Alvotech (NASDAQ:ALVO) Q4 2024 Earnings Conference Call March 27, 2025 8:00 AM ET

Company Participants

Robert Wessman - Chairman, Chief Executive Officer
Anil Okay - Chief Commercial Officer
Joseph McClellan - Chief Scientific Officer
Joel Morales - Chief Financial Officer
Benedikt Stefannson - Vice President, Investor Relations

Conference Call Participants

Ashwani Verma - UBS

Operator

Good day and thank you for standing by. Welcome to the Alvotech Q4 2024 earnings call. At this time, all participants are in a listen-only mode.

After the speakers’ presentation, there will be a question and answer session. To ask a question during this session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star-one-one again. Please be advised today’s conference is being recorded. I’d now like to hand the conference over to your first speaker today, Benedikt Stefannson, VP of Investor Relations and Global Communications.

Please go ahead.

Benedikt Stefannson

Thank you. Welcome to Alvotech’s full year results call for 2024. Yesterday evening, the company issued a press release with the full year results and an accompanying presentation that can be found on our Investor portal, investors.

alvotech. com, under News and Events. We will be referring to individual slides through the presentation today.

Our results announcement, presentation materials and some of our statements that we make today may include forward-looking statements. Please see our disclaimers on Slide No. 2 of the presentation.

These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. With me on today’s call are Robert Wessman, Chairman and Chief Executive Officer of Alvotech; Anil Okay, Chief Commercial Officer; Joel Morales, Chief Financial Officer; and Joseph McClellan, Chief Scientific Officer.

With that, I would like to turn the call over to Robert Wessman. Please turn to Slide No. 6.

Robert.

Robert Wessman

Thank you Benedikt, and thanks to everyone joining our call today. Last year was a pivotal and successful year for Alvotech, but before we talk about our performance in ’24, I would like to take a moment to recognize what we have built over the last 12 years. Biologics have become best-in-class medication for patients with cancer and chronic disease.

Because of the growing importance of those medications, access to low cost, high quality biologics is vital for patients and payors. The biosimilar industry is a young industry and the opportunities launching new biosimilars are therefore still enormous, and according to a recent report by IQVIA, 14 out of 62 biologics with main patents already expired have no biosimilar competition. Over the next decade, an additional 118 biologic medicines are expected to lose patient protection, and according to IQVIA, only 10% of biologics with near term patent expiry have a known biosimilar in development.

Also importantly, pharma development pipelines are happily focused on biologics. Approximately 60% of the pipeline of those top 10 pharmaceutical companies globally have assets in Phase II and Phase III which are biologics. Turning to the next slide, over the past 12 years, Alvotech has invested around $2 billion into its business.

Our strategic advantage in this space is the fact that Alvotech is a pure play biosimilar company with best-in-class end-to-end in-house manufacturing and the capacity to drive the company beyond 2030. Alvotech has end-to-end [indiscernible] capabilities in house and a global commercial reach to over 90 countries around the world. We have the strongest in-house developed product pipeline in the biosimilar industry based on official available data.

Ten products are in advanced development and additionally 18 molecules have passed cell line development. This pipeline with a total addressable market of over US $185 billion will define the company’s success in the years to come. With two products on the market, Alvotech is to some extent still early in its journey, yet because of this global reach, we have already executed over 50 unique launches across our first two programs.

With currently three pending submissions in major markets, we are planning several launches starting no later than fourth quarter of this year. For Alvotech, 2024 was an exceptional year. We delivered on all fronts and met the commitments made to our partners, our investors, and most importantly the patients that urgently need better access to affordable and quality biologics.

Our team delivered 2 million units of finished products in 2024. We continued scaling manufacturing quarter by quarter and delivered over half of the total volume of 2024 in the fourth quarter. This scale-up supported multiple launches throughout the year.

The most impactful were the AVT02 launches in the U.S., [indiscernible] Simlandi with our partner, Teva, and also the private label business with Quallent. Our launch of AVT04, our biosimilar to Stelara, was a very successful launch by our partner start-up throughout Europe. From an R&D perspective, the team’s hard work and dedication led to significant success in 2024 which resulted in two major U.S. approvals, as well as accepted filings for three additional projects in global markets that included the U.S., Europe and Japan.

The R&D unit also initiated the patient trial for AVT16, a biosimilar candidate to Entyvio. Finally, the cell line development group completed the development of 18 cell lines, positioning the company for accelerating portfolio development going forward. Alvotech is committed to best-in-class quality systems.

