Good morning, ladies and gentlemen, and welcome to Hypera Pharma's Q3 2023 Results Conference Call. Today with us, we have Mr. Breno Oliveira, CEO, and Mr. Adalmario Couto, IRO. Today's live webcast may be accessed through the company's investor relations website, www.hypera.com.br/ir. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After the closing remarks, there will be a question and answer session when further instructions will be given. We would also like to inform you that statements during this conference call may constitute forward-looking statements. Such statements are subject to known and unknown risks and uncertainties that could cause the company's actual results to differ materially from those set forth in the forward-looking statements. Now, I'll turn the floor to Mr. Breno Oliveira, who will begin the presentation. Mr. Breno, you may begin your conference. Good morning, and welcome to our earnings call for the Q3 of 2023. I'd like to start my presentation on slide 3. This quarter, our sellout grew 4.2%, a performance that was below our expectations for the quarter due to two main factors. First, was a recent slowdown in the market. In 2022, the market grew by 17%. In the first half of the year, this was around 12% in line with what was expected for the year. In the Q3, we had 8.8% growth, and in September and October, it has been lower, around 7%. The second factor was a completely atypical winter this year, with the highest temperatures ever recorded in the last 60 years, which resulted in a reduction of about 30% of the total flu cases recorded during the quarter. That had a reduction of 10% in flu, respiratory, and pain and fever categories, which are very relevant for Hypera. They correspond to 37% of our sellout and represent only 12% of the market. It's important to reinforce here that our growth in categories related to chronic and preventive treatments, such as cardiology, central nervous system, and vitamins, was double-digit. We'd also like to underscore that we maintained our market share in the categories we have. These preventive and chronic treatment categories, which represent the biggest share of the Brazilian pharma market, also concentrate most of our R&D pipeline. Moving on to the next highlights. The institutional market is still surpassing our initial expectations. It went up 64%, excluding non-recurrent immunoglobulin sales last year, with another expansion of our EBITDA margin. This growth is a result of the initiatives that were recently implemented to accelerate the growth of our current product portfolio, recent launches, expansion of sales teams, and higher product availability due to the investments that have been made to expand our production capacity in injectables. We'd also like to declare that we have BRL 195 million on interest over own capital, or 31 centavos per share, and we were recognized once again for our practices and sustainable commitments, medium and long term. We were listed in the FTSE4Good Index Series, one of the most important international sustainability indexes from the Financial Times Stock Exchange, and IDiversa from B3, which recognizes companies that meet criteria related to diversity, gender, and race. I'll pass it over to Adalmario. Thank you, Breno. Good morning, everyone. During this quarter, our revenue went up 5% versus the Q3 of 2022, especially due to price increases in April, and also the performance of the products that were recently launched. We can also highlight some categories in which we gained market share, such as skincare and the institutional market. There was also significant growth in e-commerce, Simple Organic, and Bioage, and also food retail products that are not considered in the sellout base from the pharma retail channel. This contributed to BRL 250 million in our revenue this quarter, which is far above our revenue during the time, and it reinforces the pipeline and the importance of new launches for our growth. At the end of the quarter, we added 26 new products to our portfolio across several categories. We have exclusive products like Addera Max Col, and line extensions for several important brands that were recently acquired, such as Nebacetin and Cepacol. Our gross margin was in line with last year's, around 63%, and we had a positive impact due to exchange rate appreciation for the Brazilian real, which impacts our costs, but this was offset by a variation in the product mix. We have less representation in brand, OTC, and prescription products, and higher sales in skincare and institutional products. Our EBITDA margin was above 36%, higher than the Q3 of 2022, diluted with marketing expenses. Marketing expenses represented less than 16% of net revenue, a lower level, promotional and media expenses related to our main brands in the categories of anti-flu medication, respiratory, and painkillers or analgesics. We also had a reduction in free samples due to lower sales across these categories. It's also important to comment, expenses with sales, which grew nearly 1 percentage point in comparison to the Q3 of 2022. This growth was due to a higher investment in R&D, and it's in line with our organic growth strategy through our pipeline and with higher penetration in other categories. We also had a reduction in the Lei do Bem benefit from BRL 22 million to BRL 7 million this year. Expenses with interest rates have impacted our bottom line due to increased debt levels and a higher spread in the issuances carried out