Good day, and welcome to the Procaps Group webinar. Today's conference is being recorded. Please note that some statements made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties. Any statement that refers to expectations, projections, and/or future events, including financial projections or future market conditions, is a forward-looking statement. The company's actual future results could differ materially from those expressed in such forward-looking statements due to a variety of risks, uncertainties, and other factors, including, but not limited to, those set forth in Procaps Group's SEC filings. Procaps assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. At this time, I would like to turn the conference over to Melissa Angelini, Investor Relations Director of Procaps. Please go ahead, Melissa. Thank you. Hi, everyone, and thank you for joining. Welcome to our first Procaps Invest webinar. Today, I have the pleasure to introduce Mariana Sarasti, Director of Pharmaceutical Industry Chamber within the National Business Association of Colombia. Mariana is an economist from The University of Chicago, with a specialization in socioeconomics from Universidad de los Andes, and a master's degree in public administration from Harvard University. She will give us an overview about the Colombian pharma market, its regulations, and its main actors. At the end of the presentation, you will all have some time for questions, which can be done through the platform. The webinar will be available on Procaps IR website. With that, I will pass it over to Mariana to begin the presentation. Mariana, thank you so much for your time. It's a pleasure, and go ahead. Thank you, Melissa, and good morning to you and to everyone. It's a pleasure to be here, and as Melissa said, I'm open for questions at the end of the presentation. So this is the agenda for today's presentation. I'm gonna talk a little bit about the health system in general in Colombia, then about ANDI, which is the business association, the National Business Association of Colombia, and in particular, the Pharmaceutical Industry Chamber, of which I'm the Executive Director, and then a bit about the pharmaceutical market more in particular. To start with the health system in Colombia, the first place to start is really the coverage rate. And as you can see in this graph, 30 years ago, in 1995, we had a coverage of about 20% of the population. What that means is that only 20% of the population had some type of insurance coverage for health. Today, we have virtually 100% of the population covered, and that is very significant and not very typical of the Latin American region. What you see in the bars is a difference in colors, and the green means the subsidized regime or the subsidized plan, and the dark blue is the contributive regime or plan, which is paid for by the workforce, by the workers and the employers and the employees. And then the light blue is just a smaller percentage of a special regime, which includes the army, special forces, and some public servants as well. So this is a big, this is a big picture of coverage in Colombia and how it has been increasing and improving. Behind that, of course, you see a significant increase in the budget, in the national budget allocated to health. Here you can see how both the national budget has been increasing in the past eight years, as well as the health budget has also been increasing. It's key to point out that right now in 2023, and it will also be like this for the year 2024, the number one sector for budget allocation is education, the numbe rtwo is health, and the third is defense. I would like to point out that this is very significant for the Colombian panorama, because defense used to be the number one sector for national budget allocation for the past 50 years. This, of course, has to do with the Colombian internal warfare, but thankfully, we are seeing how this is changing, and defense has been going down in the budget allocation, and we see other sectors coming up. I would also like to point out here that although it's not so clear to see it in the lines, because the numbers are so divergent, but the increase in the national budget between 2022 and 2023 was around 11%, while the increase for the health budget was around 16%, so significantly higher than the total pie, than the total national budget. It will continue to be like this also for 2024, which is actually being the national budget is being debated right now in Congress, for the budget for the next year. But this is something that I really like to, to showcase for Colombia, and it also is a consequence of what we were seeing in a, in an increasing budget in the last few years or in the last, you know, few decades, probably, and it's the out-of-pocket expenditure in health. And what this is, is what's the percentage of the health, expenditure that every person is paying out of their own pocket, of course. So the average for Latin America is around 38.6%. And the average for the OECD countries is 19.2%. Colombia is down here in the green with around 15%, so significantly lower than the average for Latin America, and even lower than more developed countries that make up the OECD pool of countries. This