Okay. Hi, everyone. It looks like we have everyone in the room. Welcome, and thank you for joining us. Just before we start, I just want to remind everyone how this session is going to work. . And with that, I will hand it over to Siggi.

Thanks, Layan. Good morning, everyone. Welcome to this virtual call. This has started to be normal, which wasn't normal a year ago. So I'm not going to have a long introduction. I just want to refer you to -- that you have hopefully listened to the prerecorded presentation. So we are not going to repeat that here in the beginning of the meeting. I'm sure there's a lot of questions. I think, overall, we are very, very pleased with the result of 2020. Our core revenue up 6% to $2.3 billion, and our core operating profit up 11% to $566 million. All 3 businesses are growing organically. Injectables business, growing 10% on top line, 12% on the bottom line. Clearly, a lot of volatility around the demand in the Injectable business, but we have served the market well. Our U.S. generic business grew 3% on the top line, but really has amazing bottom line, above my expectation, growing 30% on the net -- on the operating profit. And the Brand business grew mid-single digit, 5%. The operating profit went down a little bit in reported currency, but grew 11% in constant currency. So I'm sure there will be some questions about that in the meeting. A - Layan Kalisse: Thank you, Siggi. So our first question is from James Gordon.

Yes, James from JPMorgan. One of the questions was, which may be just on Branded actually. So the 220 bps of margin contraction was implied from FX. So the FX didn't have any impact on revenues, but 13% impact on profitability. So why was there such a big hit on margins for the Branded division from FX? Because presumably, the API is mainly sourced in dollars anyway. And if we look into 2021, did you -- the margin stay down here? Or could we see some margin recovery for Branded? So that was one question, please. Maybe I'll do the second one afterwards.

Yes. So maybe Khalid can address this question.

Yes. Thank you. Thank you, James. That currency has been volatile during 2020, especially for Sudan and Lebanon, and they were considered both as high-growing economies. Now part of the currency that affects the P&L or the operating profit is the revaluation of net assets. So if you value your net assets, and this is why we had a major impact of $22 million on the Branded business, especially from Sudan, and then the hyper inflationary impact as well. So on top of that, you have the transactional as well during the year, where you have to buy currency at a higher rate to settle your API or your sale. So this is why we had a significant impact in 2022 sorry, $22 million in 2020.

Yes. But in terms of looking forward to '21, is this now the new normal for profitability? Or there are some one-off factors that depressed the profitability in '20, which they wouldn't recur in '21, so the margin goes back again?

It's very hard to tell today where do we stand. We have similar situation in the past with Egypt. It affected our P&L for a year. The year after was a minimal impact. So usually, it depends on the volatility of the currency. Still this volatility took place and the weakening took place towards the end of December or the last quarter. So until we see the currency improve, it's very hard to comment at what would be the impact on 2021.

Sure. Just final thing I just ask on this that if some of it's impairments, would it be logical you've effectively mark-to-market on what FX has already done. So you wouldn't then have to make another impairment if FX just stays where it is?

Of course, of course. If it stays where it is today, it's not going to have an impact on 2021.

Which would mean higher profitability again.

The profitability will go back to the normal. So the currency, it depends as well on price increases on the drugs that we have, which we eliminate on constant currency basis. So -- but if currency stays where it is as of the end of December, there will be no revaluation. There will be no impact on the currency or hyperinflationary accounting that affects significantly the results of 2021.

But maybe just final thing. So if you don't have any more impairments, how much of the depressed profitability is the one-off versus the ongoing? So if FX just stays where it is, how much would -- how much of the previous problem was to do with FX?

If it stays where it is, then there will be minimal impact because you already, as you said, mark-to-mark all your assets, all your inventory, all your accounts payable at -- all your accounts. Your net assets is already mark-to-mark. Unless there's no further depreciation in currency, then there will be no impact on those. But it's -- as I said, the currency is very volatile. It's very hard to tell at this stage where that currency is going to land.

And I'll be quick with another question, which was -- one being Xyrem. I noticed there was an acceleration clause when you did the settlement. So you were going to launch in '23. But it sounded like from the settlement, which urged you to launch earlier, if a big chunk of the product got converted to the new one, that looks like a big chunk is being converted to the new one. So any prospect of launching that any earlier?

