AKBLF (AKBLF) Q2 2026 Earnings Report, Transcript and Summary

Hello, everyone, and welcome to this presentation of ALK's Q2 and first half year results. Thank you all for joining us. Let's turn to Slide #2 with an introduction to the speakers and the agenda. My name is Per Plotnikof, I'm Head of Investor Relations. With me today are CEO, Peter Halling; and CFO, Claus Steensen Solje. Peter and Claus will walk you through the quarterly highlights, markets, product trends and financials. After a brief strategy update, we will turn to the full year outlook. And as usual, we will end the call with a Q&A session. First, I'll hand you over to Peter to the highlights on Slide 3. Please go ahead, Peter.

Thank you, Per, and thank you all for taking the time to listen to this call. ALK sustained strong sales momentum in Q2 with double-digit sales growth across all regions, driven mainly by tablets and anaphylaxis products. Revenue grew by 18% in local currencies to close to DKK 1.8 billion and EBIT increased by 19%. The EBIT margin was unchanged at 25% as gross margin improvements were offset by continued investments in product launches, commercial infrastructure, R&D, AI, and other areas. Tablet sales again exceeded DKK 1 billion and were up 22%. The tablets with the new pediatric indications for ACARIZAX and ITULAZAX continued to perform well and were increasingly contributing to the inflow of new patients across key markets. We continue to see pediatric indications as a key growth driver for ALK for many years to come. There are still many opportunities in this space. In China, the local Phase III trial of ACARIZAX is rapidly approaching the finishing line with results expected in Q4 this year. If these are positive, we expect to see an important opportunity opening in China, which is the world's largest house dust mite market. And if approved, ACARIZAX could be launched in 2028. On neffy, we made further progress with market access and launches. We have seen good progress with our total anaphylaxis business in Germany, and we are off to a promising start with neffy in Canada. I'll be back to this shortly, but I'll mention revenue contribution from neffy in the quarter was still relatively modest and came primarily from Germany and the U.S. This reflects the early stages of the launches and particularly the situation in the U.K. where prolonged formulary approvals and administrative processes continue to impact the full rollout of neffy. The ongoing reform of the U.K. health care system is impacting the pace of market access progress. But nevertheless, we remain very confident in the opportunity in the U.K. In June, we presented detailed data from our successful Phase II peanut tablet trial at the EAACI Congress in Istanbul. The congress was attended by more than 7,000 health care professionals, and we saw strong interest from the scientific community in our progress. Feedback on our peanut trial results was very encouraging, and we still expect to initiate Phase III development before the end of '26 and planning is progressing well, including conversations both with EMA in Europe and FDA in the U.S. Based on the momentum for tablets, we are updating the revenue outlook. The update also reflects greater transparency on pricing and rebates after Germany passed new legislation, increasing the mandatory rebate on prescription drugs from 7% to 15.5%. This change will take effect from 1st of January '27. It is not expected to have any impact in '26, and we remain confident in the strong growth outlook in Germany and globally for the years to come. Germany is ALK's largest market, and it accounted for approximately 25% of global revenue in 2025. Hence, we're working hard to mitigate the financial effects of the rebate increase next year. The new scheme came as no surprise, although the size of the increase was slightly higher than what we had indicated earlier. Germany has had changing rebate policies over the past many years, and we had expected the rebate increase earlier. Consequently, ALK has been preparing for a situation like this and will be implementing initiatives to counter the impact. While not all details are yet in place, including potential exemptions from the rebate increase, it is, however, obvious that health care providers cannot and should not benefit twice from the rebates, and we'll, therefore, seek to carefully rebalance our existing rebates -- sorry, agreements and contracts with the health care providers. The rebate increase does not change ALK's long-term financial ambitions, and we still target more than 10% growth in the years ahead. Our business platform and market positions are robust, and Germany remains an important growth market for ALK. We will continue to execute on our strategy and push forward for strong results in the coming years. Earlier today, we announced the appointment of Jacob Glenting as the new Head of R&D. Jacob joined ALK in 2007 and has worked extensively in the interface between commercial and science. He has been a key architect in several of ALK's strategic developments, including the partnerships with Torii, Abbott, GenSci, and ARS Pharma. He has been deeply involved in the pediatric expansion and strategy development. Few people know our patients better than Jacob. His background in R&D and with a PhD in vaccines and immunology makes him an ideal leader to drive our innovation efforts. Jacob and the team will do so under the Allergy+ strategy and secure a strong bridge to ALK's commercial operations, including our long-term targets. His job will be to balance core business growth with expanding in existing and new adjacent allergy areas, through our own pipeline, partnerships, and business development and licensing. Now I'll hand it over to you, Claus, for the regional trends on Slide 4.

