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Edited Transcript of FAGR.BR earnings conference call or presentation 13-Feb-20 8:30am GMT

Full Year 2019 Fagron NV Earnings Call

Waregem Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Fagron NV earnings conference call or presentation Thursday, February 13, 2020 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Constantijn van Rietschoten

Fagron NV - Chief Communications Officer

* Karin de Jong

Fagron NV - CFO & Executive Director

* Rafael Padilla

Fagron NV - CEO & Director

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Conference Call Participants

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* Beatrice Allen

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Eric Wilmer

ABN AMRO Bank N.V., Research Division - Analyst

* Frank Claassen

Banque Degroof Petercam S.A., Research Division - Analyst

* Lenny Van Steenhuyse

KBC Securities NV, Research Division - Financial Analyst

* Matthias Maenhaut

Kepler Cheuvreux, Research Division - Senior Equity Research Analyst

* Stijn Demeester

ING Groep N.V., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Fagron conference call regarding the publication of the 2019 financial results. Today's conference is being recorded. At this time, I would like to turn the conference over to Rafael Padilla, CEO. Please go ahead, sir.

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Rafael Padilla, Fagron NV - CEO & Director [2]

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Thank you very much. Good morning all. Thank you for assisting in the Fagron 2019 full year results. We're going to use the presentation in PDF that is in our site in order to guide you through it. When we start with the first page, who we are, my name is Rafael Padilla. I'm the CEO of the company, started in 2002.

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Karin de Jong, Fagron NV - CFO & Executive Director [3]

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Good morning. My name is Karin de Jong. I'm Chief Financial Officer of Fagron, and I started working for Fagron in 2008.

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [4]

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Good morning. My name is Constantijn Rietschoten, responsible for communications, and I also started working for Fagron in 2008.

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Rafael Padilla, Fagron NV - CEO & Director [5]

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Congratulations, Constantijn, for preparing the day so well. Of course, this is the thing that will be together with you today, though we want to congratulate the rest of our team worldwide for the impressive work that they did in 2019.

We'll move to the next slide. If you all remember, this was the slide that we used last year when we were presenting 2018 results in Fagron in Capelle. When we were giving an outlook for 2019, we said that we would introduce new brand identity and purpose we will see afterwards in the presentation. We said that our turnover would grow in all areas. We accomplished that. We said that we saw acceleration in the second semester in 2018. We also saw it in 2019. We said that our focus would remain on strong organic growth and targeted acquisitions, our disciplined acquisition strategy. We also saw that in 2019. We said that we'd focus on innovations and quality regarding innovation, the sales of new products announced last year more than 10%. And regarding quality, we made major steps. As an example, we want to give the master control implementation as a great example, is the quality management system, and also, we did very good in our sterile facility in Hoogeveen in terms of quality. That is our Dutch Wichita facility. We proposed a dividend of EUR 0.12 that we also paid, and we said that not only the sales, as we said before, but the profitability would increase in 2019, and we also realized that.

We will move to the next slide. Of course, results are the consequence of a very strong culture, a winning strategy and precise implementation. We want to highlight the operational cash flow that almost amount to EUR 100 million, an increase of 35%. And this is the proof that we want to create a lot of value also year-on-year.

We will move to the next slide, and now we're going to -- deep in into the operational highlights. We started, as we said, with the launch of the new brand identity and purpose. If you recall, Fagron is a company almost 30 years in the pharmaceutical compounding market, and our vision was, of course, keeping our core business to move into the personalizing medicine landscape. We have developed a very strong purpose together. Together with all our stakeholders, we want to create the future of personalized medicine.

We'll reflect this in our logo. You can see it on the right side with 9 dots. Being the first 5, our 5 company values: Customer is #1, above on the left side; second, the speed of execution; the third one, and we like it a lot, entrepreneurship -- also entrepreneurship; Next one is creativity; in the middle, in the center, quality. And then we go to our business segments, on the left side down, compounding our core business and you can then drive an F. And then the 3 new segments, you have seen today the new acquisition, Gako; tech; and of course, genomics that we launched last year.

When we move to the next slide and talking about genomics, we start and you are all please invited to see our facilities in Barcelona. We launched Fagron Genomics. We started with 3 tests: the TrichoTest for hair treatment; the TeloTest for molecular biology aging; and the NutriGen, professional nutrigenomic advice. And we were very well surprised with more than 8,000 tests sold. We have big expectations for 2020. As an example, 2 weeks ago, we were at the IMCAS Congress in Paris. That is the world anti-aging congress, and we sold in 3 days 1,000 tests. So that will be one of the drivers for 2020.

When we move to the next slide, that is a photo of yesterday. You can see it was not a sunny day in Krakow. We started in 2019 the construction of our repackaging facility in Krakow as we said. You can see that we're almost done. You can also see on the roof the [air] treatment system is an investment, of course as we said, of EUR 8 million with a structural margin improvement from 2021 of EUR 2 million.

When we move to the next slide regarding our disciplined acquisition strategy for 2019, we made 1 acquisition in the Czech market, Dr. Kulich, #2 in the market. We also entered into Mexico with Cedrosa, Mexico City. That is first step in the Mexican market. And we strengthened our position in Brazil with the position of Levviale, focus on excipients. Apace is the first step in the packaging market in Brazil. If you recall, we have said many times on a daily base, 1 million prescriptions are being prescribed on a daily base. Again, we want to [increase] that one. So we have a lot of opportunities for packaging materials. And we entered into the R&D capabilities with Ortofarma, and this is very interesting for the development of our own brands for personalized medicine.

When we move to the next slide...

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Karin de Jong, Fagron NV - CFO & Executive Director [6]

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Thank you, Rafa. In August of 2019, we entered into a new credit facility of EUR 375 million. This facility has a maturity of 5 years with an extension option of 2 years. The new facility offers slightly better conditions and more flexibility. It is a so-called sustainability linked loan. This means that the interest is linked to sustainability targets back on aims to reduce the greenhouse emission by 30% in 6 years. We will also have sustainability targets for the management as of 2020 linked to the bonuses.

