMBIFY continues to gain strong traction, growing more than 60% over the last 12 months, and we're expanding into new markets through 2026. In terms of life cycle management, we are advancing new delivery formats, including XEMBIFY and prefilled syringes to improve convenience and adherence. In parallel, we are progressing with our studies to expand indications in the U.S. with GAMUNEX-C and XEMBIFY advancing in SID and XEMBIFY in CIDP. Together with our ongoing improvements in end-to-end Ig yield and operational efficiency, which will help us expand margins, this focus on innovation will ensure that our Ig franchise remains a cornerstone of sustainable and profitable growth for Grifols. Now turning to Slide 10. Let's take a closer look at our alpha-1 franchise and our strategy and progress in this area. Grifols has established itself as a leader in alpha-1 with today approximately 70% market share across both the U.S. and ex-U.S. Our position is a testament to Grifols' leadership in building this market, our best-in-class patient support programs, and our unique testing capabilities. Despite important progress throughout these last decades, we are today still only treating about 10% to 15% of the alpha-1 patient population across the world, leaving a large unmet need and untapped market opportunity. Testing is the key to unlocking this potential. We have, over the last years, complemented traditional screening with the rollout of our point-of-care and at-home direct-to-patient screening kits. Still, we only see a part of physicians systematically testing their COPD patients for AAT deficiency. We believe that we have a possibility to change this and dramatically increase the number of diagnosed patients with the readout of our outcome study SPARTA, continued advances in AI-enabled screening of electronic medical records to highlight patients at risk as well as increasing awareness in the market for new entrants. Raising awareness and improving diagnosis remain critical levers to enhance patient outcomes and enable market growth. As a company that firsthand sees the continued unmet need and the difference our medicines can make for the grievous illnesses we treat, we always welcome innovation that raises awareness and provides additional options for patients, especially in a condition where the vast majority remain undiagnosed and untreated. As a leader in this space, we want to meaningfully contribute to this innovation, both through our outcome study that will address important questions for the field as well as through both the subcutaneous and a long-acting treatment option in our pipeline. SPARTA is the largest efficacy study ever conducted in alpha-1 antitrypsin deficiency and is designed to show clinical outcomes in real-life lung tissue preservation, different from other studies primarily focused on pharmacokinetic endpoints. The results of this study have the potential to significantly strengthen the clinical and payer value proposition for augmentation therapy, increase testing awareness, and improve patient access in the U.S. as well as support broader reimbursement in Europe. The trial also includes a double-dose regimen, which could represent an important advancement in treatment. We expect the readout of SPARTA in the second half of 2026. In parallel, we are advancing a 15% subcutaneous formulation and a next-generation alpha-1 therapeutic to enhance patient convenience, expand access, and continue strengthening our position in this growing market. In summary, we remain confident in the continued success of PROLASTIN, supported by its value proposition and proven 30-plus year track record of safety and efficacy. Turning to Slide 11, innovation is at the heart of our business. Our pipeline reflects a focused and disciplined approach to advancing high-value programs that drive life cycle management, expand indications for our existing medicines, and bring new products to market both within plasma as well as beyond plasma. We have already covered the innovation underway for our Ig and alpha-1 franchises. Turning now to fibrinogen, as Nacho mentioned, we have refined our go-to-market approach to maximize our long-term opportunity. In the near term, the largest opportunity for fibrinogen lies in Europe, where markets such as Germany and Austria have adopted fibrinogen concentrate as standard of care. For these markets, we are on track for our launch of this product later this year. We have received the end of procedure notice from Germany and are awaiting approval in this key market shortly to be followed by additional countries in Europe. We are confident that our differentiated product positions us well to effectively compete and gain share over time in these markets. Longer term, the largest opportunity remains in the U.S., where the use of fibrinogen today, though, is still low, and the market has a long way to go to fully embrace this more targeted approach to bleeding management as standard of care. Here, we are on track with our biological license application for congenital fibrinogen deficiency or CFD, with a PDUFA date at the end of December. We expect to launch this indication in the first half of 2026. As Nacho mentioned, following conversations with the FDA and observing the slow growth of fibrinogen in the U.S. over the last year, we have decided to focus our biological license application on CFD for now and use the time to further strengthen our body of evidence with U.S. patients for a supplemental BLA for acquired fibrinogen deficiency or AFD at a later point in time. While this delays our indication for AFD in the U.S., this staged approach allows us to provide access to our medicines for U.S. patients with CFD in the first half of next year while giving more time for the market to evolve, further strengthen our position for a possibly differentiated label in AFD, and set us up for a leading position in the U.S. over time. As Nacho noted, these updates do not affect our guidance and the long-term goals outlined during our Capital Markets Day, nor do they change our broader development efforts and our conviction in a meaningful opportunity ahead as the standard of care continues to evolve toward concentrate-based therapies. We remain confident in the program's progress and long-term success as we continue to invest in its global rollout for the benefit of patients. Taking a step back, while we certainly look forward to the launch of fibrinogen, our pipeline reflects our focused and disciplined approach to advance innovation and create value across all our therapeutic areas. We've already covered our advancements in immunology and pulmonology. In infectious diseases, our trimodulin Phase III trial in severe community-acquired pneumonia is progressing steadily. With its innovative polyclonal antibody profile, trimodulin has the potential to address a significant unmet need. And in ophthalmology, our ocular surface Ig program for dry eye disease in Phase II has the potential to expand the use of Ig into new therapeutic areas. In the earlier stages of development, our pipeline spans both plasma-based and non-plasma programs, including a next-generation GAMUNEX process with improved yield, recombinant therapies, and novel treatments for infectious diseases. Overall, our pipeline reflects a balanced mix of near-term launches and long-term innovation aligned with our value creation plan and reinforcing Grifols' leadership in plasma-derived medicines aimed at driving sustainable, profitable growth for years to come. With that, I now hand it over to Rahul to provide more details on our financial performance.

