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Operator: Thank you for standing by, and welcome to the Synlait Milk Full Year Results Call. [Operator Instructions] I'd now like to hand the conference over to Synlait Milk. Please go ahead. Hannah Lynch: Good morning, everybody, and welcome to Synlait's Full Year Results Conference Call. [Operator Instructions] It's great to have so many of you on today's call and a real pleasure to introduce you formally to our new CEO, Richard Wyeth, who joined Synlait earlier this year in May. He's joined, of course, today on the call by our CFO, Andy Liu, who many of you will now know. Rich and Andy will speak today through to our investor presentation released this morning. And then we'll open the line for Q&A. [Operator Instructions] Richard, over to you. Richard Wyeth: Thanks, Hannah. Good morning to you all. Thank you for joining us on Synlait's Full Year 2025 Results Call. To indulge some sporting analogy, FY '25 was a year of 2 halves with Synlait. We won the first half and celebrated a return to profitability. However, over the second half was challenging on a number of fronts and the impact of those will be cleared in today's presentation. Andy and I will go over those in detail throughout the presentation. But before that, we have some good news. If you please turn to Slide 2. We have entered into a binding conditional agreement to sell our North Island assets to our valued customer and global health care leader, Abbott. These consist primarily of our Pokeno factory and 2 Auckland sites in the blending and canning facility at Richard Pearse Drives and Jerry Green, which is the warehouse. The sale price of the transaction is USD 178 million, which equates to approximately NZD 307 million -- NZD 307 million. Abbott has confirmed it will onboard most of the people who work on these sites, which is a fantastic outcome for both our people and also for the local community. The targeted completion date for the transaction is 1 April 2026. And the sale will be subject to various conditions, including Synlait obtaining shareholder approval and Abbott receiving consent under the Overseas Investment Act 2005 and normal consents such as regulatory consents from the likes of MPI. We released the notice of meeting with detailed information on the sale to inform shareholders before they vote on the transaction at Synlait's Annual Meeting on 21 November 2025. And also note Bright Dairy, our major shareholder, has confirmed it will vote in favor of the transaction, so the requirement for shareholder approval will be achieved. This is a real step forward for Synlait. The proceeds of this sale will be used to pay down debt. It will mean that by the end of FY '26, we are largely debt-free with the exception of working capital facilities. In short, the sale will deliver a stronger, simpler and more secure Synlait. We will have greater space to focus on our South Island operations and the ability to carefully and strategically review our strategy for Dunsandel. Goal is to release an updated strategy at our half year results in March 2026. But in the meantime, we're certainly very excited, and this is an outstanding win for both Synlait and Abbott. Moving on to Slide 3. I've now been in the business for just over 4 months as CEO of Synlait. I was attracted to this role due to the company's strategic strengths. It has world-class assets and its foundations are strong. Dunsandel is located in the heart of Canterbury's dairy sector with good connectivity to global markets and the ability to produce goods at scale. The company also enjoys strong demand from our global customers. Having now spent a short amount of time in the business, I've identified 3 immediate needs that we need to focus on. First and foremost, we need to improve our operational stability at Dunsandel so we can consistently deliver for our customers. I'll talk to you more about that in a moment. Secondly, we need to reduce complexity to deliver a financial uplift. The North Island transactions will assist with that. And finally, there is a need to reset the high-performing culture within the business. Synlait's focus on great people who have been through a huge amount of challenges over the last few years. My observation coming into the business is that it's very much a culture of reactivity driven some of those challenges. I want to reset the business so we can really focus on proactive performance. To that end, our focus for FY '26 will be very much targeted on operational stability. To assist with that, we are recruiting and onboarding a new Canterbury-based Chief Operating Officer who will be responsible for delivering a raft of improvements in that area and also ensuring that we can deliver the North Island transaction by 1 April 2026. We're also embedding our values framework, the Synlait Spirit, in the short term to allow us to improve our culture. Moving on to that focus into Slide 4, you will see focus areas internally that have been done dubbed the Big 6 for '26. Top of that list is operational stability. That should come as no surprise to many of you. As we announced to the market in July, Synlait has had manufacturing challenges earlier this year. The impact of those is clear in today's result with one-off costs totaling $43.5 million. While the manufacturing challenges are largely behind us, operational stability must remain a core focus alongside quality, performance and customer satisfaction. And to focus who are focused on financial resilience, it was great to see the banking facility come through last week and include the North Island sale then strengthening our financial performance has largely complete. We now need to deliver on culture, operational stability and quality, and that will lead to strong overall financial performance. We'll move through now to Slide 5 to look at our results at a glance. We are reporting total group EBITDA of $50.7 million today, which is an increase of $54.8 million on FY '24. Our bottom line was a net loss after tax of $39.8 million, which is an improvement of 78% year-on-year. As mentioned, this reflects costs associated with challenges at Dunsandel. Adjusted bottom line is a net profit after tax of $0.8 million, which shows you Synlait's recovery was on track. Pleasingly, Synlait's debt level has decreased by 55% during FY '25. Of course, most of this was courtesy to last October's equity raise, but an uplift in our trading performance has added to that with net debt now down at $250.7 million. As mentioned, the proceeds from the North Island transaction will largely bear. Group revenue increased to a record $1.8 billion or 12%. Operating cash flow was up 451% to $165.5 million and gross profit increased to $105.3 million. I'm delighted to confirm that our final milk price for the 2024, 2025 season is a record $10.16 per kilo of milk solids. Add to that Synlait's incentive program, which averages out to $0.30 per kilo of milk solids and our secured milk premium of $0.20 per kilo of milk solids for our South Island farmers, and you could see that our Synlait suppliers will be very happy. However, our average milk price or payment to South Island farmers will sit $0.50 above the farm gate milk price. That should result, as I said, in some very good Christmas presence for many of our farming staff. I will now hand over to Andy Liu, our CFO, who will take you through some more detail on the financials. Lei Liu: Thanks, Richard. Good morning, everyone. Let me take you a go through to Synlait's financial results for the year '25. This year's results shows a very strong improvement and a fresh sense of progress across our main business areas, even though we faced some manufacturing challenges at Dunsandel. Let me begin by outlining the key highlights on Slide 7. The Advanced Nutrition segments experienced robust customer demand and demonstrated strong growth in new product development. This success sales translated into a $21.1 million increase in underlying gross profit, underscoring the strength of our customer relations and our ability to innovate and bring new products to market. Our ingredients business achieved a notable turnaround from FY '24, recording a $26.6 million improvement. This was driven by effective foreign exchange management and a strategic shift to value over volume. Although stream return did not always favor our current product mix, our enhanced risk management approach proved beneficial. The Consumer and Foodservice segment achieved a $9.3 million increase in our gross margin. This was largely attributed to the outstanding performance of Dairyworks and ongoing growth in our UHT print portfolio in existing and new markets. We successfully reduced SG&A costs through disciplined cost control measures and a strong focus on eliminating wastage. Financing costs also reduced significantly, supported by better cash flow management and the recovery in trading performance. On to Slide 8. In FY '25, Synlait's total revenue increased 12% to $1.8 billion after a flat FY '24. Growth was broad-based. Advanced Nutrition up 8% on high volumes and a new Nutrabase powder successfully launched in Southeast Asia. Ingredients revenue increased by 7% on pricing and favorable foreign exchange. Our consumer base business unit reported a 12% revenue increase, with growth in export markets helping to offset ongoing pressures in the domestic market. Revenue and volume from Foodservice, driven by UHT cream, almost doubled compared to the prior year, with growth extending into Asia and the Pacific. Underlying gross profit increased to $142.5 million due to disciplined execution and strategic improvements company-wide. On Slide 9, you can see that our focus on operational efficiency and working capital management has resulted in a remarkable recovery in cash flows. Our operating cash flows increased by $213 million, reflecting improved trading performance and optimized working capital management. CapEx investment remains at a low level, a further 23% reduction compared with prior year with a focus on business continuity, growth initiatives and regulatory compliance as well as strategic digitalization, AI, cybersecurity to manage risk and opportunities. Net debt decreased by $300.9 million or 55% due to capital injection and improved cash flow performance. Financing costs contributed $48 million to net debt. That is a $7 million improvement on FY '24. These costs are expected to reduce further in FY '26 with the completion of our refinancing. Our balance sheet is much stronger, and we are targeting a net senior leverage ratio below 2.5x in FY '26. In summary, Synlait's FY '25 results reflect the company regaining its strength, simplifying its operations and establishing a platform for sustainable and profitable growth. The sale of North Island assets marks an improved turning point, significantly strengthening our balance sheet by reducing net debt, improving leverage ratios and restoring our creditworthiness. With a streamlined business model and a solid financial foundation, Synlait is well positioned to invest in strategic growth, pursue new opportunities and deliver sustainable value to our shareholders. Financially, Synlait is now equipped to support and execute a new future strategy with confidence and resilience. Thank you. I will hand you back to Richard now. Richard Wyeth: Thanks, Andy. I'll now go through an update on each of our business units. If you turn to Slide 11, firstly, Advanced Nutrition. So for FY '24, we saw an overall uplift in volumes due to strong customer demand. Our achievements for that year include an expansion of our customer base. We also had a new record in lactoferrin sales volumes, which were up 12 metric tons. And we also had the successful launch of our Nutrabase powders, which has secured multiple customers in Southeast Asia. Our focus going forward for this financial year will include working with The a2 Milk Company to support growth in China, further expanding the Nutrabase range and looking to deepen relationships with our Ingredients customers so they're more aware of our Advanced Nutrition capability and exploring new sales channels and value-add products to uplift returns on lactoferrin. So that's Advanced Nutrition. Moving through to Slide 14 and the Ingredients business. For those who know the Synlait story, you will recall we strategically moved away from fresh milk processing at the North Island assets last year. This obviously impacted our ingredients overall volume, which decreased to 108,000 metric tonnes. However, offsetting that was improved premiums over the last 12 months, which was an outstanding achievement. And obviously, we had increased revenue due to strong ingredient pricing. We also saw progress in customer and market diversification with expansion into the Middle East. Looking ahead, our focus areas for ingredients will be further uplifting the premiums we achieved last year, continued expansion of our ingredients portfolio and amplifying market awareness of our high level of quality and consistency. Moving now to Slide 13. You will see an overview of our Foodservice business performance. This is for UHT cream, obviously, a very popular product, certainly in China. For FY '25, it saw us successfully launch our second-generation cream, which has further increased product stability in market. To deliver record volume last year of 8.4 million 1-liter bottles manufactured at our Dunsandel site, every single one of these was sold. We had demand remains exceptionally strong for this product in multiple global markets, and our focus will be to continue to grow that into next year. We're looking to grow margins, although that has been challenging. The real unlocker for our Foodservice business is to continue to drive volume. And it's really pleasing to see we've picked up a new distributor, which is sending product into Fiji, and we're working more broadly to increase that volume overall for that Foodservice business. Moving on to Slide 14, the Consumer business. FY '25 was another outstanding year the Dairyworks which drives our consumer business. I'd just like to acknowledge Tim, who is the CEO of that business, who was acting CEO of Synlait and also Aaron, who stepped into his shoes for a period of time. They've done an outstanding job once again for FY '25. The solid performance was driven by offshore markets with softer growth in New Zealand due to obviously cost-of-living pressures and increased milk prices. Overall gross profit for our consumer business was $39 million, up from $30.6 million in the prior year. And offshore Dairyworks saw a 53% growth in cheese export volumes with a lot of success across the Tasman. Dairyworks is now the fastest-growing cheese brand in Woolworths, Australia. The Alpine brand has also launched in foodservice then, and both Alpine and Dairyworks products ranges are now in Costco Australia. The focus for FY '26 is to continue delivering value in new product lines to domestic companies and further growing our export volumes. So a real standout for this year. Moving now to Slide 15, which is milk supply. As I mentioned earlier today, we have confirmed a record milk price, which is significantly up on the season's opening forecast. This should deliver some very happy farmers, which has been an important focus for Synlait across FY '25. Earlier in the year, our on-farm team did an excellent job of securing our milk supply for the current season after working to encourage farmers to withdraw their case and onboarding 11 new farms. This is helped by -- this was helped by additional secured milk premiums along with new guarantees around the milk price at advance rates. We will continue to focus on finding new ways to add value on farm. One of the focus areas will be improving our digital offering and continuing to support our on-farm through Whakapuawai program, which helps Riparian planting on farm. We will also look to launch our fixed milk price offering in FY '26. Now on to Slide 16. FY '26 presents a valuable reset for Synlait, as you well know. As we've already said, the sale of our North Island assets will strengthen Synlait's financial position considerably with the proceeds used to significantly reduce debt. Given the scale of the strategic reset, we will not provide further financial guidance for FY '26. Our focus is on executing the North Island sale and building a simpler and more focused Synlait in Canterbury. We are committed to making the most of this opportunity and aim to have an updated strategic plan in place by March 2026. So moving through to Slide 17, key takeaways from today. As was noted, the sale of our North Island assets will see Synlait become a stronger, simpler and more secure business. Financially, we will deliver a full and final balance sheet reset ending the company's survival phase. And strategically, it simplifies our focus and opens the door for us to explore new opportunities here at Dunsandel. Andy and I will now take questions. Hannah Lynch: [Operator Instructions] Your first question comes from Sean Xu with CLSA. Sean Xu: My first one is around your manufacturing challenge in your Dunsandel facility. It seems to be a reocurring issue now. I'm just very interested though in what specific processing improvement can be prioritized in FY '26 to prevent these kind of operational disruption going forward? Richard Wyeth: Sorry, I just didn't quite hear the second part of the question. Hannah Lynch: Prioritize this in FY '26 to prevent this happening going forward. Richard Wyeth: Yes. So I appreciate there has been a number of manufacturing challenges for a period of time and certainly coming in and being relatively new to the business is a focus for me. So as I mentioned, for our Big 6 for '26, that focus on operational stability is key. What I can say is that there are a number of one-off issues, and we just need to work through those systematically root cause analysis and fix those issues. I'm now comfortable with we're largely through that. But as I say, the next 6 months is very important for us. Sean Xu: My second question is around the a2, the China label digital production. My understanding is that requires a new -- registration renewal in calendar year 2027. I know that might be early stage, but as I remember, the last time registration with SAMR takes a long time. I'm just curious to know if you can give us some indication on the time line of when to start prep for this process. Richard Wyeth: Yes. So we've already started that process. You're quite right, FY '27 is key. And so we've been working on that already for a fairly long period of time. There's a bit of capital required going forward, and we're working with both a2 and SAMR quite closely to make sure we're ready for that. Sean Xu: If I may just quick check in a very quick question. Last one. With Bright being your largest shareholder, I'm just curious to know, is there any further collaboration you can leverage their connection distribution channel in China to expand your market there? Richard Wyeth: Yes. I mean, Bright are obviously a very supportive shareholder of us, and we are working with them. And I think there's good opportunities. I mean, we've got a very strong working relationship with Bright. So I think as part of our strategy reset, we will certainly be looking at what opportunities we have to work with Bright. Hannah Lynch: Your next question comes from Stephen Ridgewell with Craigs Investment Partners. Stephen Ridgewell: And first of all, congratulations on the sale of Pokeno. I know that's a big win for shareholders. With that the equity raise a year ago, 2 of the big 3 challenges that have been facing Synlait have been overcome. So well done on progress. My first question is on the use of proceeds from the North Island asset sales, and it could be either for management or potentially for the Chair. If you use the proceeds, $30 million of proceeds to pay back debt, Synlait could be in a position where it's got $74 million thereabouts of debt on the balance sheet. But the comments today also talk to the proceeds providing an opportunity to -- an opportunity to strategically diversify. And I realize it's an early stage, but I'm just interested in the sort of early thoughts the company has on the extent to which those proceeds will be used to pay down debt and the extent to which Synlait thinks it's got capacity to make acquisitions or other growth investments that may be more organic? And then related question is post the sale proceeds, will the company end up operating a lower net debt-to-EBITDA ratio than the 2.5x kind of flagged today? Richard Wyeth: Yes. Thanks. I'll take probably the first part and Andy may chip in on that. So certainly, initially, we'd look to obviously pay down as much debt as sensible. In terms of the longer term, that will be clearer through the strategic review that we can update in March. And just, I guess, my final comment, a personal perspective, which I'll share with the Board is that, I mean, I'd like to see our debt-to-debt equity ratio sitting at about 20% to 25%. I think that's prudent. We're seeing that as a good balance. When it gets to 45%, 50%, it doesn't really work. So that would be my intention going forward. Andy, if you want to add anything further? Lei Liu: No. I said actually that for our refinancing, we just finished it last Friday. That's why we still think it too early stages just to talk about regarding when we get the funds what we will do. But as Richard already mentioned, yes, principally definitely to just reduce our debt in order to just to keep it at a very reasonable levels and also seeking further opportunities. So this is the key point. And Stephen, just to try to make sure what's your second question regarding the debt-to-EBITDA level? Stephen Ridgewell: Yes. Just whether the company would look to operate at a lower net debt-to-EBITDA ratio, lower than 2.5x going forward, in particular, if we kind of look through a2 Milk's English label volumes migrating to the Pokeno site in the next year or 2? Lei Liu: Yes. Let's say that for the moment, we still think the 2.5x is still a reasonable one. That's why we don't think that we will change it for the moment. Stephen Ridgewell: Okay. Yes, look, if you keep it at 2.5x, it does suggest potentially quite a lot of firepower for acquisitions. But as you say, maybe we need to wait a bit longer to see where we land there. Yes. And then, I guess, as well, just on the -- in terms of the impact of the asset sales, we can see the proceeds of $307 million coming through, which is great. But can you give us -- can you hear me? Lei Liu: Yes. Hannah Lynch: Yes. Stephen Ridgewell: Yes, great. Can you just give us a sense of the kind of the EBITDA being generated from those assets in the -- I feel like on a normalized basis in the year just gone. My understanding was Pokeno was kind of burning $35 million a year at the EBITDA level. But just can you to give a rough steer as to the EBITDA loss that those assets generated in the year just gone? Lei Liu: Yes. So I can quickly jump to this question. So based on our FY '25 numbers that they said, once we get rid of the North Island, we are thinking about $5 million to $10 million kind of the EBITDA to be improved because definitely FY '25 that -- the plant is more filled, have more demand. That's why the level is not as high as what we said before. So $5 million to $10 million EBITDA impact. Stephen Ridgewell: Okay. No, that's helpful. And then just one last one for me. Just on the impact of a2 Milk's planned migration of English label volume from Dunsandel to its soon to be acquired Pokeno plant. Can you give us a rough estimate of the EBITDA impact that Synlait is kind of planning for? Is it reasonable simply to take the gross margin per tonne by the volume? Or are there other things to consider, for example, is there cost out the company connection or other factors such as the diseconomies of scale at lower production volumes in formula? Because I think that is obviously a key issue as the market kind of looks into the FY '27 and beyond time period. I mean some thoughts on that would be quite helpful. How you -- what the impact is and then the mitigation factors, the ways that you can mitigate that impact? Lei Liu: Yes. So Stephen, sorry, that's because these kind of numbers can be really very commercial sensitivity. So yes, I can't answer that very directly. Stephen Ridgewell: Okay. Well, I guess just as an opportunity to make some comments. I guess, as analysts, we have to take a view on their own numbers. Lei Liu: Maybe let me take it offline and just think about which kind of information we can provide. Operator: Your next question comes from Adrian Allbon with Jarden. Adrian Allbon: Maybe just a follow-on from Stephen's question. 4 months since the drill, Richard, what sort of cost opportunity do you kind of see in the Dunsandel asset going forward, both initially and as you sort of deal with the transition of acreage and recycle volumes? Richard Wyeth: Sorry, Adrian, it's just a bit hard to hear. Can you have another go at that, please? Adrian Allbon: Sure. Is that better? Richard Wyeth: Yes, it's a little bit better. Adrian Allbon: I was just -- as a follow-on to Stephen's question, I was just wondering what the cost out opportunity -- is it better? Richard Wyeth: Yes, that's great. Adrian Allbon: Yes. Just as a follow-on to Stephen's question, I was just wondering what the opportunity you see for cost out at Dunsandel actually is. Richard Wyeth: Yes. Look, I think, as I say, when we reset the business with a focus just on Dunsandel, there will be some opportunity in that, again, too early to get into the specifics, unfortunately, but certainly, we'll be able to provide more of an update at the March announcement. Adrian Allbon: Okay. Would it be useful as a starting point for us to kind of look to sort of FY '18 as a sort of -- as some sort of benchmark? Richard Wyeth: Andy, I don't know whether you want to comment on that. I haven't got the FY '18 numbers in my head at the moment. Lei Liu: Yes. So Andrew, that's regarding FY '18, it's really long time ago. So what I can propose is that let me work out some numbers and try to provide you some, let's say, some reasonable figures. For example, based on FY '25, we said we are saving about $10 million, just -- we're still including the North Island. That's why we think about definitely the number should be higher than $10 million. But let me just work out some numbers, come back to you regarding how you can simulate it. Richard Wyeth: Yes. What I can say in terms of -- I'm not sure what you to look back, but what I do know, given I've only been in the business a short time is what happened sort of even 2 or 3, 4 years ago in terms of throughput on the dryers at Dunsandel is that we won't get as much throughput. So as we're focused on higher quality, it means we have to derate the dryers somewhat. Now in terms of the specifics, I haven't got those in front of me today, but it does mean we can't just go look at the past as a precursor to the future necessarily because the standards have improved and China's requirements continue to improve. And all of those things mean we have to -- it does take some capacity out, not a lot, but it does take some capacity out of the dryers. Adrian Allbon: Okay. Just related to that, can you kind of give us a steer on what your sort of milk pool or what your contracted milk pool is for next year. Richard Wyeth: Circa 70. Adrian Allbon: Okay. And then I guess like in a broad question, are you expecting -- are you actually expecting EBITDA to be higher this year? And I'm presuming that the net debt is probably going to go higher as well because you've got all these premium payments to farmers coming up shortly. Richard Wyeth: Andy? Lei Liu: So let's say, for this year compared with FY '25, yes, you are right that we will pay some additional incentive to the farmers. It can be some challenge for the EBITDA. But as I said, regarding the FY '26 that we are more focused on selling the North Island, we will try our best, firstly, to focus on production stabilities and that's why -- that we didn't share any kind of our targets for the moment. Adrian Allbon: Just if you assume that the North Island business was in the numbers, which is probably what most of us are going to have to do, would you expect the net debt to be higher this year, like given your farmer incentive payments are due? Lei Liu: I should say about the similar level than this year because, yes, farmers payment, but also do remember, we have the EBITDA to generate the cash. So that's why we still think the net debt should be, let's say, a bit better than this year theoretically. Operator: Your next question comes from Matt Montgomery with Forsyth Barr. Matt Montgomerie: Maybe just start on manufacturing issues, Richard. I suspect it's unlikely you'll provide detail on what they were. But there's sort of a footnote around them being largely resolved. It'd be interesting if you could just maybe talk to that, what largely means, what you need to see to get them resolved? And yes, just any further color, I guess, to give us confidence that they have been isolated to the period that you've outlined previously? Richard Wyeth: Yes. Thanks, Matt. Good question. That was my fault. Look, I said that to Hannah, look, the nature of these businesses is that they're very complex, right, making Advanced Nutrition, for example, you've got ingredients from 10 to 40 different ingredients. You've got complex processing. So I'm relatively conservative by nature. So I said largely because while the issues we had from January to July are largely behind us. To say they've gone forever is you just can't do that. And look, in terms of the nature of those things, they are a combination. We've got people, process systems, engineering, there's a whole raft of things that can go wrong. A rotary valve can be put in some -- it might be an ingredient issue or supplied incorrectly. So there's so many things that can go wrong in making this advanced nutrition. So the issues we've had in the first half of the calendar year are largely behind us, but that's why I'm tuning up the focus on operational stability going forward. So I am very comfortable with the issues we had in the first half of the year. We have largely dealt with all of those, but you just never know what can be around the corner. So the way you deal with that in a processing operation like we are is you have very good systems, processes and you have well-trained people. So that is the area that I'm focused on at the moment. Matt Montgomerie: Awesome. That's very clear. Just on Dairyworks, I think EBITDA of around 23. Clearly, it's been a good business over the last 5, 6 years since you've owned it. And I think from memory at the time, I think the target was around 20 of EBITDA. So maybe just from you, Richard, how you think about that business going forward, maybe anything where you see it, say, 3 to 5 years from an earnings point of view? Richard Wyeth: Yes. Thanks, Matt. Andy might be able to put some numbers around it. In a general comment, I'd say I think it's got massive opportunity. I think the team there are fantastic. Tim and his leadership team have done a great job. So I think there's a real opportunity. The thing about that business is that we can just continue to scale it up. There's no sort of restrictions on growth. And I think that's what's exciting. They can procure product, they can add value to it, and they can just put it into different markets. They've got good market share in New Zealand. They're now targeting Australia, and I'd like to get to look even beyond that. So that's sort of my general comment in terms of the numbers around that. Andy, I don't know if you've got any more flavor to add to that. Lei Liu: Yes. So let's say, for FY '25, our revenue for the Dairyworks is about 12% increase, but gross profit is about $28 million. So it really shows that other than the volume growth, it's also internally, let's