We go to the next slide. In 2019, we finalized several legacy-related matters. First, as we communicated earlier this year, we have reached a final settlement with the Department of Justice in the U.S.A. regarding a sector-wide investigation into pricing of pharmaceutical products. We paid $22.3 million in the second semester of 2019, and there will be no further cost of exposure relating to this matter.

Next, we reached the settlement with former owners of Anazao, who claimed $20 million in relation to the acquisition of AnazaoHealth a couple of years ago. This confidential agreement was signed in October 2019 and includes the payment by Fagron that does not qualify as material.

And finally, we sold HL Technology to the management. HL Technology was a noncore activity, which was part of the dental division, which we sold several years ago. The transaction was finalized in October of 2019.

Moving to the next slide.

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [7]

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Thank you, Karin. This year, we started with our disciplined acquisition strategy acquiring Gako in Germany. Gako is a developer, manufacturer and of course, supplier of mixing equipment for compounding mainly in the dermatological field. We can say now we develop, of course, and produce these machines. And what's also very interesting with Gako that is the [Gillette] model or the Gako model when you sell the machine, and then you have recurrent sales on the jars. You can see it on the right side up. And we produce them in the state-of-the-art facility in Bamberg, Germany, and you can see the injection mold on the right side.

Sales amount to EUR 4.5 million with a margin approximately of 15%. We can see Gako very strategically mainly for markets like the U.S. or Brazil as, of course, the main market for Gako is the German market.

We'll move to the next slide. Of course, we want to grow in other areas. You know that we have 3 strong areas. That is Europe, North and South America. And we enter in a partnership with Azelis. It's a very good company with a strong presence in Australia. The Australian compounding market is very interesting market, dominated by the American players. And we are convinced that, together with Azelis, we will conquer also the Australian market.

When we move to the next slide...

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Karin de Jong, Fagron NV - CFO & Executive Director [8]

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Going to the 2019 results per segment. The slide shows the turnover development, excluding HL Technology, starting from EUR 464.5 million in 2018 growing to EUR 528.5 million in 2019. Each region contributed positively to the growth. Europe grew by 2%. Latin America grew by 10.4%, and North America grew by 16.5%. We have both activities in the Brands and Essentials, and the compounding in the U.S. contributed positively to the growth, resulting in an organic growth of 7.5%.

Next, we had some positive currency impacts and EUR 25.6 million of contribution due to acquisition, resulting in a total growth of 13.4% in 2019.

Going to the next slide.

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Rafael Padilla, Fagron NV - CEO & Director [9]

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Thank you, Karin. Now we're going to zoom in, in the next 3 slides into the 3 main regions. We start with Europe, where we saw a growth 2.1%. That is slightly below on the guidance that we gave in the first quarter, 2.7%. The main reason for that is that the growth rate at the sterile facility in Hoogeveen has been somehow lower than what we expected. Again, we want to emphasize the strong start of Genomics, more than 8,000 tests sold last year.

We started the integration of Dr. Kulich in the Czech Republic. Czech Republic compounding market is a very interesting market. The whole East Europe is very interesting, so we are discovering that with the team. We are very happy with this integration, and our REBITDA margin decreases slightly to 26.1%. The reasons for that, there are 3 main reasons. The first one is the registrations in the Dutch market, as you know, that is a defensive strategy where we registered the big compounds. We keep the sales, though our margin decreases slightly. Then, of course, we have the dilutive effect of Dr. Kulich in the margin that our track record show that we can improve it in 2 years' time into the group average. And the third, we saw some Essentials -- regarding the Essentials side, we saw some mixing in the product portfolio that decreased slightly the margin.

When we move to the next slide, Latin America showed a strong growth of 10.4% at constant exchange rates, again, a fantastic year for our Latin American activities. We saw decrease in Brands in percentage caused, of course, by the diluting effect of the acquisitions. We held the First academies in Mexico, very interesting with good reception. And we saw, again, a growth -- strong growth of almost 20% in the Colombian market.

We started the integration of Cedrosa, Levviale and Ortofarma, and we saw a slight decrease of our REBITDA margin to 20.2%, again, caused by the contribution of the acquisitions.

We'll move now to North America, when we saw an impressive sales growth of 22.7%, 16.5% at constant exchange rates. When we dip in, in our 3 main activities at FSS, at the end of 2019, we saw some change in service to some of our large customer for a limited number of SKUs that limited our growth but very positively increased our profitability. We are, as we always reiterate, on track to reach our EUR 100 million 2022 target with 20% REBITDA.

When we move into Anazao, we grew 7% at constant exchange rate. And what we are doing at Anazao, we are elaborating -- we are focusing on our product offering. We decided last quarter to stop with our hot nuclear offering. And last year, this segment amounted to $5 million with seldom contribution to EBITDA.

And when we move to Brands and Essentials, we saw an impressive growth of 33% at constant exchange rate. And what we have seen is an intense collaboration between our Humco activities and our Fagron activities, our 2 main companies there having a very nice gain on market share. We want to highlight that these divisions have given us a very nice increase in EBITDA in the second semester. We are now at 18.1% EBITDA. So we're bringing our North American activities into the average EBITDA margin of the group.

Moving to our next slide.

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Karin de Jong, Fagron NV - CFO & Executive Director [10]

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Looking at the 2019 financials. We go to the next slide. As mentioned previously, sales grew by 13.4% to EUR 534.7 million and organically by 7.5% against constant exchange rate. The HL Technology division was divested as from the first of October 2019.

The next slide shows a decrease in gross margin in percentage from 61.6% in 2018 to 60.2% in 2019. The reasons for the decrease in margins are, first, because of the acquisitions in 2019; secondly, because of part of the product portfolio of Humco has slightly lower margins than the Fagron products; thirdly, because of the registration of products in the Netherlands, which increased the sales of premium pharmaceuticals but have lower overall margins; and finally, the essential product mix in Europe, resulting in a decrease of gross margin in percentage of sales. However, it is partly compensated by the reduction of OpEx versus sales. The amount of OpEx increases to EUR 205 million due to the acquisitions. However, the overall percentage decreases to 38.3% in 2019 from 39.1% in 2018. We invested in the organization in the last couple of years, and currently, we see the leverage impact of this coming back in the OpEx, resulting in a REBITDA of EUR 117 million, where we see an acceleration of the growth in the second semester.