Rahul Srinivasan, CFO

Thanks, Roland. On Slide 12, the words continued resilience sum up not just Grifols' financial performance but also very aptly describe both the Grifols business that has been built over many decades and the Grifols spirit of our over 24,000 teammates and our shared commitment towards the Grifols mission. Slide 13. From a financial performance standpoint, Q3 was a robust quarter across the board that presents an equally robust year-to-date picture. There have been some favorable phasing and mix benefits that have contributed to this robust year-to-date financial performance that I will elaborate on in the upcoming slides. As a reminder, our reported figures included the impact of the Inflation Reduction Act and the fee-for-service GPO reclassification, which could distort the underlying performance and hence, to improve comparability with prior periods, we will continue to disclose the like-for-like column for the remainder of the year, which we believe will be helpful to all our stakeholders. Starting with Q3 financial highlights. Net revenues of just under EUR 1.87 billion, up 9.1% versus Q3 '24 on a constant currency basis, led by Biopharma, and adjusted EBITDA of EUR 482 million, resulting in an adjusted EBITDA margin of 25.8% for the quarter. There was a slightly higher impact on group profit than was the case in Q2 this year, and free cash flow pre-M&A pre-dividends for the quarter of $203 million, up meaningfully versus Q3 '24. Moving on to year-to-date financial performance. Net revenues of over $5.5 billion, up 7.7% on a constant currency basis, led by Biopharma, which, as Roland mentioned earlier, is up 9.1% on a constant currency basis. Year-to-date adjusted EBITDA of over $1.35 billion is up 11.2% versus 2024 on a constant currency basis, despite the impact of the Inflation Reduction Act, albeit benefiting from some phasing and favorable mix that I referenced earlier. Both gross margin and adjusted EBITDA margin are up versus 2024, notwithstanding the impact of the Inflation Reduction Act. Year-to-date group profit of $304 million is up over 245% versus year-to-date 2024. Free cash flow pre-M&A pre-dividends is up $257 million versus year-to-date 2024, and I will elaborate on the drivers of this free cash flow improvement a couple of slides later. Furthermore, the leverage and liquidity picture has significantly improved versus Q3 2024. Secured leverage is at only 2.6x. We have almost 2 EBITDA turns of secured leverage capacity, giving us material flexibility, thus rounding out the robust and improving balance sheet referenced in the title of the slide. I have deliberately not dwelled on the like-for-like performance that you see on this slide, as we consider the impact of the Inflation Reduction Act as part of our regular cost structure now. However, the numbers in this column are eye-popping and helpful context to the underlying momentum of the business. Slide 14. Notwithstanding the impact of the Inflation Reduction Act, year-to-date revenue growth was up 7.7% on a constant currency basis, whilst clearly Biopharma led. We also had a positive contribution from our Diagnostics business that continues to execute in keeping with our plan. As Roland alluded to earlier, the Biopharma revenue growth continues to benefit from robust underlying Biopharma demand on the back of continued Ig momentum as well as progress from our alpha-1 and specialty protein franchise. Albumin, however, is an area that we continue to watch closely. Finally, year-to-date performance has benefited from some phasing-related gains that have contributed to a 9.1% constant currency growth versus 2024. Slide 15. Year-to-date adjusted EBITDA in 2025 is at $1.358 billion, up from $1.253 billion in 2024 after absorbing the year-to-date Inflation Reduction Act impact of $75 million. Adjusted EBITDA is up 11.2% on a constant currency basis, and adjusted EBITDA margins are improving versus 2024 by 60 basis points to 24.5%. The EBITDA growth was mainly led by Biopharma, supported by each of the following: strong volume growth aided by some phasing benefit, a favorable geographic mix adding to the phasing benefit with a proportion of EBITDA from the U.S. better than expectations and up meaningfully year-to-date, continuing improvements in Cost of Goods Sold, and finally, continued focus on operational expense discipline and driving the benefits of operational leverage. As for the Inflation Reduction Act impact, it is broadly in line with the guidance we provided in Q2, and we expect the full-year impact to be between $100 million to $125 million. While the impact on EBITDA of a weakening U.S. dollar is considerably more sheltered than revenues as a result of the various natural hedges in our cost structure, it has still been a stiff headwind. While the weakening U.S. dollar has been the main issue from an FX standpoint, other currencies have also contributed to the total FX impact versus the FX rates embedded in our guidance for the year as set out in our Capital Markets Day presentation. Slide 16. Over the last few quarters, we have talked about our expectation for continued convergence between adjusted and reported EBITDA on a cash basis. Or said another way, focusing on reducing the amount of cash adjustments between adjusted and reported EBITDA. We are pleased to see that convergence trend on a cash basis continue over the last couple of years, and there are 3 specific outcomes that I would like to call out. Number one, continued reduction in cash adjustments between adjusted and reported EBITDA. And as you will see on this page and the detail on Page 30 in the appendix, there has been a 56% reduction in cash adjustments on an LTM basis, primarily due to lower cash adjustments pertaining to restructuring costs and transaction costs. Number two, reported EBITDA is growing at 15.7% on a constant currency basis, faster than adjusted EBITDA despite its robust 11.2% growth on a constant currency basis. And finally, the gap between reported and adjusted EBITDA margins is reducing. At Q3 '25, this gap has narrowed to 120 basis points, having been 210 basis points at the end of 2024 and 340 basis points as at the end of 