Yes. So Xyrem settlement, we did -- we highlighted that there is an acceleration clause, which has 2 things. First of all, if some other generic company launches at risk. And the second thing is the markets here on Xyrem in the market. It's confidential how the calculation is. We are obviously preparing if that threshold would be passed. My expectation is that wouldn't be happening in 2021. Could it happen in 2022? It depends on the success of the Xywav launch in the market. But we are obviously preparing if that case would happen. But as it is now, the settlement is for January 2023, with the possible acceleration, and we as a company are ready to jump if that is crossed at any point in time.

And just a final clarification, and then I'll get to the back of the queue, which was just unallocated corporate expense. So it went up quite a bit in the second half. And what should we assume for that for '21? Should we annualize the second half number? Should we take -- should we have it keep on growing as it has been growing? Or is this a little bit exceptional in the second half, and that could come back a bit?

In the unallocated expenses, there was a $10 million impairment charge for the IT, impairment of software. So we have a new CIO who came and he did the review for all the projects that we had. So we took an impairment charge, exceptional, I would say, charge of $10 million. So if you exclude that, then our corporate expenses would be all unallocated expenses would be around $88 million. So you'd have to assume, as every year, there will be some slight increase in cost as a -- to strengthen certain functions, but this is the main reason why it went up in 2020.

Our next question is from Pete Verdult.

Yes. Peter Verdult, Citi. Can we just move quickly through probably the more important issue at Hikma, which is the dynamics U.S. generic, Siggi? I mean you exited the year with the margin that is 24%. There's a whole lot of variables to consider, Advair, Vascepa, the investments you want to make, what's happening to some of the on product mix pricing environment. And you, ever since you turned up at Hikma, have always said you want to be planning to the worst and hoping the best. And you've got a track record of putting upgrades through. So just help us understand the level of conservatism that you've applied. And I will push you -- I mean it seems from what you're saying on Advair that there's probably going to be less than 4 months' contribution baked in initially for the year. So could you spend some time helping us understand just the -- what's gone into your thinking about the guidance you provided for U.S. Generics? And whether we should interpret this as a very conservative initial gambit with risk to the upside, depending on how things play out?

Yes. So thanks, Pete. So first of all, the U.S. Generics delivered amazing 2020. I have to say, growth on top line, 3%, but growth on the bottom line, 30%. Really for the first time we managed, in a way, successful launches of new products. So remember, in 2018 in our Investor Day, my goal was to achieve 10% revenue from new launches in 2023. And the Generic business did that last year. And remember, they did that without any generic Advair. So that really based on only 6 products that we launched in the year. So I felt the execution was good. You saw in the prerecorded presentation how we are running on our service level. We are reducing our penalties to customers. We are improving the gross margin. The gross margin now is in around 45%, which was where my goal was when I joined the company 3 years ago. So really, it's been a turnaround situation. So let's talk a little bit about the guidance for 2021.

Got it. And just maybe Siggi, one follow-up and a quick one. Just -- I realize you can't say much, but the GSK Egypt deal seems interesting. Just provide an update where you are on not just broadening the revenue base? Or is there a big opportunity to improve the overall Branded margin if you are successful with your pursuit of these assets? I realize you can't say much, but anything you can say will be appreciated.

Yes. So the challenge is basically we are just doing -- starting due diligence now. So we are just undertaking the due diligence for any potential transaction. We haven't even made an offer for the transaction. The reason it is in the public domain is that GSK had to announce to the different stock exchange that the transaction -- that due diligence is happening. It really doesn't mean that transaction will happen in any way or form. I think the reason why we would be interested in this is, as I've highlighted to all of you, this is an opportunity of getting a branded assets into our sales force. As you saw in the results, Egypt was one of our best markets in 2020, really had a solid performance in that year. So it fits right into the strategy I've been talking about over the last 3 years, is giving more to my sales force, giving more to the infrastructure we already have in the Tier 1 country. So it fits exactly with the strategy. But simply, we haven't done the due diligence. So it's premature to talk about any transaction happening.

Our next question is from Paul Cuddon.

I only have one. Just for my return on capital employed within the Injectables business pages. I noticed your volumes manufactured have only gone up slightly and yet you have revenues improved. So in light of the Civica and GPO deals and sort of broader mix, can you sort of help me reconcile the manufacturing, the small increase with the revenue increase and exactly what you've done there?