earlier this year. So with that, net income came to a total of BRL 500 million, a growth of 6%. Moving on to cash flow and indebtedness on slide 8. We had a record cash generation of BRL 724 million, even with higher working capital, considering longer terms for receivables. And as we said in the previous earnings calls, with a normalized global supply chain, the company has reduced its purchase of inputs and active principles in the last months. It has been a total of BRL 200 million, and our expectation is to continue reducing inventories to optimize our investments in working capital. Increase in accounts receivable days is due to a higher, excuse me, a lower sellout, and it was higher this quarter. It will be adjusted as we have a higher level of sell-in. We had a total investment of BRL 197 million in CapEx, and this includes the acquisition of the Boehringer plant in early July. This new plant will contribute to expand our production capacity and to internalize the brand portfolio that was recently acquired. We also invested BRL 80 million in intangible investments related to new products for our pipeline. After these investments, our free cash flow generation was around BRL 450 million this quarter, which is more than enough to pay interest rates and taxes over the JCP declared this quarter. Our cash position was increased, which left us at a very comfortable liquidity level, a cash position above BRL 2.2 billion, and a net debt of BRL 7.6 billion. In October, we issued a new debenture, BRL 750 million, with a term of 5 years and a cost of CDI plus 1.35%. This new issuance had a spread of nearly one percentage point below the one we had earlier this year, and it will also contribute to reduce the average cost of debt for the company. I'll pass it over to Breno for his closing remarks. Thank you, Adalmario. This slowdown in market growth in the Q3, and especially during the months of September and October, and a completely atypical winter this year, impacted flu medication, and this brought additional challenges for the company in the last few months. Based on that, we believe that our growth in net revenue will be about 8% for 2023, which is about 95% of the net revenue projections, as well as EBITDA and net income projections that we have for the year. So our growth is aligned between sell-in and sell-out for 2023, just as we have had for the last four years. This short-term scenario does not change our medium and long-term expectations for the Brazilian pharma market. We believe that this market slowdown is only temporary, and in the next years, the market will continue to benefit from the aging Brazilian population, which stands to grow between 8%-11% in the next five years, according to IQVIA. Hypera Pharma is the most well-prepared company to capture these opportunities because we count with a leading brand portfolio. We are present across the different segments of the Brazilian market, OTC, prescription, generics, Dermocosmetics, and recently an institutional market. We also have an innovation pipeline with nearly 550 new products for the retail and institutional markets, and a distribution strategy that will reach nearly 100% of Brazilian points of sale. We'll now move on to the question and answer session. Thank you. Thank you. We will now begin the questions and answer session for investors and analysts. If you have a question, please press the reaction or raise hand button. If your question has been answered, you may leave the queue by clicking on put your hand down. The first question will be asked by Mr. Joseph Giordano from JP Morgan. Go ahead, sir. You may turn on your microphone. Hello, everyone. Good morning, Breno and Adalmario. Thank you for taking my question. I'd like to ask about how this is how the market is being normalized now. Go ahead, Mr. Joseph. Yes. Can you hear me? Okay. Good morning, Breno and Adalmario. I'm sorry, I had some trouble with my microphone. So thank you for taking my question. I'd like to ask about the first question. Excuse me. I'd like to ask my first question about working capital. We see that inputs are the main line in your inventory table. So how long will it take for the inventory to be normalized and so we can also see it in purchasing? I see that you have an inventory of 100 days, but I'd just like to see what it's at right now. My second question is about demand. So I understand that there has been a difference in the seasonal patterns we see with flu, but what about credit? I understand that restricted credit might hinder your sellout or your inventory levels. So do you see this, especially in for distributors? And finally, if you could tell us a little bit more about what you're seeing in the institutional market. Connecting to generics, how has the competitive environment been? Thank you. Thank you, Joe. I'll answer your first question, and Breno will answer your second. Considering working capital, we are still following this strategy of reducing raw materials. We're focusing on APIs and also finished goods. So if we compare the Q3 or the end of the Q3 with the second quarter, there has been a reduction of over BRL 100 million, even with increased sales. So this is a continuous process. As we said in the last few calls, it's not something that can be implemented quickly, considering, of course, the fact that it took us some time to get to this level of inventories. We have commitments with our suppliers, but it is something that is ongoing. Throughout 