say, from the focusing always the strength for the efficiencies, productivity, also supported these numbers. That's why we still said this is a very good business that's in a good trend and also expected to have further growth. Matt Montgomerie: I might go one more, just a small one, Andy, the depreciation associated with the North Island assets, like what's the EBIT drag? Lei Liu: Sorry, can you repeat your question? What do you mean the EBIT drag? Matt Montgomerie: So just following up from Stephen's question, what's the D&A sitting over the North Island assets in FY '25? Lei Liu: It's around about $1 million per month. Operator: Your next question comes from Nick Mar with Macquarie. Nick Mar: Could you just talk through the net debt number? I think the trading update right at the end of your financial year, you were sort of guiding towards $300 million and you came in at $250 million. How did that change so much? Lei Liu: Yes, sure that I can just take this question. So what changes is mostly because of we have the higher customer demand and the customer demand also triggers some additional deposits. So this is how it comps regarding one of the reasons. Another reason is that, as you know, that Nick, we also have the receivable assignment. So end of the month, there is some kind of additional kind of deliveries, which we get the receivable assignment earlier. That's why this is mostly the 2 kind of the main drivers for the $50 million just reduced. Nick Mar: Yes. That's good. And in terms of what you're selling with the North Island divestment, sort of you mentioned the kind of lease warehouse as well. Does that sort of line up to what the North Island CGU was when it was impaired at the end of FY '24? Just trying to work out the price relative to the holding value? And also, do you have any sort of breakdown of the value by sort of PP&E versus working net working capital? Lei Liu: Yes. So to answer your question, yes, it's roughly the same regarding our CGU for North Island last year when we shared the numbers. So what I can propose you is that you can take the last year annual report numbers. And yes, this is kind of be the baseline regarding the CGU in the net asset value for the moment. Nick Mar: Yes. And the sort of mix between the PP&E and net working capital? Lei Liu: So working capital one, because here, what we said is regarding the total $178 million, it's $170 million for the PPE and $80 million for the working capital, let's say, just inventory. Operator: There are no further questions at this time. I'll now hand back to Mr. Richard Wyeth for closing remarks. Richard Wyeth: Thanks, everyone, for joining the call today. I look forward to meeting with many of you over the coming days. And in the meantime, if you've got any questions, you can just follow those up with Hannah. And that concludes our call for today. Operator: Thank you. That concludes the conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the PG&E Corporation Investor Update Conference Call. [Operator Instructions] Please note we have allotted 40 minutes for this conference call. Thank you. I would now like to turn the conference over to Jonathan Arnold, Vice President of Investor Relations. Jonathan, please begin. Jonathan Arnold: Good morning, everyone, and thank you for joining us for PG&E's Investor Update. Before I turn it over to Patti Poppe, our Chief Executive Officer; and Carolyn Burke, our Executive Vice President and Chief Financial Officer, I should remind you first that today's discussion will include forward-looking statements about our outlook for future financial results. These statements are based on information currently available to management. Some of the important factors which could affect our actual financial results are described on the second page of today's presentation. Our presentation today also includes a reconciliation between non-GAAP and GAAP financial measures. The slides, along with other relevant information, can be found online at investor.pgecorp.com. And with that, it's my pleasure to hand the call over to our CEO, Patti Poppe. Patricia Poppe: Thank you, Jonathan. Good morning. Our update today comes on the heels of a busy California legislative session culminating in the passage of Senate Bill 254. The bill was signed into law by Governor Newsom on September 19 and went into effect right away. The actions taken by our state this legislative session show that they appreciated the urgent need to improve upon the framework originally adopted under AB 1054 in 2019. SB 254 provides important protections today and lays the foundation for a second phase as the state has acknowledged that the utilities and their customers cannot continue to carry the full burden of climate-driven catastrophic wildfires, especially when the utility has acted prudently. The important enhanced financial measures and the state's commitment to a meaningful second phase were the critical elements of the bill, which we and our Board weighed before deciding to opt into the fund extension. We plan to make this election this week. In terms of financial measures, SB 254 creates the framework for a new $18 billion continuation account available to cover future fires. Extending the fund provides 3 key benefits. First, it provides for timely compensation for future wildfire victims. Second, it allows for smoothing the bill impact on utility customers. And third, it builds on the investor protections of a disallowance cap. In addition to providing for the new continuation account, SB 254 includes several changes versus the original AB 1054, which we view as constructive. To start, utilities are not required to provide any large upfront contributions and a portion of the utility funding is under a contingent call, meaning it will only be required in the event of a new covered wildfire and if the administrator sees a need for cash to settle claims above and beyond available resources. Critical to upholding the principles of inverse condemnation, these contributions made by the utilities to the continuation account have value, meaning they can be credited against a future disallowance and requirements to reimburse the fund if were later found imprudent. Next, PG&E's share of contributions to the Continuation Account is just under 48%. So our annual contribution will step down by 25% from $193 million to $144 million per year starting in 2029. And the disallowance cap calculation has been clarified to reflect 20% of T&D rate base equity as of the date of ignition rather than the date of the disallowance decision several years into the future. With our growing rate base, this is a meaningful change. The state also took an important step forward in providing for a securitization option for fires with ignition dates in 2025 prior to the effective date of the new bill. This credit supportive provision allows for securitization of wildfire claims before the CPUC prudency review. While this provision is not directly impactful to PG&E, it's a helpful signal that the state appreciates the need for the investor-owned utilities to have a ready source of liquidity beyond the available fund resources. SB 254 also took one step toward limiting liabilities, introducing a Right of First Refusal for subrogation claims, giving the utilities an option to purchase claims from insurance companies at the same price as a third party would be willing to pay. SB 254 sets a clear path for the legislature to consider more comprehensive wildfire reform in the 2026 session. With the immediate need to address this legislative session, our attention has already shifted to the second phase. Specifically, the fund administrator is charged with studying and making recommendations to the legislature and the governor. The list of 10 focus areas includes considering new models to socialize liabilities from wildfires, including changes which potentially could supersede the current Wildfire Fund construct. We're encouraged by the comprehensive nature of this language. We're also encouraged by comments made by senior members of the legislature and the governor's office, both prior to and after the bill's passage. We are confident that this sets the stage for action in 2026. As you know, SB 254 calls for securitization of $6 billion of fire risk mitigation capital. PG&E's portion is approximately $2.9 billion, which will apply to wildfire mitigation capital expenditures approved by the CPUC on or after January 1, 2026. This dollar figure is much less than the earlier drafts and allows us to continue important risk reduction work at pace. The devastating wildfires in January took us all by surprise, and the state took constructive action that protects victims and customers and recognizes the importance of healthy investor-owned utilities. We look forward to working with them on phase 2 of SB 254. Now let's talk about the extension of our simple affordable plan. As I've shared with many of you, I started 2025 with a lot of optimism. This is the year we prove out the simple affordable model with our 2027 general rate case filing. This is the year we show customers that rates are going down, and this is a year to focus on serving our large load customers and enabling rate-reducing load growth. I'm happy to report that while many have been focused on the California legislative process, my PG&E coworkers have been busy executing, making these plans a reality and leveraging our performance playbook to deliver consistent outcomes for customers and investors. First and foremost, we are a company of operators, and we get up every morning to serve, putting customers at the heart of everything we do. We also know that performance is power and have built our work plan and financial plan knowing that when we perform, we will have the power to influence perceptions and outcomes. The plan we're sharing today is the plan we believe best delivers for customers and investors now and for the long run. At the same time, I want you to know that we hear your thoughts on capital allocation. If PG&E stock continues trading at depressed levels, and we aren't seeing clear signs of progress toward meaningful policy reform, then we would certainly consider reallocating some capital toward more immediate shareholder return, always being mindful of our credit metrics. The most likely way we would do this is through an opportunistic stock repurchase for which I would not hesitate to seek the appropriate authorization from our Board if conditions warrant. But first, let me reiterate, this would not be our preferred path. We prefer to keep investing in safety and resiliency for our customers, enabling rate-reducing load growth, which will drive the state's leadership in the macro trend of AI and electrification and ultimately helping our state meet its ambitious clean energy goals affordably. With the fund administrator report due next April, another rate reduction this month, our brand trust scores on the rise, customer bills projected to be flat to down in 2027 versus today and a robust data center pipeline, we're positioned to deliver for California, our customers and you, our investors. As part of our 5-year plan, we will continue important wildfire mitigation work, including undergrounding. We will prepare the grid to serve new homes, businesses and electric vehicles. We will continue to invest in the safety of our gas system with pipeline replacement, and we will invest in more rate-reducing load with incremental FERC transmission capital now in the plan. Completing this and other important work for our customers translates into average annual rate base growth of approximately 9% for 2026 through 2030, which in turn supports extending average annual core EPS growth of at least 9%, also through 2030. Our simple, affordable plan contemplates our share of the securitized utility capital investment under SB 254. It is built to not require new PG&E common equity through 2030, while also delivering customer bill increases well below inflation. With that, I'll turn it over to Carolyn to discuss more specifics of our extended 5-year plan. Carolyn Burke: Thank you, Patti, and good morning, everyone. Today, I'm happy to reiterate our 2025 non-GAAP core EPS guidance range of $1.48 to $1.52 with a bias to the midpoint. That's up 10% over our 2024 result. I'll provide core EPS growth guidance of at least 9% each year, 2026 through 2030, share the details of our capital plan, which includes average annual rate base growth of approximately 9% for 2026 through 2030 and offer our financing guideposts, including that our plan does not require new common equity through 2030, a key consideration given where we currently trade. Turning to Slide 6. We intend to invest approximately $73 billion over the 5-year period. This is a combination of CPUC and FERC's jurisdictional capital and includes the $2.9 billion of CapEx to be securitized under SB 254. Additionally, we will be guided by the following key financing principles as we move forward. First, we will continue to prioritize investment-grade ratings with IG being one of the most meaningful potential affordability enablers for our customers. Our plan maintains FFO to debt in the mid-teens, and I'll remind you that FERC jurisdictional capital converts more quickly into operating cash flow through our annual formula rate. S&P made a recent decision to maintain our positive outlook, and they too are looking to the second phase of wildfire legislation. Meanwhile, just this past Friday, Fitch upgraded our parent corporate credit rating to investment grade with similar comments on the importance of further wildfire policy reform. Second, we continue to plan conservatively. This includes having contemplated the possibility that the Wildfire Fund Administrator may or may not call for contingent shareholder contributions within the plan period. Third, we're updating a legacy commitment to pay down $2 billion of parent debt. At this stage, we believe we have grown into our current level of parent debt, which stands at about 10% of total debt. That compares to a peer average of around 25%. And lastly, we're sticking with our plan to target a dividend payout ratio of 20% by 2028. We target reaching this level on a linear basis and holding there through 2030. We still see 20% as an appropriate and conservative goal, offering financing flexibility over the course of our plan. These guidelines are in addition to other operating levers that we work every day, such as reducing nonfuel O&M by at least 2% and improving our capital to expense ratio. I am excited about this plan and what it can deliver for our customers and you, our investors. It's grounded in our brand of conservatism and will be executed using our winning performance playbook. As Patti mentioned, though, I too want to assure you that we intend to maintain discipline when it comes to capital allocation, staying mindful of ongoing regulatory and legislative outcomes included, but not limited to, progress towards a successful phase 2 of wildfire reform in our state. With that, I'll hand it back to Patti. Patricia Poppe: Thank you, Carolyn. We're looking forward to connecting you -- connecting with many of you here in New York this week. And with that, we'd be happy to take your questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Shar Pourreza with Wells Fargo. Shahriar Pourreza: So I just appreciate the color this morning. Just as we focus on capital allocation, what is your '23 financing plan embed beyond the 20% dividend payout by '28? And what would be the time frame for you to seek Board approval for buyback flexibility? Do we need to wait until the end of the '26 legislative session for that? Patricia Poppe: Thanks, Shar. Well, first, obviously, as we said, we're focused on value now and the long term. It's really important to know that our primary focus is investing our capital for the benefit of customers. We think that's the right near-term and long-term approach. However, we'll obviously continue to monitor the stock price and the state actions and attention during SB 254 phase 2. There are conditions that we would consider a buyback given the equity we issued that equity to fund our plan through 2028. And given the securitization of CapEx, that could be the equivalent of about $1 billion of -- maybe $1.5 billion on the high end of a buyback. But really, we're focused on our credit metrics and delivering for customers. And so we think in the near term, that's really the best plan. I'll have Carolyn hit the high points of the financing plan over that period. Carolyn Burke: Yes. I'll just say that as we've said, we've always built our financing plan, first and foremost, to focus on our balance sheet and maintaining FFO to debt in the mid-teens. That's a core principle. Maintaining our dividend at 20% through 2028 and sticking to it through 2030 generates a lot of internal equity, and that provides us with additional flexibility. If we need any other sort of financing, but you just can always count on us to look at the most efficient form of financing as we've done in the past, Shar. Shahriar Pourreza: Got it. Okay. That's perfect. And then just lastly, can you just elaborate on any further offsets to new shareholder contributions relative to plan? Carolyn Burke: Maybe you can -- other offsets, what do you mean by that, Shar? Maybe you can just give me a little color, so I can... Shahriar Pourreza: Just how do you mitigate shareholder contributions relative to what you have in plan there? Carolyn Burke: Well, I was just going to say -- as we said, we've built our plan to contemplate the contingent cost. And so to the extent that it's not, that would -- we consider that upside. Just... Patricia Poppe: And I'll just add in that, obviously, our simple affordable model is what drives the whole financial plan. So the offsets, obviously, significant O&M savings that we've continued to build into the plan now and for the future provide ongoing benefits, both for customers and for the financial plan. Operator: Your next question comes from the line of Anthony Crowdell with Mizuho. Anthony Crowdell: I guess just more on the legislative front. I'm curious, it was a very productive legislative session, but is there anything you didn't get or anything you guys may plan next year? Patricia Poppe: Well, I think Anthony -- great to hear your voice, Anthony, this morning. We are obviously focused on phase 2. There's much yet to be done. The whole idea that we reduce claims through multiple measures, number one, just hardening the system and support for hardening and support for both our infrastructure hardening and community hardening. We invest a lot of effort and money into preventing an ignition. We also need to, as a state, invest in community hardening and preventing the spread. And so that's obviously a key part of phase 2. And the liability reform, we'd love to see additional liability reform as part of phase 2 and then broadly a larger pool to socialize cost. I think one of the things that's important, and we definitely have heard this from legislators and state leaders, wildfire and extreme climate conditions have continued impact on California's livability on California's housing crisis. We need to have insurable homes for people to be able to get a mortgage and buy a house in California. So these climate risks are adding to the housing crisis. So phase 2 really is an opportunity to open the aperture, look for additional means of insurability for the state for, again, as I mentioned, community hardening and really looking at limitations on claims to protect customers, particularly when a utility has been prudent. We don't want customers to continue to bear an overreliance on those claims. And so I think claims reform is an important part of phase 2. Anthony Crowdell: Great. And then if I could just -- I believe you have -- administrative recommendations are due April 1, whatever the recommendations are, could you just talk about how it goes from recommendation to -- does it then come up to law? Does it come up in the legislative session then that would start? I believe it starts in May. Like just, how does it go from recommendation to law? And that's all I have. Patricia Poppe: Yes. I mean, I think some of that will materialize over time. But just like our regular legislative session, lots of ideas hit the tape in the beginning of the year. And so this report coming out in end of March, by April 1, will provide the framework then and legislative leaders will then need to do the work to take those recommendations and convert them into legislative proposals that will then subsequently be voted upon through the rest of the legislative session. Operator: Your next question comes from the line of Ryan Levine with Citi. Ryan Levine: How does the $6 billion provision of SB 254 or from a company perspective, $2.9 billion impact the financing plan? And can you kind of talk through the implications there, both in the plan and how that could evolve? Carolyn Burke: We have included the full $2.9 billion in our $73 billion -- in our $73 billion 5-year plan. So we -- and as we've just laid out, we feel very comfortable that we don't need any further equity to support that. The securitization occurs throughout the plan, throughout the 5-year plan. That's really going to be -- the exact timing of that will really be dependent on our final GRC approval. Ryan Levine: Okay. And then procedurally, given the comments about seeking Board approval for the share repurchase, is there -- I think Shar asked about kind of time line, but is there any color you could provide around how you would look to structure that if you go in that direction? Are you thinking more opportunistic? Was that the thrust of the comment that Patti had made? Patricia Poppe: Yes. Ryan, this is Patti. I would say it's too soon to say. We've not gone to the Board for that approval yet because we really feel like our go-forward plan serves the best value now and in the future, but we'll obviously be mindful as conditions take shape as we head into next year if we need to take different actions. Operator: Your next question comes from the line of Carly Davenport with Goldman Sachs. Carly Davenport: Maybe just on the new capital plan, the mix between FERC and CPUC CapEx shifting a bit here. Just curious if there's an optimal mix there that you target or maybe how much incremental flex there could be to prioritize FERC investments to the extent that the state environment is more challenged? Patricia Poppe: Yes. So you'll note in our plan, we're starting to see a good uptick in our FERC-regulated transmission investments. And I want to make sure it's clear that very little of that actually is any kind of beneficial load growth data center transmission CapEx yet. We need to continue to move that work through our cluster studies. And so what you're really seeing in that plan is already -- what I would describe as bread-and-butter transmission investments that, frankly, we've been working and waiting to build into the plan. And with this 5-year look, we now are able to increase that transmission investment, including, again, as I said, bread-and-butter substation transmission upgrades, good maintenance as well as CAISO-approved transmission projects. We have a big project in Oakland that was CAISO awarded. So there's a lot of certainty to that FERC investment. And like all of our CapEx plan, there's always internal competition for what's the highest value capital to be deployed at the lowest cost for customers that provides the most benefit -- and we're excited to be able to start to pull in that FERC CapEx. So much less driven by the appetite for capital from the CPUC and more driven by the needs of our customers and the needs of the system, and we're excited to be able to pull in that transmission work. There's lots to be done. And as we've said, we still have at least $5 billion of incremental CapEx that we would love to pull into the plan if we were ever able to. But we feel like this is the sweet spot of capital deployment at the lowest cost for customers and keeping in mind our balance sheet and our credit metrics. Carly Davenport: That's great. And then maybe just thinking about the simple affordable model, if I recall, you had some upside levers around things like O&M load growth. I think you've already touched on the O&M piece. Is the load growth embedded in this plan still that 1% to 3% range? Or is there any upside that you've now baked into this revised plan? Patricia Poppe: Yes. We're keeping it in the 1% to 3% for now. As we complete the cluster studies, both -- we've shown 1.5 gigawatts of applications in our final engineering in our first cluster study, where we see about 3.3 gigawatts of moving through our second cluster study. As those projects get to interconnection requests and final signed contracts, then we'll start to pull in that load. But we're trying to be very conservative on our load growth estimates so that we can have an accurate and conservative forecast. But another big driver, Carly, in our simple affordable model is more efficient financing. That's why our emphasis on investment grade continues to be a real drumbeat. We know that those credit metrics are essential to lowering cost for customers. And so efficient financing will continue to add value for customers as we continue to gain the confidence of the credit agencies. Operator: Your next question comes from the line of Steve Fleishman with Wolfe Research. Steven Fleishman: So just how are you thinking about cost of capital outcome in context of the plan and just managing around that? Patricia Poppe: Yes. Obviously, we feel like, Steve, we've made a really strong case for our cost of capital filing. That proceeding obviously will take through November, and we hope to be able to implement then that whatever the revision to cost of capital is in January procedurally. Look, we do think that our actual cost of capital has gone up given the conditions here with the wildfires in January and the reaction from the markets and our credit metrics. So we feel like we've made a strong case. Obviously, the commission will make the final determination. Steven Fleishman: Okay. And then just on the stage 2, like is there any better -- like is anything going to happen this year on this? Or are we really going to ramp up next year? When are we going to get a better sense of the process for that? Patricia Poppe: It's a great question, Steve. I think some of that is still materializing. We look forward to hearing from, obviously, Ann Patterson at your conference as well as from the governor's office about what their plan is and how the process will take shape. And I'm not sure how visible and public it will be through that April report, but you can be sure behind the scenes, we'll be working to provide important insights and contributions. And our team is definitely in full speed ahead working on making sure we're providing the best and most robust input to the process. But it may be very quiet between now and April 1 or there may be key milestones that's going to have to be for the governor's office to clarify. Operator: Your next question comes from the line of Aidan Kelly with JPMorgan. Aidan Kelly: Yes. So just with the capital plan now rolled forward to 2030, could you speak to when you might be able to realize the identified $5 billion in additional CapEx opportunities at this point in time? And then just like on the funding side, is there any kind of considerations for that incremental CapEx? Carolyn Burke: Yes. As we said -- as we look at that additional $5 billion of capital, as we've said, there's a number of ways that we could bring that into the plan. We could simply add to the plan or we could look at each of those projects and how they impact affordability. And so we may upgrade our capital plan by replacing some of that -- those $5 billion projects with some projects that are currently existing in the $73 billion or we could, again, continue to extend the duration of our plan. So we've got a number of ways of looking at that $5 billion and how we would bring it in. And we're always working it, to be quite honest. There are always new opportunities coming. And as Patti said, we -- our capital -- all our projects compete for capital. And we look at what is the most affordable for our customers and makes the most sense for our strategy. Patricia Poppe: And just to make sure it's clear, we have added -- we brought some capital into the plan. That's why we've rolled it forward for 5 years. We brought some of that $5 billion in and continue to have at least $5 billion more to contribute to the benefit of our customers. And so the one thing that I hope people really understand is our system has a lot of opportunities for, again, bread-and-butter capital deployment for the benefit of customers. And much of that CapEx is rate reducing CapEx. When we are able to prevent the band-aiding and the maintenance of the system and rather rebuild it to modern standards given its age and condition, that is good for customers. It helps to lower rates while we're investing in meaningful CapEx for customers. So we've got a lot of appetite for capital out here in California. We've got a lot of appetite on our system, the at least $5 billion. Again, we'll be disciplined about that. Carolyn has been clear that we've got real firm guidelines, but our customers have a lot of work for us to do, and we look forward to doing that in a way that helps to lower rates and really deliver value for customers. Aidan Kelly: Got it. Appreciate the color there. And then just looking kind of at the upcoming CEA report this April, in your slides, you kind of highlight -- Physical Mitigation and Community Impact is one area of it. Maybe just high level, curious, how much upside for risk improvement do you see kind of versus your current mode of operating at this point in time? Do you see this more kind of catered to the local communities at this level? Or just any commentary on that would be great. Patricia Poppe: Yes. I think one of the important things in the phase 2 report will be the importance of communities preparing to prevent the spread of wildfire. And for the state to work with the communities, and obviously, we'll be a key part of that, to make sure that our communities are prepared for this climate hazard that exists around us. As we continue to reduce our ignitions, and I'm proud to report our ignitions this year are at the lowest level in recent tracking, even given extreme conditions around us, we know that ignition prevention is one thing, but spread needs a lot of focus. And we know that CAL FIRE is the best in the business. But in between preventing an ignition and fighting a wildfire with our high-quality, high effective firefighting resources, there's a need to harden homes and communities, make them defensible so that spread is not such a risk. And that's what will help fix the housing crisis in California and the insurability crisis in California. So as we look to phase 2, it's all about opening the aperture, looking at the societal issue that exists, and we will obviously be a key part of working on that, but there's a lot more to it than utility-caused ignitions. And I think that's the recognition that the situation in L.A. this year helped to really illuminate. Operator: Your next question comes from the line of Paul Fremont with Ladenburg Thalmann. Paul Fremont: Going back to the cost of capital, I guess a couple of questions. The yield spread adjustment that you guys are asking for, I think the interveners have -- are objecting to that. Any thoughts there as to how investors should think about that? Carolyn Burke: Well, we think -- as we put it into our filing, we think it makes sense. I will say that the importance -- the most important thing that we think about is, again, we're very focused on getting our IG ratings and limiting the difference between what we're seeing and as we offer our short term -- as we offer our short-term debt by focusing on our IG ratings. And so that would be continue to -- the difference there will continue to decrease. But at this point in time, I mean, it is a difference, and we think that's the right way that we should be compensated in the cost of capital. But again, I'll just remind you that we're not necessarily counting on that in our plan. Paul Fremont: And then one other question on the cost of capital. Obviously, you guys are looking sort of at increased risk in terms of what you're asking for with respect to ROE and equity ratio. But the interveners, I think, are sort of focusing on affordability and their testimony as to why they think -- why they're recommending lower equity ratios and lower ROEs. Given sort of the legislative -- legislature focus on this whole affordability issue, how do you think the commission sort of balances those 2 objectives? Patricia Poppe: Well, I think 2 things here, Paul. One, the commission has been clear that the cost of capital application and cost of capital process is not the vehicle to manage affordability. And frankly, the best way to manage affordability is the work that we're doing that lowers costs for customers. And so we're working on affordability. Our rates are down this year. Our rates are forecast to go down again yet this year and then down again next year. In the face of the national trends, we're proud that we have turned the corner there, and we continue to see capability of lowering rates through our simple affordable model, reducing O&M at industry-leading levels, continuing to improve our efficient cost of financing, we know as our credit metrics improve. So we say all that to say the cost of capital should be a technical correction, and there's a process for it, and we are confident that the commission will use the process as it's intended and yet we still plan conservatively. We're not assuming large or significant cost of capital improvements. We're going to continue to plan conservatively, though we think our application absolutely warrants the improvements on the cost of capital. Operator: And that concludes our question-and-answer session. And I will now turn the conference back over to Patricia Poppe, Chief Executive Officer, for closing comments. Patricia Poppe: Thank you, Krista. Thank you, everyone, for joining us. We are very much looking forward to serving our customers better every day, and that is the path -- and the best path to deliver increasing value and consistent financial performance for you now and in the future. Thanks for joining us today. We'll see you here in New York. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good morning, and welcome to the Larimar Therapeutics Conference Call. [Operator Instructions] Please be advised this call is being recorded at the company's request, and a replay will be available on the company's website. I would now like to turn the call over to Alexandra Folias of LifeSci Advisors. Please go ahead. Alexandra Folias: Thank you, operator, and thank you all for participating in today's conference call. Before we start, I'd like to point out that there is a slide deck that accompanies today's presentation. It can be viewed using the webcast link provided on the Investors page of the Larimar Therapeutics website. Also posted on this web page is a news release issued earlier today. Before passing it off to company management for prepared remarks, I would like to remind everyone that some of the information disclosed on this conference call contains forward-looking statements that are based on the company's beliefs and assumptions and on information currently available to management. These statements include, but are not limited to statements regarding expectations and assumptions regarding the future of the company's business, the company's plans and ability to develop and commercialize nomlabofusp, formerly referred to as CTI-1601, and other matters regarding the company's planned clinical trials, business strategies, use of capital, results of operation and financial position. These forward-looking statements involve risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, among others, the success, cost and timing of the company's product development activities, nonclinical studies and clinical trials, including nomlabofusp clinical milestones and continued interactions with the FDA, that earlier nonclinical and clinical data and testing of nomlabofusp may not be predictive of the results or success of later clinical trials and assessments and that clinical trial data are subject to differing interpretations and assessments. The company's ability to raise the necessary capital to conduct its product development activities and other risks described in the filings made by the company with the Securities and Exchange Commission and available at www.sec.gov. These forward-looking statements are based on a combination of facts and factors currently known by the company and its projections of the future about which it cannot be certain, and as a result, may not prove to be accurate. The company assumes no obligation to update any forward-looking statements, except as required by law. Speaking on today's call will be Dr. Carole Ben-Maimon, President and CEO of Larimar Therapeutics. In addition, Larimar's Chief Financial Officer, Mike Celano, will be available during the question-and-answer session following the prepared remarks. With that, I will now turn the call over to Carole. Carole Ben-Maimon: Thank you, Alex, and good morning, everyone. We are excited to share some new data that highlights the strong therapeutic potential for nomlabofusp for patients living with Friedreich's ataxia and also serves as a pivotal milestone to support our planned BLA submission. Importantly, we are pleased to report today positive 25-milligram and 50-milligram data from the ongoing long-term open-label study evaluating daily subcutaneous injections of nomlabofusp, self-administered or administered by a caregiver and participants with Friedreich's ataxia or FA. We will also be providing updates to our nomlabofusp development program. Recall in December, we shared open-label study data from the 25-milligram dose, which showed increased tissue frataxin and early trends in clinical outcome measures after 90 days of dosing in 8 participants. Today, I am pleased to report that we continue to see consistent directional improvements in all key clinical outcome measures, including the modified Friedreich's ataxia rating scale, or mFARS. We also see consistent directional improvement in FARS Activities of Daily Living or ADL, which measures activities of daily living, the 9-hole PEG test, which measures upper extremity fine motor coordination and the Modified Fatigue Impact Scale, or MFIS, which measures levels of fatigue. We collected these data every 3 months in participants enrolled in the open-label study and now have data after 1 year of dosing in 8 participants. We also constructed a reference population from the FACOMS natural history study database, which will be -- we will describe later on in the presentation. In that reference population, we observed a worsening in these outcomes, focusing for a moment on mFARS, the modified Friedreich’'s Ataxia Rating Scale, which is a commonly used measure that assesses progression of disease in patients with FA and has been used as a primary outcome measure in other clinical trials. We observed a median 2.25 improvement in the open-label study participants treated for 1 year with nomlabofusp daily relative to a worsening of a median of 1 point observed in the participants in a FACOMS reference population. We believe that these observations are incredibly exciting. The increases in skin frataxin levels and the improvement in clinical outcomes, combined with the improvement in abnormal lipid profiles observed in prior completed studies further support that our frataxin replacement approach is successfully increasing skin frataxin levels in patients with FA with the resulting potential for clinical benefit. 100% of participants at 6 months achieved skin frataxin levels of more than 50% of those found in healthy volunteers, which means participants are at levels found in asymptomatic carriers who do not develop disease. With regard to safety, anaphylaxis has been reported in 7 participants in the open-label study, with most of these events occurring on the initial day of administration and all occurring within the first 6 weeks of dosing. All participants return to their usual state of health after receiving standard treatment. Importantly, there have been 65 participants who received at least 1 dose of nomlabofusp across the clinical development program and 39 have been exposed to at least 1 dose in the open-label study with 14 patients at 6 months and 8 at 1 year. Long-term treatment with nomlabofusp was generally well tolerated. The most common adverse events were local injection site reactions that were mild to moderate and did not lead to any participant withdrawing from the study. Following the 2 most recent cases of anaphylaxis, Larimar consulted with its internal and external experts and decided to modify the nomlabofusp dosing regimen in an effort to decrease the number and potential severity of these events. Larimar has provided to the FDA a full update on the clinical development program, including the safety, skin frataxin levels and clinical outcome measures and the FDA agreed with our new dosing regimen. The compelling long-term increases in skin frataxin levels, along with the clinical data, heighten our conviction in the potential of nomlabofusp to be -- to address the root cause of FA and thus be the first disease-modifying therapy. Given these encouraging results, we continue to target our BLA submission in the second quarter of 2026, seeking accelerated approval. With that discussion of today's exciting news, I'd now like to take a step back to provide an overview of Larimar and the nomlabofusp program. For those less familiar with the Larimar story, Larimar is a clinical stage biotechnology company with a novel protein replacement therapy platform with first-in-class potential. Our lead program is being developed for the treatment of Friedreich's ataxia, a rare, progressive and systemic disease with neurologic deterioration. It is caused by a genetic defect in both alleles that prevents production of the critical mitochondrial protein frataxin, resulting in lower tissue frataxin levels. On average, most patients with FA only produce about 20% to 40% of the frataxin levels seen in homozygous healthy people. Not having enough frataxin leads to a myriad of debilitating symptoms, including unsteady posture, frequent falling. Patients will often present before the age of 14 and symptoms are progressive, typically causing patients to be wheelchair-bound 7 to 10 years after the initial diagnosis. The symptoms of FA include loss of musculoskeletal function, blindness, deafness and inability to speak clearly and diabetes. Unfortunately, patients with FA have a life expectancy of only 30 to 50 years, with the most common cause of death being heart disease. In 2023, omaveloxolone was approved by the FDA as the first therapy indicated for FA in what was a critically important breakthrough for patients. Omaveloxolone has no impact on frataxin levels. And currently, there are no approved therapies designed to increase frataxin and address the deficiency underlying FA's horrible symptoms. Because of this, key opinion leaders, patients with FA and advocates have made it clear that there is still a pressing unmet need for novel therapies to treat the underlying cause of FA. To address the needs of patients with FA, Larimar is developing nomlabofusp, the first potential disease-modifying therapy designed to systemically address the underlying frataxin deficiency in FA. Nomlabofusp is a recombinant fusion protein designed to directly address the root cause of the disease, frataxin deficiency. We do this by attaching a cell-penetrating peptide to the frataxin molecule, allowing the delivery of the protein across the cell membrane and into the mitochondria. Low frataxin levels are known to be associated with disease progression in patients with FA. Data from published literature indicate that the lower person's frataxin levels, the earlier the onset of -- the earlier the age of onset of disease, the faster the rate of progression and the shorter the time to loss of ambulation. The table on the left shows the relationship between frataxin levels as a percentage of healthy volunteers, the median age of onset and the rate of disease progression as measured by the Friedreich's Ataxia Rating Score or FARS. From this table, you can see that if your frataxin level is 11% relative to healthy volunteers, your age of onset is typically very young, a median of 7 years old. As frataxin increase -- levels increase, so do the age of onset and the rate of deterioration as measured by FARS decreases as frataxin levels increase. This table also highlights that this is not a threshold effect. Rather, it is a continuum. It is also important to note that the age of onset correlates with progression in clinically meaningful outcomes as demonstrated by the data in the table on the right. The earlier the onset of symptoms, the faster a patient will lose the ability to ambulate. So connecting the dots, if you can increase frataxin levels, you may be able to delay loss of ambulation as well as other clinically meaningful outcomes. Now let's turn to the exciting findings from our ongoing open-label study. The goal of our open-label study is to evaluate the long-term safety and tolerability, the pharmacokinetics and the ability of nomlabofusp to increase tissue frataxin levels following long-term daily subcutaneous administration, along with exploratory pharmacodynamic markers like lipid profiles and clinical outcomes as compared to a reference population from the natural history database. As stated earlier, we are pursuing accelerated approval with the potential to use frataxin as a novel surrogate endpoint. The frataxin data and safety data from this open-label study are intended to be used to support the potential accelerated approval submission. In the open-label study, participants initially received the 25-milligram dose. In the fourth quarter of 2024, we began transitioning participants to the 50-milligram dose, with all newly enrolled patients starting on 50-milligrams. Participants who completed treatment in the Phase I study and the Phase II dose exploration study evaluating nomlabofusp were the first group of eligible patients to screen for the open-label study. We have now amended the open-label study protocol to include adolescent and adult patients who have not participated in a prior nomlabofusp study. As of August 27, 2025, 39 participants had received at least 1 dose of nomlabofusp and 25 participants, which includes 19 adults and 6 adolescents were receiving daily dosing of nomlabofusp for up to 527 days with a mean of 154 days. This includes the time from the initial dose of 25 or 50 milligrams to the last dose of nomlabofusp prior to data cutoff. We are now modifying the starting dose regimen to include a 5-milligram test dose followed by a 25-milligram dose 1 hour later, both under observation and then daily for 30 days at home. After 30 days, the 25-milligram dose will be increased to 50 milligrams once daily. Antihistamines will be administered 5 days prior to the first dose and for 90 days after the first dose. An epinephrine auto injector such as EpiPen will be dispensed to all participants to take home in case it is needed. Recall in December of 2024, we presented initial positive data for the 25-milligram dose showing increases in both skin and buccal cell frataxin levels. We also demonstrated that skin frataxin levels as a percentage of healthy volunteers are higher at 90 days compared to baseline. These data support the potential of nomlabofusp to increase frataxin levels in tissues and address the protein deficiency leading to the FA's devastating clinical course. In this data set, we will be showing only skin frataxin levels as a result of an agreement with FDA that increases in skin frataxin levels were less variable and correlate with frataxin levels in target tissues. Today, I will show that exposure to the 50-milligram dose further increases skin frataxin levels across all participants and that these increases are sustained over time. The graph on the left shows median skin frataxin levels from baseline to day 180. The graph on the right shows the median change in frataxin levels from baseline at day 30 to day 180. Based on the preclinical studies we conducted to understand the relationship between skin frataxin levels and frataxin levels in target tissues, our extrapolations from the skin results of the participants in the open-label study indicate that increases in frataxin levels from baseline should also be expected in the heart, dorsal root ganglion and skeletal muscle of these participants. Once again, as regards to skin, both graphs demonstrate an increase in skin frataxin levels over the course of 6 months in the open-label study participants. To get a sense of whether these increases in frataxin are clinically meaningful, we compared these levels to 50% of the skin frataxin levels found in healthy volunteers. As mentioned earlier, this is the level of frataxin that is found in heterozygous carriers of FA that do not display any symptoms. This table shows participants with quantifiable levels of skin frataxin at baseline, day 30, day 90 and day 180, who received 25 milligrams, 50 milligrams or had increased from 25 to 50 milligrams. The percentage of participants who achieved 50% of healthy volunteer levels increased over time. And on day 180, 10 out of 10 participants achieved this threshold. Now let's look at the data in a different way. In these graphs, we depict how many participants had a shift in their frataxin levels in skin cells as a percentage of average healthy volunteers at day 90 and day 180 of treatment. As in prior slides, these data include participants that initially started on 25 milligrams and were transitioned to 50 milligrams as well as those who start dosing at the 25-milligram dose. On the far left of the figure, you can see categories of percent of healthy volunteers' frataxin levels. Skin frataxin levels from our healthy volunteer study were divided into quartiles. Open-label study participants would then fit into those quartiles based on their baseline skin frataxin levels. The people in black on the left-hand side of each graph represent participants at baseline. So the right of the black vertical line are where each participant ends on day 90 and on day 180. In blue are participants that increased their frataxin levels from baseline to between 25% and 50% of the average frataxin levels in healthy volunteers. Similarly, in green are the participants who increased their frataxin levels from baseline to over 50% of the average frataxin levels in healthy volunteers. By day 90, all participants had increased their frataxin levels. And by day 180, all 10 participants had increased their frataxin levels to above 50% of healthy volunteers, which is similar to levels of heterozygous carriers of FA who do not develop this disease. Here, we have the absolute values for median skin frataxin levels from baseline to day 30, day 90 and day 180 at each time point. In all the participant groups, the levels of skin frataxin increase over time. And from our simulation and our data, we believe we are at steady state. Here, we have the disease characteristics of participants in the open-label study. To get a better sense of the clinical benefit of increases in skin frataxin levels following nomlabofusp, we compared the clinical outcomes from our open-label study to participants to those of patients with the FACOMS natural history study. The Friedreich's ataxia clinical outcome measure study, or FACOMS, is a longitudinal natural history study that includes 955 patients with a confirmed FA diagnosis. Based on key baseline characteristics of participants in the open-label study, Larimar identified patients from the FACOMS data set with similar characteristics using data recorded over the last 4 years of each patient. A group of patients from the FACOMS database was identified as a reference population. This subset was constructed using the range of each baseline characteristic of the population in the open-label study. Encouragingly, we are consistently observing improvements across a number of clinical outcomes following long-term daily nomlabofusp. As I mentioned earlier, for mFARS, which is a commonly used 93-point scale that assesses progression in patients with FA and has been used as the primary outcome measure other clinical trials, we observed a 2.25 point improvement in open-label study participants treated for 1 year relative to a worsening of 1 point observed in patients in the FACOMS reference population. Similarly, directional improvements were observed in the other 3 clinical outcome measures against the FACOMS reference population. This includes a 1-point improvement versus a 1-point worsening in the FARS ADL, which measures activities of daily living and for which the minimal important change in 1 year is thought to be 1.1 points. The 9-hole PEG test measuring fine motor coordination had a 7.4 second improvement versus a 3.4 second worsening in the FACOMS population. The open-label study change represented an approximate improvement in time to completion of the base -- from baseline of 10% change relative to a worsening of 3% in the FACOMS reference population. From the literature, a change of 15% to 20% is believed to be clinically meaningful. The MFIS, Modified Fatigue Impact Scale is used to assess fatigue and had a 6.5-point improvement versus a 1.5 point worsening in the FACOMS reference population. Based on the literature, a score of 35 points in MFIS indicates severe fatigue and a change of 4 or more points on the MFIS indicates a real difference in the severity of fatigue. Given the advanced state of disease for the majority of patients in the open-label study, we are very excited to see consistent directional improvements across all outcome measures. We believe this is the first time any intervention has been -- has shown increased frataxin levels in patients with Friedreich's ataxia to this extent and demonstrated improvement in multiple clinical outcome measures. Based on all this information, we continue to believe that nomlabofusp has the potential to be the first disease-modifying therapeutic and could very well change the treatment paradigm in FA. Now let's talk -- turn to safety. There have been 65 participants in nomlabofusp studies who have received at least 1 dose. The 39 in the open-label study had participated in at least 1 prior study, 7 of these participants experienced anaphylaxis. Most events occurred in the -- on the initial day of administration and all participants returned to their usual state of health after standard treatment. Nomlabofusp was generally well tolerated with long-term daily dosing, including 14 participants on treatment for at least 6 months and 8 for over 1 year. Most common adverse events were mild to moderate local injection site reactions that did not lead to any withdrawals. Following the 2 most recent cases of anaphylaxis, Larimar consulted with its internal and external experts and decided to modify its dosing regimen in an effort to decrease the number and severity of reactions. Larimar provided the FDA with a full update on the clinical development program, including the safety, frataxin and clinical data, and the FDA has agreed with our approach. All participants who experienced anaphylaxic reactions have been discontinued from the study as have 3 participants who experienced generalized urticaria. Other discontinuations include 1 seizure, which is the same event as was reported in December 2024, 1 vasovagal event and 2 nontreatment-related discontinuations. In conclusion, outside of anaphylaxis, nomlabofusp is generally well tolerated with injection site reactions being the most common adverse events. These reactions have been mild to moderate and have not resulted in any discontinuation. We are also pleased to see that the long-term pharmacokinetic profile of nomlabofusp is consistent with our Phase I and Phase II studies. Nomlabofusp demonstrated rapid absorption after subcutaneous administration with exposure appearing to reach steady state in plasma by day 30 at both the 25- and 50-milligram doses with no further accumulation. In our adolescent PK run-in study, which included 14 adolescents, 12 to 17 years of age, 9 of whom received a weight-based equivalent dose of 50 milligrams of nomlabofusp for 7 days and 5 of whom received placebo for 7 days. Participants demonstrated a PK profile similar to adults on 50 milligrams of nomlabofusp. Following completion of the PK run-in study, these adolescents were eligible to screen for the open-label study. Based on these exposures, we will not be conducting a second cohort in children 2 to 11 years of age, but we do plan to include these patients in the open-label extension. We continue to expand our nomlabofusp clinical program to ex U.S. geographies with our global Phase III study. We have received feedback from FDA and EMA on the study protocol for our global Phase III study and are currently qualifying sites in the U.S. Europe, U.K., Canada and Australia. The global study will be a double-blind placebo-controlled study with 1:1 randomization of 100 to 150 ambulatory patients that are more heavily weighted to younger patients. The study will include patients 2 to 40 years of age, of which approximately 2/3 will be under 21 years of age. Nomlabofusp will be evaluated following 18 months of dosing in the Phase III study. Primary outcome measures will include upgrade stability and mFARS. As you heard today, FA is a devastating and progressive neurodegenerative disease with high unmet needs, and we are focused on bringing nomlabofusp to a broad range of patients globally. We previously gained clarity on our potential path towards BLA submission, seeking accelerated approval using skin frataxin concentrations as a novel surrogate endpoint. Based on the compelling data, we continue to target submission of our BLA seeking accelerated approval in the second quarter of 2026. For our open-label study, we plan to continue enrolling participants on the new starting dose regimen with a long-term 50-milligram dose, including adolescents and those new to nomlabofusp study. We are also excited to begin enrolling children 2 to 11 years of age directly into the study as there are no approved therapies for these patients with FA under 16 years old. Taking an overall view of the program, nomlabofusp is strongly positioned to be the first disease-modifying therapy for patients with FA. These data demonstrate that the potential clinical benefits of nomlabofusp include 100% of participants increasing frataxin levels to greater than 50% of healthy volunteers by 6 months and an improvement of 2.25 points in 1 year in the mFARS score, the primary outcome measure in other clinical trials. Patients in the FACOMS reference population worsened over 1 year. In addition to improvements in mFARS, there were also improvements in FARS ADL, 9-hole PEG test and the fatigue scale compared to worsening in the FACOMS reference population. Importantly, nomlabofusp is designed to systemically address the root cause of this disease. We, along with what we have heard from the FA community, believe it is of utmost importance to consider these compelling benefits as well as the severity of this disease when thinking about the risks of the treatment. It is important to remember that Friedreich’'s ataxia is a life-shortening disease with patients losing their ability to walk and their ability to communicate. Although there is a risk of developing an allergic reaction to nomlabofusp, this risk needs to be considered in the context of the disease we are trying to treat. Nomlabofusp could very well be the first disease-modifying therapy available to the FA community. I have spoken to many of you over the years. And many of you have heard me say when asked what would be a home run that a home run would be stopping or slowing the progression of this disease. Personally, I never believe that in patients who had been sick for so long, we would be able to see meaningful improvement. Well, I may very well have been proved wrong. This data suggests that nomlabofusp may have the ability to actually improve patients, even patients with late -- in their late-stage course of disease. I don't believe any study that I am aware of has demonstrated this kind of potential outcome. With that in mind, the Larimar team is even more committed to bring this potential therapeutic to market and make it available to as many people with FA as possible. We continue to work with FDA and are targeting our BLA submission for the second quarter of 2026, seeking accelerated approval. Following our recent capital raise, we are well capitalized with pro forma cash of $203.6 million as of June 30, 2025, and projected runway into Q4 2026. Before I conclude, I would like to sincerely thank our clinical trial participants and their families. Addressing the unmet needs of individuals with FA remains our key source of inspiration. I commend their bravery and their dedication. I would also like to thank the FDA for their engagement throughout the regulatory process thus far as well as our talented and dedicated Larimar employees, our partners, clinical trial investigators and patient advocates at the Friedreich's Ataxia Research Alliance, all of whom helped nomlabofusp get to this exciting point in its development. With that, I'd like to now move on to today's Q&A session, where I'll be joined by our Chief Financial Officer, Mike Celano. We will now open the line for questions. Operator? Operator: [Operator Instructions]. Our first question today comes from the line of Yatin Suneja with Guggenheim Partners. Yatin Suneja: A couple for me. I'll start on the efficacy first and then move to safety. So the initial clinical efficacy really looks very positive, especially when you compare to the synthetic control that you have created here at one arm. Could you comment on how does the data look for 14 patients at 6 months versus the historical control? And then how many patients do you estimate you will need to achieve static there? Do we know what FDA expecting there? So that's one on the efficacy, then I'll come back on safety. Carole Ben-Maimon: Yes. Thanks, Yatin. Nice to talk to you. It's not really possible to compare at 6 months, and that's why we looked at 1 year because the FACOMS data set only collects data annually. So that would mean you would have to extrapolate and whether or not things are linear or not, I think, it's still unknown. So we did not really look at 6 months. I mean we see improvement. We saw improvements, if you remember, at 90 days even at the 25-milligram. But the best comparison really is at the 1-year time point because of the fact that FACOMS is only collects data annually. With regard to the number of patients for FDA, obviously, they've seen all these data sets. We are pursuing accelerated approval based on skin frataxin levels. So there is actually no requirement for clinical outcome data. Obviously, this kind of data is incredibly impressive And the value will be taken into account. Obviously, we wanted to see some trends. We wanted to see some meaningful changes. But the fact that we're seeing improvements of 2.25 points, I don't think anybody else has seen that kind of improvement over 1 year in mFARS. And as I said in closing, I never really anticipated that we were going to be able to improve these patients by any clinically meaningful amount. And so the fact that we actually have been able to see improvements wherein the FACOMS database patients worsen is really, really an important outcome, and I