Yes. So Paul, it has a lot to do with the COVID demand. And I can explain that in a little bit more detail. So I've said it in the midyear results was we sell a lot of 2 milliliters fentanyl, as an example, in an ordinary year. There are millions and millions of vials of fentanyl 2 milliliters that are sold in an ordinary year, which is used for the elective surgeries, for the emergency rooms and things like that. So our maiden selling items on fentanyl is 2 milliliters and 5 milliliters. And during COVID, we were mainly selling 50 milliliters. And we sold a lot less volume of the 50 milliliters, of course, but that was used in the ICU for the treatment of COVID patients. So the increase in revenue wasn't reflected in the volume for the simple reason is there was the product mix and the size mix, which was very different than in an ordinary year. So really a good spotting in this thing, but it has to do with the product mix and the size mix due to the pandemic.

Okay. And just building on that, though. Has your ability to supply consistently through the pandemic, do you think that would lead to a material sort of step up in your kind of customer kind of ordering patterns going into the future now?

Yes. So I -- obviously, I believe that. Overall, during the pandemic, our relationship with the hospitals and with -- really with our customers got a lot stronger. I've highlighted previously to you that to -- not to have stock out on products, we sometimes have to put products on allocation. What it meant that we made sure that a hospital in Texas wouldn't have an extra inventory when a hospital in New York needed a product. So we worked with all the hospitals. And in reality, our stock-up situation was less of an issue this year than ever before due to this accurately working with the customers. It's also true for the whole of the industry because if you look at the -- of the short stock now, if you look at the -- at the website of the FDA and all the websites that reported, it is a little bit better than even before the pandemic, a year ago. So I feel that most companies are stepping up, but we feel that overall, the situation has improved. Maybe one more thing on this, Paul, was we hear a lot more from our customers now that they want us to keep higher inventory, which obviously is costing working capital. You saw our working -- our inventory went up significantly in 2020 due to the pandemic. We think that will go down, but maybe not to the same level as before because we are hearing from many of our customers the reason they have a trust in the company and our supply chain is because of the extra inventory we sit in. So I feel that might be one of the changes you will see the pandemic leading to. But we might have to sit with a little bit more inventory than we were used to, maybe not all finished goods, but some of the APIs that we can convert quickly for the security of the market. But that's really where our conversation with customers are now. They're really pleased with the performance in 2020, but they're asking us and pushing us to continue with the extra inventory we are sitting on at the moment.

Our next question is from James Vane-Tempest. James Vane-Tempest: Just got some on Advair, if I can, please. So the $12 million inventory, I'm just curious what proportion of the inventory that is. And if there are kind of any further delays, is there any more that might have to be written off? Second question is just on the timing. Page 32 talks about the goodwill assessment, and you assume a 3-month delay in your CGUs. So I'm just curious if that's a fair base case for your guidance. And then the third question is just looking at FDA guidance for -- or guidelines for the CBE-0s and PASs. It seems that for the FDA to acquire a PAS instead of a CBE-0, there may have to be -- well, there may have been some kind of impurity potentially and so is above kind of permissible guidelines. So I'm still not clear from your statements why the FDA required a PAS and not a CBE-30, for example. So any color on that would be appreciated.

So let me start in a reverse order because I've already forgotten the first question. But let me start with the end question. So the CBE-30, CBE-0 and PAS, obviously, it's a little bit to the discretion of the FDA. But when you test -- so there was no change in packaging material. It simply was an update in the method. But what has happened over the 5-year period since we filed the submission is that the FDA is analyzing a lot more the extractable and the leachable in packaging material. We obviously have all that data that was submitted with it, but they take time to review that. So without getting into the FDA's mind, why they wanted to it have it as a pre-approval supplement, the politics around leachable and extractable has changed over the time. So they have never said that's the reason why they wanted to do it. But if I was a guessing man, that wouldn't be a bad guess at this point in time. But we feel fully comfortable as actually we tested for this, of course, in all the packaging material at the time of submission. In terms of the write-off. If I remember correctly, the $12 million write-off, we are fully comfortable with that. We don't expect more this year, except in an extraordinary situation. But overall, I think it's the right thing to do and will cover us well. We are building new inventory as we speak because we are comfortable in launching this product. So we will have fresh inventory of this product going to the market. And the third thing you had was, if you remind me, James.

I'll take that, Siggi. The third one is on the sensitivity around generic Advair, note on the goodwill impairment. So this is a requirement by -- a disclosure requirement, it's no indication, just sensitivity. As Siggi mentioned, we got priority approval on the PAS. So it's -- we don't know when exactly we are going to launch. But this is just a sensitivity required by the standards. That's all.

And our next question is from Christian Glennie.

A couple, please. Just follow-up and clarification on Vascepa. I think you said in your comments something might depend in terms of this potential step-up in supply this year. A, is that -- I know you're not committing to timing, but is that still an expectation it steps up at some point this year? And b, you seem to mention it might depend on the FDA. I wasn't clear on what the FDA's role or relevance might be on the supply.