2024, this will probably accelerate. We will likely see a reduction in new purchases, and we expect the company's revenue to grow. So we still have that target, and we hope that by the end of 2024, we will be at a much closer level than where we were before the COVID pandemic. Hi, Joe. Good morning. So to answer your second question on the demand side, we do believe that restricted credit is impacting the market overall. This is probably one of the reasons behind why it is slowing down. I think there are two main factors. Distributors are trying to optimize their working capital, considering that credit is a bit more restricted, and we also expect interest rates to go down, although they are higher than what had been previously expected. And they're holding credit for independent pharmacies, meaning that they're being a bit more selective with their credit policies. So in this slowdown, what we have been seeing in our figures is that it was higher in the independent channel than in direct channels. And we believe that this is temporary. This is related to a slowdown in demand. There's also a hypothesis, which is that some consumers are focusing their income to reduce their debt, regardless of their short-term demands. But this is only a hypothesis. But we believe that this is a temporary scenario, due to all of those reasons, right? This is only temporary, that the growth pace has been slower. We believe that very soon we will continue to grow, 3%-5% in volumes, which is our historical growth level, plus inflation. So it would be a total of about 10%, of the demand in nominal terms. It's hard to say, but we believe that the flu season was slower this year, but this was also temporary. Last year, winter was very harsh, so we did have a higher demand for these products. This year, we had the opposite effect. It has been the warmest winter in the last 60 years, so we believe that this was a one-off event this year. Considering the institutional market, we're very optimistic, especially because of our performance. The market is doing well, it's performing well overall, but since we have a much lower market share, there's a lot of potential for growth. As we said in our last hype day, our goal is to reach about BRL 1.4 billion in revenue in this segment. This year, it will be about BRL 400 million. So this will be an annualized growth level of about 2 percentage points per year. That will probably come from this growth in the institutional market. Thank you, Breno and Adalmario. The next question will be asked by Bob Ford from Bank of America. Go ahead, Mr. Bob. Thank you. Good morning. Thank you, Breno and Adalmario. So my question is about how long it takes for flu medication to be passed on to retailers? And what would you usually expect from a typical quarter, and how do you expect it that it will impact your spread? Thank you. Hi, Bob. How are you? The first question is about our products and our clients. Yes, I was wondering about your inventory of finished products with retailers and distributors. Yes, so our inventory with our clients and our distributors was at a higher level this quarter. I think this is probably about how our business behaves. With our business, we have to sell into pharmacies before to be prepared to the demand levels that we expect, and if it doesn't occur, then the inventory stays at a higher level. So throughout a 12-month period, our idea is that it will come to a regular level and balance the sellout. So our growth for the year, we expect the sell-in to be about 8%, and this is also aligned to the sellout forecast that we have, which is about 8%. So if you look at the last four years, that has been the case. Sell-in is usually close to sell-out. Sometimes you do see a mismatch due to how our business works, but it's always adjustable on the longer term. And it's the same for our in-company inventories. We have to always be prepared because of our portfolio, since it's, since it has a higher share in OTC, in categories that are a bit more seasonal. So it's also important to be prepared to replenish pharmacies if there's a peak demand, just like we saw last year. We benefited from having a higher inventory than our competitors. We were able to resupply retailers and maintain our market share. This year, we've been able to maintain that market share, but we're growing below the market average. So this is a bit about how it works. I don't think it's very unusual, but it will be adjusted in the last—in the next quarters, excuse me. To answer your second question on flu medication and related products in the fourth quarter, it has a lower representation, especially in sell-out, and sell-in is also lower. So these combined categories, so respiratory and anti-flu and analgesics, are about 20% of our revenue in the last two quarters during this time, usually. I don't know if that answers your question, Bob. It does. And do you-- I'm sorry, I couldn't understand that, Bob. Could you repeat it? So how do you expect this to impact your forecasts for the next years? It's still early to have a good forecast on 2024, but rationally, if this winter was warmer than average, then the comparison will also be better for next year. We don't believe that this is a long-term change, because last year we had a very cold winter, and the categories that went down 10% in volume and 3% in value went up by about 40% last year. In sales, specifically in the Q3, it was about 50% growth. So as you can tell, this is a very