think quite compelling. Yatin Suneja: All right. Helpful. Then on the safety, could you provide maybe a little bit more color on the severity of these anaphylaxis? Like what treatments do they require? And is this hypersensitivity triggered by the protection or by other components of the formulation? Carole Ben-Maimon: So let me start with end. I don't know what's triggering it, and it may be different what's triggering in different patients. The formulation itself is all grass excipients. There's nothing unusual in there. But people can be allergic to anything. But really, as you well know, it's not uncommon to have allergic reactions with proteins. Every protein I know of that's out there has seen some sort of hypersensitivity reaction. And there are some with quite severe hypersensitivity reactions that they do all kinds of things, including treatment with methotrexate and other stuff to try and minimize. The treatment that we give is totally standard of care. It consists of epinephrine, antihistamines and steroids. And all of the patients have responded to it to date, and they respond very quickly. And within several hours, they tend to be back in their normal state of health. Yatin Suneja: Got it. Maybe final question, if I may. So we talked to some regulators in the past, specifically one FDA Director. And then he basically said anaphylaxis would not be an absolute problem as long as you can manage it. So the question is you're changing this dosing a little bit. So how confident you are in this titration dosing strategy on the impact of [indiscernible]? Carole Ben-Maimon: I actually feel pretty good about it, quite honestly. We have an internal expert in our Chief Development Officer, Gopi Shankar, who is an immunologist. And we have some really good external consultants that we've been working with, including one of them that is on our DMC. And the idea here is to give the 5-milligram test dose to see whether or not we can mitigate some of these reactions when they get a larger dose. And I'm not going to go into the basic science that supports that. But this has been done with other drugs and slower titrations can also be done. But we don't think that, that's necessary at this time. We have to remember that the patients who [ are ] currently starting in the open-label extension, and that is now starting to change, but the adolescents and the initial patients were all patients who had been exposed to the drug previously in prior studies. There were a few that had been on placebo, but the vast, vast majority of the patients had, had an exposure and then have had a drug a period of time, which could be quite long where they were off drug and then were being reexposed. We believe that actually increases their risk. That's not to say that a patient won't develop an allergic reaction over time, but we do think that the majority of these cases have occurred on the first day in the clinic. And so we think that a lot of this is related to the prior exposure and the long-term holiday that they had from the drug. But we are very confident and feel very good about this dosing regimen. And I have to tell you, even with these reactions, as your expert concluded, you have to look at that in the context of this disease. And I think what speaks really towards that is we have had -- even with the informed consent, including all of these events, we have had no problem enrolling patients. We have opened now to the naive patients, and we have a long list of patients who know this. This is out there in the public domain, and they still want to take advantage of this -- at least try with this drug. And that's, I think, because if you look at the efficacy data, I mean, we had heard anecdotes before this and anecdotes are anecdotes. It's an open-label study. You don't know how to interpret that. But we don't have anecdotes anymore. We now have data at 1 year, granted only in 8 patients that clearly suggests that these patients may very well be improving, not only not getting worse, but may actually be showing signs of improvement. And so I think the data is incredibly compelling. And I hope that we continue to move as quickly as we can to bring this product to market for as many patients as we can. And we continue, obviously, to work with FDA. They have been incredibly supportive. As I've said before, the start program has been just incredible. I know a lot of people are still talking about having issue -- or talking about having other slowdowns and things like that with the agency. We have not seen that to date. So we believe we're in a good position. Operator: Our next question is from the line of Joori Park with Leerink. Joori Park: Two from me. Can you help us better understand the 7 anaphylaxis events? I'm not sure if you have this data, but did you see a difference in patients who had a drug holiday who started with a weight-based equivalent dose of 50 mg versus those who started with a 25 and then increased to 50 mg? And then I believe that you said that the FDA agreed with your proposal for the new dosing regimen. Can you provide more color on the nature of this agreement? Is the FDA requiring any new additional specific safety follow-up data from the amended protocol? Is there any way that the timing can get reset as a result of the amended protocol? Carole Ben-Maimon: So almost all of the patients -- as I said, almost all the patients who are enrolling in the open-label extension are patients who received at least 1 dose of nomlabofusp prior and had a drug holiday. We do not necessarily see a difference between how long the patients are. And the adolescents are not going to be any different, and we don't see any difference, whether it was a weight base or 25-milligram or 50. This is an exposure issue. Whether it is related to the fact that there was a drug holiday or not, we'll see as we start to get patients who were never exposed before into the trial, but it doesn't appear to be anything related to dose. With regard to the agreement, I don't know how much more I can say. We submitted all of the safety data, the frataxin data, the clinical outcome data. They have reviewed all of that. We have proposed the new regimen, and they have said, go ahead, do what you need to do. And that's been the extent of our conversations with them. There has been nothing modified, nothing changed in the plan, except that we will now be dosing patients with a test dose prior to the initial dose. Operator: Our next question is from the line of Samantha Semenkow with Citigroup. Samantha Semenkow: Congratulations on the data today. A couple for me, Carole. I just wanted to confirm that all 7 anaphylaxis events have been in patients that were previously dosed. And do any of those include adolescent patients? And then secondly, I'm wondering if you saw any benefit from the prophylactic use of antihistamines that you had previously installed? And then just lastly, how do you expect this new dosing regimen that you're deploying to help mitigate the risk of anaphylaxis? If you see a patient develop hypersensitivity or anaphylaxis on 5 milligrams, what are the next steps? Do they move on to 25 for 30 days? Or do you halt treatment completely? Or how do you handle that? Carole Ben-Maimon: Okay. So almost all of the patients have been exposed. I think there may have been one that had not had prior exposure. We have seen both in adults and adolescents. So it is not an age issue or -- I mean, they're being -- the adolescents are being exposed to essentially the same level of drug even though the dose may be different. So it does -- it appears to be an exposure issue. With regard to the test dose administration, it really provides 2 things. One, it gives us a low dose that if they react to it, we can deal with and not give the 25-milligram dose if the reaction is severe enough. The other thing it does, and this is sort of what I've learned through talking to these experts -- sorry [indiscernible] is it may help with preventing the anaphylaxis as it ties up some of the receptors on the mast cells. Now that's somewhat hypothetical. But as we move forward, we'll be able to see whether or not it does help to preclude the development of the anaphylaxis. Does that help, Sam? Samantha Semenkow: It does. One additional question. The trend you saw on mFARS is quite encouraging. Wondering if you saw similar trend, similar magnitude for upright stability? Carole Ben-Maimon: Actually, we didn't -- I'm sure our statisticians looked at upright stability because they looked at all the subscores, but I have not looked at that data, no. Operator: The next question is from the line of Joon Lee with Truist. Joon Lee: The data you presented today, 10 for skin frataxin at day 180 and 8 for mFARS and ADL. Just safe to assume that they were all from the 50-milligram dose? If not, let me know. Basically, I want to understand how comfortable you are about fulfilling the FDA requirement of at least 10 patients on 50 milligrams for 12 months. And then how many patients were already on stable background Skyclarys in your open-label extension? And I have a quick follow-up after that. Carole Ben-Maimon: Okay. So everybody at this point is on 50 milligrams, except the adolescents who are obviously on a weight-based adjusted dose that is equivalent to 50 milligrams. But it does include patients who started on 25 milligrams and were switched to 50. So they did spend some of the time at that 1 year on 25 milligrams. I think if I recall the data, it's 9 months or so, they've all had at least 9 months or so of 50-milligram dosing, but they did spend some of the 1 year on 25. We are very comfortable that we can hit the 10 for 1 year. I think that's much less of a problem than even the 30 months -- the 36 months. But I do believe, given the benefit risk assessment here and the fact that these events are occurring very early in the course of the disease, the agency will be comfortable with the data that we are targeting for the BLA submission in 2026. I mean this -- the clinical -- I mean, FDA does this all the time, right? They do look at clinical benefit risk assessment and they do consider the population of patients that you're treating. And so here, we have, I think, a very well-defined safety profile. There is a risk of allergic reactions that's obvious. But we also have incredibly convincing long-term data that, as I said earlier, I would have never expected to see in patients who are this far along in their disease. Remember, more than half of these patients are in wheelchairs and have been for a while, yet there's still signs of the fact that they may be improving. With regard to omav, there's about 53% of the patients who've been on omav. You may recall that once -- if you're -- you could not get into the trial until you were on omav for at least 6 months initially. So all these patients were stable on omav dose when they entered the trial. One of the patients actually did discontinue their omav and decided they didn't need it. And we did have one patient start omav after 6 months on nomlabofusp, and they were not allowed -- because they were not allowed to start omav until they have been in the trial for 6 months. Joon Lee: Yes. Great. And then just a quick follow-up. How would you characterize the rate and severity of anaphylaxis vis-a-vis other ERTs such as Palynziq and Aldurazyme, both of which have black box warning and that need to carry EpiPen? And were there any differences in the baseline characteristics between the patients who experienced anaphylaxis versus who didn't? Carole Ben-Maimon: So let me start with the last one. We do believe that -- sorry, the majority of patients who developed anaphylaxis, the vast majority had been exposed to nomlabofusp prior trials. So that is a little bit different. One of the differences, the patients who had not been exposed or who had been on placebo did not necessarily -- did not develop anaphylaxis. There are a handful that had only received placebo in prior trials. We'll see whether or not that changes as we start to enroll naive patients, patients who had never been exposed. We don't have that population. So we don't know the data, and we don't know those incidence rates yet. We'll have to uncover that as we move forward. From the standpoint of other proteins, especially Palynziq, we actually have a quite benign safety profile, except for the anaphylaxis. And I know that may sound somewhat silly, but when you look at Palynziq, they have a whole host of other very serious, let's say, adverse events that need to be dealt with [ granuloma, ] skin reactions and other things. Yet it's clear that in PKU, when you look at the benefit risk, it's very important for them to continue on the drug. And so we'll deal with the anaphylactic reactions. As I said earlier, right now, we are discontinuing those patients. I do want to say that if you take some of these other proteins like Palynziq, they actually do continue to dose or redose and restart patients who've had anaphylactic reactions. And we are looking at other ways to do protocols that look at desensitization or -- building tolerance in these patients. And so that's for the future. It's not for now. Right now, these patients are being discontinued. But the hope is that as we move through the development process even after approval, we would be able to get some of these patients back on drug through either dose type or slower dose titrations or some concomitant medication or predosing with some more aggressive therapy. So that's still out there. Right now, compared to many of those drugs we have really allergic reactions and then injection site reactions, which are quite manageable. And other than that, we're not really seeing things that jump out of this. Not to say that there aren't people who have some nausea and vomiting and some headache and all of those things that you see with diseases like this and with new treatments. But the 2 key safety issues we are dealing with are the allergic reactions and the injection site reactions. Operator: The next question is from the line of Myles Minter with William Blair. Myles Minter: Congrats. My first one is just on the patient number of data reported here. I think previously, you've said 30 to 40 patients worth of data I think I see 18 at baseline in the skin frataxin biopsies. Is there -- if I add back in the 14 discontinuations, is that kind of where that 30 to 40 patient number came from? Or were there some that had biopsy that didn't have any detectable levels maybe later on down the track and you remove that data? I'm just trying to triangulate the patient number. That's the first one. The second one is just on the 3 additional patients that had the urticaria that required discontinuation. I mean, do you view that as similar to sort of going down the path of anaphylaxis here? Did they resolve in the first 6 weeks of therapy? Or did they occur in the first 6 weeks of therapy? Any more on that would be helpful. And then finally, I think the FACOMS that you're comparing to came in at 1 point worsening over the first year. That seems a little bit under what I'd expect some of their prior publications that were about 1.8 points. Just wondering how the ambulatory versus non-ambulatory patients factored into that. Carole Ben-Maimon: Okay. Myles, nice to talk to you. So what we have said in the past is that there would be 30 to 40 patients who had received at least 1 dose. So that's where that number comes from. Obviously, we did have some discontinuations. There are 25 patients in the study still, and there are 14 patients who have reached 6 months and 8 who have reached the 1-year time point. There obviously were the 7 patients with anaphylaxis, and we, in our remarks, talked about the other discontinuations, if you recall, the 3 allergic reactions, which you picked up on as well as the seizure that we reported last December. A vasovagal event and 2 that were completely unrelated to anything. And so for the frataxin levels, there are a bunch of issues that occur. First, we pool the samples, and we only ship at certain frequencies. So some of the patients may have samples that just didn't ship by that time. And so we don't have samples. And the other is that they have to have 2 measurable samples, right, to be able to get a change. They have to have a baseline and a second sample. And sometimes we don't have enough tissue to measure frataxin at a given time point. But a lot of them are related just to shipping timing and when we do the data cut. With regard to the 3 allergic reactions, I don't know what would have happened had we continued those patients. We don't know that they would have gone on to develop something more severe. But at this time in the development program, we felt that it was the best thing to discontinue them and not take a chance. They do occur early usually, but they can occur later. But most of them do occur early. With regard to the 1.8 for FACOMS, this is a function of our population. And that's why the reference population that we're using is actually a subset based on using our inclusion -- I'm sorry, not our inclusion -- our demographics of each of the different outcomes. So using the ranges for each of the baseline characteristics of our population and narrowing that we have in our trial. It's easier to measure changes in mFARS in ambulatory patients simply because they have -- some of the scales on the mFARS in patients who are non-ambulatory are basically topped out. They can't change anymore. They're at the top -- they have the maximum measure. And so you don't see changes as easily. And so this is a reflection of the population. The one point is a reflection of the population that we have and I think reflects the sensitivity of the mFARS assessment in this patient population. I hope that answers your questions. Operator: Our next question is from the line of Jon Wolleben with Citizens. Jonathan Wolleben: One on safety and then one on the mFARS data. You guys didn't break out any other adverse events in like a mild, moderate serious manner. You mentioned injection site reactions. But assuming the urticaria and anaphylaxis are considered serious, but anything else to flag maybe in the moderate bucket that aren't detailed in the presentation? Carole Ben-Maimon: There is not really, Jonathan. We really -- that's why I said the safety profile for this drug is actually very clean except for the anaphylaxis and the allergic reactions. I mean we have looked and there are some -- like I said, there are the intermittent reports of headache or nausea, vomiting or feeling lightheaded in a population that has lightheadedness anyway. But there's really nothing that jumps out as something that we need to identify other than these -- the things that we've outlined here. Lab tests are quite benign. We do see some eosinophilia, but that's usually associated with the patients who may have these adverse events. And that seems to go away over time and decrease. So we're really not seeing anything that really is obvious to us that in the moderate category. Jonathan Wolleben: Got it. Okay. And on the mFARS was wondering if the baseline values for these 8 patients that you give the 1-year update from is consistent with the larger group you provide. And then can you remind us how often you're going to be measuring the trajectory of change here? Are we going to get another update prior to submission or potential approval? Or how frequently you're going to see clinical benefit updates? Carole Ben-Maimon: Yes. So the -- sorry, you asked about the FACOMS? What was that about? Jonathan Wolleben: Well, so you gave the change for 8 patients, but the baseline values for 38. Just wondering if that's consistent for the change. Carole Ben-Maimon: Yes. I think in the deck, there is -- there are both. The comparisons are very close. The baselines are very similar. And that's how we constructed that reference data set, right? We took our baselines and their baselines and tried to come up with people who were relatively similar. This is not a propensity matching where we matched patient to patient. But at least we wanted to make sure we had a reference group that was similar in its disease characteristics as well as gender and things like that and age. And so they are very similar. From the standpoint of an update, we haven't even gotten there yet. I think as we get closer to the BLA and we do a data cut, I would anticipate that we would provide that information to investors as well as we put it in the BLA. Obviously, we're going to be very highly focused on filing and getting that BLA that data into the BLA. But of course, if there's anything material or anything that changes, we'll be hypersensitive to making sure that it gets out to the investor community. Operator: Our next question is from the line of Cory Jubinville with LifeSci Capital. Cory Jubinville: Correct me if I'm wrong, you mentioned that 6 out of the 7 patients who experienced anaphylaxis had prior drug exposure. Thinking about this from a commercial perspective, if patients take a drug holiday, do you have a sense of what might be the minimum holiday that could drive an increased risk of anaphylaxis? And kind of building off of that point, you say most occurred at treatment initiation. Specifically, how many of these cases occurred beyond the first day? And did any of these patients miss a sequence of doses that potentially could have led to the delayed cases of anaphylaxis? Carole Ben-Maimon: So I can't give you an exact number of how many days are off. I don't believe that weeks necessarily matter very much, but I do believe that months do. But right now, the way we're addressing this is all patients who are starting the drug will be treated with that 5-milligram test dose. And all patients who are starting the drug, no matter what, will be receiving the 5 days of antihistamines prior to initiating their dose, and we'll continue those antihistamines. There's no way right now with the number of patients we have to basically tease out exactly what's happening. I don't think we're disclosing right now the number that happened on the first day simply because the data is still being collected on a couple of the patients. but they all occur very early. And then some -- there are patients who had to, for various reasons, take a long-term drug holiday, 6 months or more. who also were considered restarts. And there was one patient at that point who did have an -- but again, it was on the first day of the restart. So patients will have to be careful. I mean, should they have to stop their drug for a period of time. They have a surgical event that they have to be off of the drug for 6, 8, 10 weeks. I'm making this up, I don't know the exact number. They may very well have to undergo the start protocol again with the 5-milligram test dose under observation. But we'll see as we go forward and start to get the data, we'll get a better sense of what this all means. Cory Jubinville: Got it. That's helpful. Yes. And on today's mFARS data, I mean, these are really impressive improvements given that this is generally a more severe patient population. With the caveat that this is a small sample size, have these data helped inform at all any of your powering assumptions going into the confirmatory study? And either way, can you walk us through what the current powering assumptions are based on either mFARS or uprate stability? And I guess, particularly, how should we be thinking about translating some of these efficacy assumptions driven by today's data in a more severe primarily non-ambulatory population into the younger entirely ambulatory population that we'll be seeing in the confirmatory study, considering these mFARS, the improvements that they might be seeing are going to be in -- most likely going to be in completely separate domains. Carole Ben-Maimon: Yes. So they are a different population. I mean, ambulatory patients the measurements are just much easier to do and there's more room for change. And so I don't think you can use these data necessarily to change the powering statements in your Phase III. Does it mean that we could possibly need less patients or see a greater magnitude of effect for sure. But I don't think that we want to make those assumptions now, I think we'd rather be more conservative and make sure we have an adequate patient population in numbers in the Phase III to make sure we don't shoot ourselves in the foot and end up with a negative result because we just didn't have enough patients. I can't speak to the powering statement, quite honestly. I can get you that information from our statisticians. But it's -- we're using, obviously, the data in the public domain from other trials and other drugs. And most of these studies have all had somewhere around 130 patients or so in them. And I don't think our study will be any different. And that's because the assumptions are essentially the same. But you're right, it could be different. It could mean that we would have a greater magnitude of the effect and therefore, need less patients. But I think it's a bit risky to make that assumption. Operator: Thank you. At this time, we've reached the end of our question-and-answer session. I'll hand the floor back to Carole for closing remarks. Carole Ben-Maimon: Thanks again to all who joined our call, and thanks to everybody who asked questions. We really appreciate the time. I must also extend a big thanks to FDA for their engagement throughout the regulatory process, as well as to our clinical trial participants, their families and to all our employees, partners, investigators and those of the Friedreich's Ataxia Research Alliance for the important contributions made to the nomlabofusp program. We really do thank all of you. We are very excited about this data, and I wish you all a good day. Operator: Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Santhera Pharmaceuticals Half Year Results Investor Presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from Santhera Pharmaceuticals, Catherine and Shabir. Good afternoon. Catherine Isted: Good afternoon, everyone, and welcome again to the interim results for the 6 months ending the 30th of June 2025. Giving the presentation today is myself, Catherine Isted, the CFO; as well as our Chief Medical Officer, Dr. Shabir Hasham. Unfortunately, our CEO, Dario Eklund, cannot be with us today as he's actually had a recent operation on his shoulder, but he will be back with us shortly. As was said in the introduction, there will be an opportunity to ask questions at the end of the presentation. So please add these into the box as we go along. To start with, as always, we have the disclaimer. Please feel free to read this at your leisure. While I appreciate this is a results call, we thought it's worthwhile spending a bit of time going through who Santhera is and what we do and also a reminder about the DMD market. So I will start off with this small snapshot of the company. So we are a Swiss listed company, listed on SIX with our global headquarters in Basel, with about 110 employees, in total about 150, including contractors. We have a product called AGAMREE. This is a differentiated product in the Duchenne muscular dystrophy market, and it is unique because it is a dissociative corticosteroid, and we'll come into that in more details later. AGAMREE is being rolled out worldwide, and we have approvals across the U.S., Europe, U.K., China, and Hong Kong. And our own commercialization in Western Europe is going well with launches in Germany, Austria, and the U.K. We've also had a good launch in the U.S. from our partner, Catalyst. In terms of financing, as we announced this morning, we have a new financing for CHF 20 million. This means that we have a runway through to cash flow breakeven by the mid-2026. And our cash at the end of June 2025 was CHF 18.4 million. I'll now hand over to Shabir to go through a bit more details about the DMD market. Shabir Hasham: Thank you, Catherine. Just for those of you who may not be familiar with Duchenne muscular dystrophy, I'm just going to give you a very brief overview and then go into a little bit more detail about the value proposition and why we have such confidence with vamorolone. Duchenne is a lifelong neuromuscular disorder characterized by progressive loss of muscle strength and function. These are the main characteristic features. The thing to understand about it is that currently, there is no cure. It's such a large gene with so many mutations that current technologies just will not afford a cure. At best, you could try to moderate the disease to be a little bit milder, and that's really the aim of most of the therapies coming to market. Age of onset is very young, 3 to 5 years of age. Children often start to present symptoms of weakness and inability to walk and run and keep up with their peers. And what this means is that they actually present very early to physicians and to the healthcare system. Unfortunately, life expectancy is only limited to the mid-20 to 30 years of age. You get a progressive weakness with the loss of ambulation, no ability to run, walk, you end up in a wheelchair. You get weakening of the upper limbs. But really, what's more important to understand is as the disease continues, you get weakness of the heart and lung muscles leading to cardiac or respiratory failure, which is the predominant cause of death. Next slide. Current therapies today, let me talk a little bit about corticosteroids. Corticosteroids have been and will remain the cornerstone of treatment with Duchenne muscular dystrophy. They have 20 years of experience and data behind them, a robust data set, perhaps the most robust data set of all therapies at market in the moment. They have been shown to delay progression of disease at all stages. So the ability to run, walk, they delay the time to getting into a wheelchair, they delay the loss of ability to use the upper limb, hands, fingers, fine motor skills, but they also now show an impact in terms of a delay to cardiac function decline and respiratory function decline. So they have shown robustly this ability to slow down the disease progression at all stages, and that's why it's absolutely crucial to try to encourage patients to stay on drug as long as possible. However, corticosteroids do have limitations. We know that they are relatively toxic. We know from experience across all diseases, all therapy areas where they're used that these can be limiting in terms of the ability to maintain a high dose and to be able to stay on drug. The challenge with Duchenne, you're diagnosed at the age of 3 to 5, but you often started treatment about 7 to 8 years, and this is because of the toxicity. When you give steroids to children at such a young age, you're impacting really important periods of growth and bone formation and behavior. Children aren't able to stay on therapeutic doses for long enough, often having to down titrate within about 2 to 3, 4 years of treatment and then having to stop very soon before you start to see the benefit on the cardiac and respiratory function, which are the really important ones to try to moderate. And of course, they stop very quickly. This is a graph depicting what I think is a very nice way to show the key challenge in terms of how physicians try to keep patients on steroid treatment. If you want to stay on maximum therapeutic dose, over time, the toxicity accumulates. When you start steroids, early you see behavioral change in weight gain, which is common to all steroids. As you stay on drug beyond 2 to 3 years, you start to see an impact on growth, vertical fractures, long bone fractures, ophthalmological conditions, eye conditions and then eventually hypertension and insulin -- and diabetes. And so really, with the pivotal data that we had some years ago, we were only able to demonstrate the benefits in the short term, the behavior and weight gain. We showed some data showing that we didn't impair growth. But now, of course, the focus is on the longer-term data. AGAMREE, just in