If we continue on to the next slide, we see a nonrecurring result of EUR 3.2 million (sic) [EUR 3.3 million], consisting of the legacy issue with the former owners of Anazao, some dismissal and acquisition costs resulting in an EBITDA of EUR 113.7 million, which is an increase of 13.2% compared to last year. The depreciation and amortization increases with 11.1% to EUR 29.3 million. The reason for the increase is because of the acquisitions, the purchase price allocation of Cedrosa and some new rental agreements.

If we move to the next slide, financial results improved by 26.5% to minus EUR 14.5 million. In 2019, we repaid part of the U.S. notes, which resulted in a decrease of the overall interest percentage in 2019. We also see a decrease in foreign exchange costs partly compensated by an increase in credit card costs related to U.S. payments.

The effective tax rate is 20%, and the effective cash tax rate is 22.7% (sic) [22.5%] due to the timing of some payments, resulting in a net profit of EUR 55.7 million, which is an increase of 30%.

Moving to the final slide.

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Rafael Padilla, Fagron NV - CEO & Director [11]

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Thank you, Karin. To finalize this last slide that we will use in the 2020 full year results in 2021, what can we expect of 2020? We will see further growth in sales and profitability. This growth will be driven again by strong organic growth and the implementation of our disciplined acquisition strategy. We will continue to focus on Fagron Genomics globally. We see this as a very important driver for personalized medicine again. We will focus on strong R&D pipeline with the capabilities that Ortofarma offer us in order to make our Brands segment grow. And we want to enter into new partnerships in the regions where we are not present in order to spread our wonderful products.

Heard from Constantijn now that some of you have some difficulties, right, Constantijn entering the call.

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [12]

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That's correct. That's correct. I think that they missed parts -- the first part of the presentation. Our sincere apologies for that.

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Rafael Padilla, Fagron NV - CEO & Director [13]

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For sure, sorry for that. If someone wants that we elaborate on some of the slides that this presentation offers, please do not hesitate. We'll do it right away.

So thank you very much. We can move through this and also through the Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Matthias Maenhaut from Kepler Cheuvreux.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [2]

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Yes. Congratulations with the nice results. Three questions from my end actually. Maybe, firstly on Wichita, can you give us a little bit more color on the progress you're making, both from a SKU ramp-up perspective on where you are presently, where are you willing to go for next year, maybe also in terms of client ramp-up. And then also more specifically, we recently had one of the most -- larger competitors effectively announcing that they will close down their business. How do you look at it? And do you see that as an opportunity or rather as a trap? Is there already any noticeable impact at this point and stage in terms of sales ramp-up? And then I have 2 other more, but I will let you respond to this 1 first.

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Rafael Padilla, Fagron NV - CEO & Director [3]

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Thank you, Matthias. Thank you for attending as well. Regarding Wichita, regarding SKUs, we had the target this year 115 this year -- I mean 2019, right, for 115. We landed at 106, something that we learn, and that's something very interesting because Wichita, the market is a very young and dynamic market, so we learn day-on-day, right, both internally and of course, externally. We learned that it's not the number that matters, but the quality of this number, right? We have a very strong Pareto base in the number of SKUs. And it's also in our internal projections for the EUR 100 million, 20% REBITDA. It is also realized in the ramp-up. We are on track for that target internally, and of course, it's always a [holistic] ramp-up. We saw it back in the EBITDA percentage of the whole North America. Wichita, of course, helped on that. So we're very happy with it.

Regarding PharMEDium, you said opportunity or threat. Of course, we always see things at Fagron, very, very optimistic. We are very optimistic company. And what we have seen in the first days is that, yes, some of PharMEDium customers have shown some interest. That -- but it's very early to say what will be the impact, but we see, though, some interest of some of the PharMEDium customers [ending].

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [4]

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All right. And in terms of -- if I may add a follow-up, Rafa. Just in terms of automation, where do we stand? And maybe also in terms of margin because you mentioned in the press release a change to the service business model. Maybe can you just elaborate a little bit on what that is behind? And how does that -- does that impact the EBITDA margins of Wichita, please?

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Rafael Padilla, Fagron NV - CEO & Director [5]

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Yes, sure. Regarding automation, we would say we are really on track. We have -- last year, we have invested a lot in automation not only on the compounding side there, the mixing, repackaging or the elaboration of the products but also in labeling, visual inspection. And we have been -- I think that you guys saw one of the videos that Constantijn sent around (inaudible). Otherwise, Constantijn, if you can also send some others and other colleagues some videos, that would be very nice to see.

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [6]

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I will do it.

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Rafael Padilla, Fagron NV - CEO & Director [7]

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Thank you. So we were very happy with that one.

In 2019, we did a very good step on that, but also in 2020, we're going to continue invest in automation. But what we can say, it's a continuous improvement process because the volume of course increase. We can say that the volumes in terms of units, right, of the product, so the number of units increased more rapidly than the sales, right? So automation is a real key. So it's a very good question.

Regarding margin and the service, what we experienced at really at the end of 2019 that some big groups asked us, hey, guys, why don't you provide us or you sent us an invoice only for the service that you provide to us and not for the whole invoice there for the whole value of the product, because, of course, our purchase value add, so guided by very big quantities not only of these products but also other kind of products, is higher. And we said, yes, of course, for us, it's very interesting because on the profitability side you can see better margins. And of course, for your working capital -- and we have seen it back in the very nice working capital result this year also improved our performance there.

Is it a trend? We would say it is a limited number of products that they ask for, the big guys, right, so the big products, yes? I mean to say with the guys, the big products. Is this a trend? We will see during 2020. What we can see is that it's a very young and dynamic market, and we need to be resilient and ready for a change that might occur, positive or less positive, and we are very proud of the organization we have built because they reacted very well in this kind of opportunity.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [8]

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If I just may follow-up just on the margins, can you give a little bit of a quantification on how the differences stand between regular sales and the service business model?