During the year 2024, Alvotech passed multiple inspections from a number of different health authorities around the world, including EMA and the U.S. FDA. The commercial team secured a private label contract for AVT02 with a major U.S. payor, and our U.S. commercial partner, Teva was able to secure an excellent formulary position which we believe will help drive further conversion in this market going forward. Our launch of biosimilar Stelara in Canada, Japan and Europe demonstrated the global approach that Alvotech takes to biosimilars, with revenues from ex-U.S. markets growing in both absolute and relative terms.

The company also met a significant capital markets milestone in 2024, raising over $300 million in capital, including $150 million in new equity in the first half of the year and refinancing all short-dated maturities in the second half, thereby removing all 2025 maturities and greatly simplifying our capital structure. Let us now turn to the next slide for a very brief overview of our financial performance in 2024, which Joel will then elaborate on further on this call. Great execution by the team in 2024 allowed the company to meet our full year financial guidance.

The revenues grew over 400% to $492 million. Adjusted EBITDA was approximately US $108 million, which represents an increase over $400 million compared to $300 million loss in 2023. For the first time in our history, product revenues exceeded milestone revenues and came in at just over $273 million, which represents an increase of 460% over the previous year.

One very notable point regarding our product revenues can be seen on the following slide in this presentation. Product revenues increased every quarter in the year in parallel with an increase in margins. Product gross margins were negative in the first quarter but gradually increased to 45% in the most recent quarter.

The driver for those increased margins, as we predicted early in the year, came from improved scale, process improvements, higher utilization and improved product mix. Looking forward, let me touch on how we see our top line revenues and margin growing over time. In 2025, we project total revenues in the range of $570 million to $670 million, which represents a strong 25% growth year-on-year as measured from the midpoint. Adjusted EBITDA is expected to be in the range of $180 million to $260 million, which more than doubles our adjusted EBITDA in 2024 as measured from the midpoint.

Joel will talk in more detail about the key drivers for this guidance in a moment. We also want to give you a view into our longer term financial goals, looking ahead to 2028. In 2025 to 2026, we anticipate sustained growth in revenues from our product launches worldwide from the proposed biosimilars for Prolia, Xgeva, Simponi and Simponi Aria, and Eylea low dose, while also driving markets here for our Humira and Stelara biosimilars.

2026 will be the first full year where all the three molecules are on the market. By 2028, we also expect to have launched AVT16, a proposed biosimilar to Entyvio and high dose Eylea, both products where we expect to be first to market, and we will annualize revenues from these seven launched molecules. Based on this momentum, our goal is to reach $1.5% billion in revenues and a healthy 40% to 45% EBITDA margin in 2028.

Before I conclude, let me touch briefly on our pipeline development and the significance of our acquisition of Xbrane’s R&D operation in Sweden announced late last week. As I noted earlier, Alvotech has been building an exceptional pipeline and our R&D capabilities are second to none in the biosimilar business; meanwhile, there is a large and growing unmet need for biosimilars. To meet this demand, we will leverage our R&D platform and expand our capabilities to accelerate the pace of development.

Three of our early stage programs are moving into preclinical development this year. In addition, we will start preclinical development of two additional candidates where the cell lines have already been developed. Going forward, we expect to have a similar cadence of four to six new development programs starting each year.

This represents a significant step up from the earlier announced cadence of one new program starting every 12 to 18 months, and reflects how the investment in our infrastructure and capabilities gives us a unique opportunity to ramp up. The acquisition of Xbrane’s R&D operation in Sweden is a part of implementing our accelerated pace of development. With this acquisition, we are acquiring a fully functional R&D unit and a team of professionals with experience in the development of biosimilars.

Sweden is the home of the second-largest biotech sector in the world after the U.S. By establishing a base in Sweden, we gain increased flexibility to attract employees from the local talent pool. In addition, the Swedish stock market is of course a very important international hub for trading in technology stocks, including healthcare and biotech. We are now exploring the possibility of listing of Alvotech shares on the Stockholm Exchange.

As a part of this transaction, we are also acquiring a new preclinical development program, a biosimilar candidate to Cimzia that is in the same category of biologics as Humira and Stelara. Cimzia has global sales of US $2.3% billion per year and Alvotech has the opportunity to be the first to launch a biosimilar of this product into global markets in the year 2028. Turning now to the next slide, I would like to summarize our key goals for this year as follows.

We expect approval for three biosimilars by end of the year and we will be ready to launch each product upon approval. We have increased the pace of development and five projects are entering the preclinical phase this year. We expect to deliver over 3 million units of finished products to the global markets.