summary, is a dissociated corticosteroid. It's the first dissociated corticosteroid to be approved. We've demonstrated that we have the anti-inflammatory effects associated with corticosteroid treatment. In the short-term data, we were able to show that we don't impede growth, that we don't have a negative effect in terms of bone health, and that's both bone biomarkers, but some early data on bone density. We showed a benefit in behavior. Now of course, we're focusing on the longer-term data. We've got children who've been on treatment 5 to 7 years, and we're currently analyzing these data and hope to make an announcement somewhere in quarter 4 about the longer-term effects and some of the more deleterious side effects. But in essence, because this treatment is tolerated better and the side effect profile doesn't really impact children of a very young age, and this is growth, osteoporosis and bone fractures. We see AGAMREE being adopted earlier in terms of the treatment algorithm. We see patients are maintaining a higher dose for longer and some of that evidence will be coming out with the data announced in quarter 4. And of course, we see patients are able to maintain treatment for longer than when we compare them to natural history. What makes DMD very attractive, of course, is it's one of the larger of the rare diseases. There are around 300 (sic) [ 300,000 ] individuals affected globally. Of those in North America and Europe, 90% are diagnosed because the symptoms are very obvious and parents report readily to healthcare systems. The steroid utilization varies, and that's an opportunity for us to, of course, expand segments where current usage may not be as much. North America and some countries in Europe have a very good standard of care, but there are opportunities in some other European countries where steroid use could be improved. Patients and parents, of course, are often treated within specialized treatment centers. And that's an advantage for a rare disease, but also a small company to be efficient to be able to commercialize this product. And of course, physicians have been using this drug for decades. They're very familiar with it. There's nothing very different about vamorolone that it can't be adopted immediately into corticosteroid guidelines. In fact, we are now seeing guidelines clearly adopting a position for vamorolone, which is encouraging, and we'll continue to work with the community to educate them on that. With that, Catherine, I hand back to you. Catherine Isted: Thank you, Shabir. So I also just want to go through the market opportunity for AGAMREE. I think in this slide, it shows it very clearly in terms of our expectations of a total market size of in excess of $600 million. If we break that down, the first box highlights our percentage of that market. So we have potentially the 13,000 patients, DMD patients, and we expect that market to be in excess of EUR 150 million. As a reminder, these are all our own sales. So this is 100% of net sales that we report on our financial statements. Moving on to Catalyst. In that market, we're expecting in excess of $350 million market size. Obviously, Catalyst is doing very well. And in China, we have Sperogenix and the market size there, we expect in excess of $100 million. For both Catalyst and Sperogenix, the way we get paid is through upfront payments on signing those agreements as well as milestone payments as we reach certain milestones as well as royalty income. Moving to the next bucket of revenues. This is for what we call the rest of the world. So this is our distributor market. And here, we have the likes of GENESIS and also the new agreements that we have signed over the course of the summer. For the rest of the world sales, we have a what we call a sort of a distribution agreement, of which we book about 60% of net sales. So now moving on to the results itself. So these are the operational highlights. So I start with Germany and Austria. We see there a very strong growth. We're pleased to announce that approximately 40% of steroid using DMD patients in Germany and Austria are now treated with AGAMREE. Obviously, the last time we spoke about this, this was 30%. Also, if we look at Austria in its own right, it's the first country to have in excess of 50% market share. I think this really shows what a difference AGAMREE can make to DMD patients in these markets. Moving on to other EU markets. We are very pleased to announce that we had the launch in the U.K. in the second quarter of this year, and we're seeing growing demand. We've just started a home delivery program that was commenced only last month. The idea here to be able to streamline access and reduce admin burden in the NHS, which is causing issues within the NHS. We are already seeing a strong uptake of that, and we expect that to be reflected in sales as we go through the rest of the year. Other launches across Europe are expected in Q4 and into 2026, and we'll talk about that on a following slide. Going to the U.S. Our partner, Catalyst continues to perform very well. They reported H1 2025 sales were USD 49.4 million. As a reminder, they have guided for the full year of $100 million to $110 million. So you can see they are very much on track to meet their guidance. What is important here for us is that when they have in a calendar year greater than $100 million, this will trigger a $12.5 million milestone payment to Santhera. At the current rate, we are expecting that to be triggered during 2025, but I will note that in terms of cash flow, that will be received in early 2026. Moving on to Sperogenix. Again, some really positive movement. Previously, they had an early access program ongoing in -- during 2025. But as of September, they've now commenced their non-reimbursed commercial rollout. So what we mean by this is, this is the private payer market in China. We're delighted that in excess of 250 patients have already started taking AGAMREE in China. And if you think about that, that is actually around about 50% of the size of Germany and Austria combined. Due to the increased demand for products in China, both in 2025 and 2026, we are having to increase inventory, and that is part of the reason for our raise today. If we look at other rollouts in other territories, the summer has been incredibly busy for the team. We signed agreements in three different areas for five Gulf Cooperation Council countries as well as India and Turkey. The team remains actively engaged with other geographical expansion partners, and we look forward to announcing those during the rest of the year and into next year. Additionally, there has been changes at the exec and Board level. I joined Santhera as CFO in February of this year, and we're delighted that Dr. Melanie Rolli joined Santhera Board in May at the AGM. So going into a bit more detail around Germany and Austria. As I mentioned, in Germany and Austria, approximately 40% of patients or steroid using DMD patients have now been treated with AGAMREE. We've previously talked about the fact that this was with newly diagnosed patients aged 4 and 5 years old as well as switches in the 6 to 12 range. What we're now seeing is an increasing number of older DMD patients either start or restart corticosteroids with AGAMREE. So this is really growing the market. We now have between 450 and 500 patients that have started on AGAMREE and delighted to see that growth. As I've already mentioned, Austria is the first country to have in excess of 50% of steroid using DMD patients now on AGAMREE. And we look to hopefully replicate this across other countries as we roll out. The reason why we're particularly pleased with Germany and Austria is that there is no -- there was no clinical trial sites or experience in either of these countries. So I think it really shows the benefit that the product is having to patients. I think any company seeing a 40% market share within about 18 months of launch would be pleased. We've talked about -- previously about the price. We have a good price of just over EUR 3,600. And Germany, as you would imagine, is a reference country for many other markets. If I now go through to the rest of Europe. We've obviously discussed the top 2 lines on this chart in terms of Germany and Austria. In the U.K., I mentioned that previously that we have the launch in Q2, and we're now moving ahead with our delivery service, which I think is really helping to boost sales there. We look forward to the second half of the year as that continues to grow. Moving on to other countries. In Spain, we have an October CIMP meeting. Assuming that is positive, we'll then expect a rollout to commence across the regions and the hospital formularies to begin late Q4. For the Nordics, we have the team fully in place. Obviously, with the different countries, we have different dates for commencement of sales. We're expecting those in Q4 and then following through into Q1. Finally, I'll mention Italy. We are expecting there an approval as of late Q1, having decided that we will add the GUARDIAN data to the reimbursement dossier for Italy. If there's other questions around other markets, then please feel free to ask us in the Q&A. So to move to the U.S. As I highlighted, AGAMREE grew to just under $50 million worth of sales in the first half and that Catalyst has maintained their guidance of total sales of $100 million to $110 million for the full year. And then moving on to China. With the early access program that started in June 2024, we're delighted with their commercial rollout. This is in the non-reimbursed market that started only literally a few weeks ago. I mentioned this briefly earlier, but I think it is very impressive to see that they already have more than 250 DMD patients treated to date. And I think this shows the size of the market even in the non-reimbursed market in what is effectively a very short period of time. Over the last few months, we've seen increasing demand for product that we need to manufacture not only for 2025, but 2026. And hence, Santhera has needed to bring forward our inventory plans to service not only this market, but also the U.S. So now moving to the financial highlights for the year. So total revenues were CHF 24 million. This was a 70% growth on the prior year and driven by strong product sales in our launch markets as well as strong royalties and product supply revenues. If we look at product revenues in their own right, that was CHF 11.6 million. And we have seen an increase there of 76%. This is obviously primarily driven by Germany and Austria, but also with the first contributions from the U.K. post the launch in April 2025. If we combine the total sales from our U.S. and Chinese partners, so this is relating to royalties, milestones, and product supply, our total revenues from those two partners was CHF 12.4 million. Again, a very big increase over the CHF 7.6 million that we saw in the prior year, and we're expecting that to continue to grow strongly as we go into the second half of the year. Global sales, so this is from all of our partners and our own sales at the end of Q2 was in excess of $100 million. I think this is a great achievement that over 4 quarters, this has been achieved. This was achieved ahead of our expectations, again, showing the strength of sales from ours and our partners' markets. The one thing that comes with success is the fact that we have actually now triggered a $20 million milestone payment to the originator, ReveraGen, and this is seen in the cost of sales line. Moving on to operating expenses. It is very important to me as the CFO that we manage these and keep the costs in control. Operating expenses were CHF 27.3 million for the first half of the year. If we exclude share-based payments, that reduces it down to USD 25 million. And if you remember previously, my guidance for the full year was CHF 50 million to CHF 55 million. So you can see we are very much on track to keep our costs in control despite the fact that we are seeing some very good revenue growth. Our operating loss was CHF 35.4 million. If you exclude the milestone of USD 25 million that I mentioned earlier, it was very similar to last year, although actually, in fact, the loss was slightly reduced. As we'll talk about in a minute, we had a financing that was announced this morning where we secured CHF 20 million. This was a combination of a royalty agreement for $13 million and a CHF 10 million convertible bond. As I said, we'll come on to that more over the next slides. And finally, cash and cash equivalents at the 30th of June was CHF 18.4 million. So to go into the financing in more detail. And I think what is -- the key thing here is really as a reminder of why we've done this. This is for additional growth capital. The key reason for this is we've seen increased product demand from our partners, especially Catalyst and Sperogenix over 2025 and also into 2026. It is really important to us that we're able to service the product that they need to be able to continue on their strong sales and launches. We obviously saw the strong launch of Catalyst or the strong sales of Catalyst in the first half, and we've already seen the success that Sperogenix has had in their non-reimbursed commercial launch. This demand from our partners has meant that we have actually brought forward our inventory plans, hence, the requirement for additional working capital. It is very important, as I said, that we help support the acceleration of these global launches. So going into the details. For Highbridge and CBC or R-Bridge, these are our existing financing partners, and we have extended our agreements with both of them. So for Highbridge, we have an additional CHF 10 million convertible bond. This is added to the existing CHF 7 million convertible bond that is exchanging at parity. The price of this bond will be priced at a 10% premium to the closing price as of today, and it will have a 3-year maturity. We have also issued approximately 110,000 shares to Highbridge. This is in consideration for increased flexibility in relation to the CHF 35 million term loan that we signed last year. In relation to our royalty monetization agreement with R-Bridge, you may previously remember that we had an agreement with them for 75% of the net royalties. And last year, we received $30 million with the potential to receive up to $8 million more for these royalties. We've now extended that to the remaining 25% of net royalties and have received USD 13 million for that. On terms, I will say, those are slightly better than we did last year. To note on these -- both of these agreements, these agreements are capped and the full royalty stream will return to Santhera at -- once the cap has been met and also Santhera returns certain rights to buy back the royalty stream. I'll also remind you that the milestones that we received from Catalyst and Sperogenix are excluded from this agreement and will continue to be fully received by Santhera. I now move on to the financial guidance. I'm delighted to say that we've been able to increase our revenue guidance for this year. You may remember previously that we talked about full year revenues in excess of CHF 65 million to CHF 70 million. That was our previous guidance. We've now said that we can -- we are expecting in excess of that level for the full year 2025. For 2028, we maintain our guidance of EUR 150 million. This is for revenues from direct and partner markets, including our royalty income from North America and China. It does exclude any milestone payments received from partners. Looking to our 2030 guidance, again, we maintain that guidance that in direct markets, so that is our own markets, we expect in excess of EUR 150 million of sales in 2030. And finally, I think it's very important to reiterate our guidance on operating expenses that on 2025 and on a going-forward constant portfolio basis, we expect this in the range of CHF 50 million to CHF 55 million, excluding non-cash share compensation. Moving on to strategy. And for those of you at the Capital Markets Day, you would have seen this before, but I think it's helpful to reiterate our strategy over the coming years. Obviously, the key focus for this year and into next year is that continued rollout across Europe. And we're working hard to increase the number of geographies where AGAMREE is available for DMD patients. We'll also increase our expansion geographically beyond Europe through distribution partners and continue to work to sign up more distribution partners. The next stage of development is really around how do we maximize our infrastructure that we have here. I call it operational efficiency. We have a head office here in Pratteln in Switzerland, and we are servicing one product. It makes complete sense to add in a second product in the rare or orphan disease space. That way with very minimal incremental costs, we can really leverage the marketing and sales team as well as the in-house infrastructure that we have here. Looking to additional indications. Our partners are working on additional indications. We've said that we won't currently be funding any new indications. However, as our partners progress, we have opt-in rights and we'll be discussing with them at that time, obviously, assuming positive data if we will look to opt in. And finally, just to go back to a summary of the company. We have a differentiated product in AGAMREE with worldwide rights. I hope you can see today we have a clear growth strategy, and we had strong growth in the first half of the year. We've got a strong and growing partner network, again, as evidenced by our new distribution agreements as well as progress with our licensing partners. It's important that we remain nimble. And with this being able to be nimble, we're able to move and react to opportunities. And hopefully, we'll be able to announce something during 2026 in terms of additional products that we'd look to license in. And finally, to note, we are funded to cash flow breakeven. With that, I'd like to move to the Q&A. So just ahead of that, if I can maybe remind you if there's any more questions, if you could please ask them in the chat. Right. I will start here. I'm going to read them out and then between myself and Shabir will answer them. Just a moment. Catherine Isted: So the first question is, how is the rollout of AGAMREE in Europe and rest of the world progressing, including pricing, reimbursement, and hiring of staff. Do you see Germany, U.K. pricing and reimbursement support decisions in other countries? So I think the first part of that question in terms of rollout across Europe and the rest of the world, I think that's very clear. We are seeing very good growth in our own markets as well as partner markets. We've maintained a good pricing as well. You saw the pricing in Germany. And in terms of reimbursement, we're moving ahead in terms of new markets to get the right price for AGAMREE as we roll that out in the remaining countries in Europe. In terms of hiring of staff, we have had no problem hiring staff. In the end, I think if you have a good product when people can really see that you have something that is differentiated, people want to work for you as a company. And obviously, we are hiring people as we increase our commercial presence. The second part of that question, asking about German and U.K. pricing, reimbursement, does that support other countries? Well, in terms of the German pricing, absolutely, many countries use that as a reference pricing. In the U.K., it's more around NICE approval. As a reminder and as a native grit to actually get NICE approval and recommendation is incredibly difficult. So that is very positive that we have that. So the combination of the German pricing and the NICE recommendation absolutely is positive in terms of decisions in other countries. So moving on to the second question. What is the reason for your full year 2025 revenue expecting to exceed the previous guidance range? Well, I think you can see, obviously, we got good growth in our own direct markets. China has only just started to be launched in September. So obviously, good growth there as well as the annualization impact of the U.S. So across all of those areas, we actually expect H2 to be far stronger than H1. In addition, as I mentioned earlier in the presentation, assuming that Catalyst does reach that USD 100 million sales milestone by the end of the year, we would have an extra USD 12.5 million of sales milestone that would be recognized in 2025. I hope that answers the question. Moving on to the third question. Are the terms of the new R-Bridge royalty monetization agreement of $30 million at similar terms as the early agreement or better? No, we've never given exact details on this. However, I will say that we have agreed better terms, not only on the cap, but also on the coupon rate. We had long discussions around this. But I think considering the strength in both those markets and the reduction in risk, it was only right that we should have a lower cap and a lower coupon rate. So I'm pleased to say that, that was negotiated into that discussion. Moving on to the next question. This is probably one more for Shabir. It says, although it is still early days, do you see evidence for AGAMREE to allow patients to stay on time, on dose and on treatment, addressing the limitations of standard corticosteroids? Shabir Hasham: The answer to that, Catherine, is yes. We're seeing evidence, and this is something you pointed out to when we discussed Germany that the drug is being used across all segments in terms of age. So specifically, we're seeing new starters grow and tolerate treatment well. We're seeing patients now who are on other corticosteroids switching to AGAMREE and those who are either discontinuing or down titrating also adopting AGAMREE. We've been following patients up, and we'll be announcing data from our long-term follow-up study in quarter 4, but we are seeing a majority of patients tolerating drug at a higher dose for longer than we see in terms of natural history. Catherine Isted: Thank you, Shabir. So the next question is regarding China. I said, when do you expect first sales in China? Does this trigger a milestone payment from Sperogenix? And what has increased the forecasted demand in China for '25 and '26? So absolutely, we had actually sales in the first half of the year. We have EAP sales. In addition, we now have sales in the second half of the year in relation to their commercial non-reimbursed rollout. We have, obviously, the royalty component of their sales, but also importantly, we have the product sales as in bottle sales that go to China as well. So we have a double impact of the benefit from a strong Chinese market. The Chinese market, I think we've already seen, as I mentioned, with in excess of 250 patients already on AGAMREE, they have only just launched. That's already half the size of Germany and Austria in such a short period of time. I think that really shows the potential of the product in China. And our partner is very confident about forecast, and we have binding forecasts with them out a number of months, and those have increased. And that is a key reason for the increased need for inventory to provide to the Chinese market. Moving on to the next question, and this is another one for Shabir. On a positive POC trial results for AGAMREE in Beckers, how long would it take to gain market approval for this indication? And how significant is the market potential? I don't know how much you can say, but the question has been asked. Shabir Hasham: Thank you for the question. It's a little too early to say. We haven't seen the data yet. I'm awaiting that imminently. I think depending on what we see in the data, there were some thoughts in terms of regulatory strategy, whether it would be an accelerated submission or not. So that depends really on the data. Beckers is obviously an attractive market. It's the same call point or touch point. It's the same physicians that treat Duchenne and the neuromuscular centers for those who are at different age ranges. And the market size is somewhat similar. I can't make any comments really until I see the data, and then, of course, we'll provide our view. Catherine Isted: Okay. Moving on to the next question. That is how is the manufacturing expansion progressing? We actually put this slide deck up on to our website and one of the slides in the appendix actually talks about manufacturing capacity expansion. We are delighted to say that our second site is running ahead of, I think, the previous guidance that we gave, and we are now expecting that to be able to deliver first supplies of product in the fourth quarter of this year. It is important to us because this does bring down our cost of goods. And also, it gives that certainty of supply. When you are single source, there is obviously always a higher risk level. So to be dual sourced, I think, is very important. but also because of the size of the manufacturing site and the size of the batches, this also increases our -- or improves our cost of goods. So delighted to say that, that is progressing well. The next question, I think I've covered off. It's another question asking about total revenues for 2025 exceeding previous guidance. Can you give a bit more detail on how you expect this from different sources? I think I ran through that earlier in terms of the increased direct markets, obviously, the positive impact that we would expect from the milestone, but additionally, continued strong royalty income as well as product -- direct product sales to the U.S. and to China. Going to the next question. You said you have announced quite a few additional distribution agreements, Turkey, Gulf countries, and India. Maybe -- could you maybe comment high level on the financing terms and the market potential you see in these respective markets? And then maybe also, could you share what you consider to be remaining key markets to partner and where you stand on these discussions? So in terms of the high level, in terms of the financials, and I think this is quite an important point because there has been some, I think, some misunderstanding on this front. We book approximately 60% of the net sales from these countries. So those are booked to our top line, and that is the commercial agreements that we have. So some are a fraction more, some are a fraction less. Sometimes we get a small upfront payment as we had over the summer. So those are the financial terms. I think if you look at any individual country, the incremental benefit to the top line is not going to be the same as one of the major European countries. But if you continue adding all of those up, then those are very meaningful. We certainly are looking to expand to other countries. And again, actually in the appendix to the slides that will be available later, we list some of the other countries that we are looking at. This includes the likes of looking into Latin America, Russia, Australia, New Zealand as well as South Korea. So if you're looking at key countries that we're looking at as the next phase, those are highlighted in the appendix to the deck. I think that's the main -- that answers that question. The next one, can you please compare the U.K. launch to the launch in Germany and Austria, where you achieved 30% market share in the year 1 of launch. Are you seeing any reasons why your market share in the U.K. or other key markets should be different? We've obviously had the summer months over the U.K. We also have -- we have needed to get in place the delivery program to actually help with logistics. We are seeing good sales in the U.K., and they continue to grow strongly. Even in September, we've actually got some very strong growth there, particularly since the start of the delivery agreements being started to be rolled out. At present, we won't discuss market share, but we said we are pleased with how that launch is going. Let me just go to see if there's any -- those are the -- some of the questions that have come in. Let me have a look to see if I can see if any more here. There is. So other questions. When you secured the financing agreement in August last year, you expected it to extend the cash runway to anticipated cash flow breakeven. Now today, you secured an extra CHF 20 million in new capital. Could you help us understand what has changed the underlying conditions to make this additional capital necessary beyond the increased inventory needs related to this? And when do you expect local manufacturing supply to be up and running in the U.S. and China? So two very different questions. So let's answer the first one to start with. So certainly, last year, we hadn't expected the large increase in inventory. This is a major factor, particularly in China. From the time frame when we actually have to put our first, I say, binding forecast into when it's actually made is about 16 months. So it is a long period of time. we do have -- and it takes quite a while to actually produce the product as well. So we do have to carry higher levels of inventory. I think it's important that we have flexibility to be able to help our partners and really help with their growth as they continue to expand AGAMREE sales. In terms of U.S. and China, the U.S. is progressing ahead with manufacturing. This happened before any of the Trump's discussions. However, that won't be online and producing product into some point into probably the second half of next year. That's probably more of a question for Catalyst to firm up the exact timings. For China, that will still be a number of years away in terms of them being able to manufacture themselves, although I know that's very key to them because that helps extend their patent life. Another question. This is probably more for Shabir. Can you elaborate further on the GUARDIAN study? What kind of endpoints will you report? And if positive, how do you expect it will impact uptake in existing markets? And how to help in reimbursement pricing discussions with regulators? Shabir Hasham: Thank you. So let me just remind you of what the GUARDIAN study is. As you'll know, we've had children who've been on various programs, various studies in the development program, Phase IIa, Phase IIb studies. Those children then went into expanded access programs. And what we've done is for a subset of these patients, we've actually rolled them into a formal long-term extension study, the GUARDIAN study. So we have 40 to 41 children anticipated in the study. They've been on drug 5 to 7 years. I think this is a very important study. If you remember, being on a steroid at high dose, the toxicity accumulates. So what we've been able to show so far has really been based on short-term outcomes from the pivotal study. The GUARDIAN study will be the first time we see what I believe is the true value of vamorolone. We have two objectives. One is to show that we maintain efficacy and that vamorolone is comparable to standard of care corticosteroids in terms of outcomes. We want to show that children remain mobile for longer. There's a delay in loss of ambulation. And secondly, we really want to start to differentiate on important safety outcome measures. So rather than looking at just bone biomarkers, we'll be looking at actual bone fractures, hard clinical outcome measures. We have a measure of eye health, ophthalmological assessments of cataract and glaucoma. We're looking at bone age. We're looking at delay in puberty, which is common with corticosteroids, especially with boys who are now in the GUARDIAN study coming up to the age of about 11 to 12 entering into puberty. And of course, we're looking generally across a number of safety outcome measures. These data are very important. Physicians are currently using AGAMREE in all segments and ages as experience accumulates, but predominantly in the younger age group. With these data, I believe it will give physicians the confidence to switch away from current standard of care corticosteroids, having confidence that the efficacy