seasonal category. In the last two years, specifically, we had a major variation after the COVID pandemic in the comparison with 2022. And now in 2023, the temperature has been completely different in Brazil. So with that being said, I think the best estimation is that, or the best prediction is that we'll have a better comparison for the winter of 2024. Thank you, Breno. The next question will be asked by Mr. Vinicius Figueiredo from Itaú BBA. So Vinicius, you may unmute your microphone. Good morning, everyone. Thank you for taking my question. I have a follow-up for that question that was asked before. We see that some other brands are more aggressive with prices, and what do you imagine is the reason? What do you expect for the rest of the year? And looking at the fourth quarter, Adalmario mentioned that there's a gap in the medications related to flu and fevers, and this is smaller than the rest of the market for the fourth quarter. So do we expect to grow along with the market in the fourth quarter? And my final question is a little bit more direct. If you can tell us about your growth, specifically in segments that are not included in IQVIA's sellout projections, that would be great. Thank you. Hi, Vinicius, this is Breno. I'll take your first and second question, and Adalmario will answer the third. So about the generics market specifically, we see that competitors are a bit more aggressive, but in specific market segments, specific molecules. It's more aggressive, but part of the performance from sales is not related, so that's why we're not lowering our prices for products that have a very low margin. Some products, you know, if we use the same prices that the rest of the market is using, would have a negative margin, so this kind of competition would not make sense for us. We're focusing on profitability and cash generation for the company, not gaining market share in generics specifically. And the price of raw materials has been going down. There's the exchange rate, but maybe this is, maybe industry have less inventory, so I think they're seeking to burn off that inventory. I don't know exactly what the reason is, but it is happening in some molecules, some specific molecules. Concerning the growth for the fourth quarter, what you said makes sense. Now, these categories that have a higher weight for us, so flu, respiratory medication, pain and fever, they have a lower weight in sales for the fourth quarter, so they are less subject to seasonal temperature variations. So they have a lower effect on our results, and we expect our growth to be in line with the fourth quarter. Looking at October as an example, the market grew about 7%, so our growth is also slightly above it in October. So we expect it will be very close to the market. However, it will probably be at the lower. The lower part of the growth that we've seen for the quarter. So I'll let Adalmario answer your question on OTC. Hi, Vinicius, I think you asked about the performance in product categories that are not in pharmaceutical retail, that we can't capture through sellout. These products or these categories are performing very well in other channels. So we've seen a growth of about 30% in the Q3 of this year versus last year, but it's still based on a lower basis. So if we sell everything that is in the food channel, plus e-commerce and direct to consumer sales, like Simple, Bioage, and institutional, it's about 12% of our revenue total. It has been growing 9% of our revenue last year, and now it's about 12. But we believe that this will be a positive dynamic for the next few years. Great. Thank you, Breno and Adalmario. Thank you. The next question will be asked by Gustavo Mieli from Goldman Sachs. Go ahead, sir. Good morning, Breno and Adalmario. Thank you for that call. I have three short questions. First, when we look at operational cash flow for the company in provision and others, we see a reversal of BRL 260 million. So if you could tell us a bit about that line, if it's a one-off or how we should base our expectations for this item in the next quarters, that would be great. My second question is a bit more objective on results. In ITR, when we look at the gross revenue, we see a slight increase in returns. I think this is probably connected to how the different channels have higher inventories. So I'd just like to understand if this is a recurring figure, if you're still getting any feedback from the different channels that would suggest a higher return for the next quarters. A Q3, and this one is a bit more strategic and connects back to the main core category of flu, pain, and fever medication. It's interesting to see that in your total sellout, it's a category that you would imagine would have a higher margin. But I imagine that the Q3 will raise a discussion on how sensitive this category is. So my question about that is if the Q3 has any implications on your launch, on your drug launch pipeline. I remember that during the last Hype Days, you said that half of the launches would be category extensions, which is something that you've executed very well. In this category, do you have the same expectation for launches, or do you expect to change this? Those were my three main points. Thank you. Hi, Gustavo. Thank you. I'll answer your first two questions, and Breno will answer the third. What you're seeing in the provision and others line in our cash flow refers to a reassessment that was made for the assets related to the production of