We have a truly exciting and transformative year ahead of us, and with that, I would like to turn the call over to Anil Okay, our Chief Commercial Officer. Over to you, Anil.

Anil Okay

Thank you Robert. Let me turn to the next slide. We will start with a commercial update on our biosimilars to Stelara and Humira.

As we noted in our Q3 2024 earnings call, we had 1.3% million units in committed purchase orders from our partners in the U.S. for our biosimilar to Humira, which we delivered by end of last year with 60% of those volumes being delivered in the fourth quarter. These 1.3% million units were delivered both to our partner, Teva, and to the private label channel. As you recall, in April 2024 we announced our first private label deal for the U.S. market with Quallent, part of a subsidiary of Cigna Health.

The continuing growth in 2024 and the large volumes delivered in the last quarter of the year demonstrate the capabilities and the flexibility of our manufacturing platform, resulting in a rapid scale-up of capacity and level of execution which is of enormous value to our commercial partners. The volume shipped of our biosimilar to Humira represents about 12% of total U.S. demand for Humira and Humira biosimilars. After a very slow uptake in 2023, by the end of 2024 Humira biosimilars had, according to IQVIA data, reached about 21% share of the U.S. Humira market. It should be noted that this understates the real market share of Humira biosimilars as some of the private label sales are not represented in IQVIA data, including sales of Alvotech’s private label product.

We also see 2025 as being another transformational year in the market. All the major pharmaceutical benefit managers of all PBMs have now announced that they will exclude Humira from formulary. AbbVie, the manufacturer of Humira, has in fact stated publicly that the firms expect coverage for its brand to drop by 50% in 2025. We expect that the market share for Humira biosimilars can grow significantly in 2025 and that about 50% of the U.S. market could be converted to biosimilars by the end of the year.

Teva has been very active and strongly engaged as a partner, and we have great confidence in their ability to increase market share. We have a preferred formulary position with one of the largest PBMs and other regional players for Simlandi, our Humira biosimilar, and continue to seek further coverage. We have inventory already in place to push more volumes through the formulary channel and the capacity to respond to increased demand for biosimilars as the originator exclusions start to impact.

Now for a quick update on the U.S. launch of our Stelara biosimilar, which was launched under the Selarsdi brand by Teva on February 21 this year. We are starting to see flow through in the formulary channel in the first month of the launch and our partner has already announced an important deal with Lumicera. We also expect formulary inclusion by PBMs this year.

This will drive further conversions of Selarsdi in the U.S. market. As we announced earlier, the FDA has approved provisional interchangeability for Selarsdi which will be effective after the first interchangeable biosimilar loses exclusivity at the end of April. No time is lost as customers already take the forthcoming interchangeability status into account.

We are expecting that biosimilars will have an [indiscernible] of about 25% of the Stelara market in the U.S. or higher. We remain very excited about the U.S. opportunity for Simlandi and Selarsdi within 2025. Turning to the next slide looking at ex-U.S. markets, we see stable growth for our Humira biosimilar in Europe, Canada and rest of the world.

In spite of being relatively late to the market in some ex-U.S. markets, we have continued to gain market share not least because of the strength of our supply chain, our focus on quality and reliability as a partner, coupled with strong response of patients to our proprietary auto-injector design which emphasizes patient comfort, safety and ease of use. In Europe, we have sustainable growth with high single digit numbers for adalimumab, and we are very happy with the progress of STADA expanding access of this product in 15-plus European countries. In Canada, we are running towards a market leadership position with our partner and we expect to be the adalimumab leader, if not end of 2025, definitely in 2026 which again shows the strength of both our production and commercial capabilities.

Now shifting to AVT04, our biosimilar to Stelara, we were the first to launch a Stelara biosimilar into Canada and Japan in Q2 2024, and in Europe in early Q3 2024. Having a day one launch in Europe and being first in Europe gave us a very strong market position and shows Alvotech’s capabilities in rolling out the product in 20-plus countries in a very short period of time. Still today, we remain the only Stelara biosimilar to have launched in Japan.

The launch in Europe with STADA under the Uzpruvo brand has been highly successful. Uzpruvo is now in 24 EU markets, actively commercialized both in tender and retail markets. By year end 2024, we were either the number one or number two biosimilar in each European market with close to 30% exit share of the market for Stelara biosimilars in Q4 or 8% of the overall market in the EU, which is a very attractive conversion rate and positive for biosimilar penetration.