has been maintained for 5 to 7 years will be very important in that switch decision. And so I believe it will have a very positive impact. Of course, in terms of safety differentiation, if we can show hard clinical outcome measures in addition to consistency across several earlier studies in both biomarkers and X-rays, again, it gives confidence to the market that the safety differentiation really is a key value driver of vamorolone. In terms of reimbursement pricing discussions, where we are able to use these, of course, I think it will have a positive outcome, and I look forward to the data being announced very soon. Catherine Isted: Thank you, Shabir. I'm going to answer one of the questions. Now there are several that are along steemed around how to explain the weak share price performance and commenting that we're not looking after the interest of shareholders. I think the most important thing is to have growth in this company. We need to support not only our markets, but also our markets of our partners. So if that needs us to increase our inventory levels to help do that, then I think that's important for the long-term growth because in the end, we want to see more sales of AGAMREE around the world. In terms of share price performance, I mean, I tend to not look at it day-to-day. You need to look over the longer term. If I go back to this time last year, the share price has increased 35%. I think most people would be very happy with that. And I appreciate today that there has been a dip in the share price. I am hoping that after this call, people have a better understanding of our excitement for the rest of 2025 and into 2026, and why we're increasing our sales guidance on the back of that confidence. So I hope that sort of answers the question. We are looking at the long term. We don't look at day-to-day movements, and we've had some very good growth over the last year, and that's what we'd look to have over the coming 12 months, too. Another question is, why do you not see an increase in sales from 2028 to 2030. I'm actually just going to go back to that slide, if it's going to allow me to. It's actually two different definitions. So what we say for 2028 is basically all revenues excluding milestone payments. So milestones, they can be lumpy. They could fall one side of a year or the other side of the year. If you think of the remaining part of that sales, so that's our own sales or partner market sales or royalty income, this is the underlying revenues for the company. And we're saying that they will reach EUR 150 million by 2028. By the time we get to 2030, what we said is we're just going to take only our portion. So that is just purely those European sales, our direct market sales in Europe. So if you remember back to the earlier slide, when we talked about we expect the European market to be in excess of EUR 150 million by 2030. That is that figure there. So by 2030, we'll have not only EUR 150 million of sales. We'll then have the royalty streams in relation to our Chinese and U.S. partners, which obviously by which stage could be very, very sizable in addition to our distribution partners. And as you can see, we've been rolling those out as well. So by 2030, yes, we would expect sales far, far in excess of EUR 150 million if you're looking at all sources of revenue streams. And I think we're nearly on to the final question here now. So there was a question saying, how much do you believe the market for AGAMREE will grow as DMD patients who have stopped taking other products return to take AGAMREE. So I think that's probably more for you, Shabir. Shabir Hasham: Yes. So let's talk about unmet need first because that will give you an idea both of the urgency, but also of the opportunity. So those who tend to stop treatment, corticosteroids or others tend to be in the older age segments. Now remember, there are very few options for children who are in the older age segments. You'll know from the gene therapy stories and Elevidys that it's unlikely that gene therapy will be a suitable treatment for those who are older, which remains then the only option you have are corticosteroids and potentially givinostat in the marketplace. So a lot of adult neuromuscular physicians that I speak to are, quite frankly, absolutely desperate. They have nothing really to treat older kids, whether they've stopped other treatments or wish to restart corticosteroids. Remember, the leading cause of death in Duchenne isn't going into a wheelchair, isn't having weak arms or legs. It's the cardiorespiratory failure that kills you and prematurely kills you. Now steroids have been shown to actually also delay time to onset of cardiac and respiratory failure. So they are a very important treatment option with the evidence base already established. And I'm hearing very positive sentiments from adult neurologists for people who want to come back to corticosteroids that AGAMREE is a very valuable and suitable option. It's really based on an unmet need where we believe the driver and growth opportunity will be. Catherine Isted: Thank you, Shabir. With that, I will hand back to the operator. Operator: Perfect. Thank you very much indeed for your presentation and for being so generous of your time and addressing all of those questions that came in this afternoon. And of course, if there are any further questions that come through, we'll make these available to you immediately after the presentation has ended. But Catherine, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and to the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great. Catherine Isted: Thank you. First, I want to say thank you again for your time today to hear about Santhera and our results over the first half of 2025. I hope you can see here the impact that we're having from having a differentiated product in the DMD market. I hope it's clear you can see about our growth strategy and how we are executing on that and also how with our strong partners, we're continuing to grow AGAMREE sales globally. So with that, I'd like to thank all my colleagues for their efforts over the last 6 months, and thank you again for your time and listening today. Operator: Perfect, Catherine. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Santhera Pharmaceuticals, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.
Operator: Thank you for standing by, and welcome to the Synlait Milk Full Year Results Call. [Operator Instructions] I'd now like to hand the conference over to Synlait Milk. Please go ahead. Hannah Lynch: Good morning, everybody, and welcome to Synlait's Full Year Results Conference Call. [Operator Instructions] It's great to have so many of you on today's call and a real pleasure to introduce you formally to our new CEO, Richard Wyeth, who joined Synlait earlier this year in May. He's joined, of course, today on the call by our CFO, Andy Liu, who many of you will now know. Rich and Andy will speak today through to our investor presentation released this morning. And then we'll open the line for Q&A. [Operator Instructions] Richard, over to you. Richard Wyeth: Thanks, Hannah. Good morning to you all. Thank you for joining us on Synlait's Full Year 2025 Results Call. To indulge some sporting analogy, FY '25 was a year of 2 halves with Synlait. We won the first half and celebrated a return to profitability. However, over the second half was challenging on a number of fronts and the impact of those will be cleared in today's presentation. Andy and I will go over those in detail throughout the presentation. But before that, we have some good news. If you please turn to Slide 2. We have entered into a binding conditional agreement to sell our North Island assets to our valued customer and global health care leader, Abbott. These consist primarily of our Pokeno factory and 2 Auckland sites in the blending and canning facility at Richard Pearse Drives and Jerry Green, which is the warehouse. The sale price of the transaction is USD 178 million, which equates to approximately NZD 307 million -- NZD 307 million. Abbott has confirmed it will onboard most of the people who work on these sites, which is a fantastic outcome for both our people and also for the local community. The targeted completion date for the transaction is 1 April 2026. And the sale will be subject to various conditions, including Synlait obtaining shareholder approval and Abbott receiving consent under the Overseas Investment Act 2005 and normal consents such as regulatory consents from the likes of MPI. We released the notice of meeting with detailed information on the sale to inform shareholders before they vote on the transaction at Synlait's Annual Meeting on 21 November 2025. And also note Bright Dairy, our major shareholder, has confirmed it will vote in favor of the transaction, so the requirement for shareholder approval will be achieved. This is a real step forward for Synlait. The proceeds of this sale will be used to pay down debt. It will mean that by the end of FY '26, we are largely debt-free with the exception of working capital facilities. In short, the sale will deliver a stronger, simpler and more secure Synlait. We will have greater space to focus on our South Island operations and the ability to carefully and strategically review our strategy for Dunsandel. Goal is to release an updated strategy at our half year results in March 2026. But in the meantime, we're certainly very excited, and this is an outstanding win for both Synlait and Abbott. Moving on to Slide 3. I've now been in the business for just over 4 months as CEO of Synlait. I was attracted to this role due to the company's strategic strengths. It has world-class assets and its foundations are strong. Dunsandel is located in the heart of Canterbury's dairy sector with good connectivity to global markets and the ability to produce goods at scale. The company also enjoys strong demand from our global customers. Having now spent a short amount of time in the business, I've identified 3 immediate needs that we need to focus on. First and foremost, we need to improve our operational stability at Dunsandel so we can consistently deliver for our customers. I'll talk to you more about that in a moment. Secondly, we need to reduce complexity to deliver a financial uplift. The North Island transactions will assist with that. And finally, there is a need to reset the high-performing culture within the business. Synlait's focus on great people who have been through a huge amount of challenges over the last few years. My observation coming into the business is that it's very much a culture of reactivity driven some of those challenges. I want to reset the business so we can really focus on proactive performance. To that end, our focus for FY '26 will be very much targeted on operational stability. To assist with that, we are recruiting and onboarding a new Canterbury-based Chief Operating Officer who will be responsible for delivering a raft of improvements in that area and also ensuring that we can deliver the North Island transaction by 1 April 2026. We're also embedding our values framework, the Synlait Spirit, in the short term to allow us to improve our culture. Moving on to that focus into Slide 4, you will see focus areas internally that have been done dubbed the Big 6 for '26. Top of that list is operational stability. That should come as no surprise to many of you. As we announced to the market in July, Synlait has had manufacturing challenges earlier this year. The impact of those is clear in today's result with one-off costs totaling $43.5 million. While the manufacturing challenges are largely behind us, operational stability must remain a core focus alongside quality, performance and customer satisfaction. And to focus who are focused on financial resilience, it was great to see the banking facility come through last week and include the North Island sale then strengthening our financial performance has largely complete. We now need to deliver on culture, operational stability and quality, and that will lead to strong overall financial performance. We'll move through now to Slide 5 to look at our results at a glance. We are reporting total group EBITDA of $50.7 million today, which is an increase of $54.8 million on FY '24. Our bottom line was a net loss after tax of $39.8 million, which is an improvement of 78% year-on-year. As mentioned, this reflects costs associated with challenges at Dunsandel. Adjusted bottom line is a net profit after tax of $0.8 million, which shows you Synlait's recovery was on track. Pleasingly, Synlait's debt level has decreased by 55% during FY '25. Of course, most of this was courtesy to last October's equity raise, but an uplift in our trading performance has added to that with net debt now down at $250.7 million. As mentioned, the proceeds from the North Island transaction will largely bear. Group revenue increased to a record $1.8 billion or 12%. Operating cash flow was up 451% to $165.5 million and gross profit increased to $105.3 million. I'm delighted to confirm that our final milk price for the 2024, 2025 season is a record $10.16 per kilo of milk solids. Add to that Synlait's incentive program, which averages out to $0.30 per kilo of milk solids and our secured milk premium of $0.20 per kilo of milk solids for our South Island farmers, and you could see that our Synlait suppliers will be very happy. However, our average milk price or payment to South Island farmers will sit $0.50 above the farm gate milk price. That should result, as I said, in some very good Christmas presence for many of our farming staff. I will now hand over to Andy Liu, our CFO, who will take you through some more detail on the financials. Lei Liu: Thanks, Richard. Good morning, everyone. Let me take you a go through to Synlait's financial results for the year '25. This year's results shows a very strong improvement and a fresh sense of progress across our main business areas, even though we faced some manufacturing challenges at Dunsandel. Let me begin by outlining the key highlights on Slide 7. The Advanced Nutrition segments experienced robust customer demand and demonstrated strong growth in new product development. This success sales translated into a $21.1 million increase in underlying gross profit, underscoring the strength of our customer relations and our ability to innovate and bring new products to market. Our ingredients business achieved a notable turnaround from FY '24, recording a $26.6 million improvement. This was driven by effective foreign exchange management and a strategic shift to value over volume. Although stream return did not always favor our current product mix, our enhanced risk management approach proved beneficial. The Consumer and Foodservice segment achieved a $9.3 million increase in our gross margin. This was largely attributed to the outstanding performance of Dairyworks and ongoing growth in our UHT print portfolio in existing and new markets. We successfully reduced SG&A costs through disciplined cost control measures and a strong focus on eliminating wastage. Financing costs also reduced significantly, supported by better cash flow management and the recovery in trading performance. On to Slide 8. In FY '25, Synlait's total revenue increased 12% to $1.8 billion after a flat FY '24. Growth was broad-based. Advanced Nutrition up 8% on high volumes and a new Nutrabase powder successfully launched in Southeast Asia. Ingredients revenue increased by 7% on pricing and favorable foreign exchange. Our consumer base business unit reported a 12% revenue increase, with growth in export markets helping to offset ongoing pressures in the domestic market. Revenue and volume from Foodservice, driven by UHT cream, almost doubled compared to the prior year, with growth extending into Asia and the Pacific. Underlying gross profit increased to $142.5 million due to disciplined execution and strategic improvements company-wide. On Slide 9, you can see that our focus on operational efficiency and working capital management has resulted in a remarkable recovery in cash flows. Our operating cash flows increased by $213 million, reflecting improved trading performance and optimized working capital management. CapEx investment remains at a low level, a further 23% reduction compared with prior year with a focus on business continuity, growth initiatives and regulatory compliance as well as strategic digitalization, AI, cybersecurity to manage risk and opportunities. Net debt decreased by $300.9 million or 55% due to capital injection and improved cash flow performance. Financing costs contributed $48 million to net debt. That is a $7 million improvement on FY '24. These costs are expected to reduce further in FY '26 with the completion of our refinancing. Our balance sheet is much stronger, and we are targeting a net senior leverage ratio below 2.5x in FY '26. In summary, Synlait's FY '25 results reflect the company regaining its strength, simplifying its operations and establishing a platform for sustainable and profitable growth. The sale of North Island assets marks an improved turning point, significantly strengthening our balance sheet by reducing net debt, improving leverage ratios and restoring our creditworthiness. With a streamlined business model and a solid financial foundation, Synlait is well positioned to invest in strategic growth, pursue new opportunities and deliver sustainable value to our shareholders. Financially, Synlait is now equipped to support and execute a new future strategy with confidence and resilience. Thank you. I will hand you back to Richard now. Richard Wyeth: Thanks, Andy. I'll now go through an update on each of our business units. If you turn to Slide 11, firstly, Advanced Nutrition. So for FY '24, we saw an overall uplift in volumes due to strong customer demand. Our achievements for that year include an expansion of our customer base. We also had a new record in lactoferrin sales volumes, which were up 12 metric tons. And we also had the successful launch of our Nutrabase powders, which has secured multiple customers in Southeast Asia. Our focus going forward for this financial year will include working with The a2 Milk Company to support growth in China, further expanding the Nutrabase range and looking to deepen relationships with our Ingredients customers so they're more aware of our Advanced Nutrition capability and exploring new sales channels and value-add products to uplift returns on lactoferrin. So that's Advanced Nutrition. Moving through to Slide 14 and the Ingredients business. For those who know the Synlait story, you will recall we strategically moved away from fresh milk processing at the North Island assets last year. This obviously impacted our ingredients overall volume, which decreased to 108,000 metric tonnes. However, offsetting that was improved premiums over the last 12 months, which was an outstanding achievement. And obviously, we had increased revenue due to strong ingredient pricing. We also saw progress in customer and market diversification with expansion into the Middle East. Looking ahead, our focus areas for ingredients will be further uplifting the premiums we achieved last year, continued expansion of our ingredients portfolio and amplifying market awareness of our high level of quality and consistency. Moving now to Slide 13. You will see an overview of our Foodservice business performance. This is for UHT cream, obviously, a very popular product, certainly in China. For FY '25, it saw us successfully launch our second-generation cream, which has further increased product stability in market. To deliver record volume last year of 8.4 million 1-liter bottles manufactured at our Dunsandel site, every single one of these was sold. We had demand remains exceptionally strong for this product in multiple global markets, and our focus will be to continue to grow that into next year. We're looking to grow margins, although that has been challenging. The real unlocker for our Foodservice business is to continue to drive volume. And it's really pleasing to see we've picked up a new distributor, which is sending product into Fiji, and we're working more broadly to increase that volume overall for that Foodservice business. Moving on to Slide 14, the Consumer business. FY '25 was another outstanding year the Dairyworks which drives our consumer business. I'd just like to acknowledge Tim, who is the CEO of that business, who was acting CEO of Synlait and also Aaron, who stepped into his shoes for a period of time. They've done an outstanding job once again for FY '25. The solid performance was driven by offshore markets with softer growth in New Zealand due to obviously cost-of-living pressures and increased milk prices. Overall gross profit for our consumer business was $39 million, up from $30.6 million in the prior year. And offshore Dairyworks saw a 53% growth in cheese export volumes with a lot of success across the Tasman. Dairyworks is now the fastest-growing cheese brand in Woolworths, Australia. The Alpine brand has also launched in foodservice then, and both Alpine and Dairyworks products ranges are now in Costco Australia. The focus for FY '26 is to continue delivering value in new product lines to domestic companies and further growing our export volumes. So a real standout for this year. Moving now to Slide 15, which is milk supply. As I mentioned earlier today, we have confirmed a record milk price, which is significantly up on the season's opening forecast. This should deliver some very happy farmers, which has been an important focus for Synlait across FY '25. Earlier in the year, our on-farm team did an excellent job of securing our milk supply for the current season after working to encourage farmers to withdraw their case and onboarding 11 new farms. This is helped by -- this was helped by additional secured milk premiums along with new guarantees around the milk price at advance rates. We will continue to focus on finding new ways to add value on farm. One of the focus areas will be improving our digital offering and continuing to support our on-farm through Whakapuawai program, which helps Riparian planting on farm. We will also look to launch our fixed milk price offering in FY '26. Now on to Slide 16. FY '26 presents a valuable reset for Synlait, as you well know. As we've already said, the sale of our North Island assets will strengthen Synlait's financial position considerably with the proceeds used to significantly reduce debt. Given the scale of the strategic reset, we will not provide further financial guidance for FY '26. Our focus is on executing the North Island sale and building a simpler and more focused Synlait in Canterbury. We are committed to making the most of this opportunity and aim to have an updated strategic plan in place by March 2026. So moving through to Slide 17, key takeaways from today. As was noted, the sale of our North Island assets will see Synlait become a stronger, simpler and more secure business. Financially, we will deliver a full and final balance sheet reset ending the company's survival phase. And strategically, it simplifies our focus and opens the door for us to explore new opportunities here at Dunsandel. Andy and I will now take questions. Hannah Lynch: [Operator Instructions] Your first question comes from Sean Xu with CLSA. Sean Xu: My first one is around your manufacturing challenge in your Dunsandel facility. It seems to be a reocurring issue now. I'm just very interested though in what specific processing improvement can be prioritized in FY '26 to prevent these kind of operational disruption going forward? Richard Wyeth: Sorry, I just didn't quite hear the second part of the question. Hannah Lynch: Prioritize this in FY '26 to prevent this happening going forward. Richard Wyeth: Yes. So I appreciate there has been a number of manufacturing challenges for a period of time and certainly coming in and being relatively new to the business is a focus for me. So as I mentioned, for our Big 6 for '26, that focus on operational stability is key. What I can say is that there are a number of one-off issues, and we just need to work through those systematically root cause analysis and fix those issues. I'm now comfortable with we're largely through that. But as I say, the next 6 months is very important for us. Sean Xu: My second question is around the a2, the China label digital production. My understanding is that requires a new -- registration renewal in calendar year 2027. I know that might be early stage, but as I remember, the last time registration with SAMR takes a long time. I'm just curious to know if you can give us some indication on the time line of when to start prep for this process. Richard Wyeth: Yes. So we've already started that process. You're quite right, FY '27 is key. And so we've been working on that already for a fairly long period of time. There's a bit of capital required going forward, and we're working with both a2 and SAMR quite closely to make sure we're ready for that. Sean Xu: If I may just quick check in a very quick question. Last one. With Bright being your largest shareholder, I'm just curious to know, is there any further collaboration you can leverage their connection distribution channel in China to expand your market there? Richard Wyeth: Yes. I mean, Bright are obviously a very supportive shareholder of us, and we are working with them. And I think there's good opportunities. I mean, we've got a very strong working relationship with Bright. So I think as part of our strategy reset, we will certainly be looking at what opportunities we have to work with Bright. Hannah Lynch: Your next question comes from Stephen Ridgewell with Craigs Investment Partners. Stephen Ridgewell: And first of all, congratulations on the sale of Pokeno. I know that's a big win for shareholders. With that the equity raise a year ago, 2 of the big 3 challenges that have been facing Synlait have been overcome. So well done on progress. My first question is on the use of proceeds from the North Island asset sales, and it could be either for management or potentially for the Chair. If you use the proceeds, $30 million of proceeds to pay back debt, Synlait could be in a position where it's got $74 million thereabouts of debt on the balance sheet. But the comments today also talk to the proceeds providing an opportunity to -- an opportunity to strategically diversify. And I realize it's an early stage, but I'm just interested in the sort of early thoughts the company has on the extent to which those proceeds will be used to pay down debt and the extent to which Synlait thinks it's got capacity to make acquisitions or other growth investments that may be more organic? And then related question is post the sale proceeds, will the company end up operating a lower net debt-to-EBITDA ratio than the 2.5x kind of flagged today? Richard Wyeth: Yes. Thanks. I'll take probably the first part and Andy may chip in on that. So certainly, initially, we'd look to obviously pay down as much debt as sensible. In terms of the longer term, that will be clearer through the strategic review that we can update in March. And just, I guess, my final comment, a personal perspective, which I'll share with the Board is that, I mean, I'd like to see our debt-to-debt equity ratio sitting at about 20% to 25%. I think that's prudent. We're seeing that as a good balance. When it gets to 45%, 50%, it doesn't really work. So that would be my intention going forward. Andy, if you want to add anything further? Lei Liu: No. I said actually that for our refinancing, we just finished it last Friday. That's why we still think it too early stages just to talk about regarding when we get the funds what we will do. But as Richard already mentioned, yes, principally definitely to just reduce our debt in order to just to keep it at a very reasonable levels and also seeking further opportunities. So this is the key point. And Stephen, just to try to make sure what's your second question regarding the debt-to-EBITDA level? Stephen Ridgewell: Yes. Just whether the company would look to operate at a lower net debt-to-EBITDA ratio, lower than 2.5x going forward, in particular, if we kind of look through a2 Milk's English label volumes migrating to the Pokeno site in the next year or 2? Lei Liu: Yes. Let's say that for the moment, we still think the 2.5x is still a reasonable one. That's why we don't think that we will change it for the moment. Stephen Ridgewell: Okay. Yes, look, if you keep it at 2.5x, it does suggest potentially quite a lot of firepower for acquisitions. But as you say, maybe we need to wait a bit longer to see where we land there. Yes. And then, I guess, as well, just on the -- in terms of the impact of the asset sales, we can see the proceeds of $307 million coming through, which is great. But can you give us -- can you hear me? Lei Liu: Yes. Hannah Lynch: Yes. Stephen Ridgewell: Yes, great. Can you just give us a sense of the kind of the EBITDA being generated from those assets in the -- I feel like on a normalized basis in the year just gone. My understanding was Pokeno was kind of burning $35 million a year at the EBITDA level. But just can you to give a rough steer as to the EBITDA loss that those assets generated in the year just gone? Lei Liu: Yes. So I can quickly jump to this question. So based on our FY '25 numbers that they said, once we get rid of the North Island, we are thinking about $5 million to $10 million kind of the EBITDA to be improved because definitely FY '25 that -- the plant is more filled, have more demand. That's why the level is not as high as what we said before. So $5 million to $10 million EBITDA impact. Stephen Ridgewell: Okay. No, that's helpful. And then just one last one for me. Just on the impact of a2 Milk's planned migration of English label volume from Dunsandel to its soon to be acquired Pokeno plant. Can you give us a rough estimate of the EBITDA impact that Synlait is kind of planning for? Is it reasonable simply to take the gross margin per tonne by the volume? Or are there other things to consider, for example, is there cost out the company connection or other factors such as the diseconomies of scale at lower production volumes in formula? Because I think that is obviously a key issue as the market kind of looks into the FY '27 and beyond time period. I mean some thoughts on that would be quite helpful. How you -- what the impact is and then the mitigation factors, the ways that you can mitigate that impact? Lei Liu: Yes. So Stephen, sorry, that's because these kind of numbers can be really very commercial sensitivity. So yes, I can't answer that very directly. Stephen Ridgewell: Okay. Well, I guess just as an opportunity to make some comments. I guess, as analysts, we have to take a view on their own numbers. Lei Liu: Maybe let me take it offline and just think about which kind of information we can provide. Operator: Your next question comes from Adrian Allbon with Jarden. Adrian Allbon: Maybe just a follow-on from Stephen's question. 