is something that we saw during the pandemic, definitely, where Colombians, of course, had a shock because of the pandemic, but we did not have financial shock or economic shock at the household level. This is because we have such high rates of insurance coverage and both for workers and in the informal sector as well. That's something that we definitely could see as a result of this well-functioning system that we saw during the pandemic. Some health indicators, and this, I want to bring some key indicators and see how this has been evolving in the last 10 years. Birth rates have gone down from 16.5 for every 100,000 people in 2011, to around 12% for every 100,000 people in 2021. Maternal mortality rate, this has actually gone up, and I wanted to bring it anyways because I think it's important also to be honest, and to show, you know, it's more credible if you show the real picture. Maternal mortality rate went up in 2020 and 2021, but because of the COVID effect. So the number of deaths recorded here for pregnant women weren't. We can't have the separation between deaths because of COVID or deaths because of pregnancy-related illnesses. It actually went up, but we think this went up because of COVID, and it's good to see what will happen in the numbers that will come up for 2022 and 2023, to see if that tendency stayed up or if it actually went down again. In terms of neonatal mortality rate, we have 9.6 deaths for every 1,000 births in 2011. In 2021 and 2020, we have 7.2, so an important decrease. In life expectancy, we went from 76.6 years in 2011 to 76.02 in 2021. In the immunization program, we also see a decrease, unfortunately. So we had 90% national coverage. And what I mean by the immunization program is the, you know, all the vaccines that the health system or the health minister recommends for the population, national system pays for this immunization program. So we had a pretty good rate of 90% of the country. It went down to 88.5%. And again, the reason for this is COVID. And, but the reason for that is that, unfortunately, people started paying much more attention, unfortunately, but it's very understandable. And actually, this happened in many other countries. People started paying much more attention to the COVID vaccine, and that implied maybe less attention to the other vaccines. So, this is something that both the private sector and the public sector, to make sure that these numbers come up again. Here, I wanted to give you a little bit of an overview. Who are the actors in the health system? So, this varies significantly from country to country, and it's hard to understand exactly how it works in every country. But more or less, these are the main four actors in the Colombian health sector. So first of all, we have the EPS or HMOs. They're similar to the HMOs in the U.S., the health maintenance organizations. And what they do is that they receive and administer the funds. Funds from both the private businesses, but also the public sector. And they work as an articulating agent. They manage the health risk of their, of their affiliates, but also the financial risk. So because they receive the money, most of the money, before they use it, they need to manage that financial risk, of course. So those are the EPS or HMOs. Then we have the IPS, which are basically hospitals and clinics, and also laboratories, and they're responsible for providing the attention to users, of course. Many IPSs are linked to the EPSs and many are not. So you have a pool of different, both HMOs and clinics and hospitals in a, in a network all throughout the country. You have what we call the providers, which are the pharmaceutical industry, pharma producers, medical devices, producers and importers, medicinal gases, that are also mostly produced in Colombia, and many other health suppliers that, again, supply both the IPSs and the HMOs. Finally, you have the logistics operators that work as intermediaries between all of these actors. They may be drugstore chains, but they also dispense or provide medicines directly to patients when they have that type of contract with hospitals and clinics and HMOs. Basically, the pharmaceutical industry here, which is whom I represent, can sell to either one of these other actors in the system. Mostly to the logistics operators, but also directly to hospitals and clinics, and also directly to HMOs. And here I wanted to show you some key results from a nationally wide poll that ANDI had done. Maybe we had that done maybe six months ago or eight months ago. This, of course, was in order to bring more information about what people thought about the health system, in the middle of a debate that, and I will go into that, of the health reform that's being debated in Congress right now. So there's some very interesting results, and actually, they were a surprise to even us. We weren't sure the results were gonna be so positive. This was a statistically significant poll, and people around the country were polled, and both rural and urban in both rural and urban areas. So in terms of the quality of service, more than 70% of the respondents rated the health services they receive above 3, on a scale from 1 to 5. In terms of access to the system or access