Good morning and good afternoon, everyone. My name is Thibault Boutherin. I am part of the European Pharma team, and I am joined on this call by my colleague, Mike Canfield, Head of EMEA Sustainability Research at Morgan Stanley. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. We are pleased to have with us Ming Li, Chief Strategy Officer at Alvotech, for this session on affordable biologics. Ming, thank you for joining us. Thank you. Before we get into the details of Alvotech's ESG strategy, Ming, can I ask you to introduce the concept of biosimilars for investors who are not familiar with it and highlight the role they play, and the benefit that they bring to the healthcare system? Yes, absolutely, and thank you for the time today. I think before I answer the question about biosimilars, it's important to understand biologics and biologic medicines and what they've done in the field of medicine. Today, nine out of the top-selling 15 products in the world are biologic medicines. Even more importantly, that 59% of new launches in 2022 were of biologics medicine. There's a lot of investment in the future of originator companies as far as their biologics pipeline are concerned. In the U.S. alone, over 40% of all spending on pharmaceuticals, period, are on biologic medicine. They re-represent a significant cost to healthcare systems, not just in the U.S., but all over the world. Biosimilars are therapeutically equivalent versions of these biologic medicines that are sold at a lower price. From a societal perspective, I think there's three main things to consider. One thing, biosimilars help to manage healthcare inflation, which I know is an issue around the world. They can also increase access, particularly in emerging markets, where oftentimes the biologic medicine themselves is not the standard of care, although it may should be. biosimilars can actually increase, and it's something that isn't talked about too much, innovation across the board because it creates competition more broadly in the industry across pharma in general. we think for those reasons, I think biosimilars are critically important to healthcare going forward. Thank you. Could you also talk a little bit about Alvotech's business model in particular, which is quite unique, with a focus on product development and manufacturing, and with a commercial model which is based on partnerships? Yeah, absolutely. Today, Alvotech is roughly 1,000 people, and I would say over 85% of them are either in quality, operations, or research and development. Our business model is to focus on development and manufacturing, and we create commercial partnerships around the world, which we now have in over 90 markets. We share the development cost of biosimilars, which is quite high, through milestone payments, and we also get a substantial share of the market of the in-market sales as part of our partnerships. We maintain that structure which is rather unique, to allow us to focus on our core competencies. I think that's number one. It also allows us to make product selection decisions that are somewhat agnostic to the therapeutic indication. We're not tied to a particular indication. It allows us to diversify our revenue streams as we have revenue tied not only to the development success, but also through product revenue, which we believe will which we receive globally. That's clear. Could you talk a little bit about what differentiates your development process and your manufacturing facilities from a, you know, technology, from quality and sustainability standpoints? Yeah. You know, I think the biggest differentiator, because obviously other companies develop biosimilars and biologics manufacturing. While it's challenging, it does exist in other places. I think the biggest differentiator we have is our sole focus on biosimilars. A few companies that exist today are vertically integrated and have scale that are also pure play biosimilar companies. Most of the companies that are in the biosimilar space are large cap pharma. Novartis and Pfizer, and Amgen, for example, have been the biggest players in biosimilars. We think it's important going forward that we have a pure play platform that can focus on biosimilars. Our agenda is very clear. Our priorities are very clear. It's 100% biosimilars, and I think that's probably the biggest differentiation that we have. Thank you. I will pass on to Mike for questions which are more e-focused on ESG. Thanks very much, Thibault. Thanks as well, Ming, for that introduction. Just to flag to the people dialed into the call, there is a Q&A box at the bottom of your screen. If you'd like to ask questions, do feel free to submit, and we will do our best to get to them before we hit time. Maybe a first question around your access to medicine strategy and how you think about responsible sales and responsible promotional practices. If you could give us a bit of color on that and whether you have an explicit plan in place, that would be maybe a good starting point. Yeah, absolutely. You know, as mentioned earlier, Alvotech is a B2B model, so we actually don't sell any of the products ourselves that we developed in any given market. That doesn't mean we deprioritize responsible practices. The first course of action is, of course, choosing our partners wisely. I think at this stage, we have 18 distinct partners, And we believe they're the best in class in biosimilars, and they were chosen for a multitude of reasons. The second step, of course, is to put in place a robust program of monitoring and reviewing, and that is something we plan to continue to develop further. We're still very early in our commercialization phase as we've launched in 17 markets our first product. As that develops, so will our oversight across our partners. Makes sense. Perhaps actually to take one step back before we move into a bit more detail around your NS thoughts. Can you give us a sense of what you think the core hurdles are to adoption