4 months since the drill, Richard, what sort of cost opportunity do you kind of see in the Dunsandel asset going forward, both initially and as you sort of deal with the transition of acreage and recycle volumes? Richard Wyeth: Sorry, Adrian, it's just a bit hard to hear. Can you have another go at that, please? Adrian Allbon: Sure. Is that better? Richard Wyeth: Yes, it's a little bit better. Adrian Allbon: I was just -- as a follow-on to Stephen's question, I was just wondering what the cost out opportunity -- is it better? Richard Wyeth: Yes, that's great. Adrian Allbon: Yes. Just as a follow-on to Stephen's question, I was just wondering what the opportunity you see for cost out at Dunsandel actually is. Richard Wyeth: Yes. Look, I think, as I say, when we reset the business with a focus just on Dunsandel, there will be some opportunity in that, again, too early to get into the specifics, unfortunately, but certainly, we'll be able to provide more of an update at the March announcement. Adrian Allbon: Okay. Would it be useful as a starting point for us to kind of look to sort of FY '18 as a sort of -- as some sort of benchmark? Richard Wyeth: Andy, I don't know whether you want to comment on that. I haven't got the FY '18 numbers in my head at the moment. Lei Liu: Yes. So Andrew, that's regarding FY '18, it's really long time ago. So what I can propose is that let me work out some numbers and try to provide you some, let's say, some reasonable figures. For example, based on FY '25, we said we are saving about $10 million, just -- we're still including the North Island. That's why we think about definitely the number should be higher than $10 million. But let me just work out some numbers, come back to you regarding how you can simulate it. Richard Wyeth: Yes. What I can say in terms of -- I'm not sure what you to look back, but what I do know, given I've only been in the business a short time is what happened sort of even 2 or 3, 4 years ago in terms of throughput on the dryers at Dunsandel is that we won't get as much throughput. So as we're focused on higher quality, it means we have to derate the dryers somewhat. Now in terms of the specifics, I haven't got those in front of me today, but it does mean we can't just go look at the past as a precursor to the future necessarily because the standards have improved and China's requirements continue to improve. And all of those things mean we have to -- it does take some capacity out, not a lot, but it does take some capacity out of the dryers. Adrian Allbon: Okay. Just related to that, can you kind of give us a steer on what your sort of milk pool or what your contracted milk pool is for next year. Richard Wyeth: Circa 70. Adrian Allbon: Okay. And then I guess like in a broad question, are you expecting -- are you actually expecting EBITDA to be higher this year? And I'm presuming that the net debt is probably going to go higher as well because you've got all these premium payments to farmers coming up shortly. Richard Wyeth: Andy? Lei Liu: So let's say, for this year compared with FY '25, yes, you are right that we will pay some additional incentive to the farmers. It can be some challenge for the EBITDA. But as I said, regarding the FY '26 that we are more focused on selling the North Island, we will try our best, firstly, to focus on production stabilities and that's why -- that we didn't share any kind of our targets for the moment. Adrian Allbon: Just if you assume that the North Island business was in the numbers, which is probably what most of us are going to have to do, would you expect the net debt to be higher this year, like given your farmer incentive payments are due? Lei Liu: I should say about the similar level than this year because, yes, farmers payment, but also do remember, we have the EBITDA to generate the cash. So that's why we still think the net debt should be, let's say, a bit better than this year theoretically. Operator: Your next question comes from Matt Montgomery with Forsyth Barr. Matt Montgomerie: Maybe just start on manufacturing issues, Richard. I suspect it's unlikely you'll provide detail on what they were. But there's sort of a footnote around them being largely resolved. It'd be interesting if you could just maybe talk to that, what largely means, what you need to see to get them resolved? And yes, just any further color, I guess, to give us confidence that they have been isolated to the period that you've outlined previously? Richard Wyeth: Yes. Thanks, Matt. Good question. That was my fault. Look, I said that to Hannah, look, the nature of these businesses is that they're very complex, right, making Advanced Nutrition, for example, you've got ingredients from 10 to 40 different ingredients. You've got complex processing. So I'm relatively conservative by nature. So I said largely because while the issues we had from January to July are largely behind us. To say they've gone forever is you just can't do that. And look, in terms of the nature of those things, they are a combination. We've got people, process systems, engineering, there's a whole raft of things that can go wrong. A rotary valve can be put in some -- it might be an ingredient issue or supplied incorrectly. So there's so many things that can go wrong in making this advanced nutrition. So the issues we've had in the first half of the calendar year are largely behind us, but that's why I'm tuning up the focus on operational stability going forward. So I am very comfortable with the issues we had in the first half of the year. We have largely dealt with all of those, but you just never know what can be around the corner. So the way you deal with that in a processing operation like we are is you have very good systems, processes and you have well-trained people. So that is the area that I'm focused on at the moment. Matt Montgomerie: Awesome. That's very clear. Just on Dairyworks, I think EBITDA of around 23. Clearly, it's been a good business over the last 5, 6 years since you've owned it. And I think from memory at the time, I think the target was around 20 of EBITDA. So maybe just from you, Richard, how you think about that business going forward, maybe anything where you see it, say, 3 to 5 years from an earnings point of view? Richard Wyeth: Yes. Thanks, Matt. Andy might be able to put some numbers around it. In a general comment, I'd say I think it's got massive opportunity. I think the team there are fantastic. Tim and his leadership team have done a great job. So I think there's a real opportunity. The thing about that business is that we can just continue to scale it up. There's no sort of restrictions on growth. And I think that's what's exciting. They can procure product, they can add value to it, and they can just put it into different markets. They've got good market share in New Zealand. They're now targeting Australia, and I'd like to get to look even beyond that. So that's sort of my general comment in terms of the numbers around that. Andy, I don't know if you've got any more flavor to add to that. Lei Liu: Yes. So let's say, for FY '25, our revenue for the Dairyworks is about 12% increase, but gross profit is about $28 million. So it really shows that other than the volume growth, it's also internally, let's say, from the focusing always the strength for the efficiencies, productivity, also supported these numbers. That's why we still said this is a very good business that's in a good trend and also expected to have further growth. Matt Montgomerie: I might go one more, just a small one, Andy, the depreciation associated with the North Island assets, like what's the EBIT drag? Lei Liu: Sorry, can you repeat your question? What do you mean the EBIT drag? Matt Montgomerie: So just following up from Stephen's question, what's the D&A sitting over the North Island assets in FY '25? Lei Liu: It's around about $1 million per month. Operator: Your next question comes from Nick Mar with Macquarie. Nick Mar: Could you just talk through the net debt number? I think the trading update right at the end of your financial year, you were sort of guiding towards $300 million and you came in at $250 million. How did that change so much? Lei Liu: Yes, sure that I can just take this question. So what changes is mostly because of we have the higher customer demand and the customer demand also triggers some additional deposits. So this is how it comps regarding one of the reasons. Another reason is that, as you know, that Nick, we also have the receivable assignment. So end of the month, there is some kind of additional kind of deliveries, which we get the receivable assignment earlier. That's why this is mostly the 2 kind of the main drivers for the $50 million just reduced. Nick Mar: Yes. That's good. And in terms of what you're selling with the North Island divestment, sort of you mentioned the kind of lease warehouse as well. Does that sort of line up to what the North Island CGU was when it was impaired at the end of FY '24? Just trying to work out the price relative to the holding value? And also, do you have any sort of breakdown of the value by sort of PP&E versus working net working capital? Lei Liu: Yes. So to answer your question, yes, it's roughly the same regarding our CGU for North Island last year when we shared the numbers. So what I can propose you is that you can take the last year annual report numbers. And yes, this is kind of be the baseline regarding the CGU in the net asset value for the moment. Nick Mar: Yes. And the sort of mix between the PP&E and net working capital? Lei Liu: So working capital one, because here, what we said is regarding the total $178 million, it's $170 million for the PPE and $80 million for the working capital, let's say, just inventory. Operator: There are no further questions at this time. I'll now hand back to Mr. Richard Wyeth for closing remarks. Richard Wyeth: Thanks, everyone, for joining the call today. I look forward to meeting with many of you over the coming days. And in the meantime, if you've got any questions, you can just follow those up with Hannah. And that concludes our call for today. Operator: Thank you. That concludes the conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the 5E Advanced Materials Fiscal Year 2025 Year-End Results Conference Call. [Operator Instructions] Please note, today's call is being recorded. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions and subject to risks and uncertainties that may cause actual results to differ materially. For more information on these risks, please refer to the company's filings with the Securities and Exchange Commission. 5E Advanced Materials undertakes no obligation to update or revise any forward-looking statements. At this time, I would now like to turn the call over to Paul Weibel, Chief Executive Officer of 5E Advanced Materials. Paul, please go ahead. Paul Weibel: Good afternoon, and thank you for joining us today. Fiscal year 2025 has been a transformative year as we move from development to commercial readiness. We achieved broad validation across our project from the SK-1300 pre-feasibility study to customer qualifications and supply chain milestones. Before I go into detail, let me summarize the key achievements from fiscal year 2025. Strong project economics have been validated. Our recently published pre-feasibility study for Phase 1 only confirms a 39.5 year mine life with a robust after-tax NPV of $725 million and a 19% project IRR. Commercial front, we have successfully qualified our high-purity boric acid with 14 customers across multiple segments and have now advanced to full-scale production testing with a Tier 1 specialty glass manufacturer. On the financing front, we received a nonbinding LOI from USXM for a potential $285 million project debt facility, a major step towards securing funding for Phase 1 construction. And in regards to on track for being -- towards the project FID, we now have milestones and are well positioned to advance towards FEED engineering and a final investment decision in mid-2026. Today, I will cover these 4 areas in more detail and discuss the upcoming fiscal year 2026. First, the recently published SK-1300 PFS provides a strong validation of the scale, economics and longevity of our Ford Cady resource and reserve. This study covers Phase 1 only, not including future expansions or higher-value boron derivatives. The results underscore the strength of our project fundamentals. The project shows a pretax NPV of approximately $725 million with a 19% project IRR. The after-tax NPV is about $469 million with a 16% project IRR. We estimate free cash flow over the life of mine have roughly $3.7 billion pretax with an after-tax payback of just under 6 years. The study outlines a 39.5 year mine life, supported by 5.4 million short tons of boric acid reserves. Phase 1 targets 130,000 short tons per year of boric acid, which we believe has a strong need in today's global market. On the cost front, all-in sustaining costs are estimated at $555 per ton with initial capital at about $435 million. This is inclusive of contingency and a gas cogen facility. These results are underpinned by real-world operating data from our small sale facility, which confirmed our expected recovery and efficiencies. Thus far, we have received highly favorable feedback from analysts, prospective customers and the investment community. Next, I'd like to turn our attention to our traction with customers where we see growing validation. Earlier this year, 14 customers successfully qualified our boric acid. They span a wide range of industries that includes specialty glass, fiberglass, ceramics, insulation, agricultural, defense and chemicals. We continue to see accelerating demand for our high-purity U.S.-based boron supply and additional customers are in advanced testing phases. As we move from breadth to depth, we recently hit a significant milestone with a Tier 1 specialty glass manufacturer. We completed a full logistics and handling trial, shipping 2 tons of product from the California Port of L.A. to Taiwan. This trip took approximately 20 days and the material passed all on-site handling tests, including successful deployment in a glass furnace. As a result, we have received a green light to advance to full-scale product testing within this future customers' production system. As it currently stands, the product for the full-scale product test is produced and fits ready to ship. We are coordinating the shipping PO and the shipment of 20 tons of high-quality borate product is imminently expected. The next trial is expected to take 2 to 3 weeks to ship overseas and approximately 5 weeks to test in a commercial glass furnace. Furthermore, our team has begun producing the next batch of high-quality borate that will go to other large LCD glass manufacturers who are waiting in queue to implement a similar test. Our operation is proven, scalable and consistently meeting the strictest global quality standards. With these successful milestones being delivered, we have formally entered into long-term offtake discussions and have had 2 formal presentations with the most recent being a presentation of specific offtake terms. Most recently, our forecast of supply and demand has been resonating with our future customers, and industry dynamics are creating a clear opportunity for 5E, particularly in light of recent announcements from 1 of the 2 major borate producers. 5E and our stakeholders believe there is a fundamental need and requirement for a new market producer to reduce supply chain risks and our method and approach thus far has reinforced confidence and strengthens trust within the borate market and investor communities. Finally, I'll cover our road map to FID and financing. We remain on the path towards an FID by mid-2026. We have commenced early FEED engineering activities with 5E targeting the formerly stage gate to FEED engineering before year-end. We have prepared an application for the EXIM Engineering Multiplier Program and target $8.5 million to $10 million in a loan facility that will provide the capital and liquidity to fully fund FEED engineering. Once stage-gated to FEED, we expect that process to take approximately 8 to 9 months to complete, which leads to FID in mid-2026. Last week, we submitted a formal response to the USGS draft critical minerals list, where we strongly believe boron has a place on the list. The draft list was released prior to the second largest borate manufacturer, citing that their business is under strategic review. As it currently stands, we believe the United States has a single point of failure in the borate market. Per publicly available financial results the second largest port producer and single point of failure in the United States supply chain have seen their costs increase approximately 60% for 2017 on a B203 basis. Given the material announcement at the largest U.S. borate producer, their 2018 reserve downgrade and what we believe are weakening business fundamentals, there is a need add boron to the proposed critical minerals list. Without this producer, the United States would lose its position as the second largest producer and as a nation, we would transition from a net exporter to a net importer. The boron market is an oligopoly. The United States has a single point of failure and without further investment in new borate projects, the United States will be reliant on Turkey for boron and China for its critical advanced boron materials. We view 2025 as an inflection year for boron, as independent analysis shows supply shortfalls beginning in 2026, which we believe supports the fundamental need for a new market producer. Looking ahead, we are focused on several key catalysts in the upcoming quarters. These include progressing full-scale testing with multiple specialty glass manufacturers, securing additional qualifications and initial offtake agreements, securing a small XM loan to cover FEED engineering costs, completing fee-ready, engineering deliverables, advancing the larger project finance and XM loan process, finalization of our mine plan in connection with our horizontal well trials and lastly, the potential opportunity for USGS to do the right thing and add boron to the final critical minerals list. In closing, I want to thank our employees and partners for their dedication. With the achievements from fiscal year 2025, we are well positioned to advance towards FID in mid-2026, and build long-term value for our shareholders and our stakeholders. Thank you, and I look forward to your questions. Operator: [Operator Instructions] Okay. And it looks like -- apologies, just about to hand it back to you, Paul, but we did get a question coming in from Tate Sullivan from Maxim Group. Tate Sullivan: Can you review the comments you had about the disruption to the California boron mine? What was the specific announcement that you cited? Paul Weibel: Tate, yes. No, appreciate you dialing in and thanks for the question. So at the end of August, Rio, with the appointment of the new CEO, made announcements that they've streamlined their business. Historically, Rio has been broken up into 4 different business segments. And on a go-forward basis, they're now structured where they have 3 business segments, which is one, iron ore; two, copper; and three aluminum or lithium. And essentially, the industrial minerals, which I believe that's where their diamonds, borates and titanium business sat, are essentially up for -- well, they now sit with the chief -- the office of the Chief Commercial Officer for the release and they are up for a strategic review. Tate Sullivan: Okay. And then to get boron on the USGS critical mineral list, is it a -- I mean 3, 6-month process or what needs to happen in terms of the review? Paul Weibel: Great question. So we were in D.C., I was down there and met with Interior in July. Kind of the word on the Street was that sometime this fall, the draft list would come out. And there was no comment on it, boron would or would not make the list. But essentially, the appropriate measure to get boron added to the list is essentially to submit public comments. My kind of gut told me at a time, I should expect to see a draft list by October. Was pleasantly surprised that kind of came in ahead, and I think it was maybe the first week of September or last week of August the draft list was published, which essentially opened up a 30-day public comment window. All comments are available on the Federal Register. And we submitted our comment, as did believe 8 other groups, that you could search for borate on the Federal Register under the comments and they're all there. I was pleased that there was some well-known groups that did apply. And so we're not now the kind of the only one in the room kind of ringing the bell that there are supply chain concerns there in this market. Operator: And there were no other questions at this time. I will now turn the call back over to Paul Weibel for any closing remarks. Paul Weibel: Great. Thank you. I appreciate the Q&A during today's call. As noted, we believe 5E has the right resource, and now it's the right time. We are committed to building a strong and resilient borate supply chain that underpins the U.S. industrial base for many generations to come. We look forward to fiscal year 2026 and delivering on our expected milestones as we go into 2026. Thank you. Operator: Thank you. And this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Matthias Bodenstedt: Welcome, everyone. Good morning, good afternoon. Thank you for joining today's webcast. My name is Matthias Bodenstedt, I'm the Chief Financial Officer of MoonLake Immunotherapeutics. As usual, I'm joined here by our Co-Founder and CSO, Kristian Reich; our Co-Founder and CEO, Jorge da Silva. We are also honored to be joined today by Professor Alexa Kimball, a leading [indiscernible] in HS. We will go through the data and then look forward to the thoughts and reflections of Professor Kimball on the VELA data that we will be presenting today. In the end of the session, as usual, we will open up for Q&A. Please take note of our disclaimer on the forward-looking statements. [Operator Instructions]. The presentation document and the replay of this presentation will be made available on our IR website on moonlaketx.com. With that, I'm handing over to Jorge. Jorge da Silva: Thank you, Matthias. Also from my side, welcome all. Good morning, good afternoon, depending on where you are. Thank you for making the time to join our presentation today. I'll start very briefly with a quick summary of the points that we're going to be hitting in the call today, most of which obviously has been covered in the press release that was sent out yesterday. The main messages are that obviously, the VELA-1 and VELA-2 trials formed the VELA program, which, as you know, has been testing sonelokimab in adults with moderate to severe HS to a primary endpoint readout at week 16. Importantly, from a regulatory perspective, and obviously, for all of us, the combined VELA program demonstrated clinically meaningful and obviously, significant improvements across all primary and secondary endpoints at week 16 using, of course, prespecified strategies with the regulators with a very, very low p-value. Obviously, as you know, there are two big differences between VELA-1 and VELA-2. VELA-1 met all primary and secondary endpoints, as you saw the delta to placebo at week 16 between sonelokimab and placebo for HiSCR75 reached a delta of 17%. We fully understand that for the street, maybe the expectations were a little bit higher. Obviously, ours were too. But obviously, a 17% delta in our minds is very much in line with what is needed. And as you know, for us, there's many other elements about HS that matter more than a delta to placebo. VELA-2, as you know, hit an issue. We had a higher-than-expected placebo arm. It's meant that we needed to dig deep into our statistical analysis plan as agreed with the regulators to really understand the significance of the primary endpoint at week 16. And from the perspective of the company, we feel that the trial has all the merit to proceed in clinical development. I want to make clear that the company does not agree with the statement that the trial failed, but it does require us to do a bit more investigation with the regulator. Very, very importantly for us, because obviously, we're doing this because we believe that more drugs and more solutions are necessary for these patients, VELA-1 and VELA-2 demonstrated very strong responses across endpoints that really matter to us, not just HiSCR75 or HiSCR50, but very importantly, pain scores, quality of life, which really matter to patients and we continue to see a very favorable safety profile. Obviously, the convenient subcutaneous scheme continues to be an advantage that we think is important for physicians and patients. As I told you already, the VELA trial will progress. We will now seek advice from the regulators and continue the process. And obviously, we're continuing to drive several other catalysts in other indications. I want to quickly remind you of the design of the VELA trial, just to make sure that we're all on the same page. On the left side of Page 5, you see the common design between VELA-1 and VELA-2. We ended up with a total of 838 patients across the two trials. And on the right side, I want to remind everyone of the hierarchy of endpoints and why some of these things matter. Number one, you obviously see in the dark pink color, the endpoints that relates to lesion counts and in the lighter color, the patient-reported outcomes. As you know, in agreement with the regulators, we use HiSCR75 as the primary endpoint first time in a Phase III. And we would also like to call your attention to the pain response and to the high score, which were specific requests from the regulator to include here because they reveal something that is very, very important in clinical practice. So obviously, there's a hierarchy, but there's a lot of richness in the endpoints that were chose. No news on VELA disposition and many of you have seen disposition charts for sonelokimab across many trials. It's the usual story. The patients tend to stay in great numbers as we progress through the clinical trial into the endpoints and beyond. The other element that obviously, we need to cover upfront, but it's also [indiscernible] no new slide is that the patient characteristics are very well balanced across the trials. As you remember, it was very important for us that both VELA-1 and VELA-2 had very close set of patient characteristics that tells you a lot about the validity of the trial and as you can see, the differences are minimal. I think very importantly, it's very well aligned with our Phase II program, MIRA, which, as you all know, is very important also from a regulatory perspective. But also all the small differences of a few percentage points that you see between placebos and those or between the two trials, VELA-1 and VELA-2, in our mind are all relatively small and definitely within the range of what we've seen for other Phase III programs. Now because of the VELA-2 placebo, I'm pretty sure lots of people are using a magnifying glass to try to see these numbers, try to see if something is happening that we have not been able to detect. But what I can tell you is that there's no smoking gun, if you allow me to use that expression in any of this to reveal anything regarding the placebo and the patient characteristics are exactly as we wanted. Before I hand over to Kristian and to the data, allow me to show a little bit of a deep dive into our statistical analysis plan with the regulators. Now I know this is unusual for many of you. This is always something that happens in the background. You don't see it, you don't need to see all this detail. But to understand the valid data and to understand what happens next in terms of our regulatory path, we feel that it is important to spend a couple of minutes here. What you see here is two strategies, the composite strategy and the treatment policy strategy. These are different strategies to analyze our data. They apply to the whole population that we intended to treat. They both use multiple imputations to analyze missing data. There's a little bit of a difference on how you impute the responders. However, what is really important to remember here is that both of these strategies are must-see strategies by both the FDA and EMA for any scenario for any I&I drug. I want to be very clear about this because: A, this is not an optional set of strategies that we use; B, is not something that MoonLake decided to use just to make the results look better. This is something that is required by both regulators. Why are they required? To test robustness. So essentially, what you need to do is that you need to use your primary strategy, which in our case is the composite strategy to evaluate the significance of those endpoints and then you need to test the robustness of that significance. And you need to see concordance between the two strategies. If there is no concordance, if the p-value analysis is different, which is the case for our VELA-2, then you need to discuss all this data with the regulator to see how you progress forward looking at the data. And this is where the absolute numbers of response, for example, in a drug like sonelokimab, the safety, the concordance between primary endpoints and secondary endpoints, the concordance between trials, this is when it all becomes important, right? It is rare that we need to go to this level of detail, either trials fail or they don't fail. But there's a series of trials where the p-value is just at the border line and this type of analysis is necessary. But again, not something that MoonLake decided to use, but something that is specifically discussed with the regulators at all times. So I hope that she had some clarity of why you're seeing different strategies here and why it's important that you know about them. And I think this is a good time to pass on to you, Kristian, to go through the data. Kristian Reich: Yes. Thank you very much, Jorge. On the first slide, I want to show you the kinetics of our primary endpoint, HiSCR75. We show you this using both of the methods that Jorge has just explained. You see in the upper panel always our primary analysis strategy, so-called composite strategy. The lower panel, you see the treatment policy. We show you this for VELA-1 and for VELA-2 and for the combined VELA program. First of all, I want to highlight this again, both methods are very conservative valid methods. There's not a first class and the second class. If you look at the VELA analysis, you immediately see that the results generated by applying these two methods are actually very similar. You see that in VELA-1, whatever method you use, you see a high statistical significant delta between active sonelokimab and placebo. If you look at the delta at week 12. at week 16, which is, of course, the primary endpoint, you see that the numbers are actually identical. So in VELA-1, very robust study, primary endpoint met with whatever strategy with high p-values below 0.001. What you see in VELA-2, and Jorge already discussed this, that at the primary endpoint, applying the composite strategy, our primary analysis strategy, you see a borderline p-value of 0.053. For those that are familiar, you know that this is driven by a single patient. This is a scenario where your second method becomes relevant and you need to, I think, also show to the world. This is why we decided to do this, show the results with the second method. And as you can see and probably highlighting how border line this finding really is using the treatment policy, you see a statistical difference also in HiSCR75 at week 16 with VELA-2, and this is where we will seek clarity with regulatory authorities on what this means. We also see, of course, in the combined program that primary endpoint is met with high statistical significance, very similar to VELA-1. I want to take a step back and highlight some other findings that you see on this slide. Number one, if you look at the blue curves, so the efficacy obtained during treatment with sonelokimab, the lines between VELA-1 and VELA-2 are almost identical. So very clearly, this is not an issue with [indiscernible], this is an issue with placebo. And when you take a closer look at VELA-2, you actually see it's an issue mostly at week 16. You see that the delta to placebo in VELA-2 at week 12 is 17 percentage points. You see that it narrows at week 16. You also see a double whammy, if you will, a double hit. You not only see this dramatic increase, unexpected increase to a number we have never seen before in the Phase III trial, 25% at week 16, but you also see that the response to sonelokimab is actually coming a little bit down. I think both phenomena together explain the borderline significance. I think what arises from this is the immediate question, well, what's going on then