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Rafael Padilla, Fagron NV - CEO & Director [9]

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Sure, Matthias. For us, it's somehow difficult to give this number, this guidance. What we always said and stated -- and it is, of course, our ambition. We are very ambition-driven here -- is that the U.S., North America needs to be in 2022 at the average group margin. So -- and that's what we, together with the teams there, we are focusing and of course, not only in Wichita but also in the other 2 divisions, Anazao and Brands and Essentials, right? And this is what we want to keep and where we want to communicate on "contact on contact", and we are on track with that, as you already saw today.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [10]

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Yes. Okay. Maybe last question from my end. In terms of working capital improvement, you already highlighted Wichita. Are there any other drivers behind this? And is this performance, is this sustainable? Should we now bank going forward on working capital being rather at a 8% range than the 10% range. Should we see this rather as a one-off, please?

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Karin de Jong, Fagron NV - CFO & Executive Director [11]

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If we look at working capital, we implemented a new purchase order procedure, which helped reduce our stock levels and improved the quality of our stock, which we believe is really important. Next to that, we have a specific reduction plans per country for our receivables, and of course, we also review the payment terms of important suppliers. Going forward, I would say, in 2019, we did a terrific job on working capital being around 8% going forward. We believe that we are around 10% because, as you well know, sometimes we anticipate with our stock positions and product availability, so it increases sometimes. As you know, in the past, we did that in Brazil. So going forward, it will be around 8% to 10%. This year was extremely good with 8%.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [12]

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Yes. Okay. Maybe one follow-up in terms of factoring. What is the factoring amount that is presently outstanding?

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Karin de Jong, Fagron NV - CFO & Executive Director [13]

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Approximately 20 million.

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Operator [14]

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We will now take our next question from Lenny Van Steenhuyse from KBC.

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Lenny Van Steenhuyse, KBC Securities NV, Research Division - Financial Analyst [15]

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First of all, I'd like to zoom in on the European market. As you've mentioned, we've landed a bit below what was guided for at the first half of this year. I was wondering if you could elaborate a bit more on the reasons why. And also, how do you look at growth in Europe going forward? We've seen that there was a bit of a slowdown now in the compounding market. And also next to, let's say, a numerical basis, where do you still see opportunities or sources of growth in the European market also next to the branded and essential market? Is there still some room for growth in compounding? Or will growth be mainly be based on expanding the Brands and Essentials business? That's my first question.

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Rafael Padilla, Fagron NV - CEO & Director [16]

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Thank you, Lenny. Regarding Europe and the 2.7% guidance that we gave in the first quarter, personally, I gave this guidance because we were very convinced that the restart of both Hoogeveen and Dutch Wichita would be a big success. We invested a lot of resources in order to bring this facility up to the high standard quality at our respect and of course, in the Dutch inspection respect. Very humble, please. Don't take [us bad], very humble, we can say that is one of the best in terms of quality of course and quality standards, compounding facility of sterile product not only the Netherlands but in Europe. We also performed for all our portfolio. All our portfolio, before we launch a product into the market, we perform a full stability data test, and that is something somehow unique in this market. This brought us internally with a very good collaboration with our sales teams not only in the Netherlands and Wichita but also in Belgium that we have sterile activities and also in South Africa. So this brought the sales team together, right? The interchange of R&D, we were doing some R&D tests in the U.S. for our Dutch colleagues.

And when we went back to the market, we saw that customers that were currently buying from us, the individual, this is the ad hoc compound, the individual compounds that we were still preparing there. They accepted very well our own stock products, right? So with this new, I would say, new improved quality standards -- by the way, we did get the GMP reward, let's say, this way in 2019 from the ECA [contract] authorities. And what we saw that the customers that, unfortunately, we lost them because they have to acquire the product somewhere else. It has been somehow difficult for us in terms of competitive advantage and in terms of pricing, right? So we have to decide during the course of the last year what are we going to do, are we going to enter into a price war or we're going to keep the margins where we feel comfortable with and we're going to tell our customers that quality is very important for us. As we said in the presentation, it's in the middle of our brand values, and we're going to continue to invest in quality, of course, which shows for the second sterile products, you cannot make any single mistake with that one. So yes, we foresee that this -- maybe not in the short term, but in the mid, long term, this will give us benefits.

The guidance for Europe, your second question, we keep in the low single growth digit, even though it's a mature market -- compounded market. We keep with this guidance for the next quarters and years. And the growth opportunity, you said it very well. The Brands and Essentials offers us a lot of opportunities, also compounding. Of course, we do the third-party compounding. We have the outsourcing of compound in the Netherlands, but we see that maybe markets will open. So we are, of course, very [attend] to that one. And also what we are focusing a lot on is -- and sorry, that I have repeat myself a lot, but on the genomics opportunities because we see genomics not only a revenue stream for the test itself, but it's a driver for the compounded products, right, whether you produce yourself, like in the Netherlands, of course, but also for the Brands and Essentials. So personalizing medicine -- shifting into personalizing medicine offer us new opportunities. And this is what we also see in Europe that, of course, as you said, we need to be very innovative.

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Lenny Van Steenhuyse, KBC Securities NV, Research Division - Financial Analyst [17]

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Okay, very -- and very interesting. Do you see for the compounding market within Europe perhaps specific reasons or specific markets where regulations are changing as of now? Or is it a bit speculative at this point?

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Rafael Padilla, Fagron NV - CEO & Director [18]

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It is -- oops, sorry, Lenny. It is a very, I would say the second one, a bit speculative because, you see in Europe, it's not the United States of Europe. It's [the de-united] states of Europe, right? We see that many countries have different velocities in terms of implementing a regulation, and we don't see that a big change will happen shortly. Maybe one country or another would be somehow faster, but, not that you say the whole Europe, right? So we will see different velocities, maybe one country faster than another one but not Europe as a block on the outsourcing trend.

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Lenny Van Steenhuyse, KBC Securities NV, Research Division - Financial Analyst [19]

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Okay. Last question from my side. In the Australian market, you've decided to go for a partnership model, which is a bit new in terms of strategy, I would say. Why now shift to that model for that specific market compared to the more tried and tested M&A strategy we've seen in the past?