Yes. So you're right. We expect to step up supply this year. We don't know the timing of that. The reason I mentioned the FDA is simply that when an API supplier is increasing their output, they sometimes have to get a pre-approval supplement approved in the change in method or things like that. So I'm just saying, there might be a change that needs to be approved, et cetera, et cetera. But it is -- it has to be with that, with the increased output from the API. We are fully comfortable that there will be a step-up. I simply don't know when that would be during the year.

Okay. And then following up on the sort of prospect M&A side of things. Any particular updates there? The obvious things that are often asked around biosimilars, I think your language at the sort of Q3 update was that you're much more optimistic about that as an opportunity. Any particular updates there? Any characterize, any discussions that may be ongoing on the M&A side?

No. So the only thing ongoing is in the public domain, of course, is that we are in a due diligence of the GSK asset in Egypt and Tunisia. And that wouldn't be in a public domain, except for the rules of the Egyptian Stock Exchange, of course. But overall, I think for the business, not much has changed where our focus is. In terms of the biosimilars, I still think the market is okay. I'm still of the opinion that I have emphasized since the third quarter update, is that I don't see us maybe being in commercializing anything before 2023 or soon thereafter, 2023. I think most of the products up until that point are very crowded. There are 6, 7, 8 companies on each of the big molecules that will come off patent, prior to -- and prior to and including Humira coming to the market. So that's why the 2023 is a little bit like a milestone. I think there is a settlement with around 8 or 9 companies on Humira. So I'm not sure if that really is a fun party to be joining as a first entrance to the market. So we are looking a little bit more long term in the opportunity where we can add value. We have learned a lot from our MENA launch. You saw it in the prerecorded presentation that really the infliximab, Remsima launch in MENA has been very, very good. We are very pleased. We have approval in 8 markets. And I mentioned the growth we see in the market, both in Iraq and Saudi Arabia after we came to the market. So we are bringing that. Those learnings, we are trying to see how that affects our U.S. positioning. Obviously, U.S. is a very different market, much more crowded with biosimilars, but they're same principles that we are saying that the partner we would select needs to have a strong scientific base. What I mean by that is promotion is very much built on safety data. Usually, the doctors believe the efficacy data based on the approval Phase III study. But you constantly need to update on the safety data. And we feel by finding the right partners, this might be an opportunity. But overall, I think it's the same on the generic side. It's the new dosage form, new technology that we would love to include if there's an opportunity. Same in a way for Injectables. We don't have the capabilities to do all the slow-release injectables that I would like us to have. So that would be a technology that would be interesting to us. And then in the MENA region, it's a little bit looking for portfolios to give to our sales force to execute on. So we are as focused as before. You saw the balance sheet this morning. We are still under 1x net debt to EBITDA, even if we bought 12 million shares last year when Boehringer sold their share. So we feel very good about the opportunity. But also, you see there is not many companies. And I can't say none of our peers, but very few of our peers that are growing 6% on top line and double-digit on bottom line, only organic in a year like 2020. So we are a little bit in a special situation, where, obviously, we want to use our balance sheet, we are ready to use it. But the desperation isn't there to do just a transaction, to do any transaction. We want to do the right thing when we do it.

Our next question is from Thibault.

My first question is on the generic margins. I mean, as you have said before, your guidance on top line is, I think, is very conservative. And if generic Advair is launched relatively early and Vascepa is fine and your base business is actually -- is actually growing a little bit, you could do better. But what does it mean for the margins? If you do better than your top line guidance, could we see an uplift in margin? Or do you intend to reinvest any potential additional top line into R&D and SG&A? And just a follow-up on that. What does it mean for longer-term margin in generics? Because I think some investors are expecting a kind of operating leverage story based on Advair and Vascepa launch. So is this something that could happen? Or are you committed to reinvest in R&D and SG&A and operate the transition to a more specialty care portfolio? That's my first question.