with sonelokimab treatment? What if you treat longer, do these patients gain more response? Or does this little drop between week 12 and week 16 and VELA-2 indicate that the response has kind of expired. And you see the answer to this question on this slide. And there's a couple of important things here. Number one, there's really a very fast onset of response. HiSCR75 is already significantly different between sonelokimab and placebo from week 4 on. HiSCR50 actually from week 2 on. So as we saw in other indications, a very fast onset of response. Secondly, you see again that the curves for VELA-1 and VELA-2, if you look at the blue curves, the sonelokimab arms are almost identical with the exception of this dip in VELA-2 at week 16. What you can clearly see is that if you continue treatment and not every patient in our trial has yet achieved the week 20 and week 24 endpoint, but you see the numbers below the X-axis, the vast majority of patients have. So I think this is a valid analysis to share with you. You see that the response continues to go up. And I think this 50% HiSCR75 response at week 24 is remarkable, thinking about a 50% HiSCR50 response that has been a wishful outcome for other drugs in HS. The second and really important thing you see on this slide is that this high placebo response does not stop the patients in VELA-2 to get exactly the same benefit from treatment to sonelokimab after the switching compared to the patients in VELA-1. Actually, within 4 weeks in VELA-1, the patients show an increased HiSCR75 response of 13 percentage points. It's almost identical 14 percentage points in VELA-2. So whatever your starting point from a placebo response perspective was, you gain the same benefit from the switch to sonelokimab and within 4 weeks, the patients coming from placebo basically have the same response in the patients that started on sonelokimab at baseline. What does this indicate? I think it clearly indicates and it could be different. We could have the same placebo response across both trials and have a wobble and/or active response. I think that would be a far worse outcome. But what we clearly see here is very valid, very similar responses across both trials on sonelokimab. And the placebo, if you allow me to use this nontechnical word, the placebo wobble pretty much exclusively in one study, one time point, one outcome, which is the lesion count. You can see this again reflected here on this slide. The gray horizontal bar in the background is the range where we saw HiSCR75 placebo responses in Phase III trials in HSV4. A range between 13% and 18%, you see that in VELA-1, our placebo response at week 16 was on the high end, 17.5%, but within the historical range, if you will, you clearly see the outlier here is this unexpected high placebo response at week 16 in VELA-2. However, what you also clearly see, and you think this is -- what in the end characterizes sonelokimab in this trial probably best is that the drug really delivers on the HiSCR75 responses, whatever method you use and whatever trial VELA-1 or VELA-2 you look at. For fairness of comparison, only we had HiSCR75 as the primary endpoint, all the other trials you see on the right-hand side had HiSCR50 as the primary endpoint. So then let's look at the HiSCR50 response and you see the same type of analysis. We will not go into details. You see in pink the responses in VELA-1 and VELA-2 to sonelokimab. And again, I would say that not only are the responses also with regard to HiSCR50 identical, but I would also think that the active drug, sonelokimab really delivers not only on HiSCR75, but also on the HiSCR50 response. Now counting lesions in hidradenitis suppurativa is obviously a complicated business. I'm looking forward to what Professor Alexa Kimball has to say about this. This is not the first time the HS community is discussing placebo responses. So I think these three important patient-reported outcomes we have as key secondary endpoints, I look at them as a very important validation of what's really going on in the trial because if you have a reduction of pain, if your quality of life dramatically changes, I would think it's very rare to see this on placebo and not on active. And this is exactly what we see. You see here the pain reduction. I remind you, we use the FDA recommended somewhat more conservative pain reduction, which is not 2, but 3 points or more on a worst pain numerical rating scale. You see a very clear separation between sonelokimab and placebo, again, similar in both trials. And for this pain outcome, the delta between VELA-1 and VELA-2 is very similar and you see the statistical analysis yourself. If I would have to choose from all the outcomes we present, I would probably think that this is the most relevant for patients. If you're not familiar with the hidradenitis suppurativa quality of life score, this is a tool HS specific quality of life tool that was validated in the U.S., validated in Europe that includes 17 questions covering four domains that really ask patients about all the different aspects of the disease burden in profession, in relationship, in sport, symptoms like pain, everything is included in here. It's very interesting for me to see that on the 280 patients that received placebo in our study, uniformly between VELA-1 and VELA-2, the patients said, I see very little improvement in the HiSCR. My disease continues to bother me. From the 560 patients that received sonelokimab across VELA-1 and VELA-2, you see a very similar and highly statistically significant difference. Now patients say, I'm no longer bothered that much by my disease. I can do sport again, I can go to work again, I can have a relationship. So this is probably a pretty fair view on what's happening in the study. I should also say that these reductions of HiSCR are actually higher than what we saw in MIRA, our Phase II trial, and they also seem to be higher than what currently available treatments for HS are able to demonstrate. Our third key secondary PRO outcome was the DLQI. We show here the patients. This is a more-broader tool that looks into quality of life in association with dermatological diseases. Overall, it's not HS specific. You see the percentage of patients that achieved a meaningful improvement of the DLQI. For me, this is very reassuring on top of the HS specific that I just showed you that indeed quality of life dramatically improves. You see the same delta to placebo across VELA-1 and VELA-2, around 20%. This is very much in-line with what we saw in MIRA. And again, I would think it indicates a potential advantage over what other drugs available for HS were able to show when it comes to DLQI. This is a complicated table, and by no means I will take you through this table. But just to share very transparently, all data I was talking about in the last minute as analyzed with both the methods that you are now familiar with. So you see on the left-hand side, our primary endpoint in both. You see all the key secondary endpoints. You see in the upper part of the table, the analysis done with our primary analysis strategy, the composite. You see on the lower part of the table, all analysis done with the treatment policy. There's just a few things I want to highlight here. First of all, if you look at the p values in VELA-1, I would think this is one of the most robust -- when the just robust -- if I just look at the statistic analysis, Phase IIIs ever done in HS when I look at the p values. You see the problem, if you will, at week 16 in HiSCR75, but it's interesting to see that even in VELA-2, when you look at all key secondary endpoints, nominal p values were achieved. If you use the treatment policy in VELA-2, all primary all key secondary endpoints met statistical significance, and I already talked about the VELA combined finding. Just so that you know why we presented it this way in the press release and why we, as a responsible managers in MoonLake are convinced that the study by no means shows that sonelokimab does not work in HS, which we think it does show that it works in HS. And looking at the patient-reported outcomes, we even see a potential for a competitive advantage. Super important is the safety. I'm a dermatologist myself, but I will say that dermatologists are probably not the bravest physicians in the world. They want -- they need chronic treatment for their patients. They want safe treatments. They want a safe long-term control. The safety profile is shown here for the combined VELA-1 and VELA 2 study. Actually, the very favorable safety profile that we saw before, no new safety signals. To me, there is evidence in here for an even differentiated safety profile in the sense that some of the warnings we see with competitors, suicidality, hepatic. In our analysis, we saw no evidence for a reason to get a similar warning. So we would think that the safety profile is actually very favorable safety profile. I want to remind you that all of this is achieved with a dosing scheme. And again, coming back to something that is not so much in a Lancet publication or in the presentation to investors, but what really matters for patients and physicians in the doctor's office. And that is how convenient is this? How long does an injection take? How much needles do I need to get before I go to a maintenance scheme? We have 1 milliliter of 120-milligram SLK. It's injected in a few seconds. We need 4 injections for the induction -- from then on, it's the monthly maintenance scheme. We always thought that this is a little competitive convenience that we already have in our pocket and of course, these days. Matthias Bodenstedt: Thank you, Kristian, for walking us through the VELA week 16 results. Now as introduced earlier, we are very honored to have Alexa Kimball -- Professor Alexa Kimball join us here today to discuss the results with us. Now, you see her disclosures on the screen. Professor Kimball is one of the leading KOLs in hidradenitis suppurativa. Probably she doesn't need any introduction because all the audience will be familiar with her. Again, thank you so much for joining us here today. And I would say, a very, very simple question to you. We would be very, very keen on hearing your thoughts, your reflections on the VELA data that Kristian just presented. Alexa Kimball: So thank you so much for having me here this morning. And what I'm going to try to do, having been working in this area now for 15 years more is give you a little bit of context of what we expect to see in HS studies, how this data fits into that context, what the regulatory precedent has been a bit from some of the other studies because of some of the common occurrences that are a little unusual that we see in these studies. So as I said, I've been thinking about HS for about 15 years. And I have been along with MoonLake for their entire journey as well. And it -- we have evolved incredibly, right? So back in 2009, when a group of people, including myself sat down to think about HS assessments and how we could actually get drugs through regulatory approval because we saw that there was a signal when using TNF inhibition that we thought was worth pursuing. We knew it was going to move forward. And remember at that time, we didn't even think HS was a common disease, but we thought there was value in patients to figuring out a regulatory pathway. And it was that process that ultimately led us to the HiSCR or the HiSCR50, which is not a perfect measure by any means, but has proved a valuable addition and has been the basis of all the regulatory approvals to date in terms of efficacy assessments by clinicians. Now, very important in development of the HiSCR50, which is a 50% improvement in nodules and abscesses without a conversion [indiscernible] is that we created that system to correspond to the PROs. So the inflection point that we took at 50% was related to both the efficacy that can be achieved, but also where we saw meaningful differences for patients on our array of PROs. [indiscernible] was not available at that time, but we were using things like a DLQI and a pain measurement. And I say this is important because as you look at the totality of all the data presented, you would want those to be internally convergent, and I'll talk about that in a bit. But clearly, in this study, as you heard, they are. Now flash forward 15 years, and we are starting to move people to HiSCR75. And that is a tremendous goal. And hopefully, one day, we will see HiSCR90s and HiSCR100s, just as we've seen in other fields. But as we'll talk about, that evolution does create some other trade-offs as you think about the design of all of these studies. So as you have seen, I have been involved in almost all of the Phase II programs for HS and all of the Phase III programs. And I've learned, of course, as have we all along the way about some unusual things that happen in HS studies. And I will also just reference I have conducted over 150 studies in every disease from acne to cutaneous T-cell lymphoma. And there are something in HS that happen that are unusual in most things. The first is that assessing lesions is difficult, and that's why we knew it was hard. Why is that? It's because some of these areas are deep underneath the skin, they can't be seen. They have to be palpated. They are in regions of the body that are hard to access in a way that is consistent. And so it is challenging to do clinical assessments. And again, we evolved to a set of metrics that help us to assess them, but it will always be somewhat challenging. And despite having looked at every alternative available, there is no more straightforward way to do the assessments, I think, than the way that we were doing good. Other things that we've seen from across the study portfolios are that treatment arms can perform differently even when as you see, there are not large differences in the demographics. And what's interesting about that is we've seen that in some programs where the loading doses with 2 different arms are the same, and yet you can see the arm performing differently very early in those programs as well. Again, often, there is not a smoking run means it's not just one factor or another. It may be a combination of factors. It may be a combination of patients, it may be a combination of studies. It is absolutely true that HS patients can both worsen and improve spontaneously in pretty dramatic ways. And that leads to a lot of underlying variability in our assessments and in the studies. So -- and it's also true, you can see in some of these cases that other biomarkers for these patients improved as well. So they are truly improving during the course of the disease. And that's why when we are using 12- to 16-week endpoints, it can be very hard to interpret in the studies what is happening with these patients. And I will also say in every program to date that we've seen, continued therapy does lead to continued improvement for patients. I expect you will see this in this program as we go on further. And that's because actually 12 to 16 weeks is very important in the course. We use it because that's really the longest period of time that we can manage a placebo group. But really in the clinical setting, I am looking for improvement over a 20 to -- 24- to 48-week period of time, and that's what I tell patients as well. Other unusual things we see in HS studies are sometimes lower doses are outperforming higher doses. Again, that probably has to do with some underlying variability in how the patients are doing, what their underlying characteristics are and other factors that, again, as an aggregate probably have an impact. But on an individual basis, we've not been able to get them. And then I think the HiSCR75, as you see in this program has creates another nuance, which is although it is clearly where we want to be from an efficacy standpoint because fewer patients make it to a HiSCR75, variability in just a few patients can change the dataset in a way that maybe at the HiSCR we don't see. So all of these are trade-offs in study design that we have to manage and have proven a little bit unpredictable on the margin in all of the programs. And certainly, we have seen in other large Phase III programs that some of the key endpoints were not met even though the bulk of the endpoints were. And again, this has to do with some of the underlying variability out in the process. So I'll kind of conclude in my lessons learned by talking for just a second about a term that I coined that you heard this morning, which is the data model. And this is, again, I have never seen in other programs, but happens in HS, which is that 10th ultimate endpoint, the 12-week endpoint in this case and others is actually not as strong as the 16-week. And again, this has been repeated across some studies. This placebo model as it were that you see here, I've seen less frequently, but really had major impact in the statistical analysis of that final one. But factors that seem to lead to do that while the treatment group are, again, related probably to some of these more so convergence of demographics and other risk factors that lead to different outcomes. And again, we have seen uniformly patients continue to improve with further treatment, but this is a model that we do see at week 16 in some of the earlier studies. So lots of lessons learned here, and I hope you can take away that the variability that we sometimes see in some of these endpoints is a common occurrence in these studies, and we have not been able to completely mitigate that even as we have tried to refine our design and refine our metrics over time. It is just how this disease presents itself. In terms of this set of data, it is very clear, right, that IL-17A and F inhibition is an effective mechanism of action for HS. You see this across the programs. This medication is no different in terms of having proven and established role efficacy in this area. And I think as you look at the collection of this data, it is highly convergent. This was a well-conducted study. You can see that the PROs and the efficacy metrics line up. You can see that the endpoints in terms of the treatment group are almost identical in terms of their achievement. And you can also see that the treatment, the placebo arms as they shift to treatment have highly predictable responses as well. And you can see that the PROs are lining up with all of these measures as well. So the internal consistency in this study is exactly what you would like to see for a study like this -- and I also want to point out that the pain data in particular, is excellent, and this has been, in particular, an endpoint that has been hard for some other programs to move and it's been one of the least reliable in some. So again, a lot of convergence to the data that we see. I'll also add that the safety data in, again, this early phase of the trial is very strong. The things that I look for as an investigator and a clinician, in particular, to all the usual things are the IBD rates, dermatitis rates and immune-rates. And this profile is very compelling as we bring this forward. No surprises and within the spectrum of what we'd like to see and in some cases, below that, particularly, again, or in this study with 0 IBD cases that have been looked. So in conclusion, it's clear that there will need to be regulatory conversation about this data given how the primary endpoints were designed. But the convergence in totality of the data demonstrate that it was well conducted and that there is compelling aggregate data that demonstrates that this drug is working in the high efficacy range of the therapies that we have to date available. I will also say that the unmet need for HS patients still remains acute. You can see that as many programs are in the field for HS, and they are enrolling rapidly and successfully because there are a lot of patients out there still looking for both current treatment options and better treatment options going forward. There are programs sprouting up across the United States at almost every academic medical center and in the community with an emphasis on HS and those programs are filling up almost immediately. And we're seeing large cohorts being prescribed from multiple centers, which again demonstrates how much unmet need there is there in terms of the patient population that is [indiscernible]. So I am -- I was very much looking forward to starting the study for my clinical trials patients here, and I'm very much looking forward to having this medication available for patients in the future. I think, again, the totality of this data demonstrates a clinical meaningful impact and value to our patients with HS who deserve the best treatments that we can provide them. Thank you. Matthias Bodenstedt: Thank you for Professor Kimball for your reflections on the dataset. Now I know that you had other appointments to attend to. So once again, thank you very much. With that, let me hand over for the last bit to our CEO Jorge da Silva, again. Jorge da Silva: So, great to have Professor Kimball as one of the key researchers in the field and in our trial. Hopefully, that was informative for those listening to this webcast. Before we go to Q&A, I want to get to a few clear points around what happens next. As you can imagine, I've been reading some of the reports that have been coming out since yesterday night, and I seem to hear that there's a clarity of -- a lack of clarity of path, and I have to confess that I could not disagree more. I think it's unclear what exactly the path will be, what are the adjustments that we will need to make, if any, but the path is very, very clear. We believe, and I think you've heard some of that color that the HS package that we have with sonelokimab has good chances of being approvable based on all the data and this -- again, this correlation of data and what it means around a single data point for a single element that changes in one trial. And therefore, we will be seeking to confirm that registration path with the appropriate regulators. Now you'll be asking, okay, but what does this mean? What are you going to discuss? What do you think the outcomes may be? I think it's very unlikely that this is seen as a failed study and as a failed program. That's what the company believes at this point, having consulted with several folks internally and externally. We could imagine paths in which VELA-1 becomes the leading registrational trial and VELA-2 together with MIRA, which as I mentioned already today, is part of this whole game, if you allow me this expression, will then support VELA-1 as registrational. It could be that it's VELA-1 and VELA-2 as originally predicted. We just obviously have to understand and describe that significance around that primary endpoint. It could also be that the FDA requires us to do a little bit more work. All of these are possible outcomes. We believe that we have a very strong set of arguments here. And again, you heard other people in this call saying that today. So we're feeling confident. But the path is very clear. We are preparing those books. We are looking to engage with the regulators in short order. There should be no lack of clarity around what happens next. And hopefully, within the next quarter, we'll be able to come back with a good plan. What I think is also true, and I want to make this, and I want to underline this point is that this company continues to believe that SLK has a differentiated profile in HS, matching others in efficacy and obviously showing an impact on pain and quality of life and safety and convenience that we believe will really drive the acceptance of this medication with patients and physicians that, as you heard, sorely needed. And obviously, we had an issue with one trial and endpoint in HS. But that doesn't mean that the drug cannot perform extremely well or better than others in other indications that we're also running, PPP, axSpA, PsA, et cetera, right? So I think it's also important to remember that this is one trial, and we have excellent data also in other indications. We believe that it's very important, as you heard also from Professor Kimball, that this data is discussed and out there. So we will wait no further and make sure that the data is presented in a scientific conference as soon as possible. And that means we will be in Nashville at the end of October to present the valid data as soon as possible so that you can all continue to see all data in all transparency and for the Street and investors to have an opportunity to engage directly with KOLs and those that will participate in the approval process and in the prescription to create your own perspective around what this data really means. So with that, we'll move us to Q&A. Maybe Matthias, you can check the many questions that are out there, and you can direct a bit traffic. I think we'll take 5, 10 minutes for this. Matthias Bodenstedt: Absolutely. And we did receive quite a few questions. So let me try to group them a little bit. There's a few questions here that continue talking about the placebo. One of them here specifically asked, have you identified any particular reason of why the placebo response is so high? Maybe Kristian, you want to address this one? Kristian Reich: Yes. Short answer, no. You've heard from Professor Alexa Kimball, it's not the first time that the HS community has observed such a phenomenon. And although many have tried, I think there's no clarity what really drives this phenomenon yet. Very clearly, the quality, the operational execution, the validity of our trial is flawless. We have looked into every corner. There's no site, no country issue sites that have participated in mirror or not. There's no smoking done, if you allow me to use these words. Of course, we have started to do the analysis. Are these patients somehow different? Do they have a different baseline characteristics? Is there anything different with regard to the phenotype, the smoking status. So far, we have not identified any difference between those placebo responders and others. But it's clearly an issue that we will continue to investigate and discuss with regulatory authorities. Matthias Bodenstedt: Thanks, Kristian. I see another couple of questions here, specifically asking about the path to approval, the path to VELA. May I call out 2 questions here. One of them very general. Can you elaborate more on the path to approval? What makes you so confident that the VELA studies are approvable? And yes, one other question from an analyst here is asking specifically regarding is there any precedent from other studies that were in similar situations that support our level of confidence. Jorge? Jorge da Silva: Absolutely. I don't think I need to elaborate much more on the path and why we're confident that the studies are approvable. I think, again, you heard an external person clearly stating this drug is in the high efficacy range and has all these things going forward. So I think the concordance of all of this, the quality of what we have done, I think, gives us all that confidence. On the path to approval, obviously, I haven't specifically said it, but I can obviously state it that, of course, we are looking for an interaction with the regulator to get clarity as soon as possible. Ideally, we would get that in the next month or so. Obviously, these things sometimes take a little bit of time. It might be closer to Christmas, but anything within the 1- to 3-month range, I think we're there. So hopefully, that brings a little bit more clarity, but I think we've said it before. Now very, very interesting question on the examples, case examples from before. There are several, but I will call one because I think it's the most helpful here. I would like to remind everybody in this webcast that one of the drugs approved for HS, Secukinumab for its approved dose actually did not meet statistical significance in one of its Phase III HS trials in the SUNSHINE trial. So here, you have a clear example of the drug that, if you will, has performed even worse in the sense that it just didn't meet significance in any of the analysis and obviously, still seen as an overall package as an important package and obviously something that has been extremely helpful for patients in the market and obviously has performed very well for the company that markets that product. So I think quite a bit of confidence, case examples in our own indication. So I think we're feeling very confident here. Obviously, a lot of work to do. Very, very clear that it didn't create the result that the Street was expecting. We understand all of that. But we are here to develop sonelokimab for the long run. Matthias Bodenstedt: Perfect. And I do see a few questions here asking aside from the path to approval, how confident are you that you can compete against existing therapies, mainly called out bimekizumab. Also some questions here for Professor Kimball, but I think she addressed them already in the call, but maybe the company's view, our view on ability to compete in the market. Jorge da Silva: Again, Matthias, I hope the people watching the webcast don't get bored, but I will go back to the statements from Professor Kimball. You heard it. Sonelokimab is a drug that operates on the high efficacy range with a lot of great things going for it. I invite all investors, the Street, anybody that is watching this webcast to do their homework in terms of where other competitors, and I'm not going to name any specific competitor, but how those competitors have fared along all the lesion scores, but also all the pain scores, all the quality of life scores, the safety, the convenience. And I think we truly believe that the data is strong enough for us to compete. By the way, as of now, we don't necessarily see a very large impact in terms of time in the VELA process. So if you're thinking, well, you could compete, but you're going to come 20 years later. Obviously, we don't believe that to be the case. So I think the data is very strong. And I want to underline one more thing, Matthias, if you allow me, which is we're talking about HS. We're talking about HS. We also have to talk about PPP. We also have to talk about PsA. We also have to talk about axSpA. We also have to talk about indications. It's not like all of a sudden, the drug doesn't work, which obviously, as you see from the data is far from the truth. So I think a lot to go for. Obviously, a setback, a disappointment in terms of what was expected by the Street, but I insist not a case for us to stop believing in not at all. Any time for more questions? One more? Matthias Bodenstedt: I see a couple of questions here that probably I'm best suited to answer because they ask about the capital and the cash position of the company, also specifically calling out our debt facility with Hercules. So maybe providing a quick response on this one. So based on the VELA results, we're not planning to draw the next tranche from the Hercules facility. But importantly, we are by no means with our back against the wall. The last reported cash that you've seen in our 10-Q was $425 million. And as we've seen in the past and as you will continue seeing in the future, we operate very efficiently with a comparably very low cash burn compared to other companies at our stage. So we believe we are by no means with the back against the wall. Now let me be clear, the situation certainly presents some challenges to the company. We have lived through similar challenges in the past. And this management team and certainly myself as CFO, will make sure that we continue to be very prudent with our capital allocation. I think with this, we have covered all big things here. Once again, I would say thank you very much for joining us here today to hear our presentation of the VELA week 16 data. We hope it was helpful to also have Professor Kimball share her view and her reflection on the data results with you. Once again, thank you from my side. Kristian Reich: Thank you. Jorge da Silva: Thank you. Have a great day.