We often point out that biosimilars expand availability and reduce healthcare costs. To restate the importance of the impact on mature markets, the Stelara market in Europe actually grew by 9% last year, which comes on the back of fairly strong compound growth over previous years. We expect such continued growth in both European and other markets to last for several years to come as biosimilars gain additional market share. By end of 2025, Stelara biosimilars overall could reach at least 50% market share in European markets, and for Uzpruvo we expect double-digit share of the overall market by year end.

As for the near term launches, as noted before, we have marketing applications for three biosimilar candidates in Europe and the U.S., with approvals expected in Q4 this year. AVT03, our biosimilar to Prolia and Xgeva, has been partnered with Dr. . Reddy’s in the U.S. and jointly with STADA and Dr. . Reddy’s in Europe.

We are on track to launch this product as soon as possible after approval, which is expected in Q4 for Europe and close to year end in the U.S. This biosimilar with launch into a fairly crowded market, but our reliable supply chain and strong commercial partners should allow this product to gain a good share of what is clearly an undeserved market with growth potential, in particular for osteoporosis, a chronic and sometimes debilitating disease that the majority of patients do not receive adequate care. It is important to note that we will be penetrating the European market both with STADA and Dr. . Reddy’s that puts us in a unique commercial position.

It is also important to remind that STADA has another osteoporosis treatment product which is a market leader in it segment, so highly complementary with Alvotech’s AVT03. AVT06, our biosimilar to low dose Eylea, has been partnered with Teva in the U.S. and Advanz, STADA and Biogaran in Europe. We expect these markets to be competitive, but as many of our competitors will not be able to offer a [indiscernible] at launch, we expect somewhat limited competition when we come to the market.

We have a non-infringing formulation that is unique, therefore gives us a very strong position. It is also important to remind that both STADA, Advanz and Biogaran will be commercializing this product for us in Europe, which positions Alvotech uniquely as all these three companies are the market leaders in their home markets, so we are highly excited about the AVT06 launch in Europe and in the U.S. I also would like to remind that as several other companies remain blocked from entering the U.S. market because of IP issues, we remain quite optimistic for the biosimilar to low dose Eylea and our ability to gain market share. As for the high dose presentation of Eylea, which the originator introduced last year, we believe that we remain in the lead in developing a biosimilar version.

We are currently in the scale-up phase and working through the regulatory process, seeking the most expedited path to all applicable markets. Having both low dose and high dose presentations of Eylea alongside with offering both vial and prefilled syringe presentations positions Alvotech uniquely in the global markets. These important achievements are testament to our strong integrated capabilities and unique go-to-market model.

Finally, AVT05, our biosimilar to Simponi and Simponi Aria, faces very limited competition at launch. We expect to be the first to launch a biosimilar to both products, which are based on the same molecule, and that we will be the only manufacturer in these markets for several months. Our partners for AVT05 include Teva in the U.S. and Advanz in Europe. These partners share our enthusiasm for the prospects of this biosimilar.

Being first into a highly attractive market with very limited competition represents a unique revenue opportunity for Alvotech. We already have early feedback from the market through our partners which is quite positive. With that, I would like to turn the call over to Joe McClellan, our Chief Scientific Officer.

Joseph McClellan

Thank you Anil. I would like to begin by talking about Alvotech’s capacity and capabilities. In the past, we at Alvotech have used the terms fully integrated, broad in-house capabilities, and end-to-end platform to describe our biosimilar development and manufacturing capabilities.

We have emphasized these capabilities as they have been a catalyst for us to build a leading biosimilars company with global reach. Further, having built this large infrastructure as a pure play biosimilars company, it differentiates us within the biosimilars industry and thus the biotech industry at large. It has taken tremendous courage and dedication from our founders, early supporters and shareholders with over 12 years and nearly $2 billion in investment, coupled with a relentless drive by our broad team to create our successful end-to-end biosimilars development and manufacturing platform.

This dedication has resulted in an astounding and truly best-in-class organization with highly capable and proven development and commercialization capabilities, a state-of-the-art manufacturing site for drug substance, drug product, and finished product, a superb quality mindset and, importantly, all under one organizational umbrella. We are not done evolving within our facility in Iceland. We are amid expanding our profusion capacity for our biosimilars to Stelara and Simponi and growing our drug product operations, device assembly and packaging capabilities.

It is quite a privilege to deploy these capabilities every day, working with the best team in the business to increase patient access to vital biologics and lower the cost of healthcare around the world. Our manufacturing facility in Iceland now has the infrastructure and expanded capacity to support development and manufacture of our entire disclosed pipeline for global markets through 2030 and beyond. As we move to the portfolio, today we are excited to announce that we intend to leverage these unique capabilities to increase the number of new products in development each year, thereby building an even larger and more valuable pipeline.