Yes. So great question. So overall, there is a little bit of a step-up in R&D investment now when we are kicking off the Ellipta development. So we would like to invest more in that in this year. There is an opportunity to be one of the first to the markets. There is a benefit in that. On some of the work we are doing now will benefit us long term. So I think if significantly earlier that generic Advair would be approved very early based on that the FDA gets comfortable quickly on that product, my intention would be to invest quite a lot of that extra bottom line this year to accelerate the development of Ellipta, if I can, because I think the return on that investment would be very good because it would put me in the front of the line on these very important product. What that means long term, it doesn't mean that I'm diluting it forever and ever the generic margin because I feel that what you saw in the 2020 is way ahead of schedules. We are in the 20s in the net operating profit, which is really one of the best among peers. How we do that is basically in 2022, 2023, it depends a little bit on the opportunities we have on the commercial side. We have already spoken about it here in this meeting. Will Xyrem be accelerated to 2022? Or will it stay in 2023? Those kind of things can lead us a little bit is how much we want to invest in the R&D and see the return on investment. I'm excited about the margin itself. I feel we have a -- we are guiding around 20% for this year going in. With a step-up in R&D, with a step-up in sales and marketing, it doesn't mean that I'm guiding 20% in the -- even in the short to the medium terms, I'm guiding for that for 2021, but then the commercial opportunities will really lead us to how much should we invest as long as the return on investment makes sense. But in -- for this year, I just want to highlight. If we have an inflow of profitability early, which I -- we are not guiding to, I might want to invest some of that into the R&D to give me this pole position on the Ellipta development, which the early investment will pay off in the long run for the whole portfolio.

That's very clear. And my second question is on the European injectables. You had a very strong performance this year. I think some was driven by the contract manufacturing on remdesivir. So you will probably have a bit more of this time win in the first half. But how should we think in this year and in the following year of the balance between remdesivir and your kind of capacity expansion and launch of new products in Europe? So are 2020 and 2021 exceptional because of remdesivir? Or do you think you can kind of manage the transition of the portfolio between the portfolio and the contract manufacturing?

No. So I'm really excited about the growth in Europe. And the European growth was -- majority was due to the growth in our own market. But then we had the CMO growth not only on remdesivir, but we also do quite a lot of other CMOs to utilize the capacity in our plants. And all of that increased in the year. But in one of the slides in the prerecorded presentation showed how each of the markets grew through the year. So just in the markets themselves, there was over 20% growth in that market. What we also highlighted is we filed 160 applications in Europe. And we have been focusing on Germany, on Italy, mainly a little bit in Portugal so far. But now we have started to file application in France, in Spain, in U.K., mainly in these 3 markets on top of other 3 markets we were in before. What that means is when -- if there is extra capacity, because I've been very clear that like the CMO arrangement with Gilead, if there's no need for that volume anymore from Gilead, that would open up capacity for us. But now with all these filings in Europe, we can utilize that for our own benefit. So we are excited about the opportunity. We have used this year now when we are utilizing the capacity extremely well, both for our own business but also for CMO, is to file more applications, so we don't have this dip you're referring to in the capacity if the CMO volume goes down, and we don't have the COVID volume. So I'm excited about Europe, over 20% growth in the markets themselves, which we saw in 2020. So you can see based on the math that really Gilead wasn't a big game changer for the injectables. It was important, I think, for 2 things. It was important for recognizing that we took in Gilead, we started to manufacture remdesivir. Within 6 weeks that we reached agreement with Gilead, we have the product on the market, which is amazing, by the way. And the second thing is, it shows the flexibility and the capabilities of what we are doing and the recognition that Gilead chose us, and we have been an integral part of that. But if that volume goes away, we are ready now with all the new applications to step in with our own products.

Our next question is from KC.

I have three, please. One on Advair. Have you had discussions with the FDA on if you require inspection or not? And if this is something that you'll know during the 4 months review period? Or do we need to wait for the entire 4 months and at the end of it, we'll know if you need an inspection or not? That's one. On the second one, Vascepa. In your guidance, how many generic players do you assume will be operating in the Vascepa market, please? And the third one, what are you assuming for new launches for Generics division?

So if I start with Advair. To be clear, this is an analytical method, so there's no inspection required. So it's not an inspection. Remember, we got the full approval in December without an extra inspection there. So this is just an analytical method, pre-approval supplement. So there's no expectation or even -- I don't think it's theoretical that an inspection would be required for that kind of pre-approval supplement. On Vascepa, it's difficult to say, but how I think is, I think Dr. Reddy's has been pretty vocal that they are coming to the market. I think the expectation was before the end of March, they would come to the market. I don't know their timing, but they talked about that they would bring this product to the market before the end of their financial year, which I think is the end of March. I think Teva has the approval in hand. I don't know what their situation. And then Apotex is the fourth filer. They don't have approval in hand. So it's difficult to say exactly how many players, but I wouldn't be surprised if there would be, maybe by the end of the year, 3 players. There is a possibility of the fourth, but I think the fourth player is highly, highly unlikely. The third one, if you repeat that again. Sorry, KC.