of biosimilars across the markets that you address? Is it a regulatory thing, or is it more around the incentivization structure? What do you think the obstacles are there to overcome? You know, it's interesting because I think biosimilars and biosimilar penetration has increased over time, and I think that time is a factor, and the market has been around for a while for biologics or biosimilars more broadly. We have seen an improvement in how biosimilars are perceived in the medical community. There was, of course, some skepticism in the beginning. I think time is a big factor. I think one of the other issues is to be able to develop a competitive product. While biosimilars are therapeutically equivalent by definition, the originator companies are always thinking of ways to maximize their market share going forward. Being able to. They do that by changing the way the product is presented, changing the dosage and things like that. I think biosimilars, to remain competitive, need to actually move with the originator companies in lockstep so that they can make sure that they're presenting the best possible product when it's time to launch. So I think, you know, biosimilars really need to be nimble and be able to react in a way that, you know, keeps them competitive. From a regulatory perspective, I know that was, you know, part of the question, and some of it is sort of, sort of approval regulatory and some of it, you know, I would call it intellectual property from a regulatory standpoint. I think, the regulatory framework for biosimilars is relatively clear. I do think what could happen in the future is for certain products, you may see a lowering of the regulatory hurdles from a clinical perspective. I think that will help open up to more competition and the ability for companies to target more products than they otherwise would because of the cost and expense of, call it, inpatient studies. The second obstacle, the regulatory obstacle, I think, is intellectual property. I do have to say that's mostly a U.S. construct. It's a little bit more clear elsewhere in the world, and there's been a lot of discussion about patent use, patent misuse, and bipartisan patent reform. I do think that that is something that could help clear the way for more biosimilars going forward, and we certainly are an advocate for patent reform. Interesting. That makes complete sense. Thinking maybe a little about that growth strategy that you alluded to, you said you had a clear path in mind and how you see the future materializing. Can you give us a bit of color around that, how you're thinking about it, perhaps regionally and in terms of products and disease areas that you might be looking to address? Got you. I think from a disease area, we have focused primarily on the immunology space. Of course, we have some others in the primary care area and ophthalmology, but mostly on the immunology space, which is where biologics, you know, has made a big entrance as far as the standard of care. Recently in our last earnings call, we unveiled a biosimilar candidate to Keytruda, which is our first primarily oncology product. I think that is a space where, you know, we think we could expand further. There's obviously a lot of targets and opportunities, and a lot of originator investment dollars are going into oncology from a biologics perspective. I think regionally, even as we stand today, at least for a subset of our portfolio, we have partnerships across 90 markets. There's actually very few markets we do not intend to enter. Of course, timing is different for each one. We intend to be a global biosimilar company, and we've already started marketing and distributing it... Not marketing, but distributing into 17 markets around the world, including Canada and other markets across Europe. Perhaps linked to that in terms of the challenges of that expansion, can you maybe give us a sense of, you know, things like headcount, things like, you know, transitioning from being an R&D-focused institution to including fill and finish manufacturing? Can you maybe give us just a bit of color around how that experience was and what you see as the obstacles to that challenge, to the growth story going forward? I think growth story going forward, obviously, it's a challenge to move from R&D into commercialization, so it's really about adapting to scale. You know, there's been a lot of headcount growth, and obviously managing that change is, you know, it is a challenge. We think we've put in the systems and the leadership in place, you know, to manage that challenge effectively. I think concurrently operating R&D at the scale at which we're trying to do and doing that scale, I think is an important challenge for us to understand and for us to be able to bifurcate that effectively, right? It's really about being able to keep that R&D engine, with still the capacity, to, you know, to manage the growth and output, which, you know, we certainly have and expect to do going forward. You mentioned there the headcount growth, very substantial in 2022. I think 40% growth in total employees, if my numbers are correct. How do you think about that recruitment and attracting talent piece? You know, are you finding availability of a skilled workforce to be an issue, or are you seeing significant wage inflation? How are you navigating that particular element? We, you know, it is, it is a challenge, you know, I think for any company to grow at the rate that, you know, we've been growing. I think from a, from a skilled workforce perspective, we've done a good job of attracting a rather large expat community to, you know, to the manufacturing site. We have, I think, over 60 nationalities that work for Alvotech around the world. It's also all similarly diverse at our manufacturing facility in Iceland. I think we've done a good job of, you know, attracting folks. The other thing we do is that there are actual parts of the development process that lend themselves