2023, mainly on the back of lower cash adjustments. The convergence tends to happen rapidly, often within around 6 to 7 months, validating the credibility of these cash adjustments. We also want to proactively flag the potential for non-cash adjustments in Q4 that importantly do not impact the go-forward EBITDA growth story or free cash flow growth story. These potential non-cash adjustments are simply the other side of the capital allocation discipline coin, where prioritizing our valuable capital mainly on the projects we talked about at our Capital Markets Day in February this year means that some other projects remain dormant or on hold. There might be an impact on their carrying value. But to be clear, and to repeat, we are confident that these potential non-cash adjustments will not impact our go-forward adjusted EBITDA growth or free cash flow growth story. Slide 17. A quick update on our progress towards our free cash flow pre-M&A, pre-dividends goal for the year. As you will recall, we improved our free cash flow pre-M&A, pre-dividend guidance at H1 from $350 million to $400 million, up to $375 million to $425 million, considerably up from the $266 million free cash flow outperformance in 2024, and we expressed our confidence that the business could do meaningfully better over time. And finally, recall that unlike EBITDA, free cash flow pre-M&A, pre-dividends is more insulated from euro-dollar volatility. The punchline on our year-to-date free cash flow performance is that we are tracking well versus our improved free cash flow guidance provided in our H1 call, as at the end of Q3, we are EUR 257 million better than we were in 2024 at the same point. The principal driver of the improving performance is greater vigilance on cash flow across the entire organization. In addition to that, improved EBITDA contribution, lower cash adjustments, tight working capital management, disciplined CapEx and capitalized IT and R&D spend, and an improvement in cash interest expense as a result of debt paydown in 2024 and significantly lower utilization of revolving credit facilities have supported our year-to-date progress on the free cash flow front. And more on free cash flow guidance for 2025 on the next slide. Finally, on Slide 18, updates on both capital structure and our outlook for the year. First, on capital structure. The clear tightening of our longest-dated bonds in our capital structure by over 200 basis points in just the last 3 to 4 quarters is evidence of the clear progress in the re-rating of the Grifols story. By that, we mean not just from a credit perspective, but also our clear focus on progressing on the immense equity re-rating opportunity we believe there is. It is also pleasing to see a number of our banking partners further corroborate the re-rating progress implied by our tightening bond yields by proactively offering meaningful upside support for a potential upsized revolving credit facility as part of the refinancing that we are targeting in H1 2026. All very helpful steps forward on the capital structure front, and preparations are ongoing. We have also just a short while ago launched a harmonizing exercise to align the documentation of the 2 bonds we currently have maturing in 2030. As I alluded to before, both bonds continue to trade very positively, hence the launch of this nice-to-have action. Before speaking about our outlook, it might be helpful for us to contextualize our year-to-date performance. Notwithstanding very stiff FX headwinds and the Inflation Reduction Act impact, our performance has been robust for the reasons we have already discussed. We have also benefited from some positive phasing and mix gains and thereby accelerating aspects of our EBITDA performance for the year, which we expect will partly reverse in Q4. When considering year-over-year comparisons to Q4, please remember that we are lapping our best quarter in history from an EBITDA perspective, a quarter that itself back then benefited considerably from phasing. Taking that together with the Inflation Reduction Act and the FX headwinds, we expect a robust Q4 '25. However, it will compare less favorably to Q4 '24 in absolute terms. The team remains very focused on ensuring that we execute with the same discipline and intensity as we have all year. It is also worth reminding the market of our updates in prior quarters about the impact of a weakening U.S. dollar and how that headwind reduces as we move down our P&L as a result of the natural hedges embedded in our business, from a weaker U.S. dollar having a significant impact at the revenue level to being broadly neutral at the net income or group profit level and indeed broadly neutral on free cash flow too. Absent any abrupt movements in FX, particularly euro-dollar as we move to the end of the year, we expect it to be broadly neutral on leverage, too, which then leads me to the final section on guidance. On the right-hand side, we compare our updated guidance to the original guidance we provided at our Capital Markets Day on 27 February 2025 at guidance FX rates. On the left-hand side, we estimate the full year FX impact to be roughly around EUR 70 million on adjusted EBITDA if FX rates stay as they are currently for the rest of the year versus the guidance FX rates in order to assist all our stakeholders with their analysis. As you will see on the right-hand side, our updated guidance at guidance FX rates compares favorably to the original guidance we provided at our Capital Markets Day, improving updated guidance at guidance FX rates for both revenues and free cash flow pre-M&A, pre-dividends. On the latter, we are once again improving our guidance further to EUR 400 million to EUR 425 million. The adjusted EBITDA guidance at FX rates is reaffirmed to be consistent with the original guidance provided, and we are currently tracking very comfortably within the guidance range provided, which, as I mentioned at the start of the financial performance section, speaks to the resilience of the Grifols business, notwithstanding the highly dynamic markets that we have navigated well thus far this year. With that, let me hand it back to Nacho for his concluding remarks.