No worries. It's a pipeline assumption that you have for Generics in terms of launches.

Yes. So the launches are a little bit difficult. We are still in the mid- to high single-digit launches that we have in the year. Obviously, with 6 launches last year, we did more than approximately 10% of the revenue, which was amazing. So I don't give the exact revenue I expect from this, but we are still in this mid- to high single-digit launches that we have for the year in the Generic business.

Our next question is from Patrick Wood.

Perfect. Just two for me very quickly. The first would be surrounding slightly weird release in Civica in terms of putting down some capacity small, but $200 million, $250 million on generic injectables. Why do you think they're doing that? It seems an odd thing to do. Is that a function of the shortages? I mean I'm just curious how you feel about that. And then the other one is one of your peers, obviously, has a 483 letter on their biggest production plant in the U.S. We've been here before. We remember Grand Island back in the day. And obviously, McPherson and then Rocky Mount for Pfizer. I'm just kind of curious how you feel and your thinking about potential escalation there and whether that would impact the volumes for you guys positively or no real impact.

Yes. So first of all, Civica has been a great partner this year. They have been, I think, learning the business, so it has been a gradual increase in their business throughout 2020. We are very pleased with the working relationship. This is a take-or-pay relationship, where we obviously commit to a strong service level, but they commit to a minimum volume. So Civica really was one of the customers that came out and really delivered on what they said in 2020. In terms of their strategy with Phlow Corp. of building a plant. That really doesn't impact us in a way. It's a relatively small plant. I think they're saying this will be for critical product that needs to be manufactured in the U.S., American-made to make the supply 250 million volume in capacity. It's a relatively small plant on the overall scale of the U.S. market. It will take quite a few years, you know that. I think Hospira can tell you how long it takes from when you start to break ground until you have first moved in products and validated and gotten FDA approval. So this is not even in the short to the medium term. So this is medium to long term, where this will start to affect the market. So in a way, this is not of concern. They are a good partner. We are happy with the relationship. So really, we monitor, obviously, what they're going to do. But at this point in time, we don't see this as a risk to our business. In terms of quality challenges of our competitors. We always monitor this very, very carefully. So we have done a full overlap analysis of this plant versus our portfolio. We sit with a little bit extra inventory on these products, if the case would be that they can't supply it to the market. At this point in time, we don't see -- there might be 1 or 2 products where we are seeing them struggling a little bit at this point in time. But really, it's nothing because you have to remember, they probably are sitting on 5, 6 months of inventory themselves. So -- but just in case, we want to be ready to step in if that opportunity would come. But we haven't assumed that in our guidance that there will be a big shortage in the market due to that. But we always need to manage, and we need to be ready now in preparing and having an inventory on the overlap portfolio if this would happen.

Our next question is for Emily Field.

One quick one. Just how many launches in U.S. Generics does your guidance anticipate for 2021? And then a couple, I guess, more structural high-level questions. The first being there's been a lot written in the press, like a few articles in stat, talking about coming out of the pandemic, U.S. hospitals potentially having more political power. And I was just wondering, would that resonate into purchasing power as well if you see sort of the competitive dynamics between yourselves, the manufacturers and the GPOs changing at all coming out of the pandemic? And then also, just about a year ago, kind of when the pandemic started, all of the big kerfuffle about the redomiciling of API or generic manufacturing seems like that's gone completely dead. Is that still an issue that you're hearing at all in either the U.S. or Europe?