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Rafael Padilla, Fagron NV - CEO & Director [20]

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Yes. We would like to handle this question to Constantijn because he did an impressive job in Australia. We're very proud of what you did, Constantijn, so I think you are expert from Australia, right?

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [21]

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Thank you, Rafa. Let me -- as you might know, we entered Australia in 2014. We had a distributor there, didn't go that well, and that's why we decided to acquire that company. If we look at the Australian market, it's a very interesting market from a compounding perspective, but it's also a highly competitive market. As you know, our focus is on Europe, Latin America and North America. So the Fagron Australia didn't get the attention it needed. Azelis is one of the competitors in the market. We had good contact with them. They were struggling a little bit. They have good APIs, but they lack the brands, the vehicles, [assessments, the central brand]. We have very good brands. We only don't have the footprint in Australia, a relatively small team. So we decided that giving our focus on the 3 core regions, entering into a partnership with Azelis is in the best interest of both Azelis and Fagron. And again, I think it's a beautiful solution for Australia for us, and it also gives a lot of upside for us in this market.

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Lenny Van Steenhuyse, KBC Securities NV, Research Division - Financial Analyst [22]

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In that sense, it sounds a bit quite complementary as it was with Humco, so again, my question being why here go for partnering and no M&A events.

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Constantijn van Rietschoten, Fagron NV - Chief Communications Officer [23]

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Yes. If you look in Australia, Lenny, you've see MEDISCA, PCCA, Letco, Azelis and then you have Fagron. So we see the same competitive landscape as you see in the U.S. market. First of all, M&A was not on the table because we focus our M&A on the 3 core regions, Europe, North and Latin America. Secondly, as far as we know, companies like PCCA and MEDISCA, Letco are currently not for sale. If we would consider that, that's not an option now.

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Operator [24]

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We will now take our next question from Beatrice Allen from Berenberg Bank.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [25]

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I have a couple to you, but I'll do them one at a time if that's okay. You gave us earlier in the year a run rate target for Wichita for Q4. Can you give us an indication of -- if you've hit it and if you're going to give another target, provide a short-term kind of 2020 target going forward?

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Rafael Padilla, Fagron NV - CEO & Director [26]

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Yes, sure, Beatrice. Regarding the target that we make in Q3, we set the expected run rate of 50 million when we normalize, right? When we would account for the finished product so, right, when normalized, would be slightly below. So we feel comfortable with that. Going forward, we want to make it very clear, right, because sometimes we get questions on the 2022 target, we want to stick to that one. But as again, we have experienced in the last 2 years in a very young and dynamic market that things happen -- that things change from one day to another, right? We feel more comfortable giving a 2022 target, as we said, EUR 100 million, 20% REBITDA and then following quarter-on-quarter and explaining to you guys what we have done, what are the developments and what are we seeing for the upcoming months.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [27]

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Okay. And then just kind of on a more current trading update view, to what extent is the spread of coronavirus impacting your supply chain? What's your exposure as a percentage of suppliers to China? And if the issues do persist, what could the potential impact for Fagron be going forward?

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Rafael Padilla, Fagron NV - CEO & Director [28]

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Yes, sure. Look, yesterday, we had a call with all the purchasing teams globally, and this was one of the surfacing agenda. So we are closely monitoring this one. So far, we have not experienced any supply issue regarding this unfortunate event in China, right? There would be one. There would be one. We need to take into account that we have cost for our product. We have more than one supplier audited and approved, so that's one. And secondly, imagine that 1 product, 2 suppliers have the issue with the coronavirus. We would have an average stock of 3 to 4 months. And of course, we have also some local suppliers that would supply. So we have also thought about the Plan B, C and D. But as for now -- as from yesterday, we do not see any effect, and we are monitoring very closely these events.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [29]

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And can you quantify your exposure in terms of percentage of current supply? Or is that not a number you give?

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Rafael Padilla, Fagron NV - CEO & Director [30]

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Look, again, we cannot quantify it because we don't see an exposure, with 0 exposure on that. So if you want to know where are we buying our raw materials from, we have said many times that our materials are being supplied around 50% from Asia, and Asia is not only China. We also have India as a source, right? The whole pharmaceutical industry worldwide have the same pattern. So yes, we cannot really quantify an exposure because we don't see it, right, Beatrice.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [31]

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Sure. Okay. That makes sense. And then in terms of the -- could you give us a bit more granularity on kind of the acquisition in Germany, the strategic rationale behind it, what you think the opportunity is in, you said, Brazil and the U.S. and what exactly positioning is within the German market?

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Rafael Padilla, Fagron NV - CEO & Director [32]

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Sure. Gako, well, as you saw -- we said at the beginning, with the logo, we have one new segment. That is lab, and lab, we mean different activities. One of it is helping our customers in order to create or to make, to produce high-quality compounds. Gako has a very interesting system. It's a closed system, so there is no interference of other materials that could be inside. So the compounding is being done in a closed [aromatic] way within the jar. Of course, you get the recurrent sales of the jars. Gako is very strong in the local German market, though you can also see that there is some spread of sales throughout the globe. When we look at the biggest markets [world class] in compounding, of course, a number of units is the U.S. and Brazil, where Gako is present but very -- I would say, not as expressive as it should be.

So our theory, our investment increase theory was with Gako enhanced, we really can leverage the nice footprint that we have in Brazil and the U.S. now also with Brands and Essentials. And we can leverage a lot the capacity that Gako offer, the factory, the photo that we showed you with the presentation, has a lot of capacity. It's a brand-new factory. So we have a lot of capacity to fulfill the needs of mainly the U.S. and Brazil. That was the reason behind.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [33]

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Okay. And then in terms of these partnerships, I think in the last slide, you say that you're going to enter into -- more in 2020 in new geographical markets. Can you give us an indication of what regions you're looking at for that?