Jose Ignacio Abia Buenache, CEO

Thank you, Rahul. I would like to conclude today's presentation with just a few final remarks. Our third quarter results confirm that the strategic roadmap we set in motion this year is delivering results. The value creation plan is driving measurable progress from continued market share gains and sustained top-line growth to a significant improvement in free cash flow generation. This performance underscores our focus on strengthening financial fundamentals and executing with the discipline required to turn a strategic vision into financial performance. We have also further strengthened our balance sheet through deleveraging, enhanced free cash flow generation, and a disciplined financial and capital allocation. This combination provides the flexibility to invest in growth while maintaining a prudent approach to leverage and liquidity. As we approach year-end, we remain vigilant as market conditions continue to be dynamic, with foreign exchange pressure and other external factors still present. These potential headwinds are being closely monitored. As in previous periods, we are confident in our ability to respond with resilience and execution. Therefore, we reaffirm full-year 2025 revenue and adjusted EBITDA guidance and the exchange rate presented at our Capital Markets Day and updated free cash flow guidance to exceed EUR 400 million. Finally, I want to recognize once again the dedication of the entire Grifols team whose commitment to our value creation plan continues to drive this company forward. We are executing with focus, accountability, and discipline and remain fully committed to creating long-lasting value for all our patients, donors, and stakeholders. Thank you, as always, for your continued support. And with that, Danny, back to you.