Yes. So the answer to the first one, we are assuming mid- to high single-digit launches on the generics, so 5 to 10 launches. We don't know exactly. We had 6 in 2020. So similar number in 2021. In terms of the pandemic and the influence of the hospitals and the buyers, I think this is highlighted by my previous comments about inventory. So really, we haven't seen so much conversation about maybe pricing or change of that. But many of the conversation we are having now with the hospitals and the GPOs is they're asking us to secure that we sit on a significant inventory just in case. That has changed. People are even asking us to sit with up to 6 months of inventory, which isn't the best use of working capital as long as you have the flexibility of manufacturing things. So we are working with the customers of having inventory of API, but maybe not of a finished goods. But that really is the conversation now, is how can you secure the supply just in case. So we are changing the supply chain from just-in-time to just-in-case and how we can address these concerns and the request from the GPOs and the hospitals of sitting on more inventory without really ruining the working capital we are working on because we want to maintain a good service level. But there is also a balance of because they can then change -- you have to remember how the chemistry is with the customers. If they get a 10% lower price on a vial, they can move to somebody else, and I'm sitting with 6 months of inventory of a product. So there has to be some kind of commitment both ways for us to invest in that kind of things. So we feel there will be a change. But will the economy change? I'm not sure. I'm not seeing that yet, but we obviously are keeping an eye out. But what I say based on the previous question also is people -- the customers wants to be closer with us. What they mean is they ask us much more now how much inventory do you have of this product? Can you supply me over the next 3 months? So they are more on top of the supply chain than ever before, so the transaction relationship that was very much and is still in the U.S. generic is less in the hospital setting where they want to understand the supply chain and where they have less of a risk of a shortage. The redomiciling issue, it's probably not dead. It will come up again. But I think most people have realized it's -- I think, in total, there's about 3,500 molecules that are generics around the world today. And we are not going to redomicile 3,500 APIs to the U.S. It will never happen. But are there a few APIs which is critical to manufacture here? Yes, probably. Are there a few products which are critical to be manufactured locally for the security of the market? Probably. So I think this conversation will happen. You heard in the news yesterday that Biden was talking about redomiciling. Now he's talking about computer chips. So I think the next thing might be coming into pharmaceuticals. So we need to keep an eye on it. I think we are extremely well positioned to do that with our plant in Columbus and in Cherry Hill. So majority of our volume that we sell in the U.S. is locally made. But I think people will need to find and will find this balance of finding the key and critical products and molecules that should be manufactured locally versus trying to make it as a political issue that everything should be moved back to the country because I don't think the pricing will allow for it.

Our next question is from someone on the phone. Can you please introduce yourself and go ahead and ask your question?

Hello?

Hello. We finally got you.

So sorry about that. Just I wanted to get a bit more clarity on your strategy for the leverage of the business.

Sorry, could you introduce yourself?

Yes, sure. Alexandre Ayoub from Waha Capital.

Okay. Sorry, go ahead.

Yes, I just want to get a bit more color if possible on the leverage strategy. So I think you had very low leverage over the last few years. And now it's kind of ticking up close to 1x. I think with this acquisition in Egypt, if it goes ahead, maybe you're going to be close to 1.5x. Is that fair? And then I wanted to get a better feel about what's your strategy on the leverage side.

So maybe if I start and then I hand it over to Khalid. But we haven't made an offer, so we don't know what -- if a transaction would happen, what the purchase price is. So we can't comment on how, and if it happens, how that would affect our leverage. But Khalid, maybe you can talk a little bit about our debt financing and where we are.

Yes. Thank you, Alex. We always said in the past that our target leverage ratio is around net debt to EBITDA of not more than 3x. So 3 plus, it depends on if we have a transformation deal. And we've never -- if you look since we went public, we never reached that level. The maximum we reached it was like 2.7. And immediately, we were able to delever very quickly. So this is the level. We have now, I would say, enough facilities in place, enough firepower. We managed to issue our bond, eurobond this year. We got to investment-grade status from Fitch and Standard & Poor's, and we are in a very good position so far.

Got it. But on -- like, for example, for 2021, our understanding is like you don't really have, apart from the Egyptian asset, many opportunities which are likely to realize this year. So is it fair to say that this year, your leverage is likely to remain between 1 and 2x?

It's impossible to say at this point in time because transaction might take us shorter than a year. So it's opportunistic. But I think the commitment is that we have a ceiling or a soft ceiling of 3. If we go above that, it has to be a transformational that we deleverage within 12 months below 3. But overall, we can't commit to exact leverage level during the year. That wouldn't be the right guidance for us to give. But we have a guidance for the company as a whole overall.

Our next question is from Amy Walker.

Sorry about that. Had trouble unmuting myself. I just had a couple left, Siggi, and they were both about the margin impact of some of the mix changes that were alluded to in your video earlier. So I wondered, in Europe, with high containment facilities and the growth that you've talked to in the Injectables business within Europe. What is the effect of that, if anything, on your expectations for your medium to long-term margins in the Injectables business? Clearly, the outlook today, again, sort of the upper end of the 30% range. In the past, we've talked about that maybe coming down. I'd just like to you to update us on that. That's the one question. And the other question was in the Generics business, where you've talked about the rise in contribution from the nasal sprays on that side of your product portfolio. Again, I wondered if you could comment on the gross margin effect, if anything, on that. Are those higher, lower? How is the mix at the gross margin level? I appreciate what you've already stated about the OpEx and investments, but just gross margin, please.