Thank you so much, Peter. So let's look at the sales. All sales regions delivered double-digit growth in Q2, and Europe continued to lead the development. European revenue was up 19% in local currencies, driven particularly by tablets and anaphylaxis products. The performance was sustained. Q2 sales growth was identical to growth in Q1. Tablet sales was up 27%, mainly on higher volumes linked to the strong inflow of new patients during the '25, '26 initiation season. The new pediatric and adolescent indications for ACARIZAX and ITULAZAX remain strong contributors to growth, whereas the contribution from GRAZAX was more modest. Tablet sales grew strongly in most markets in Central and Western Europe, including Germany and France. High sales growth, although from a lower base, was also achieved in Eastern European markets such as Poland, Slovakia and the Czech Republic as well as the U.K., where ACARIZAX and ITULAZAX obtained general reimbursement for adults use last year. I can add that just a few days ago, ACARIZAX and ITULAZAX for pediatric use received a positive endorsement from NICE in the U.K. Of other positive news, I can tell that in Sweden, the government recently introduced a new national allergy strategy calling for more preventive, effective, and equal allergy care throughout the country. We expect these new guidelines, once implemented regionally, will support more patient in treatments with AIT. Combined SCIT and SLIT drops sales in Europe increased by 4%, with SCIT growth coming from both venom and non-venom subsegments in Central Europe. Sales of SLIT drops, primarily marketed in France, regained some momentum in Q2 after a weak start to the year. Sales of anaphylaxis and other products in Europe increased by 28%. Growth for our anaphylaxis products alone was 30%, which also became a key driver behind the 20% market growth in Europe. Our Jext auto-injector continued to benefit from tender wins, strong commercial execution, as well as intermittent competition supply issues in certain markets. And the overperformance by Jext more than made up for the slow uptake of EURneffy in the U.K., as mentioned earlier by Peter. Revenue in North America increased by 13% in local currencies based on continued double-digit growth in both the U.S. and Canada. Canadian tablet sales remained an important growth contributor, reflecting an increasing number of customer touch points and solid demand, particularly for the tree tablet ITULAZAX, which again was boosted by the pediatric indication. Tablet sales in North America were up 17% with double-digit growth in both Canada and the U.S. SCIT sales was flat, while revenue for anaphylaxis and other products increased by 22%. The increase was linked in part to the cost compensation from ARS Pharma related to the co-promotion of neffy, as well as sales of PRE-PEN diagnostics and other products. In international markets, revenue grew by 18%, mirroring increasing product shipments to China and Japan. SCIT shipments to China increased compared to last year, when shipments was impacted by the renewal of ALK's import license. In-market sales growth temporarily slowed down during the transition to our new partner, GenSci, but a new sales setup is now in place and in-market sales are expected to pick up in the second half year. Tablet revenue returned to growth and was up 9% in international market. Japan delivered double-digit growth from product shipments and royalties. Supply from our Japanese partner's new API manufacturing facility for the CEDARCURE tablet has reached the market, and in-market sales of both CEDARCURE and MITICURE accelerated in Q2. We remain confident that ALK's revenue from Japan will pick up further in the second half year as planned. Now let's continue to Slide 5 with the product lines. Global tablet sales grew by 22% to just over DKK 1 billion. Sales exceeded the DKK 1 billion mark for the second consecutive quarter, well supported by the pediatric rollout. Europe led the way with 27% tablet growth, followed by North America with 17% growth, and international markets with 9%. Combined SCIT and SLIT drops sales were up 7% to DKK 515 million, mainly driven by the ramp-up of SCIT shipments to China. Sales of anaphylaxis and other products increased by 26% to DKK 267 million. Sales were boosted by Jext with a growing, but still modest, contribution from neffy. Now let's turn to Slide 6 and the half year financials. Half year revenue increased by 18% in local currencies to DKK 3.6 billion on double-digit growth across all sales regions and product lines. The gross profit of DKK 2.4 billion yielded a gross margin of 68%, up from 66% last year due to higher sales volumes, production efficiencies, and changes to the sales mix with a higher proportion of ALK branded products with higher margins. Capacity costs increased by 22% in local currencies to DKK 1.4 billion, driven by significant investment in current and future growth drivers, including product launches, commercial infrastructure, and R&D, not least the peanut and ALK014 programs. Sales and marketing costs increased 25%. 6 percentage points of this increase was due to the U.S. neffy co-promotion cost and the marketing fee to our Chinese partners. These items had very limited impact on our numbers last year. The operating profit improved by 20% in local currencies to more than DKK 1 billion. The EBIT margin was unchanged at 28% as progress on the gross margin was offset by a slightly higher capacity cost-to-revenue ratio, which we had guided for. The net profit was DKK 776 million, up from DKK 617 million a year ago. Free cash flow improved to DKK 889 million, driven by higher earnings and changes to working capital, including timing of payables and lower CapEx investments. Free cash flow was higher than expected, which is also why we have notched the full year assumption for free cash flow up. The net debt-to-EBITDA ratio remained negative at 0.6. All in all, another strong quarter and solid financial position with high growth and margin resilience despite extra allocation of funds and resources to growth initiatives. Now let's continue to Slide 7 for the execution of the Allergy+ strategy. Over to you, Peter.