to the health services, 79% of the rural populations said they had access to the health system, and 72% of the urban population did so as well. This was particularly interesting and surprising because one of the things that is most discussed right now in the health reform bill is precisely the access to the health system. So one thing is the coverage, which is, as I mentioned before, around 100%. But then, I'm sorry. I got distracted. I'm sorry. But then the other thing is the actual access that you have to the health system and to the health services. And one reason why it's. And And we thought, or in general, the belief was that in the rural areas, access wasn't as good as in the urban areas. And we actually got a different opinion from the users, and it may have to do with, you know, traffic in the urban areas and length that it takes for you to go to a hospital or to a clinic in the urban areas. What are the system challenges? So the number one thing that people pointed out was opportunity in finding appointments. Opportunity means, and I don't know this is a good translation, but in Spanish, opportunity in the health sector means timing. So how long it actually takes for you to get an appointment, and especially to get an appointment with a medical specialist. In terms of attention, 87% received more than one healthcare or health service in the last 2 years, and that's actually pretty high for international terms as well. And 70% of those 87% who received some type of service rated the care as excellent. In terms of the bill, the reform, 67% of the respondents considered that there should be no structural reform to the health system in Colombia, and 71% expressed concern for a system whose funds are administered solely by public entities. So maybe I can... Give me one second. So, part of the reform, what they're debating in Congress in terms of the reform, is how the system is administered and what are these actors that I showed you before. And one of the possibilities is to get rid of the HMOs completely, so that financial risk and that health risk will be now- will be then managed by the public sector directly, without this private actor being the administrator of the fund. So this is what this refers to. And we have that 71% of the population would be concerned of making that move. Okay, so, that's what I wanted to talk to you about the general health system. Now I'm gonna talk a bit about ANDI, which is a business association that I represent, and the Pharmaceutical Industry Chamber. ANDI is the biggest business association in Colombia. It has more than 79 years. Next year, we're gonna be 80 years old. It has 1,400 affiliates, which represent between 50%-55% of national GDP. We have interactions, of course, with the private sector, academia, international environment. There are many of those 1,400 affiliates that are multinationals or businesses from other countries who operate in Colombia, civil society, and of course, the public sector. ANDI is concerned and works for, obviously, business development, but also national development. This is part of our DNA, is the development of the country as a whole. These two together, and this is our motto: to promote economic, social, and environmental development within a participatory democracy, strengthening free business competition. And then within ANDI, we have different chambers for the different sectors of the economy, and so I represent the Pharmaceutical Industry Chamber. We have 81 affiliates, representing pretty much all regions of the globe. And those affiliates produce both prescription and over-the-counter medicines, as well as dietary supplements, and APME, which stands for Special Medical Purpose Food. And so we also represent those producers. And the Pharmaceutical Chamber represents about 80% of its total sales of these products in Colombia. So we have a pretty good representation of the whole country. And I think it's important to note that, this industry is definitely one of the most, I would say, interesting industries right now, in the country. There's a big emphasis on how to promote and strengthen, pharma production in the country. And this is something that the government is aiming for, as well as, of course, the private sector. So I think it's a very interesting moment for the industry. And I think post-COVID, everybody understood how important this sector is. And so there's definitely that emphasis there. But the other thing that I think we learned from the COVID pandemic, is how resilient this industry is as well. There are more than 100 production plants in this sector, in Colombia, alone. While I represent 80% of the sales, that other 20% is mostly local producers, more medium-sized and small-sized. What that means is that this is really a robust sector, with healthy, I would say, healthy, robust competition. In terms of national production of pharmaceutical exports, this is the... For the past 10 years, you can see how it's been increasing. In 2022, the pharmaceutical industry represented around 12% of industrial GDP. In exports, however, not so much. You can't see that improvement, unfortunately. This has to do with raw material, which have been scarce for the past years, again, as a result