Yes. So thanks, Amy. So I think on the Injectables, the impact of the high containment really now isn't so much because there's not a lot of oncology products coming out there. Where we are using that facility now is to help us in a way to address the extra capacity we have to take on due to the contract manufacturing on remdesivir. So we are using this plant because it's part of the Portugal plan. So we don't have to manufacture to oncology in that plant. We can also do regular product. So we are doing some regular product there. So there isn't an impact in 2020 on the gross margin, but it gave us the flexibility, which we needed that year because the demand was going up and down, and we took on remdesivir in the middle of the year to do it. So it was extremely helpful to get the FDA approval in the first half of the year. If you think about the margin, so I've always said that in a way, the base margin is around 35%. In good years, we hopefully do a bit better than that. In bad years, we could go a little bit lower. We are guiding now to 37% to 38% for 2021, which is a good margin. The reason why it is a little bit lower, and you alluded to in your question, is that I think most of you know this, is our highest margin, even though we don't report it like that, but I've been quoted in saying this previously, we have the highest margin in the U.S., next in MENA and the lowest margin is in Europe. And that's the fact of it. It's a tender business in Europe, all the injectables. So the more business we have in Europe, even though it's a profitable and it utilizes the plant better, the margin is a little bit diluted. It's still a relatively small business in the overall scheme of things. So it's not having a big impact on the final margin. But the more Europe grows and less U.S. grows, you see that there could be a tiny bit of dilution on the margin. It doesn't mean it's going to be a big transformation on that. But that's the reason why I'm always clear that 35% is, in a way, the base you should think about. And from there, the opportunities, risk and opportunities. The reason why we feel good about the year on injectables, a little bit outside of your question, is that, yes, we don't expect the same demand for COVID-related products in 2021. Or in a way, on a personal note, I hope we don't get the same demand because of vaccination and other things like that. But I also think the elective surgeries will pick up to compensate for it. And you saw in the graph on our slide how low they were. So this is why we feel good about the margin being in the 37% to 38% range. In terms of the Generic margin, we don't report, obviously, on product category the gross margin. The only thing I can say on the nasal spray is it is a very competitive market. There are both Apotex and an Indian player worker competing on all the nasal space. So it is a competitive market. On top of that, the devices, the nasal spray devices are quite expensive. So it's not a huge contributor. It's not like -- it's not a key thing to the improvement in the gross margin that you have seen over the years. So it's not that. But I think we are managing well because the beauty of it now is why we have improved the margin a little bit is because we have a lot more volume. And that has helped us to offset both the pricing pressure on the competition and also the cost of especially the devices for the product. One last question, Layan?

Yes, we have one from Pete Verdult.

Siggi, it's Pete from Citi. Last question. Apologies, going back to the U.S. Generics margin. If you execute on your strategy on Vascepa and Advair, can you just reassure us that if what they want to do and you have a tailwind behind you, with the products that you have and the potential of the separate Advair, the ability for the U.S. Generics business to post sustainable margins north of 20% is on the table? Obviously, you're not guiding to that. But I just want to make sure in your range of scenario analysis, you execute, you hope to on Advair and Vascepa just that you still feel that, that is a potential margin outlook for the U.S. Generics business. I just want to frame the debate a little bit better as it relates to U.S. Generics.

No. Absolutely, Pete. I fully agree with you. If everything goes our way and we get an early launch of generic Advair, we get additional supply of icosapent to the market. We have the opportunities to be in the 20s. There's no question about it. The question for me is, and it came to the TPO question, was how much of that do we want to invest in R&D. And that's the question because with the extra inflow of bottom line, where do I want to position the profitability? Because I can spend a lot more on R&D. But obviously, I want to run the business to the best return on investment. So I would like to do a little bit more R&D, if I can, but it has to do with -- you have to remember, with guidance around 20%, as we gave this morning, it has a lifter, both in sales and marketing dollars and in R&D and Generics to get to that number. So the run rate, if you compare to the cost basis that you saw in 2020 versus 2021, the run rate is in the 20s. But the question now I'm doing is how much do I want to invest in the infrastructure that gives me the outer years' benefit on sales and marketing and R&D.

Very good. I think we are just out of time. Happy to talk to any of you. If there's any burning questions, we are available, Susan, Layan, Guy and the team available on the phone all day today. And if you need to speak to me or Khalid, they will be happy to set it up. But I appreciate you joining this morning. Thank you.