scopolamine, especially the acquisitions from Boehringer. So we had a positive assessment of about BRL 64 million, and this impacts other revenues, and this was partially offset with other additional expenses. But this is in the others line in our cash flow. In this quarter, we had a revenue of about BRL 7 million from Solena. And this is due to part of the plant that was sold. This is also included in what we mentioned before, the revenue from other channels that were not measured by sellout. So consider. To answer your question about returns, we always look at the level of returns as a percentage of our revenue, and we're at a very close level to what we saw in previous quarters. This is not at all concerning. As Breno said, we don't believe that this reduction will be permanent. It's a one-off thing, and it should go back to normal next year. So we will probably not see any impacts on returns as the demand normalizes. And pharmacies have been supplied to meet that demand. So, Gustavo, to answer that last question on the launch pipeline, if that changes our decision. No, it doesn't change anything. We still- ...We are going to keep the same pipeline, having a mix between line extensions of our strong brands, which are in acute use categories, but we also have very strong brands in chronic use categories. That includes line extensions, new brands. When we look at the kind of medication, yes, 70% of our pipeline is in chronic use products and also institutional products if we look at the entire pipeline. It's closer to 70%, actually. Our dependence on acute use medications will tend to reduce, but this is the long-term impact. The 550 products that we have on the pipeline will be launched in the next five years, so it's a very gradual process. The short-term performance will not change our medium to long-term strategy, which is going in that direction. Yes, that was very clear. Thank you, Breno and Adalmario. The next question will be asked by Mr. Leandro Bastos from Citibank. Go ahead, Mr. Leandro. Hi, everyone. Good morning. I have a couple of quick questions on my side. First, about OTC. Since you have a higher inventory in this channel, do you expect any impacts for the sell-in dynamic in the first months of 2024? And do you expect sell-in and sell out to balance in the next quarter? So that's my first question. And in terms of leverage and working capital, what is your aim for 2024? Thank you. Hi, Leandro. Good morning. So to answer your first question on selling, sell-in and sell out. I think I mentioned in the beginning that with the new forecast of 8% growth for the year in sell-in, this is very aligned with the sellout that we expect for the year. So just as we had the same alignment in growth in the last four years, we believe that the same will happen this year. We'll conclude the year at the same level that we started. To answer your second question on leverage, this is one of our focuses, cash generation, profitability, reducing leverage, and this will be a gradual process. So we expect to conclude the year at around 2.5x, and we expect to gradually reduce this leverage to 2x in the next months. Thank you. The next question will be asked by Mr. Rafael Barros from XP. Go ahead, sir. Good morning, everyone. Thank you for taking my question. Connecting to the last question that was asked, you talked about your debt level. I'd like to understand if the current debt level is limiting for investment projects that the company might have, organically or non-organically. And I'd also like to understand what we can expect for the next years concerning CapEx. Thank you. Hi, Rafael. Good morning. I think from the inorganic growth perspective... Yes, we wouldn't want to exceed this level in the short term. We don't have this intention to increase our leverage, especially in a higher leverage scenario. So one thing would be to have interest rates of 10%, and the other thing would be to have 2%, as was the previous scenario. So our goal is not to increase leverage in inorganic growth. The company's cash generation, as we've been seeing in the last few years, we believe will be enough to finance for future growth through CapEx, through intangible investments, right? Intangible CapEx, R&D projects, and also debt and dividend payouts at the same levels that we currently have. So it would also reduce our debt. This is our goal, so we don't believe that it will impact the company's organic growth potential, especially in this scenario, where, as Adalmario has been saying, we have been focusing on using working capital. So this will be a bit slower than what was initially foreseen because of the lower demand. So we aim to optimize working capital and generate cash for the company. Concerning CapEx levels, we don't provide guidances for that, but this year and next year, we have a few one-off projects, like the expansion of the plant that we acquired here in Itapecerica da Serra. It's being expanded to internalize products from Takeda and Sanofi. But we expect it to be higher for this year and next year, but from 2025 onwards, we expect it will be lower than what we have on the short term. Great. Thank you. Thank you, Rafael. This concludes our questions and answer session. We will now turn it over to Mr. Breno Oliveira, who will give the company's closing remarks. Thank you for listening to our earnings call, and we're open, especially our investor relations team, to answer any remaining questions. Thank you, and have a good day.