Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hypera SA (HYPMY, Financial) reported an 11% growth in sellout for the third quarter of 2024, driven by the normalization of demand for flu, respiratory pain, and fever products.
- The company achieved a 10% increase in its Dow Jones Sustainability Index score, highlighting its strong corporate governance and ESG initiatives.
- Free cash flow generation grew by 23% in the quarter, reducing net debt by over BRL250 million.
- Hypera SA (HYPMY) is leading in new drug registrations in Brazil, with over 12 registrations for medications in 2024.
- The company is investing heavily in R&D, with expenditures exceeding 7% of net revenue, reinforcing its commitment to innovation.
Negative Points
- The working capital optimization process led to a reduction in net revenue and impacted income, affecting short-term operational leverage.
- General and administrative expenses increased by 10% due to higher consultancy, digital, and IT project costs.
- The EBITDA margin and net income declined this quarter due to lower short-term operational leverage.
- The competitive scenario for generics remains intense, with high competition affecting growth and profitability.
- The company's CapEx for 2025 is expected to be higher than in 2024, indicating ongoing significant investments.
Q & A Highlights
Q: How has the inventory adjustment process affected Hypera's growth levers and legacy portfolio?
A: Breno Toledo Pires de Oliveira, CEO, explained that demand for seasonal products, including their mature portfolio, has been growing, bringing them close to or above market levels. New product launches are a significant growth driver, and Hypera continues to invest heavily in them. The inventory adjustment process is neutral for clients, enhancing efficiency without requiring additional investment from Hypera.
Q: Can you elaborate on the impact of the working capital optimization on accounts receivable and future revenue expectations?
A: Adalmario Ghovatto Satheler do Couto, IRO, noted that the optimization process began at the end of Q3, so its effects are not yet fully visible in accounts receivable. By the end of Q4, about 50% of adjustments will be completed, with the remainder fine-tuned throughout 2025. This process is expected to stabilize by mid-2025, allowing for revenue growth.
Q: What changes are being made in advertising and sales strategies to maintain sellout levels?
A: Hypera is shifting its focus to digital media, aiming to increase penetration in digital channels. The company is investing in more brands, including those previously without media investment, and balancing media investments with fewer commercial discounts to maintain exposure at points of sale.
Q: How is Hypera managing foreign exchange impacts and CapEx investments?
A: The impact of foreign exchange on costs has been minimal, with raw material prices in USD decreasing post-COVID. CapEx investments focus on internalizing portfolios from Takeda and Sanofi, expanding production capacity, and developing a scopolamine production plant. CapEx in 2025 will be slightly higher than in 2024, with a focus on efficiency and cost improvements.
Q: What is the outlook for Hypera's institutional market and competitive dynamics?
A: Hypera is on track to reach BRL1.4 billion in institutional market revenue by 2028, with significant growth expected from new oncology products launching by 2025. The company is expanding its client base and product offerings, including injectables and dedicated institutional products, to enhance market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