One of the keys to this plan is the fruition of our investment in strong in-house capabilities for cell line development. We have completed the development of high producing cell lines for over 18 unique biologic molecules which we may develop into biosimilars of important and valuable biological medicines. We have selected the target molecules from a list of reference products that Robert spoke about earlier, targeting valuable products where we project that demand will be strong after biosimilar entry and where we expect to be able to stay ahead of our potential competition.

Alvotech intends to be the first to enter each market with differentiation and offering the best quality, reliability and service. Regarding our development portfolio, we have seen continued and reliable progress as described in recent corporate announcements. In addition to our previously disclosed pipeline, we are excited to share that we are in the process of product development stage for potential biosimilars to Dupixent, Taltz, Tremfya, Alaris [ph], and Kesimpta.

With more cell lines ready for further development, we are looking forward to sharing the future programs we’ll be adding to our pipeline. The power of our development approach is that we bring colleagues from R&D, quality and manufacturing together as one team on each program from the beginning. Following our established and ever-improving Alvotech blueprint, we efficiently advance our programs iteratively from inception to approval with quality, reliability and competitive cost of production always in focus.

This is possible because our vertically integrated team has all the necessary capabilities within one house required to develop, manufacture and attain regulatory approvals. We believe Alvotech’s results speak for themselves to demonstrate the strength of our approach and capabilities. It’s why we are bullish for expanding our pipeline.

Next, at Alvotech we are also very excited that we are establishing an R&D presence in Sweden, which has a thriving and vibrant life sciences community. With the acquisition of Xbrane’s R&D operations, Alvotech will be able to attract new talent, create opportunities for scientific collaboration, and support our growth. We are also acquiring Xbrane’s potential biosimilar to Cimzia.

Cimzia is a pegulated anti-TNF molecule that is unique in the immunology space as it is the only anti-TNF indicated for women of childbearing age during pregnancy and breastfeeding. Cimzia continues to see growth worldwide in both market sales and volumes. Aligned with our aspirations to be first to market, we anticipate that our potential biosimilar to Cimzia will be first into the clinical stage.

Further, this product will be a nice complement to our basket of immunology products that we are developing. We look forward to providing you more updates on the acquisition of Xbrane’s operations, our plans for expansion in Sweden, and our development of Cimzia after the close of the transaction. With that, I would like to turn over the call to Joel Morales.

Joel Morales

Thanks Joe. I’ll now provide a summary of our operating performance for the year ending December 31, 2024. On the following slide, you will find a summary of our adjusted operating results, where we show key non-IFRS P&L line items and metrics for the full year.

For reference, IFRS reported financials and reconciliations to our adjusted results are included in our press release and the slides in the appendix of this presentation. We achieved $273 million in product revenues as we closed the year with another strong quarter of product shipments to our customers. As you heard earlier from Anil, we delivered on our U.S. purchase orders for our biosimilar to Humira and we also shipped initial prelaunch orders of our biosimilar to Stelara to our U.S. commercial partner.

We are also pleased with the performance of the launch of our biosimilar to Stelara across the Europe region. Our commercial partner for Europe has been successful in securing share across multiple markets and re-orders have increased, driving higher shipments as we exited the year. Specifically in the fourth quarter of 2024, we successfully shipped over 1 million units across two distinct products to multiple markets worldwide, which is a demonstration of the skill of our manufacturing capabilities and our ability to execute at this level. We recognized product revenues of $146 million in the fourth quarter, making it our third consecutive quarter-over-quarter increase in product revenue this year. Adjusted product margins in the fourth quarter were 45%, which represents a sequential quarter increase from Q3 where we reported adjusted product margins of 37%.

This was driven by increased volumes in manufacturing efficiencies, an increase in product shipments to our U.S. commercial partners, and the shipments of reorders for our biosimilar to Stelara to our European commercial partners, which is a higher margin product. For the full year, we achieved adjusted product margins of 33% and adjusted gross margin of 63%, driven by the strong contribution of our licensing and other revenues. On this note, we achieved $219 million of adjusted licensing and other revenue for the year, which is a reflection of the significant progress we have made with our pipeline as we achieved positive top line clinical results for two programs and submitted marketing authorizations for three programs in major markets, including our most recent submission of our AVT05 program in the fourth quarter.

Additionally, we achieved performance milestones as a result of our partner’s commercial launches of biosimilar to Humira in the U.S. and biosimilar to Stelara internationally. We achieved positive adjusted EBITDA of $108 million for the year ended 2024 versus negative EBITDA of $291 million for the same period in the prior year. This was largely driven by the gross margin contribution in the period and lower opex, particularly lower R&D costs as we were running three clinical programs concurrently in the prior year.