Daniel Segarra, Head of Investor Relations and Sustainability

Thank you, Nacho. Now let's move on to the Q&A session. Let's begin with Charles from Barclays.

Charles Pitman, Analyst

Just first one on fibrinogen. I want to clarify what the driver there is behind the fibrinogen and AFD being delayed to the U.S. Is this kind of FDA pushback reflective of their internal resourcing? Or is it reflective of the quality, quantity of your supporting data for the indication? Just because thinking about this asset previously, a key differentiating factor for Grifols was to be the first U.S. approved asset with both forms of the disease as part of the label. So just to your point about not impacting the midterm guidance, how do you expect to be able to continue to differentiate against the competition? Or is this just set to be a very short delay? And then my other question is just for Rahul on the refinancing. Just coming back to terminology there, you're highlighting the harmonization process of the 2030 bonds. Can you confirm whether this means that you're also considering refinancing these 2030 maturities as part of the 1H '26 targeted refinancing for the '27 maturing bonds? And just wondering, as part of that refinancing as well, is there any potential to renegotiate the terms of the GIC deal?

Jose Ignacio Abia Buenache, CEO

Thank you, Charles. On fibrinogen, I think that we always have stated and have been aware of the fact that in the United States, we would need to change the standard of care, which currently is based on cryoprecipitate in order to boost the sales of fibrinogen to the level that we expected. This is a mission that we are very committed to do. We believe, based on what we see in other markets, that this certainly will bring benefit for patients. But as I mentioned, based on the conversations with the FDA, we feel that it's important to bring even more solid clinical information and clinical data with U.S. patients in order to help with that standard of care. At the same time, I think, obviously, our focus in the short term is going to be to develop markets outside of the U.S. And in the U.S., obviously, with the congenital fibrinogen deficiency, certainly, we will start working with physicians for them to know and be more aware of the benefits of fibrinogen versus other alternatives. I don't know, Roland, if you want to add anything else?

Roland Wandeler, President of Biopharma

Perhaps just commenting on how this compares to the plan that we laid out at the Capital Markets Day. As mentioned, today, the largest opportunity is in Europe, north of 200 million. There, we remain on track for our launch in Germany this year, and we believe that we can differentiate and gain share in this market and actually have some opportunities in ex-U.S. or ex-Europe markets as well to gain share. In our considerations, the U.S. was always a slower build, and therefore, a delay of AFD at this point does not materially change our outlook in the near term. At the same time, we believe that with a possibly differentiated label at the time of the launch of AFD in the U.S., we have an opportunity to still lead that market and capture the long-term potential, which is north of EUR 800 million that we laid out at the Capital Markets Day. So that's where the comments come about that we don't see a change in our outlook.

Rahul Srinivasan, CFO

And Charles, on the 2030 bond harmonization, that's just a harmonization exercise between the conditions or the documentation, if you like, between the 2 bonds. Your comment around 2030 refinancing, of course, we have the optionality if we so choose to refinance those. Those bonds are callable on the 1st of May 2026, if I recall correctly, which gives us that optionality. And clearly, as you can see with where those bonds are trading today, there is value as we think about refinancing those in due course. But it is a part of refinancing options that are available to us. It doesn't have to be in 2026. We can decide on the right time for that. And then finally, on GIC, you're absolutely right, there are those 8% dollar bonds, and the way we look at that is sort of unsecured risk. There is value there. Again, we will decide when the right time to optimize a possible redemption of that is in close partnership with GIC. GIC has been a partner of ours for some time, and we will work through that at the right time. But clearly, there is also possible value there.

Daniel Segarra, Head of Investor Relations and Sustainability

Now let's move to the next one, Jaime from Santander.