of COVID. We're big importers of raw materials for this industry, but also with exchange rate, et cetera. But this, again, is something that both the government and the private sector have as a big goal for next year. And we actually have a roadmap that seeks to increase the value of the exports to $1.8 million by 2032, and there's a bunch of commitments in order to make this possible. Okay, where do we export to? So we mainly export to the Latin American region, starting with Ecuador, Peru, Panama, Chile, El Salvador, and Mexico. But we also do have some exports to more developed countries or sophisticated markets like the U.S. or the European Union. And I would add that between those who get to export to those more sophisticated markets, Procaps is definitely one of the big players that is exporting to those markets. What do we, what do we export? We mostly export over-the-counter generics medicines, but also dietary supplements, vitamins, antibiotics, and also vaccines. What are the key drivers of the pharmaceutical industry in Colombia? I'm gonna read this slide because I think it's important. This is the result of a, you know, big studies between the private sector and the public sector together, and this is coming from past governments all the way to the current government, which is continuing to see the importance of this industry. The compliance with high quality standards by the industry for the production and marketing of medicines, compliance with good manufacturing practices, knowledge and basic infrastructure for the development of clinical studies. INVIMA, which is the regulatory agency or like the, the U.S. FDA. So the INVIMA's capacity as a reference regulatory entity... And this is important because what it means to be a, an agency of reference, is that the Pan American Health Organization, which is part of the World Health Organization, you know, has a ranking for these agencies, and Colombia is in the highest ranking of the region. So that's important, and it's a key factor in order to be able to produce more and quality products that we can then export. Highly qualified labor for the production of medicines, private sector capacity and capital to invest in productivity initiatives, ability to satisfy demand and volumes of medicines for foreign trade and production capacity for all types of pharmaceutical forms. This is what we've identified as the key drivers. Finally, I wanted to show you, and I've been talking about, the current government's focus on this sector. There's industry policy, and the government has called it the re-industrialization policy. They have identified five sectors that the government wants to focus in, and one of those is the health sector, and in particular, the pharmaceutical sector. The objectives of this industrial policy are to close productivity gaps, to strengthen productive chains and investment, to diversify and sophisticate the internal and exportable offer or supply, to deepen integration with Latin America and the Caribbean, and to foster multilateralism also with more developed countries. And the specific measures include capital and financing, and this is investment for productive and sustainable transformation, financing for industrialization development and international trade and research and development, investment by public companies and mixed companies, and this has a lot to do with efforts to produce vaccines locally. Colombia used to produce vaccines maybe 30 years ago, and we stopped. And again, as a consequence of the pandemic, both the private and the public sector and academia see a very interesting sector to develop in vaccine production. And inclusive and sustainable trade. And then training in human capacities is building of knowledge networks with support of the Colombian diaspora, capacity building among public officials and policymakers for reindustrialization and internationalization. And finally, in technology, they want to foster alliances for technology transfer and supplier development, which I think is key, and creation and strengthening of research centers and generation of alliances for basic and applied research and businesses innovation. So this is actually, I think, a lot, a lot of words that might be confusing. This is exactly how the government is wording it, but I think what's important is what's behind here, which is this sector has been chosen as one of the sectors with the biggest potential and interest. And there are financing instruments for this sector, and there is a big willingness from the government to work together with academia and the private sector, to see where we can invest and where we can work together to develop and strengthen this sector. So that's the industrial policy, and that's the end of the presentation. So thank you very much, and Melissa, we are open for questions. If you wish to ask a question, please click on the Q&A button. Wait while we poll for questions. Mariana, thank you so much for the presentation. We do have already a few questions. So the first one is: in line with what you were just explaining, what would you say can be improved in the Colombian ecosystem to foster the industry's development? Thank you. Yeah, I think maybe I would choose