In summary, 2024 was a transformational year for Alvotech as we launched the second product from our pipeline into global markets, submitted marketing authorizations for three more biosimilar programs and transitioned to EBITDA positive for the first time in the history of the company. Turning to the next slide, you’ll find a summary of our cash and liquidity for the year. During 2024, we raised almost $300 million in capital that was used to continue investing behind our pipeline and our product launches.

With our improved operational performance, however, we now expect profits from the sales of our existing commercial products, new product launches and milestone collections to be the primary source of future funding. Additionally, we are exploring the potential listing in Sweden that we mentioned in conjunction with our announcement of the Xbrane acquisition. Sweden is the Nordic base of technology and biotech companies, which attracts informed investors and funds focused on healthcare and life sciences.

Given Alvotech’s expanded presence into Sweden and historical Nordic roots, this listing has the potential to broaden our shareholder base and increase global trade and liquidity. We closed the period ending December 31 with $1.069% billion in debt and $51 million of cash on hand. We are pleased with the refinancing we completed during the second half of 2024 as we were able to eliminate near term maturities, simplify our capital structure, and improve our cost of capital.

We expect to commence deleveraging in 2025 and our facility has favorable non-call features providing us with additional flexibility to further reduce cost of capital over time. With our refinancing behind us, our major product launches underway and continued advancement of our pipeline, the company believes it has sufficient cash runway to achieve free cash flow positive in 2025. We closed the period ending December 31 with 301.8% million shares outstanding, including unvested earn-out shares.

In the appendix to our management presentation, you will find a summary of shares outstanding. Now looking ahead to 2025 on the following slide, we are forecasting revenues between $570 million and $670 million. This is over a 25% increase in revenues year-on-year as measured from the midpoint of $620 million.

This growth is driven by a combination of increasing product revenues forecasted between $340 million and $410 million, and milestone revenues forecasted between $230 million and $260 million. Product revenue growth stems from the annualization of our 2024 launches in 2025, including our biosimilars to Humira in the U.S. and Stelara in the EU, which launched midyear respectively. Most recently, we launched our biosimilar to Stelara in the U.S. in Q1 2025, and we expect more significant contribution from this product towards the second half of the year as we see more formulary inclusion by PBMs.

. Additionally, we expect three additional new biosimilar programs to be launched globally before the end of the year. Specifically as it relates to Simlandi in the U.S. and as Anil mentioned earlier, we are expecting increased biosimilar penetration of the Humira market in 2025 and have confidence that our commercial partner will continue to expand their share in this market. We see conversion of the formulary channel as a significant driver for us in the second half of the year.

We have launched our biosimilar to Stelara across a number of markets outside the U.S., but in particular our launch in Europe has performed well and we’re pleased with the success of our partner in establishing market share early. We expect this share to continue to grow as they continue to execute on their commercial plans, and we also expect to benefit from the growth of the overall Stelara market in Europe. Regarding our anticipated new biosimilar launches, we have already submitted applications globally for biosimilars to Prolia, Xgeva, Simponi, Simponi Aria, and Eylea, and anticipate approvals in the fourth quarter of this year.

We are making the necessary preparations in collaboration with our commercial partners to launch as soon as possible after approval. Now let’s move onto product margins. We expect product margins in 2025 to be in the range of 38% to 41%, an increase from full year 2024 where we achieved 33%.

This was driven by a combination of product mix, geographic mix, and assumed price erosion. Our margins are growing more modestly in 2025 versus what we demonstrated in 2024 during our transition to profitability. We do expect to see product margins to continue increasing in subsequent years, but I’ll speak to that more in just a few minutes.

Turning now to milestone revenues, we are expecting an increase year-on-year as a result of several drivers, such as for the new commercial launches globally, performance-based targets for commercialized products, the advancement of our earlier phase pipeline, and the signing of new deals for our most recent pipeline additions. As we’ve mentioned in the past, the advancement of our pipeline not only provides the basis for longer growth but generated near term milestone revenues that help to offset the cost of development, which is a core part of our business model. Based on the commercial assumptions I just described, adjusted EBITDA for the year is forecasted in the range of $180 million to $260 million.

This includes continued R&D investment as we advance three new programs through to regulatory approval in major markets and continue to progress our earlier phase pipeline programs, such as our biosimilars to high dose Eylea and Entyvio through clinical phase. Now looking at the evolution of 2025, we expect to see a reduction in revenue and EBITDA in the first half versus our second half 2024 levels, with a return to quarter-over-quarter growth in the second half of the year. Product revenues should be fairly balanced between first half and second half.