Thanks, Claus. Let me now take you through some of the Allergy+ initiatives that we have lined up for the near future. Starting with respiratory allergy. The pediatric tablet rollout continues to perform really well and increasingly contributes to the tablet growth. By the end of Q2, the house dust mite tablet was launched in 22 markets, including North America, and the tree pollen tablet in 13. Key performance indicators remain strong. We had around 4,500 prescribers in our direct served markets that have now prescribed at least one of the two tablets to children. Around 20% of these doctors have not prescribed any ALK tablets before. This indicates that we are expanding our prescriber base in existing markets. Our current focus is, first and foremost, on increasing depth and sustaining prescriber adoption, although we also continue to work on prescriber expansion. As mentioned earlier, the local Phase III trial of ACARIZAX in China will complete in Q4, followed by an anticipated filing in '27 and potential approval in '28. In Japan, the GRAZAX Phase III trial continues towards completion in '27, with a potential filing the same year. Additional life cycle management activities are expected to follow in the years ahead, aimed at further building the value proposition of our core business. The commercialization of neffy or EURneffy in Europe for anaphylaxis continues. A few days ago, the 2 milligram version was launched in the key Canadian market, bringing the number of markets where the product is available up to 10. The 1 milligram version for younger children was approved across Europe, including the U.K., while approvals of the 1 milligram version are pending in Canada and other markets. Market access processes -- sorry, market access processes are ongoing in several places, and we are planning many additional launches over the next half year, allowing us to start building a more sizable neffy business in the years ahead. As mentioned in my opening remarks, we made good progress with market access in Canada, both with the public health care providers and the commercial plans. And the initial launch feedback looks promising, even though still early days. We've also seen good progress with our total anaphylaxis business in Germany. Since the beginning of '25, we have doubled our market share, which is now close to 50%, driven by both Jext and EURneffy. This happened in the context of the market growing approximately 20% in '26. We have been able to grow EURneffy sales during the period and maintain a sound market share even during the recent peak season. Jext has also benefited from tender wins, which is a major part of the German market. Finally, on food allergy and new disease areas. In just a few months, we plan to initiate the pivotal Phase III trial with the peanut tablet. Preparations are well advanced. We have initiated a positive and constructive dialogue with the relevant authorities on the Phase III plans. And, subject to their final feedback, we expect to go live by the end of the year and include patients from both sides of the Atlantic. Moreover, as part of our broader food allergy portfolio strategy, we are also seeing positive progress with ALK014, a biologic drug candidate targeting the key mediator of allergic reactions. We expect to enter clinical development in '27. This program may be applied to food allergy as well as many other IgE-mediated allergic diseases. In the beginning of next year, we also expect to see interim data from ARS's Phase 2b trial with neffy that is assessing rapid relief of acute flares associated with chronic spontaneous urticaria, a potentially very interesting add-on to ALK's product portfolio. So, all in all, work continues to strengthen existing revenue streams and build new ones. We look forward to sharing progress on these and other initiatives. Now I'll hand it back to you, Claus, and the full year outlook on Slide 8.

Thanks, Peter. We decided to raise the lower end of the revenue outlook range. We now expect revenue to grow by 14% to 16% in local currencies, up from the previous outlook of 13% to 16% growth. The EBIT margin is still expected at around 26%. This clarification reflects the continued strong momentum for tablet sales, particularly in Europe, combined with lower risk related to price and rebate adjustments after it became clear that the German rebate increase will not take effect until next year. We expect volume-driven revenue growth across sales regions and product groups. Tablet sales are expected to grow by double digits across regions, with children and adolescents projected to account for a growing share of the sales. Combined SCIT and SLIT drop sales are anticipated to grow by single digits, while sales of anaphylaxis and other products are expected to grow by low double digits. As usual, the timing of shipments to China and Japan may cause quarterly fluctuations. The gross margin is now expected to be slightly higher than last year due to positive volume and mix effects, although these will be partly offset by growth in lower-margin partner-related revenue. Capacity costs are still projected to increase as we continue to reinvest scale benefits into strategic initiatives. Disciplined capital allocations and careful prioritizations remain key to us. We now expect free cash flow to further improve and exceed more than DKK 1 billion, partly driven by optimized CapEx investments. So, to sum up, the business momentum remains strong. We expect to continue our trajectory of double-digit organic revenue growth for the eighth consecutive year with an EBIT margin slightly above our long-term financial ambitions. So, with this, I hand it back to you, Per, and Slide 9.