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Rafael Padilla, Fagron NV - CEO & Director [34]

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Well, what we have seen is that we are -- we have been historically a sales and marketing organization, right? We have moved the last years into developing our own brands. With acquisition of Ortofarma, we really enter into developing from scratch our own brands for personalizing medicine and also doing the needed studies on it, right, galenical, clinical, et cetera, for personalizing medicine, right? So what we saw and also very important to say, Beatrice, regarding the genomics, they also offered us a very attractive look and feel as a company into the market still. So what we have seen in some threat first is that people are approaching us in order to distribute our products in other countries where we are not present. And we are thinking about Africa. We're thinking about Asia. Of course, Latin America, we are very strong. From Brazil, we deliver to other countries. And from Colombia and Mexico, we deliver to the other small Central American countries. And what we see, of course, in Asia, in other countries in Eastern Europe, in Africa that there is a lot of interest. We were saying about the IMCAS during the presentation that we sold in 3 days 1,000 tests. And we have now closed 2 partnerships in countries that you would never expect like Lithuania and Namibia, right? We have closed agreements there. So we really believe that this trend will continue.

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Operator [35]

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We will now take our next question from Frank Claassen from Degroof Petercam.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [36]

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I'm Frank Claassen, Degroof Petercam. Two questions please. First of all, on the gross margin, it's been declining, again 150 basis points second half even below 60%. Can you remind me what are the main reasons behind it? And what can we expect going forward? Can we expect a pickup in the gross margin again? And then secondly on Wichita, I may have missed it. But what is the target for the number of SKUs by year-end 2020? Can you say a little bit more on the ramp-up you see for the SKUs?

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Karin de Jong, Fagron NV - CFO & Executive Director [37]

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Yes. So starting with the gross margin. Indeed, we see a decrease in the gross margin. There are several reasons for that. First of all, it's the acquisitions, so we acquired the companies, for instance, in Mexico, which has lower margins than ours. Secondly, we see Humco. Humco has a broad portfolio of products, but in general, the margins are a bit lower than the Fagron margins. Thirdly, we have the registrations in the Netherlands in which we see a pickup in the sales of premium pharmaceuticals. But again, those products have a little less margin than the overall margin of Fagron. And last is -- and that's basically what you see in the second semester, is the product mix of the Essentials in Europe having a downwards pressure on net margin in the second semester.

So if you look at the margin going forward, of course, with regard to the acquisitions, we have plans on bringing those margins up to the Fagron standards. As you know, in Mexico, we will copy the Brazilian model, which we already started in 2019, which means that besides the essentials, we're going to introduce branded products, and that will help increase margins. And same for the other acquisitions. Humco will slowly evolve to the Fagron margin, but that will take some time.

Of course, the registrations in the Netherlands, which is part of our strategy but not our main strategy, it's a defensive one, but in general, you see that those products have lower margins going forward. And the last region and especially the drop in the second semester, that has to do with the products mix, and that's not something we expect going forward, Frank.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [38]

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Okay. That's a clear answer.

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Rafael Padilla, Fagron NV - CEO & Director [39]

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Yes, right, Frank. And regarding Wichita, the number of SKUs, now we are at 106. We would like to highlight that is -- the number of SKUs is important, though what we have learned is that the quality of these SKUs is more important than the number, so the Pareto works with Wichita, right, of the sterile outsourcing market in the U.S. We -- internally, we have set guys when we want to reach our ambitious target of EUR 100 million in 2022 with 20% REBITDA, we want to have a portfolio between 180, 200 SKUs. So that -- they're in between, of course, keeping the Pareto, a clear target for this year. Of course, our R&D team has some projections, right? And we need to scale up to that number, though we -- for us, giving a clear target on 2020 on the number of SKUs for us is more relevant qualitative guidance on the sales of those SKUs, and that can catch up also with the production, right? But if you want to have 1 number in mind for 2022 between 180 and 200, and of course, we will update you in every call the number of new SKUs that we have introduced.

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Operator [40]

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We will now take our next question from Stijn Demeester from ING.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [41]

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First one is on the competitive situation in the Dutch compounding landscape. How do you assess the impact of the loss of the umbrella agreement with Mosadex to new entrants in November of 2019? And what is your strategy to retain these sales in 2020 and 2021? After all, this is a wholesaler supplying 40% of the Dutch market so it could have a sizable impact on your volumes. This is my first question.

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Rafael Padilla, Fagron NV - CEO & Director [42]

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Yes, sure, Stijn. Well, regarding the Dutch situation with the new competitor, Ace, again, we want to state that we have a very optimistic company. And of course in life, you don't decide what happens to you. You decide how you react, and everything will react very positively. We think that this will have a positive impact because we have worked very detailed on a plan of introducing new compounds, right? And also, as you said, before this morning, the registrations are very important for us. So we also have a plan in order to register some of the compounded products that, of course, keep the sales at home.

Regarding the compounding activities with the Mosadex umbrella, we need to understand as well that Mosadex is a very important and -- wholesaler in the Dutch market. Mosadex does not own the compounding pharmacies or the pharmacies, the retail pharmacies in the Netherlands. And it's also very interesting to understand that the pharmacy needs to have a contract with the compounder, Ace, Ceban, Fagron, right, and that we are 30 years in this market. We are well known on service and on innovation, and we think that this is something highly appreciated by the Dutch pharmacies. So we are very positive about this.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [43]

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Okay. And...

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Rafael Padilla, Fagron NV - CEO & Director [44]

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Sorry, just to finalize on one of your questions, when you will say how would that impact on the figures, we don't see any material impact on that, Stijn.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [45]

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So what is the underlying assumption then when you say there is no material impact? What is your estimate for the market share loss that could result for this?

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Rafael Padilla, Fagron NV - CEO & Director [46]

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Well, again, we don't see any material impact, Stijn, there. So...

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [47]

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Okay. Related to that perhaps, do you expect pressure on pricing in the Netherlands due to the increased competition also knowing that Ceban is going for another push and knowing that health insurers could exploit these new found competitive dynamics in Dutch compounding?