Our U.S. commercial partners are well stocked and we expect to see reorder activity in 2025 at slightly lower pricing; however, we expect our ex-U.S. business to experience higher growth in volumes as we increase shipments to our European and rest of world partners as they continue to make progress on expanding their share of the biosimilars market for Humira and Stelara. This geographic mix and product mix will lead to lower product margins in the first half versus where we exited 2024, and we estimate we will land in the mid-30% range. Product margins are expected to increase again in the second half of 2025 with the fourth quarter being our highest margin quarter of the year at about 50% product margin.

Milestone revenues are inherently lumpy, and this trend will continue in 2025. Q1 will be the low point in milestone revenue recognition with a gradual increase quarter-over-quarter. We expect revenues to be more heavily weighted, close to 75%, towards the second half of the year, in particular the fourth quarter where we expect to achieve a number of milestone triggers such as regulatory approvals, new launches, and pipeline progress.

Our operating expenses, comprised of R&D and G&A, will be fairly balanced between the first and second half; however, given that our product margins and milestone revenues are higher towards the second half of the year, the majority of our EBITDA generation will be more weighted towards the second half of the year. Turning to the next slide, given the momentum we’ve established with our commercialized products, our plans to introduce three additional biosimilar programs into global markets this year, and the continued advancement of our pipeline, I’d like to take the opportunity to provide and offer a view into some of our broader financial goals we like to call Target 2028. Over the next several years, we anticipate sustained top line growth through our planned product launches over the short and midterm.

Building on my comments regarding our 2025 guidance, we will continue to work with our commercial partners to ensure we are driving market share for our existing commercial products, biosimilars to Humira and Stelara. We expect to continue to drive market share through 2026 in both existing markets and through launches into new markets, followed by year-on-year price erosion over time, with the contribution of revenues from this basket of products declining below 2025 levels by 2028. The next basket of products represents our near term launches planned for ’25 and ’26. We have three additional launches from our pipeline planned for the end of this year, which we also covered earlier on this call.

We expect these launches to annualize in 2026 and beyond, with each product presenting a unique market opportunity for our global commercial partners. Some examples include our biosimilar to Simponi and Simponi Aria, where we expect to be first to market in the U.S., EU and other rest of world markets and achieve our fair share of this market, which we believe will experience limited competition for some time. Low dose Eylea is another example where we could potentially be second to market in the U.S. in a limited competitive environment for a period of time.

We expect to have further updates on this product launch towards the end of this year and look forward to keeping you updated on our progress. Additionally, we plan to launch into Europe and other rest of world markets this year and expect to take meaningful share in those markets as well. Our last basket of products are our future launches, including biosimilars to high dose Eylea and Entyvio, where we also expect to be first to market in the U.S., EU and rest of world markets.

These are just a couple of examples that demonstrate the importance of product selection and how we use our nimble and vertically integrated infrastructure to pursue opportunities that differentiate us in the market. In the appendix to this presentation, we have included a summary of assumptions for each of the products within these baskets. This should serve as context to better understand how we view the potential of our broader portfolio over time.

In summary, our goal is to achieve approximately $1.5% billion in revenues by 2028. We remain steadfast behind the development of biosimilars to ensure we can continue driving long term growth through a series of near and midterm launches from our pipeline. On the following side, we flip to the cost side of our forecast, where you can see the impact of Alvotech’s business model as we expect to deliver EBITDA margins exceeding 40% over time.

This is driven by our best-in-class pipeline of products that we continue to expand as we launch more products globally, taking advantage of the operating leverage that has been demonstrated in 2024 as we transition to profitability. Said differently, we are beginning to scale very efficiently as we can add products to our portfolio without any meaningful change to our infrastructure costs. For these reasons, we believe we can drive to attractive profitability levels and free cash flow over time while continuing to invest behind our pipeline.

On the following slide is our forecast horizon. You’ll see that the Alvotech platform is set up as a lean R&D-focused organization that generates attractive margins. Profit ultimately converts strongly to free cash flow as working capital and capex needs moderate over time as our launches mature and net operating losses reduce cash tax obligations over the near term.

With these benefits of our business model, we expect to be free cash flow positive in 2025 and also to accelerate the pace of cash flow generation over the midterm, which will result in rapid deleveraging, providing further options to consider regarding future capital allocation, including the potential for dividends. In closing, it’s an exciting time for our company. Alvotech has a uniquely positioned platform with our near and future launches.