Thank you, Claus, and thank you, Peter. And this concludes our presentation, and we will now open up the Q&A session. Operator, please go ahead.

[Operator Instructions] Our first question today comes from Ben Jackson from Jefferies.

I guess, first of all, can we talk a little bit more about early thoughts into 2027? And I guess more of the focus here is this kind of cryptic messaging that you're giving around the potential for 2027 mitigation of those German rebates. I guess it's probably a little bit about contract-like flexibility with contracting, inflation adjustments, maybe even this idea about how you construct clinical trials. So any thoughts on -- or more detail on that mitigation? And then, perhaps more broadly, how we should be thinking about the top line build into next year? It's early, but it's useful for us. And then secondly, if I could just ask for a little bit more color on the dynamics around neffy, please, particularly just a bit of commentary about how Canada has initially gone, where you are at with market share in Germany now versus when we last caught up. And then the outlook, and when we should see U.K. becoming a bit more meaningful here given the headwinds that are currently there to slow down the initial launch?

Thanks, Ben. Appreciate it. So let me start out, and then Claus and Per can jump in and supplement. So, first on '27. As you know, we are not guiding specifically on a given year, but I'll give you some high-level thoughts around where we're heading and specifically around how we see the German market. I think, overall, we continue to see Germany as a key growth driver for ALK going forward. It has been a strong contributor to our double-digit growth in the past years, and we expect that to continue going forward. As you also know, we've been talking about the German rebate and the expectation that it would go up in the past years. And we have all along been planning for how to tackle it. Obviously, there is a commission now coming in place in Germany. And they have been tasked with the fact that the 15.5% rebate, what would potentially be allowed for exemptions to that rebate. So, we are attacking it from a couple of fronts. One is, if we look at the rebate as it is constructed and potentially with the exemptions, it may be that we can actually use the number of clinical trials with German patients to lower the rebate. Currently, we don't know whether that is going to be included, but this is part of the discussions in the committee. Moreover, there has been less clear discussions around manufacturing in Germany, R&D in Germany, et cetera. But what it tells us is that there will be levers going forward that may allow a company like ALK to lower the amount we pay in the rebate. The other part of the rebate is that, basically, the way it works in the German system is that we pay a rebate directly to the German health authorities. As part of that, they send it directly to the insurers. We also have direct contracts with the insurers coming from the other angle, where we are also negotiating a certain amount of rebates. Now, what we are expecting is that this type of double-paying a rebate from two angles is obviously something that we will look into and something we feel can be negotiated with the German insurers, and that can also help us mitigate the rebate. Thirdly, on an internal front, we've known this for a while that the rebate would come one day, and now it's in '27. First and foremost, it gives us more clarity. We know where we stand, and we also know how to approach it. That means that we have been looking at what are the initiatives that we may or may not continue with in which form. And that allows us to make clear choices quickly and implement them. And then, finally, I'll say, do remember that ALK has been growing above our long-term targets. That has allowed us to also invest ahead of the curve. And that means that we have been able to make commercial investments quicker than what we've done or been able to do based on our earlier projections. And that allows us also to invest in markets like Germany, and we've been doing that for a period of time. And that also gives us a strong basis going forward. For instance, the TAV -- so, basically, the move from unregistered products to registered products is ending towards the end of this year, meaning that prescribers and patients will need to transition from unregistered to registered products. That gives ALK a strong opportunity with our portfolio to capture some of that business going forward. So, that also gives us opportunities we haven't had in the past when we look into '27. So, just to give you an idea of how are we actually intending to mitigate some of this and how do we look at the market going forward in Germany. Last comment on Germany. We see this as a core market in Europe. We look at this market as a market with a lot of growth potential going forward. The rebate will only come once. It might be changed going forward one way or the other, but Germany remains, as it has been, a key country in ALK's portfolio. So, hopefully, that gave you a little bit of flavor on that one, Ben. Then on neffy, you asked about whether we could comment a little more on Canada, Germany, and the U.K. I can start out, and then I think you guys just jump in. I think it's early days in Canada. But what we are encouraged about is that some of the market access challenges that you could potentially see in a market like Canada, which is, to some extent, similar to the U.S., we've not been facing. We found a way to mitigate some of this with patient programs. And that also means that it's an easier flow. And from the patient standpoint, when you acquire or when you get a neffy, you don't experience some of the same market access issues you've seen in the U.S. with rejections. So, we have a clear flow-through. That has been positive, and that's something we've seen also with the pull-through from the wholesalers into the pharmacies. So, overall, a good start. But do remember that we are basically, more or less, 3 or 4 weeks into the launch, but a good start. Germany, I think, it's a very good example of a market where you have less market access restrictions. It's a market where we've seen, when neffy can flow freely in, it has a pretty solid adoption rate. Now, why are we then stalling a bit? It's twofold. One is, part of the German market is a tender market. And there, we've been very pleased to see that our focus on neffy and our focus on the anaphylaxis portfolio, including Jext, have enabled us to also win tenders in Germany, and that has given us a stronger portfolio and a stronger overall business. The other part of it is that, normally, in Germany, you also see peak seasons typically in advance of the summer. And that's where we were interested in seeing whether neffy would maintain its market share, and it has been maintaining its market share. This is typically where you see a lot of the auto-renewals. So, that's also been a positive driver in Germany. Now, we're also realistic around the German market. A fair portion of the German market is still general practitioners that prescribe auto-injectors. And there, we need the guidelines to come in place. That means update of guidelines. So, basically, neffy or a nasal device is on par with the auto-injectors also from a guideline standpoint, and it takes time. This brings us, obviously, to the U.K. And on the U.K. market, we must admit that we had not anticipated the complexity of a health care system which is under reform. As Claus also said at the call, and we also said earlier today, we remain very optimistic around the market. There is no doubt that it is a very well-received product. In the U.K., patients, patient organizations, doctors, and even authorities are positive around it. Now, our challenge is not only getting on the formularies but also having the budgets in place and then getting updated on the lists on the local hospitals. That has taken longer than what we had expected, and it's been complicated by the fact that we are moving from 42 regions to 26 regions in the U.K., and we have had downsizing and also cost-budget reforms on top of it. That has slowed the progress. But it doesn't take away from the fact that the U.K. remains one of the biggest markets for anaphylaxis products, and we believe neffy has a very strong place in that market going forward. It's a matter of time. Claus, Per, anything to add? I hope that gave you some insights.