Jaime Escribano, Analyst

So a couple of questions from my side. The first one, could you elaborate a little bit more on the dynamics of the albumin in China? Basically, if this pricing pressure comes from the offer side, so more competition? Or is it the demand or the reimbursement or the social security there that is putting lower prices? And the second one regarding also fibrinogen, just for my understanding, so it seems that there are 2 segments: AFD and CFD. Out of the $800 million addressable market, how much is AFD and how much is CFD? Basically, my question tries to understand the short-term opportunity when you launch for CFD versus the additional indication AFD?

Jose Ignacio Abia Buenache, CEO

Thanks, Jaime. Let me start with the second one, and then Roland will address the one about China. So on the fibrinogen, I mean, it's not possible to see or assess really what the market opportunity right now is because the market development effort needs to be done. I think that we know that at this point, the use of fibrinogen in the U.S. is limited. It's very limited. It's small. And we know as well what potential fibrinogen can have. If we manage to get the standard of care at the levels that we see in other markets like Germany or Austria. So at this point, both AFD and CFD are small. Our work is going to be to really prove and bring clinical evidence that those markets will develop to the level that we expect they will be of this $800 million European opportunity over time, and we are confident it will happen. And on China, Roland will comment now.

Roland Wandeler, President of Biopharma

Yes. On China, the key underlying driver is the government-imposed cost controls that we talked about across the whole healthcare sector. That had an impact on prices and also had an impact in terms of the demand in the market slowing down. But it is important to note that while we see this impact at this moment, China remains a key market for us. It's important. We believe that our partnership, our strategic partnership with Haier and Shanghai RAAS puts us in a strong position to navigate this market, and we are working to seize opportunities to realize growth in other parts of the world, particularly the U.S. and ex-U.S., to see how we can aid to continue to balance our albumin with the Ig growth that we foresee. So in terms of the driver, it's really coming down on this market. It's a dynamic situation, but we believe that we are in a good position to navigate this with our strategic partnership.

Daniel Segarra, Head of Investor Relations and Sustainability

Now we will go to Alvaro Lenze from Alantra, please.

Alvaro Lenze Julia, Analyst

The first one is on the EBITDA guidance for the year. If I take the range you provided and I subtract the EUR 70 million expected FX impact implied, Q4 in the lower range would be about EUR 450 million adjusted EBITDA, and on the upper range would be around EUR 500 million. That is on the low end, a 15% decline, and that would put Q4 less than either Q3 and Q2. So I don't know if there is any phasing there. I know Rahul explained the comparison base for Q4 last year is quite tough, but still, in absolute terms, the low range of the guidance would look a bit underwhelming. So I was just wondering what your thinking process for that guidance was. And then a second question would be, you mentioned some impairments for Q4. I just wanted to know what sort of assets you are thinking of for the impairment and when did those assets join the balance sheet, just to understand whether you are looking at past or very old investments that you no longer think are as valuable as represented on the balance sheet, or if it's more recent investments that you're cutting.

Rahul Srinivasan, CFO

Sure. Let me address the second question regarding impairments. As I mentioned earlier, we outlined our R&D and innovation plans during our Capital Markets Day, and these efforts are not affected. This is simply about some projects in our portfolio that haven't received much prioritization in terms of capital. We're proactively highlighting this. Importantly, though, this does not affect our future adjusted EBITDA growth or our future free cash flow growth. It’s mainly about lower prioritization from a project perspective. Regarding the first question on guidance and ranges, I stated two things. First, we are well within our guidance range for adjusted EBITDA. Second, we anticipate a strong Q4 2025. The only caution I mentioned was that the comparison to Q4 '24, which had significant phasing benefits last year, is something we wanted to address prudently. From our viewpoint, the lower end of the range is one we feel confident managing and exceeding. As always, we will focus on execution with discipline and intensity. We'll see where we land, but that's our tracking approach, and we aim to highlight the phasing elements as we've indicated.

Daniel Segarra, Head of Investor Relations and Sustainability

Thank you so much. Now we would like to get Charlie Haywood from Bank of America.