to decentralization, right? You know, we're, you know, as a company that's looking to access the entire globe, you know, regulatory environments are different everywhere. We do have centers of excellence in India and Switzerland and the United States, for example, to help us, you know, on that front. You know, clinical research is obviously done in many different markets around the world. Again, that's a, that's a great place to, you know, decentralize your workforce, but still gain, you know, the kind of efficiency that we need. Of course, training, I think, is important, I think in any industry, but in the pharma industry in particular and how regulated it is, it's also a key piece to ensuring that you can manage the growth, which, you know, as you noted, has been substantial over time. Absolutely. linked into that, how do you think practically about DE&I in your operations? you know, Who manages that, and what practically do you do to try and maintain that diversity through your team? You know, I think most of our sustainability initiatives in general are an ongoing discussion between management and the board. Right? We have a Corporate Sustainability Committee at the board level that oversees our targets and our goals. We work closely with the board to ensure that we're, you know, aligned on those things. I think on DE&I specifically, you know, the company, you know, we just recently issued our recent Equality Report, and I would like to take a lot of credit for, you know, for the results that we've been able to generate thus far. In large part, I think it's naturally a part of the company's culture. you know, although we're a global company and we have sites all around the world, there is a very much Icelandic and Nordic heritage to the company. There's a framework actually that exists in Iceland, you know, around equality. We've tried to roll that out to our other sites. I think, you know, that's a big part of it. The other big part of it, of how to practically maintain it, I would say, you know, part of the reason why we do these disclosures and collect this data is so that we can have something to work towards and something to measure ourselves against. I think that's one of the reasons to do that, is so that we can have that practical conversation with the board and internally at the company just to make sure that we're continuing our practices. Absolutely. Another piece, I guess, to think about the environmental side, perhaps, of the expansion. Mm-hmm. Obviously a very different environmental footprint when you expand into manufacturing from where you were with HoReCa. How do you think about managing that piece? Can you give us a bit of color around your processes there and the key hurdles, the things that you're identifying and working on first and foremost? Yeah, absolutely. You know, I think from the environmental piece, one of the advantages of operating where we do is that A, it's on an isolated grid, B, it is that grid is supports almost exclusively renewable energy. From an emissions point of view on Scope 1 and Scope 2, you know, we're essentially close to zero just by, you know, just by definition. We also have access to clean and hot water, which is incredibly important for biologics manufacturing. I think our biggest initiative now, I think this is an initiative for any young company, is to really understand our environmental footprint more broadly. Because we are a global company, we intend to distribute our products globally. Biologics and all pharma actually is highly driven on a pretty complex supply chain and value chain. As we do some disclosures on Scope 3, but it's really our goal is to understand what that is so we can really do something about it. Intrinsically, you know, I think it's a very, very good natural footprint. As we start to globalize, I think the key thing is to understanding what it is. Again, we do publish some disclosures, but it's a process, of course, to really understand your footprint on a Scope 3 basis. Absolutely, yes. It's always gonna be an iteration, especially as you say, as a young company. Linked into that, perhaps, you know, question around supply chain and just how you think about supplier standards and how you monitor and audit through your Scope 3 to that point, but also more generally across both the environmental and the social pillars. Be great. Yeah. A good question, I think that is one area where we plan to target in 23, is to roll out a supplier code of conduct and work with our suppliers. Interestingly enough, we are a supplier, we've had to answer a lot of questions on behalf of our partners more recently as they're doing their analysis. We have a good sense of where we need to get to, that's something that we certainly need to do. It's a focus going forward 'cause as I mentioned earlier, there's a lot of inputs that go into pharma production and biologics production. That's something that is a goal for the board and a goal for the company as well. Thank you, Ming. Maybe just coming back a little bit to the access of medicine part, and, you know, to come back to this, it's about, it's a lot about, you know, how biosimilars are penetrating and being received in the U.S. You touched a little bit about this at the beginning, but I just want to maybe focus on this aspect of the debate. What we've seen, you know, initially is the U.S. has very clearly lagged Europe in terms of adopting biosimilars. We've seen a lot of barriers to entry. Your competitors have taken a lot of time to launch biosimilars. The first commercial experiences as well have been quite difficult. Over time, we've seen this improving and the launches of the last kind of few biosimilars have had much better trajectories. If you just could maybe come back a little bit on this and how you see the landscape right now, and what are the levers that can, you know, be, you know, be activated by, you know, government, different stakeholders to further improve this