Our next question comes from Thomas Bowers from SEB.

A few questions from me here. So, maybe just kick off with the peanut project. So, you mentioned a positive dialogue with the regulators. So, should I understand this to be a dialogue with the FDA and EMA? And maybe are there any early conclusions on the TD versus ED endpoints that you have at this point already? And what are, sort of, the remaining gating factors before you can start the study here in the fourth quarter? And then, second question, just on the full year guidance. So, right now, with a super strong Q2 number here, you implied, sort of, to reach the middle of your updated growth guidance, you imply 13% for H2. So, what actually prevents you from raising the upper end of guidance today? Is it primarily the uncertainty for the initiation season? Or is it mostly the timing of shipments to international markets? And then, maybe just lastly, just on pediatrics. So, can you give us a little bit more color on where you actually are with the pediatric rollout for ACARIZAX and ITULAZAX? So, I know it's probably still a bit early, but where are we, sort of, percentage-wise of the total prescriptions? I remember ACARIZAX being around those 30% to 40% of prescriptions in Europe or Germany. So, are we getting, sort of, close to that number, or is it still far off?

Thanks, Thomas. Let me kick it off quickly. I'll hand it over to Per. And for the full year guidance, Claus, maybe you can also comment on the peds, and we can jump in as needed. So, on the peanut Phase III, yes, we have had meetings both with the FDA and EMA. And I think we've had a very constructive dialogue with both. What we're really happy about is that they have confirmed that they also think that we have had solid Phase II data. So, we are confident moving into Phase III. We still need to submit and have final approval for the trial designs before we can move into it, but we remain optimistic around going into Phase III towards the end of the year. So, all in all, good dialogue, but we need to finalize it. Per, you want to comment a bit further on the peanut?

Sure. As to the exact trial design, it is still too early to conclude, as we are still negotiating the details here. Once we have the trial protocol approved by the authorities, we will communicate to the market, and that is expected to happen later this year, and then we initiate the study also later this year. But it's a little bit too premature to have detailed discussions about the trial design before the authorities have approved it. So, that's where we are on that one. Claus?

Full year guidance.

Thank you. Full year guidance. Thanks, Thomas, for the question. And you're right that we had a strong first half with the 18% growth. And we are, of course, looking into now a half year where we are then mathematically expecting somewhere between 11% to 15% growth in the second half in local currencies. I think it's important to state that we still expect a very strong underlying business momentum to continue. So, that's basically not the case, and we are not looking into anything related to the underlying business here. I think there are three things that are worth noticing. First of all -- please bear in mind that we are up against some tough comparisons versus the second half of last year, where our revenue grew by 18%, especially tablets and Jext in Europe. So, this is the comparison we are up against. And then, you are right that you mentioned it yourself, we have key swing factors for second half, is always the timing of shipments to international markets, Japan, and China. And those could be a swing factor, and we would like to get a little bit further into the second year before we start to conclude on that. And then, thirdly, our initiation season. We are actually coming out of, as you know, two good initiation seasons back in both '24 and '25 that are also fueling our growth this year. And this is, of course, good, and it will continue to do so. We are expecting a nice initiation season. We still can only look at the early signals from the spring, and that's looking good. But we also have to be a bit cautious here, and we find it prudent to wait until we understand how this initiation season starts one, two months from now. So, when we know more about that, then we will, of course, as soon as we can see something, report it out. But for now, we believe it's the right thing just to wait a few more months to see where the second half is going. I hope that puts some flavor on that.