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Rafael Padilla, Fagron NV - CEO & Director [48]

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Well, price pressure exists, of course, in the Dutch market and other markets. And you know very well in order to move out of the price pressure, and we were saying also before with the sterile activities in the Netherlands, we need to work in high quality. We are very well known in the Dutch market for having very high quality standards and also innovation. We have also said that we have the broadest portfolio in the Dutch compounding market, and we have plans of extending this portfolio rapidly in the upcoming months. And this will take us out of the price pressure, but of course, when a new market -- or a new competitor enters in a market, you experience some price pressure. So we are very well positioned for that.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [49]

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Okay. Could you give some sense of sales growth that you expect in Europe in 2020? Last year, you said at 1H it should be in line with last year. Do you think you could repeat the performance of last year in Europe in terms of sales growth?

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Rafael Padilla, Fagron NV - CEO & Director [50]

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Yes. Sure, Stijn. In our plans, in our long-term plans, we see Europe as a mature region. And we stated low single-digit growth for Europe, and we keep for the next quarters and years on the high -- sorry, low single digit. High would be an ambition, right? You're all very optimistic. But the low single-digit growth would be a very good assumption.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [51]

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Okay. And a final question on AnazaoHealth. Sales growth [has] further tailed off in the fourth quarter? Is that already driven by the abandoning of these nuclear products, which could really impact your sales by $5 million? Or is that something for 2020? And are there other effects that play in the fourth quarter and actually also in the third quarter because sales growth was also lower than expected then?

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Rafael Padilla, Fagron NV - CEO & Director [52]

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Sure. You see the effect already in the last quarter of the stopping of the hot nuclear activities. You see it also in the fourth quarter but very important because we need to enter clean into the 2020 figures. The other segments of Anazao showed very good performance.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [53]

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Okay. So the $5 million will impact 2020.

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Rafael Padilla, Fagron NV - CEO & Director [54]

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For sure.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [55]

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And there's no effect of the $5 million in the fourth quarter. Okay.

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Rafael Padilla, Fagron NV - CEO & Director [56]

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Sorry, sorry, sorry, Stijn, my English, when we speak in that, I speak like -- sorry for that, but in English, I will try to explain better myself. We started stopping the activities in the fourth quarter. So in the fourth quarter, yes, we do see impact of abandoning the hot nuclear activities, and the full impact we will see it in 2020.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [57]

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And that's $5 million in 2020.

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Rafael Padilla, Fagron NV - CEO & Director [58]

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Yes. Was it clear enough, Stijn? Sorry for that.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [59]

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So the $5 million -- no, no problem. So $5 million impact is on 2020 delta to 2019.

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Rafael Padilla, Fagron NV - CEO & Director [60]

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Yes.

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Operator [61]

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We will now take our next question from Eric Wilmer from AMRO Bank.

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Eric Wilmer, ABN AMRO Bank N.V., Research Division - Analyst [62]

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ABN AMRO, Eric Wilmer, 2 questions. First question is on CapEx. It seems somewhat elevated at 4% of sales versus 2.5% to 3.5% typically. Do you expect this figure to remain higher going forward? And secondly, if I understand correctly, some managers of this new challenger, Ace Compounding, used to be management of Pharmaline acquired by Fagron in 2014. The facility that was then acquired was the one in Oldenzaal. I was wondering if you mentioned umbrella contract loss would have a material impact on the operations of this facility.

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Karin de Jong, Fagron NV - CFO & Executive Director [63]

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Yes. So Eric, maybe to start on the CapEx question, as stated before, we invested in the Poland facility in 2019, and we gave guidance on CapEx around 3% to 3.5% excluding the Poland acquisition of the new building and the new production facility. So if you exclude that, we are between the 3% and 3.5%, and that's also the guidance we are giving for the next couple of years.

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Rafael Padilla, Fagron NV - CEO & Director [64]

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Yes. And Rafa speaking. Regarding entering of Ace into the Dutch compounding market and Oldenzaal, we don't see any materiality there.

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Eric Wilmer, ABN AMRO Bank N.V., Research Division - Analyst [65]

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Okay. That's very clear. And just one follow-up if I may. In absolute terms, it seems that sales of the Essentials business in Europe was down flat year-on-year. What are the key drivers here? Do you see more competition? Or what is leading to this flat performance?

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Rafael Padilla, Fagron NV - CEO & Director [66]

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Yes, sure. So Essentials, we are -- when you look at the Europe landscape and in the compounding landscape for the Essentials, right? It's a very mature market. So there is very seldom movements on the volumes and the quantities there. And we have, of course, in almost all the markets, a very strong position, right? Next to this, we see Essentials -- when you look at the train, you have the first wagon. That's the branded product, right, where we focus on, where we really make a lot of marketing and sales effort with [the prescribers], and Essentials follow the Brands trend, right? So we see in a very mature market, the growth driver. It's branded products, new ideas, new innovations like Fagron Genomics and Essentials will follow up. We have very big market shares in many countries. So our work internally is to be as lean as a possible to gain margin on that.

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Operator [67]

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(Operator Instructions) We will now take our next question from Matthias Maenhaut from Kepler Cheuvreux.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [68]

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Yes. Maybe a follow-up of me on the Dutch compounding business. I recall in 2016, there was a comparable situation with also loss of exclusivity with the large distributors. Can you maybe give us a bit of a feeling if you see that as quite comparable? Or was that situation then actually more threatening at first glance? And could you maybe also give a little bit of color how that actually impacts the business over time?

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Rafael Padilla, Fagron NV - CEO & Director [69]

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Yes. Thank you, Matthias. Well, what we experienced at that time, we didn't expect any materiality at that time, right? So the difference, I think you are talking about Brocacef, right, Matthias?

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [70]

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Yes, that's correct.

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Rafael Padilla, Fagron NV - CEO & Director [71]

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Yes. So Brocacef owns some of the pharmacies, right? So of course, when a pharmacy owned the decision-making process is somehow different than when a pharmacy is not owned by a wholesaler, right? So in the case of Brocacef, Brocacef does own some of the pharmacies, right, that they deliver. Though, at that time, we didn't see any materiality, right? So that would be the slightly difference with the Mosadex.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [72]

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But you did...