Our integrated platform is positioned to generate high returns as R&D costs are offset by milestones from partners, we avoid the infrastructure costs of maintaining a global commercial operation, and we maintain sharp focus on continuing to scale our operations in developing the next wave of biosimilars to bring to markets around the globe. With that, I’d like to turn the call back over to the Operator for Q&A.

Operator

Thank you. [Operator instructions] Thank you. We’ll now take our first question, it is from the line of Ash Verma from UBS.

Please go ahead.

Ashwani Verma

Hey, thanks for taking our questions, and congrats on all the progress. [Indiscernible] the business today. Maybe just one on Stelara - wanted to get your thoughts on where pricing is coming out to be and how you think about that, and then what gives you confidence about a potential private label deal here.

We saw the innovative alternative player from getting into such a deal. Then separately, a second question just on the milestone revenues, here it would be helpful if you can help us understand the cadence of how this will shake out. It’s a pretty sizeable contribution in 2025 guide - what’s driving that, and I thought you had initially indicated that it would be a step down versus 2024.

Then as you progress for 2026 and 2027, what’s the level of milestone revenue that you expect. Thanks.

Anil Okay

Okay, thank you Ash. Anil is speaking, thanks for the questions. Let me take them from my perspective, from the commercial perspective.

Starting from the milestone revenue, 2025 we have a significant portion of these milestones that have been already signed, so we have good confidence on achieving those numbers because of--based on signed contracts. As Joe and Robert mentioned, we also managed to advance further programs in our portfolio that are candidates for further business development deals, and we have very attractive and active dialogues going on, so we feel fairly confident in achieving those milestones in 2025. Going back to your Stelara pricing question, first of all, let me divide the question into two pieces, the U.S. and Europe.

In the U.S., as you can appreciate, we just launched the product a month ago. Our initial experience is very positive with the uptake. We are seeing a relatively faster trend than Humira phase out, so we remain optimistic in our market position of Stelara in the U.S. I think it’s too early to really communicate the U.S. pricing yet because it’s just a very recent launch, as you can appreciate.

In Europe, the good thing is that we were--day one in the market, we were the first company launching Stelara in the market. We have significant market share, we are one of the number one and number two players, depending on the market. There, we have more established pricing and we have made our 2025 AOP based on this established trend, and of course as the competition increases, we also assume certain price pressure on the portfolio for that specific product, both in the U.S. and in Europe.

The last piece of your question was on the private label. We have various active discussions ongoing, and also we have a contract which is very advanced to be signed that will give us a position in one of the private label businesses in the U.S. market. Overall, we feel very confident about Stelara revenues in 2025 and beyond.

Joel Morales

Thanks Ash, and to answer the second part of your question on milestone revenues, I think ultimately the size of milestone revenue contribution is a function of the progress that we’re making in our R&D lab in our facility, and you heard some comments from Robert and Joe in particular about how we’ve been prioritizing that and advancing the pipeline. I think with respect to the higher contribution this year than maybe we had previously communicated, I would attribute that just to the good progress that our organization has been making in prioritizing our R&D programs. With respect to phasing, as I mentioned in the prepared remarks, we are expecting a higher weighting in the second half of the year, about 75% of our milestones we’re expecting to recognize in the second half of the year, in particular in the fourth quarter. That’s really driven just by the timing of the number of milestones that we’re achieving in the fourth quarter, including we receive milestones once we get approvals from our partner, upon launches by our partner, as well as just some other, I would say development milestones that we’re also planning to achieve in that second half of the year.

As I look more broadly through 2028, we mentioned--or I should say at least in the management presentation, you’ll see we’re expecting cumulatively to recognize about a billion dollars in milestone revenues between ’25 and ’28, and I think that would more or less approximate about $250 million per year between now and 2028, just given the programs that we have in place in our pipeline at this time.

Ashwani Verma

Great, thank you guys.

Operator

Thank you. As a reminder, if you would like to ask a question, please press star-one-one on your keypad. To withdraw your question, you can press star-one-one again.

Once again, that’s star-one-one if there are any further questions. There are no further questions coming through at this time, so I will now hand the conference back to the speakers for any closing remarks.

Benedikt Stefannson

Okay, thank you Sara - this is Benedikt. I want to give a special thanks to all the participants on the call today as we experienced a little bit of a delay at the beginning because our vendor had to resolve some technical issues that caused this delay; but on behalf of the Alvotech team, I just want to thank you all and wish you a very good rest of the day.

Operator

Thank you. This concludes today’s conference call. Thank you for participating, and you may now disconnect.