Charlie Haywood, Analyst

Two questions, please. First one, unless I've misunderstood, could you clarify what the FX headwind to your reported revenue guide would be for the full year? And then just on the sort of FX impact, what specifically on FX has changed since the second quarter when the guidance was reiterated and there wasn't an implied FX impact there? And then the second question, just wanted to get your thoughts on, obviously, the competitor readouts we've had in alpha-1, your confidence in rebuttal of that, especially on the margin level, which I understand is slightly higher than your standard products, and given also the fibrinogen delay today, might lead to more of a margin impact. So just high-level thoughts on how you can rebut that impact.

Rahul Srinivasan, CFO

Thanks, Charlie. I'll address the first question. Looking back at our Q1, Q2, and now into Q3, we've consistently faced the challenge of the U.S. dollar weakening impacting EBITDA. However, this remains generally neutral when considering leverage, group profit, net income, and free cash flow. Additionally, in each of those presentations, we've emphasized the basis on which guidance was provided, and this remains unchanged in Q3. Therefore, when comparing our current guidance to the guidance based on FX rates, we are still on track in terms of revenue and free cash flow. In fact, we have improved and reaffirmed our guidance for EBITDA. We want to ensure transparency, and we provided a sensitivity analysis in Q2. We're now trying to estimate what the current rates at the end of Q3 could imply for adjusted EBITDA if they hold steady through year-end. Regarding revenue impact, we haven't disclosed that, but considering that about two-thirds or 65% of our revenues are denominated in U.S. dollars, rough calculations suggest an impact of approximately $300 million to $400 million based on your exchange rate assumptions for the remainder of the year. Nonetheless, based on the guidance FX rates, we're raising our revenue guidance for the year. Now, I'll pass it to Roland for the second question.

Roland Wandeler, President of Biopharma

Yes. On alpha-1, we always, as part of our plan, assumed positive top line data of the pharmacokinetic endpoints. So this was as we expected. What we hear from thought leaders are basically 2 questions at this point: one is waiting to see the detailed data and understanding safety of this recombinant approach, and the second question is around the pathway to approval. We're obviously also eagerly waiting to see what this means. But as we think about alpha-1, we just want to bring it back to the immense opportunity that still remains. We are only treating 10% to 15% of patients today, which means 85% of patients are undiagnosed. We just saw with CIDP how a new entrant can dramatically improve and accelerate diagnosis. Beyond that, we know that with our outcome study, SPARTA, we have it in our hands to raise awareness of this disease in the U.S. and ensure that we can have a broader reimbursement in Europe, which gives us a growth lever. Lastly, as we mentioned, we're excited about our subcutaneous treatment, 15%, which we're advancing into Phase III and planning to submit an IND there in the coming months along with our long-acting option. As we look at this market, a new entrant, but most importantly, the growth opportunity that this market has, we remain committed and confident about alpha-1. As we think about fibrinogen concentrate, as we outlined, the path to growth is not materially affected by what we just shared. We are still in a position to compete and possibly accelerate our uptake outside the U.S., and we have an opportunity to strengthen our positioning in the U.S. and see that we can lead in this market in the long term.

Daniel Segarra, Head of Investor Relations and Sustainability

Thank you so much, Roland. I appreciate your thoughts on that. Now let's go to Thibault from Morgan Stanley.

Thibault Boutherin, Analyst

Just on the free cash flow guidance, so obviously, versus the beginning of the year, EBITDA and change at constant currency, I mean, using February FX as a base, free cash flow guidance has been upgraded a couple of times since. If you can just remind us of the moving parts in between for the free cash flow improvement and any risk of seeing some of these elements reversing in the future? For example, working capital, if you could comment on your expectations for working capital position at the end of the year and what it means for potential reversal in Q1 next year?