access and help you in your mission to bring, affordable care? Yeah, absolutely. You know, as you mentioned, there has been an evolution, and I'd say the early days of biosimilar launches in the U.S. have been, you know, you could call it disappointing. You've seen a, you know, a lot of change in the more recent biosimilar launches, specifically in the oncology space. You know, I think one thing that I mentioned earlier, of how, you know, some of the hurdles biosimilars face, is keeping up with the originator presentations, right? I think, you know, at our first product, you know, which is now launched in 17 markets, is a biosimilar to HUMIRA. Here's a market where they've changed the presentation, from a low to high concentration. They changed the device, they did a number of items that we, you know, reacted to as part of our development. In that particular case, in the U.S., that presentation that we developed is now over 85% of the Humira market, you know, in the U.S. I think the second part of it, as you mentioned, different levers. One of the levers, particularly in retail products for chronic treatment, PBM driven products in the U.S., you know, I think interchangeability can be very important. That is something that we're a big advocate for. Two of the products in our pipeline for the U.S. market are having gone through an interchangeability study or we intend to go through an interchangeability study. Where applicable, we will, you know, we will look to do that more often than not. I think, you know, I think going forward, the government in the U.S. is certainly promoting biosimilars, right? I think, you know, you can see in some of the things that have come out of the recent administration on pricing and reimbursement, biosimilars are advocated for strongly. Interchangeability is something that the FDA has advocated for as well as the government. I think, you know, the language is there. I, you know, I think ultimately, you know, time will be the friend of biosimilars, and that I think, you know, overall, when we see regulatory changes, you know, we hope and we believe that those will be positive to biosimilars. Thank you. That's for the U.S., very clear. When you think about ex-U.S., I want to talk a little bit about your global footprints with your ex-U.S. partners. You know, can you tell us where you see the largest opportunities outside of the U.S.? As well, when you think over time, how do you expect, you know, your revenues to shape over time between U.S. and ex-U.S. regions? Yeah. I mean, obviously, Europe is the most mature biosimilar market today. It's actually the biggest biosimilar market is in Europe. Financially, that would be, you know, that would be target number two behind the U.S., which is the biggest, pharma market more broadly. You know, but I, but I think in general, going globally, I think has a lot of benefits because it, you know, really helps diversify. I think particularly in some of the smaller markets is where you can see some of the emerging markets is where you can see the biggest difference in patient access. We are focused, and we're bound to focus because we have partnerships in markets, you know, all around, all around the world. Oh, I'm sorry, what was the second part of that question? It was how you think your revenues are going to shape over time. Yeah. Between the U.S. and ex-U.S. markets. Yeah, absolutely. Generally, biologics, and pharma more broadly, I would roughly estimate somewhere between 65% and 70% is U.S., and the rest is ex-U.S. Because the ex-U.S. portion has the potential of expanding access a little bit greater than the U.S., I would imagine that you know, biosimilars would roughly break down into that ratio, except maybe a little bit higher for the ex-U.S., simply because of the opportunity to expand. It makes sense. Also, you know, just thinking about from a business perspective, the evolution of your revenue stream and your P&L over time. You know, biosimilar business is a relatively new industry overall. We are still, you know, seeing the industry shape. We are seeing consolidation. It's quite difficult to understand how revenues are going to evolve over the long term due to the, you know, number of moving parts, because we are seeing volumes overall of the biologics going up with better access. We are seeing price going down. You know, competition seems to increase. We seem to see over time for the same biologics, new competitors coming into the market. However, we could also reach a point where it's difficult for new players to make a return on their investment, and they could also drop on the market. Just when we take a biologic in particular, how do you think about the long term, you know, revenues and profit of each opportunity? Then when you take a step back, how do you think about your business overall, you know, considering this dynamic? Yeah. Great question. So we see, you know, biosimilars as something that can grow over time, right? 'Cause penetration will, you know, grows over time, and that the tails are more sustainable than, let's say, small molecule generics where the competition is higher. You know, I think it is, it's a long-term race for us, and we think that these are long-term, you know, opportunities going forward. It also helps to be global, right? A lot of these markets are retail and there's a branded element, and so we need to build that brand with our partners, you know, all over the world. Every market may have a different market dynamic, but when taken in totality, we think these have somewhat longer tails. Our thesis as a company, right? We discussed this going in the very beginning, is that we're a B2B platform, right? We focus on manufacturing, we focus on development, we rely on our partners for commercialization. The theory is that we can add products over time, right? Into our development pipeline, get them onto the market, we can add them faster because of the number of opportunities that are