two main things. So the first one is human capital, and I showed it as one of the key factors. And I think human capital in Colombia, in this sector, is good, but we need to foster and invest in much more human capital in order to make a leap to producing, for example, biologicals or more added value type of products. So to give you an example, maybe 15 years ago, there was only four schools that had a degree in pharmaceutical chemistry. Right now, we have more than 10 schools that have that degree at the undergrad level. But we need more schools, but also more master's degrees and PhDs. And if we want to make the leap again into biologicals, we need more, you know, general science students that go into those areas thinking of then going into industry. So there's one thing that I would pinpoint, that we—if we want to be able to absorb knowledge transfers from multinationals, we need to have that capacity at the labor market. And the other thing, and I think it was mentioned in a question, is INVIMA's capacity. So as I mentioned, INVIMA is definitely a recognized agency in the region. Many other agencies in the region want to take best practices from INVIMA back to their countries. But we have been seeing in the past year, and actually it's not only in the past year, but maybe the past few years, a slowdown in sanitary authorizations. And this is something that we are definitely worried about, but that we're working on with INVIMA. So from the industry, we're providing, you know, possible solutions to their slowdown. And hopefully, they will take these solutions that are, you know, created with the academia. And actually, ANDI is working on some proposals for INVIMA, with academia and also taking best practices from other countries, so that both INVIMA, but also the Health Ministry, take those on, and we can solve those issues that we've been seeing as of late. So those two things I would point out. Thank you, Mariana. So I'm gonna read the question that we have that is related exactly to that, that you were just saying about the drug approvals. So the question is: There was a slowdown in drug approvals in Colombia earlier in 2023. Was this partially connected to the healthcare reform? Has the approval of drugs picked up, or does it still remain slow at this point? No, it has nothing to do with the health reform. I think it's completely disconnected. I think it has more to do, unfortunately, with the change of government and the new government. It's been slow in picking up, and actually, there's been a lot of turnaround in the workforce inside INVIMA. So I think it has a lot more to do with that. And what was the second part of the question? Sorry. If you see this. Ah. This slowdown still at this point? I can say that we see big efforts from the entity to improve. So I think that, and I think that's positive. And this is in the past couple of months, they've been issuing new regulations that will help them speed things up. So I think that we will start seeing an improvement in the next couple of months. Perfect. Thank you. The other question is regarding the disbursements and how does that work? Or can you explain a little bit more how it works, the disbursement between the government and the HMOs and the EPSs? That is a little bit more complicated, but I will do my best. So, Colombia has a large, we call the benefits plan. So most of the drugs, most of the medicines in the sector are covered by the system. What that means is that the government allocates a budget that gives directly to the HMOs, and the HMOs, as I was saying, they manage the risk, you know, with their patients or with their affiliates, and with the type of illnesses that they have in their affiliates. So that's how most of the money is being transferred to HMOs. Then HMOs pay, you know, the services that the clinics and hospitals provide, and then the clinics and hospitals pay for the pharmaceutical industry and the other things that they have to pay for. But then there's also a smaller piece of the pie, which is not covered in the benefits plan, which is high cost, mostly high-cost drugs, and those are reimbursed. So the HMOs pay for it upfront, more or less, and then they get reimbursed by the government. So more or less, that's how it works. Great. Thank you. Next question is: What is being discussed in the health sector reform bill discussed in Congress right now? Okay. So, it's a long bill, and it has to do with the whole health system. But the main issue or where the most discussion is right now is with how is with this actor that I call HMO. Is the most similar actor to the U.S., so that is an HMO. And what the government is proposing in this bill is to get rid of this actor as a health and financial risk manager. And what that means is that risk will be transferred to a public entity, and the public entity will be in charge of managing the financial risk and managing the health risk of the population, and disbursing the money directly to clinics and hospitals. So that's the main change that the bill proposes. And of course, there's a lot of intermediary solutions to getting rid completely or to having the HMOs as they work right now. And so there's a lot of alternatives in the middle that are being