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Rafael Padilla, Fagron NV - CEO & Director [73]

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Do you mean that's not clear?

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [74]

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Partly. Just to be fully clear, you didn't see any materiality. And was there any impact?

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Rafael Padilla, Fagron NV - CEO & Director [75]

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No. No, we didn't see any materiality on that.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [76]

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And historically, if you look at sales evolution, there was no impact on the Fagron compounding business sales growth trajectory just after the contract.

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Rafael Padilla, Fagron NV - CEO & Director [77]

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It's after the contract. Of course, for some customers, you do see less revenues. Again, we always focus on high quality and strong innovation power. And again, we have the broader portfolio, so that is highly appreciated by the customers. Our competitors -- our portfolio is bigger than all of our competitors, and that's pure service. And next to this, we have been registrating our top compounds, and that's something that generates extra sales as well, right? So the combination with the -- a product's registration together with new tailored compounds, right, make the mix within the pharmacies. You compensate somehow a loss that may occur with a new competitor entering in. So we understand that dynamic very well. We are here for the last 30 years. We have been living this market, pioneering this market. We were the ones also starting with the outsourcing trend here. So we understand that very well. And of course, we have the innovation capabilities of other countries that we also, of course, leverage. So we are quite confident that this, of course, will help us in order to have a fantastic 2020 also in the Netherlands.

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Operator [78]

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We will now take our final question from Stijn Demeester from ING.

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Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [79]

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Yes. A follow-up on Dutch compounding and on Brocacef. If chain-owned pharmacies typically followed the umbrella agreements and Brocacef owns more than 300 of the 460 pharmacies in the Netherlands, how do you explain there was no material impact of the loss of the umbrella agreement in 2016? And could it be somewhat, yes, masked by other effects that play in Dutch compounding?

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Rafael Padilla, Fagron NV - CEO & Director [80]

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Well, again, Stijn, I mean, here, it's a conversation that we could have. It could take not seconds or minutes, but maybe 1 full day even with the dinner included, right, in order to discuss this dynamic on the Dutch market. What we can say, of course, you can take our figures from 2016 onwards until now. You can see the figures, and numbers do not lie, right? What we have seen is that, again, when a new competitor enters, and it would be the other way around, but we are [executing] Wichita, right, that we are the newcomer, the guys, right? We bring in new products, and it's not so evident, but when you start, you can bring the full portfolio at the same day. I mean it's not so evident -- it's not so evident for us in the U.S. Of course, it's not so evident for our competition in a market like The Netherlands, right? So it's not from 1 day to another that you will have the full portfolio.

Of course, when an umbrella agreement falls down, an umbrella agreement has certain (foreign language). How will you say that in English, Stijn? Help me. Conditions. Thank you, Karin. And these conditions fall down. So this means that also the discount that you would make is covered by increase of the value share. That would be one driver. We cannot quantify that one. Again, in order to quantify that one, we would be the whole day here with management, talking about it. And of course, you are more than welcome to come here, and we would go into detail, please. Whenever you want, we can make an agreement with Constantijn. I will be more than happy to explain this to you.

Then, of course, you don't have as competitor the whole portfolio and Fagron as market-leading company for the last 30 years is including on a weekly base -- on a weekly base, we're introducing new products in the Dutch compounding market. First, we introduced them as ad hoc individual compounding. And when they are relatively big enough, we move into batch compounding, right? And when you move a product from ad hoc into a batch compounding, your service also improves because when you send a prescription to a compounder, when it is a stocked product, you can get it right away. And when it's not a compounded product -- or I mean when it's not a stocked product, you take some time in order to make the individual prescription. So that's also very interesting for us as a competitive advantage in order to have many products on the shelf prepared, and we don't have to do it one by one, right?

We have as well registered some of the [8] compounds that also bring sales to us, right? So that would be a fourth driver. And also, we don't need to forget that next to the compounds, we also trade or sell other products to the Dutch pharmacies like supplies, like raw materials. Now we are also starting with genomics, and the whole mix compensates a loss that may occur in the bread and butter of the big compounds because, of course, when you are a new player in the market, you do what we do, Wichita, you take the Pareto. You focus on the big guys, right? But of course, when the main competitor, and in this case, [Ace], Fagron, when we look at from the eyes of the new entries, register the product, this falls down out of your assortment, right? So it's a combination of all those elements that we are very happy to explain this to you one day here with a whiteboard, and we can go through it.

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Operator [81]

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We will now take our next question from Beatrice Allen from Berenberg Bank.

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [82]

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Just a follow-up on the main sort of conversation for today on the Dutch compounding market. You said that you're also kind of focusing on the hospital market as well, which is obviously a market that you've had a relatively small market share of -- to date. What's the opportunity in that market? And how are you seeing that progress in 2020?

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Rafael Padilla, Fagron NV - CEO & Director [83]

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Yes, thank you for your enthusiasm, Beatrice, always. You said the hospital market, right, to understand correctly?

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Beatrice Allen, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [84]

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Yes.

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Rafael Padilla, Fagron NV - CEO & Director [85]

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Yes, sure. So the hospital market in The Netherlands is not as mature as is the retail pharmacy, right, or the community pharmacy in The Netherlands. It's starting. It's moving at a lower pace than what it is in the U.S. as an example, as a comparison base, right? So we see this, of course, the opportunity. We also might admit that it takes more time than we expected, right? So we are or we chose last year for high-quality standard products with full stability steps, offering the high-quality products to our hospital customers, and we're going to keep on that strategical choice. And we are sure that sooner or later, we will see the benefits from that strategy. We introduced, of course, also new products, right, that have traction, and we are also learning what is the best offering for the Dutch hospitals. But you're very right, one of the main opportunities in the Dutch segment is the hospital market as well.

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Operator [86]

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There are currently no more questions in the queue.

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Rafael Padilla, Fagron NV - CEO & Director [87]

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Okay. Thank you very much all for attending the presentation, also for the nice questions, and we all wish you a very nice rest of the day. Thank you very much.

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Karin de Jong, Fagron NV - CFO & Executive Director [88]

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Thank you very much.