Claus, you also want to comment on the peds.

Yes, I can do that on the peds. We are very satisfied with what we are seeing. We have said that a few quarters, actually. We are right now in 22 markets for ACARIZAX and 13 markets for ITULAZAX. We are seeing that the children are taking a larger and larger share of our share growth. And if you look at it from a new patient point of view, then we can see that we are approaching 30% of new patients being children. We have said at some point in time that we would like to get up to 50%. So, we are approaching that very well and as expected. So, very nice development, and we can only say that we continue to see positive trends in that, and as expected, and very positive. So, that's good.

Our next question comes from Jesper Ingildsen from DNB Carnegie.

Three questions. So, first, on the gross margin, you delivered a strong gross margin again in Q2. Just help us understanding the phasing in the second half. So, now you're guiding for a slightly higher than last year gross margin. But considering normal, sort of, like seasonality, I assume that it will have to improve from Q2, but just help us square that compared to the full year expectation. I understand, obviously, there's a bit more partners mix, perhaps, in the second half, but is there anything else you could help us better understand that dynamic? Then, on the international market tablet sales, you saw very strong growth here in Q2, again, helped by always new manufacturing facilities being up and running. Just help us understand what the expectations are for growth here into the second half. You were alluding to some of the shipments you normally have, but this seems to be, like, very strong in Q2. Could we get any flavor on the underlying demand in Japan and what potentially the efforts of Shionogi would potentially add to that acceleration once they finally get the confirmation for the takeover of Torii? And then, maybe just finally, on capital allocation. Anything new you can share there? What's your current view, particularly, sort of, on BD? Are you still, sort of, like looking for smaller bolt-ons? Or what are you particularly looking at in the market right now? And what would require you to -- what would trigger you to start looking at distributing some of this excess capital to investors?

Thanks, Jesper. So, I'll let Claus kick it off with the gross margin. I can talk about the international tablets. We can talk jointly around the capital allocation. Claus will talk mainly on the CapEx. I'll talk about the BD. So, Claus?

Yes. Thanks, Jesper, for the question here. You are right that our gross margin is actually higher than what we had expected at this point in time. Remember, when we guided last year, we had actually expected higher shipments to both China and Japan, but also higher partner sales, as such, over the year. Thereby, we actually said that you should expect to see this one to two percentage point down on the gross margin this year. Now, we have changed the guidance for that. Now, we are looking at slightly higher compared to last year, and that is very much driven both by that our manufacturing colleagues are doing a very good job. We are looking into good scrap. We are following the efficiencies in the manufacturing sites, but also that we are now seeing delayed shipments into China and Japan, and that will impact that. The in-market, I think it's important to mention, is actually continuing in both China and Japan very well. Peter will cover the in-market sales also in Japan. But from a gross margin perspective, then, it's the shipments that are postponing it a bit to the second half of the year. And that's why we also say, where we are now, then, we expect more to have visibility in the second half on the gross margin, and we will end this around -- yes, a little bit better than what we did last year. And then, when we look into the second half of the year, we are seeing higher tablet sales in Europe also, and this will also bring up the gross margin there. So, we should expect full year a little bit better than what we did last year. And this is, of course, a quite significant upgrade compared to when we were six months ago guiding for the full year.

And I think, Jesper, on the tablets for international markets, particularly Japan, we continue to see a really strong underlying demand in Japan. The in-market sales continue well, both with MITICURE but also CEDARCURE. And especially as more API becomes available, it's a matter of meeting that demand. So, I think we expect this to continue. And there, it's really important that we have the full supply chain in order where we can make the shipments on a timely and also to a larger extent that we've done in the past, in order to meet that demand. So, we look positively at Japan and the in-market growth. Secondly, on the partnership with Torii and, soon, Shionogi, I think it's important to say Shionogi has still not fully vested the MA -- so, the marketing authorization -- that they currently have. And that also means that there is a split between the Torii business and Shionogi. We are talking to Shionogi, but we are talking to Shionogi outside of the business we have with Torii. So, this is obviously always a little more of a difficult position to be in, but it's a natural position when you see some of these takeovers. So, we are waiting until we have full flow in order to have a communication and discussion around the Japanese market in particular. But that doesn't prevent us from discussing what we can do with this partnership and how we can work together going forward. And I will say we are really excited about both the partnership we have with Torii, but certainly also with the opportunity we have ahead with Shionogi. It's an interesting partner. So, I think I'll leave it there. And maybe, Claus, if you talk about the general capital allocation, I could talk about the BD part.