discussed, but that's the main issue. And actually, and there's obviously articles concerning many other sectors. So, for example, there was one article, and the bill was being discussed in this, in the second debate at the House of Representatives yesterday, and it will continue to be debated today. But in the debate... I was just reading before our meeting. I was just reading the what happened last night in Congress, and two articles that concerned the pharmaceutical industry directly were erased, and that was, you know, one concerning pharmaceutical policy, and yeah, it had to do with pharma, and those were the two articles that concerned me the most because they were directed especially at pharma, and they were actually erased. So there's many, you know, things being discussed within the bill, and there's actually different bills, not only the governmental bill, but also there's been bills presented by other parties in Congress. And so we will see what you know, we will see what happens, but it's a big, big mix of many things. But what happens to the HMOs is maybe the biggest issue being discussed. ... Okay, thank you. And now, Mariana, going back to the reimbursement policy or how it works, the other question is: who sets prices for drugs? The manufacturers or the plans, or, or how does that work? So we have—as I said, we have a robust market competition. So for most medicines, it's the market, and there's healthy competition. However, we do have price regulation for a group of medicines. And the number of medicines with prices being set by the government has been increasing. And we're actually seeing right now, we're in the process of discussing with government, the new methodology for the new price setting. And again, this doesn't involve the whole pie, but a subset of drugs. And so we do have regulation, but not for the whole market. Thank you so much. I think we have a couple more questions. So the following one is: what are some specific initiatives that the government is supporting to strengthen the pharmaceutical industry? Well, I showed you at the end some of the, you know, what are the key areas where the government wants to focus on. But I would say vaccines is definitely one of the focus for the government. And they're working with a couple of universities. So, public universities, working together with government to see where they can, how they can go about producing vaccines. But there's also private sector initiatives to produce vaccines, and I think that's important. And I think it's important that we have, you know, the whole mix. We have public sector, and that's how many other countries in the region have been able to, develop vaccine. Vaccine production is with a hard investment by the government, but also hopefully mixed, you know, public-private partnerships and also solely private. So we have maybe those three areas developing, and I think, I think it's important that that you do it like that. Now, it's also important to point out that Colombia is a country with 50 million inhabitants, and that is, you know, significant for the region. But for production of vaccines, you need to be able to reach other markets as well, so that your investment makes sense. So it's important to have a very well working INVIMA or FDA, so that we can get recognition in other countries, and we can export, eventually, the vaccines that we produce to other countries as well. Thank you so much. Another question is: how do you see Procaps in this challenging environment, in the pharmaceutical industry in the region? Well, Procaps is definitely one of the leaders in the country. It is a, you know, it's a Colombian company that now. Well, it's a public company in the U.S. And as I mentioned, Procaps is one of the few locally produced or local producers who exports to many countries, and including developed countries like the European Union, countries in the European Union and the U.S., and Canada. And so it's definitely one of the leaders in research, development, and innovation. And actually, talking about innovation, ANDI has a ranking of innovators. So out of our 1,400 affiliates in all different sectors, we have a ranking of who are the most innovative businesses. Procaps has been ranked within the 31st innovators out of the whole, you know, range of industries. For the past 5 years, Procaps has always been ranked in the first, 30. In the pharmaceutical industry, they've always been the number one innovator. So, I would definitely highlight the importance that Procaps gives to innovation, and how that has enabled them to, you know, be an international competitor. Okay, thank you. So for now, we have no open questions. I'm just gonna pause for one minute to see if someone has another question. If you guys want to do or, or send another question, just please access the Q&A button. Let's just pause for a minute to see if we have anything else. No, apparently there is not. So, Mariana, I thank you so much for your time, and presentation. And hopefully, hopefully, that was very helpful to, to everyone who is listening. Thank you, and have a nice day. Thank you, Melissa. Thank you, everyone. I hope it was hopeful, helpful. Bye-bye. Good morning. Thank you very much. Bye-bye.