Rahul Srinivasan, CFO

Your question pertains to the various components contributing to our improved free cash flow. We have indeed raised our free cash flow guidance several times this year. The improvement can be attributed primarily to better EBITDA on a year-to-date basis. Our adjusted EBITDA has risen significantly, and even after excluding certain cash adjustments, the numbers remain strong compared to 2024. We have maintained strict management of our working capital despite the impact of a declining dollar on inventory levels. Our inventory, receivables, and payables are all being managed carefully. Regarding capital expenditures, as we anticipated during our Capital Markets Day, 2024 is expected to mark a peak in total CapEx, which includes what we previously called extraordinary growth CapEx. The ratio of total CapEx to sales is at its highest in 2024. Everything is unfolding as we expected, reflecting disciplined CapEx spending. Additionally, we have seen significant benefits from deleveraging in 2024 due to the partial sale of our Shanghai RAAS stake, contributing to better leverage and debt repayment. Furthermore, our reduced use of revolving credit facilities has also positively impacted our financing. All these factors contributed to a $257 million increase in free cash flow compared to last year. Looking ahead for the remainder of the year, we are optimistic about achieving our updated guidance of $400 million to $425 million for free cash flow before mergers and acquisitions and dividends in 2025. Regarding 2026, we will address that in our guidance later in February next year, but we do not anticipate significant variations. Notably, we experienced considerable improvement in free cash flow in Q1 compared to Q1 2024. We aim to sustain this level of performance as much as possible, and we will elaborate on this in our guidance for 2026 at the end of February next year.

Daniel Segarra, Head of Investor Relations and Sustainability

Thank you so much. Now we would like to get Guilherme Sampaio.

Guilherme Sampaio, Analyst

Yes, I have two questions. First, I assume that the growth acceleration in immunoglobulin was positively influenced by some pricing benefits you mentioned, along with volume gains in the U.K. You're indicating a slowdown in growth going forward. Can you clarify how the growth will be phased between Q4 and Q1? Should we consider the 6% to 8% growth range only for Q1, with Q4 possibly being lower, or is the 6% to 8% the run rate we should expect moving forward? My second question is about 2026. Based on your comments, it seems we might see lower underlying growth, particularly in Biopharma. However, the weaker U.S. dollar usually has a positive effect on margins. During the Capital Markets Day, you indicated a consistent margin progression throughout the plan. Could this less favorable impact on absolute EBITDA result in higher margin expansion in 2026 than what was previously planned at the Capital Markets Day?

Roland Wandeler, President of Biopharma

Guilherme, happy to add a bit more color on the Ig side. As you may recall, in our Capital Markets Day, we said that we aim to grow Ig in line or slightly ahead of the market and gave that 6% to 8% CAGR rate, which just reflects the potential that Ig has, and we expect it to be in there. The other part that I want to just bring up again is you may recall that in the 2023 call, leadership at the time announced a plan to win back share in the U.S. During the pandemic, we lost share in the U.S. and we announced that we wanted to win it back. We have since executed on this plan using a strong inventory position that we had at the time, and that translated into this double-digit growth, well ahead of the market during this time. We have since regained market share, and at this higher market share, we now expect to grow in line with the market or ahead of the market. So from that perspective, I would look at these last 2 years as our ability to actually reposition us in the market and from here to grow with or ahead of the market moving forward.

Rahul Srinivasan, CFO

No real change in terms of the building blocks driving our margin improvement story over the coming years. With respect to what we had guided from a margin standpoint for 2025, was for adjusted EBITDA margins to be in line with 2024, having fully absorbed the impact of the Inflation Reduction Act. Year-to-date, we're doing exactly that. You can see on a like-for-like basis and even on a year-to-date basis that our margin improvement is up. That remains the story for 2025. With respect to 2026 and beyond no change; we will update the market with respect to 2026 guidance specifically when we come to it at the end of February.

Daniel Segarra, Head of Investor Relations and Sustainability

Thank you, Roland. Thank you, Rahul. We have time for the very last question. It's going to be Justin from Bernstein. Justin, please.

Justin Steven Smith, Analyst

Yes. Justin from Bernstein. Just a quick one on fibrinogen, and apologies if I've missed some remarks here. But when you talk about the new evidence that you need to bring, are we talking about new clinical data? If so, could you just share some thoughts on execution risk there? I mean, is it a case with acquired patients? It's quite difficult to locate those patients and run the trial, so any thoughts there would be very helpful.

Roland Wandeler, President of Biopharma

Yes. The one thing to highlight is that we are obviously looking at the study in the U.S., and we have different proposals on the table, and we'll be looking at the best way with an eye on making sure that this obviously helps us with speed to market and that there is possibly differentiation in our label. We do not see an execution risk there; we see the need and interest to conduct a trial like that.

Daniel Segarra, Head of Investor Relations and Sustainability

Okay. Thank you so much, Roland. I say that was all for now. Thank you so much for all your questions and for joining us today. If there is any follow-up, please let us know. There is an IR team dedicated to that. Thank you so much.