I will do that. So, Jesper, you're right that we are, of course, seeing some opportunities because we are increasing the free cash flow that you have been seeing. We have already explicitly stated that we will be disciplined about our capital allocation. So, we are sure that we ensure both sufficient flexibility to deliver on our growth ambition while we also generate attractive shareholder returns. You can also see in today's report that we are generating increasing free cash flow. We are even guiding a bit higher than what we did at the last quarter. So, this is also moving in the right direction. We will continue to allocate capital in the order we have said earlier. First, investments in organic growth, including the R&D area. Second, business development and licensing activities. Peter can comment on that. And then, thirdly, cash distribution to shareholders via dividends and/or share buyback programs. And that's, of course, also why we resumed here our dividend payouts earlier this year. And there's no doubt that we will continue also to focus on that. So, this is the -- sorry, the disciplined capital allocation we are following. And number two of those was BD activities, Peter, that we're looking at.

Yes. I mean, we don't have anything specific to comment on. I said it before, but I also think you need to look at it in the context of we believe we can do more on the BD side, but we want to do it for the right opportunities. And we're going to do it with, as Claus said, a disciplined approach, but also with regard to our long-term financial targets, including EBIT and including what we said in terms of how we're going to allocate to the R&D function. So, we continue to monitor the market. We continue to look for opportunities globally. But especially, we'd like to find something that could also be relevant for the U.S. market. So, we continue to work on that angle. And I promise you, if and when we find something, then we will make sure to communicate it based on what we can do there. So, I think it's as close as we get to that one. I hope that gave you some answers, Jesper.

Yes. But we're still talking, sort of, like, mostly bolt-on BD rather than transformational -- or how are you looking at that at this point in time?

We are not looking at -- it depends on how you define transformational, but we are not looking at changing this company fundamentally in any way.

Our next question comes from Peter Hugreffe from Nordea Markets.

So, Claus, I'm sorry, I would like to go back on the implicit second half because you very kindly answered so much questions around the top line. But I guess an implicit 3% to 8% growth on EBIT maybe warrants some explanation of what will take you to 3%, because right now, at least, I fail to see that. So, could you help us with some building blocks around that? And then, just a small follow-up on -- just on the capital allocation. So, can I just understand: when is it enough in terms of piling cash? Now it's DKK 1.7 billion. I'm just curious to understand when is it that you, kind of, see -- and I respect your dividend payment. And then, just finally, the hire of Jacob Glenting, congratulations on that. Can you just, kind of, in addition to just, you can say, what you mentioned on the strategy -- I mean, are you going back to a bit more, kind of, ALK classic? Or what is it that we are -- we should expect with this mix?

Thanks, Peter. I'll let Claus answer on the second half and the margin growth. Again, on the capital allocation, we can split it. "When is enough enough?" I like that phrasing. And then, obviously, I'll talk to Jacob as well. So, Claus, do you want to kick it off?

Yes. I can do the full year. And thanks, Peter, for the questions. And you're, of course, right -- before, I only touched upon the top line. If you look at the bottom line and the EBIT there, then we continue to have that very nice growth, 20% for the half year. As we stated, we are still guiding this around 26% -- how can that then be? What is it for building blocks that we are then, kind of, invested into, with sales doing good and gross margin also improving? There are a few things that are important to notice. First of all, we continue to invest into both the children launches and especially the neffy launches. These two are great opportunities for the company in the long run, and we will make sure that we keep investing into that. That also means that if we find, you can say, pockets of money where we can actually see that we can invest even further into secure the organic growth over the many years to come, then we would like to do that. And if we get those opportunities, for example, with some extra investment opportunities and money, then we would like to do it. And then, also on the R&D part, here, we have, of course, the peanut, as we just talked about before. Here, we are doing everything we can to speed it up as much as possible. The positive -- the dialogue with the FDA and EMA is positive. And that also means that we feel confident that it's the right thing to do to invest as much as we can into the peanut trial as fast as possible. Of course, we should not do it with head under our arms, but when we can see it makes sense, then we do it. And besides that, then, we're also starting up to invest into ALK014, our own anti-IgE. So, we have some big bets: two commercial, two R&D, where we have an opportunity in the second half of this year to increase the investments. And this is the building blocks to keep the 26% EBIT margin. Should I just add also on the -- just high level on the -- when it's enough enough, it's a good one. I think we will steal that one. Of course, there is no right or wrong answer on that one. But we are, of course, also debating internally when is enough enough. As Peter alluded before, and he can add a little bit more again maybe on the BD. But of course, we would like to make sure that we have opportunities, also financially, that if there is anything we find, then we can actually quite fast react on it. And that means that where we are right now, we would like to keep that flexibility. But it also means that if we do not find anything, then, as we have said before, we do not want to be a bank, and then we will continue, one, with the dividend -- that's the plan. And then, share buyback could be an opportunity. Right now, there are no plans; and, of course, we would inform you about it. But that could be an option if we can see that there are no BD opportunities out there that we would like to spend our cash on. But we will come back to that as soon as we know something concrete.