out there faster than the tails would decline on these products. That's how we intend to leverage the platform. Yes, we give up, you know, we give up revenues as part of our commercial agreements for different reasons, but we believe we, you know, we can add these, you know, more quickly over time. That's really the fundamental business thesis, which maybe I forgot to mention earlier as to why we have this model. Is to be able to leverage this platform through a more expansive portfolio, right? We have eight products today, but that's just what we've disclosed, right? We're, you know, obviously because we do early development, early cell line development, we're always working on biosimilar targets and clone selection, you know, at an early phase, which we can then quickly move into, you know, further on in the development process. Ming, just maybe to add a little on that point, we have a question in from the audience around the pipeline and particularly the opportunity in ophthalmology biosimilars. If you could give us a bit of color around what's happening there and your plans, that would be much appreciated. Yeah. Just they're referring to AVT06, which is the biosimilar candidate for Eylea. Eylea is a very, you know, big, you know, big product. You know, certainly, you know, I think we're not the only ones working on it, right? I think it'll be a, you know, a competitive space, but we intend to, you know, to have the presentation that is now taking up most of the market, which is the pre-filled syringe. We're developing that as part of our program. The other thing I would say is that the ophthalmology space for biosimilars has recently formed, right? Not, not in, not in Eylea, but in Lucentis. I think, you know, similar to what we've seen in oncology, we're going to see a gradual. We're happy that Lucentis has launched. See a gradual appreciation because it is a very targeted community, right? Ophthalmologists and I think over time, I think, you know, time is the friend here. You know, we think there'll be more acceptance in that community, we're excited about this opportunity overall. Great. Thank you for that update. Can I maybe ask a very general question around the sustainability strategy in the organization and how accountability and responsibility is thought about at Alvotech? Can you maybe give us a bit of color on where that responsibility sits and how it factors into things like remuneration, if it does, or how different parts of the organization take charge of that broader ESG impact, do you think? Yeah. No, absolutely. Good question. Again, it starts with the board. The board has conversation with management. Robert, who's our CEO, is on the Sustainability Committee, right? It's led by an independent director, but Robert is also part of that Sustainability Committee. We meet, you know, throughout the year during the board meetings, and we have discussions about targets that we, you know, set for ourselves. We do have targets, and some of those targets are brought down to individual folks. We have yet to widely disperse those targets across the organization, and I think that's a level of maturity that I think we can get to. It's something that the board is certainly considering. You know, I think we're a relatively young company, so we're trying to make sure that we take these steps in gradual fashion so that they're not just well-intentioned, but also effective. Certainly there are targets and objectives set at the board level to management. Management executes on those, and certain managements, you know, are tied to their personal objectives. I think the next step would be to do that more broadly, and certainly the company is something that the committee is definitely wanting to do. Absolutely. That makes sense. Linked into that policy piece perhaps, you know, you alluded to earlier your process for thinking about partnerships and how you go about selecting your partners. Can you maybe just delve a little bit more into that and as much as you're prepared to disclose, of course, around how you think about that selection, what sort of standards you expect and sort of how that process actually unfolds practically? Initially, you know, it really starts with understanding, 'cause again, we, you know, we're not selling anything, but we can try to understand what our partners are doing to maintain their practices, right? Every company that we work with has some, you know, their own policies and their own procedures, and it's something that we do as part of our review process initially. Going forward, of course, I think it's about establishing a more routine oversight from our perspective. That's not uncommon in our industry, right? Because, you know, even though there's not that many B2B biosimilar companies, there are B2B companies and even companies that aren't B2B, they do a lot of things through partnerships. It is something that, you know, we will go moving forward, but the first step is, of course, understanding what our partners do. That's something that's done at the first step. Perfect. Thank you. We've just had one follow-up question around the ophthalmology biosimilar. Can you just give us a sense of timeline, first of all, and whether PFS is included in the trial? We are currently in clinical trials, you know, I should say patient studies. Six is an interesting one 'cause generally speaking, you need two distinct studies. For this one, because of the nature of what it is, you know, it's all done in one study, right. That study is ongoing. PFS is part of it, yeah. Or is part of our program. Understood. That's great. Thank you very much for your time, Ming. Thibault, do you have Anything else at all? No. I think we covered a lot of topics, so thank you very much, Ming, for joining us. Yeah. Thank you. Thank you for having me. Yeah. Great overview. Yeah. Thank you very much for your time and great to see what the company's doing. Thanks everyone on the webcast for joining in.