Yes. Thanks, Claus. I think on the BD side and also on Jacob as new Head of R&D -- I think on the BD side, we will continue to explore the opportunity space. It's important for us to say that when you look at -- when we outlined Allergy+, we know that in the respiratory area, we have a really strong base. We also have a high market share, which limits some of the moves one could envision there. But when we look at some of the other areas, the first one being anaphylaxis, it was clear we could do something on the BD side. We did it. And I think we had a really good deal with neffy coming in at a very low price, paid off more or less immediately. And now, it's about if we can get this executed, which we believe we can. Then, we have food, and we also have potentially new areas, the example being the CSU with neffy. But in the food space and also to supplement some of the other spaces, there might be options out there that could help us, as example. So, we'd like to strengthen this because the thinking and the strategy is a global play opportunity to become a strong number one or number two, with ambition of always being number one, and then with a portfolio, meaning more than one product. So, for instance, in food, currently, we have peanut. And there is an example whether we should do something ourselves internally or if we want to add externally, as examples. It all boils down to price opportunities, et cetera, and timing. So, that's also why we need to work through some of these things. And it will, by the way, be an ongoing discussion internally. So, ideally, we can meet the investors' needs on all ends. Then, on Jacob, first and foremost, I'm also very pleased, and thank you for noting it, that we found Jacob. Jacob has gone through an extensive process against external candidates, and he came out on top. And, as I also stated, it's because Jacob brings the right type of expertise, both from 25 years in the field, PhD, and R&D background, in a strong combination with an understanding of ALK and what we do and what we need going forward. You asked whether this was, kind of, back to basics. I don't think ALK had ever left the basics, but I think we look at it as an opportunity with Jacob to strengthen the partnership side, but also to really build a stronger bridge between R&D and commercial and continue to strengthen our position, both in the respiratory space but also in some of these new spaces. And Jacob brings that expertise. And then, do remember, Jacob has an organization of close to 400 people that are all experts and the subject matter experts, and who have been vital in our success so far. And luckily, I believe all of them are continuing with ALK on top of it. So, I really feel we have a strong foundation, but Jacob brings something else to the table. And I think he brings that combination that will allow ALK to scale and further build, and become and stay the number one leader in this space. So, super pleased. And hopefully, you will see it soon as well, Peter. So, I hope that, kind of, wraps up the questions.

Our next question comes from Sushila Hernandez from Van Lanschot Kempen.

On neffy, what could the CSU opportunity mean for ALK? And if you opted in after the Phase IIb data, what kind of investments are you looking at?

Thanks, Sushila. So, neffy CSU, as I heard it -- neffy and the Phase IIb. So, ARS is currently conducting the trials. We expect to have the readout in Q1 now. The reason for the slight delay is, basically, when you run the trial, you want, unfortunately, to see at least three incidents from a patient. And luckily, we cannot decide when that happens for each of the patients. So, we need to have the patients to wait for that. So, that is currently being conducted. By the way, part of it is being conducted in Germany. So, we are obviously excited around the trial and the trial results. Now, in terms of the investments coming from it -- it's too early to say. But we will obviously, together with ARS, depending on the outcome and also the research we've done, figure out how to scale this. Basically, as it stands, this is an ARS investment, with us having the commercial rights outside of the U.S., but we are closely involved. If it turns out and if the business case look as promising as we've seen so far, then we'll obviously work hard to ensure we have the funds in order to commercialize the product as fast as possible. But that will depend also on what are the asks are from the European authorities, authorities in Canada, U.K., and other markets. So, that remains to be seen. So, first and foremost, we're waiting on the trial outcome. But we are sharing ARS's optimism about the potential. I will say, though, that -- do remember -- there's a difference between what you pay in the U.S. and what you pay outside of the U.S. So, I think the potential outside of the U.S. cannot exactly be 1:1 with what you see in the U.S. Nevertheless, a very exciting product and potential for the future. Did that answer, Sushila?

That's clear. Thank you.

Showing no further questions, I'd like to turn the floor back over to management for closing remarks.

Thank you very much, and thank you all for the good questions. Before we end the call, let me just draw your attention to a few upcoming investor events and roadshows across our three continents. We certainly hope to see you at one of these events. Please also note that we will release our Q3 report on the 17th of November. It was previously planned for the 18th of November. With this, we will end today's session and wish you all a pleasant day. Goodbye. Thank you.

Ladies and gentlemen, with that, we'll conclude today's conference call.