Alvotech Q3 2026 Earnings Call - Manufacturing Recovery Accelerates as Three FDA Approvals Loom, but Guidance Slips to Low End

Conference Call Operator: Good day, and thank you for standing by. Welcome to the Alvotech Q3 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Benedikt Stefánsson, VP of Investor Relations and Global Communication. Please go ahead.

Benedikt Stefánsson, VP of Investor Relations and Global Communication, Alvotech: Thank you, and welcome to our listeners. Yesterday evening, the company issued a press release announcing our financial results for the first nine months of 2026. Material accompanying today’s earnings call, including the presentation we will be referring to on today’s call, are available on our website, alvotech.com, in the Financial section. Our press release, presentations, and statements that we make on the call today may include forward-looking statements. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. Any risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. Presenting on today’s call are Róbert Wessman, founder and Executive Chairman, Lisa Graver, Chief Executive Officer, Joseph McClellan, Chief Operating Officer, and Linda Jónsdóttir, Chief Financial Officer. Róbert will begin today’s presentation with a brief overview.

Lisa will then present a commercial and operations update, Joseph will provide a pipeline and regulatory update, and Linda will conclude with a discussion of the financial results. Following the presentation, our team will be happy to take your questions. With that, I would like to turn the call over to Róbert Wessman.

Róbert Wessman, Founder and Executive Chairman, Alvotech: Good afternoon, everyone, and thank you for joining us here today. It is now just over two years since we entered the U.S. market commercially, and we have come a long way in that time. Today, we have a growing portfolio of commercial products across major global markets, and some of the most important opportunities in our history are directly ahead of us. We are expecting FDA approvals on three products before end of this year, including AVT05, which we believe has particularly strong potential. Beyond those near-term opportunities, we have built what we believe is one of the strongest biosimilar pipelines in the industry. Our programs for Entyvio and high-dose Eylea are great examples. We are among the first to file with Entyvio in both U.S. and Europe. With the high-dose Eylea, we made the first known regulatory filing anywhere in the world.

These are very large markets, and we believe being early puts Alvotech in a very strong position. We have also built the infrastructure to support that growth. We have invested more than half a billion dollars in our manufacturing capabilities in Iceland, created a world-class platform at the heart of Alvotech. While Iceland remains our home base, we are building an increasingly global and cost-effective supply chain through strategic partnership with Fujifilm, Lotte Biologics, and other long-term partners. Our business model is evolving too. Our new partnership with Lotus gives us, for the first time, the opportunity to commercialize two of our pipeline products directly in the U.S. market alongside our partner. We continue to lead the development and production and supply. At the same time, we are capturing more of the value chain. I believe Alvotech is now at a very important inflection point.

Today, we have one of the strongest pipelines in the industry. We have the manufacturing capabilities and the commercial reach to support the next phase of our growth. I am very excited about what lies ahead of Alvotech. We expect the fourth quarter to be the strongest in Alvotech history, and we have a strong order book as we move into the year 2027. With that, I will hand you over to Lisa to take you through the business updates.

Lisa Graver, Chief Executive Officer, Alvotech: Thank you, Róbert. I want to begin with two important FDA approvals we received in October for Simlandi at our Reykjavik facility. The approvals of additional manufacturing capacity and of our enhanced manufacturing process in DSM2 are significant developments. They follow the FDA’s closure of its May inspection with a Voluntary Action Indicated classification and provide further evidence of the progress we have made in strengthening our manufacturing and quality systems. They also give us greater operational flexibility as we work to supply an expanding commercial portfolio. Joe will explain the technical implications and implementation in more detail. At our half-year results, we described a business with strong underlying demand but constrained product availability due to the cumulative impacts of the manufacturing slowdown related to our quality improvement programs. We explained that restoring production was the starting point and that the cadence in commercial deliveries would build over time.

The third quarter shows further progress along that path. Our focus remains on continuing to fulfill market demand and sustaining that progress through the important final quarter of the year. Turning briefly to our financial performance, revenue for the first nine months was $323 million, with EBITDA of $78 million, an increase of 15% year-over-year. As previously indicated, we expect a significant proportion of our full-year revenue and EBITDA to be generated in the fourth quarter. We now expect performance to trend towards the lower end of our stated range. Linda will walk you through the financial results in more details. Turning to our commercial and operating progress, I would highlight three drivers of value creation. First, commercial performance. Product and service revenue increased to $58 million in Q3, up 78% year-on-year, and 6% over the second quarter.

This is clear evidence of the gradual recovery we outlined in August. Our established products continue to demonstrate solid commercial traction, while newer launches are broadening the portfolio’s geographic reach. Second, our pipeline, where we have continued to achieve important regulatory milestones. Our Entyvio biosimilar is now under review in both the U.S. and Europe, covering both intravenous and subcutaneous presentations. In Europe, AVT29 became the first known regulatory submission worldwide for a biosimilar to high-dose Eylea. Together, these programs position us to participate in the first wave of biosimilar competition in two important markets. The agreement with Lotus Pharmaceutical, announced by our partner after half-year results, is an important illustration of the commercial potential of our pipeline.

It gives Alvotech an opportunity to participate directly in the U.S. commercialization of biosimilars to Hemlibra and Imfinzi, alongside our partner, evolving our traditional partnership model and creating the potential to capture more value from these assets. Third, manufacturing, where our priority is to put our strengthened capabilities to work in support of reliable commercial supply. Reykjavik remains an important part of our manufacturing capacity, complemented over time by additional sourcing options through Lotte Biologics and Fujifilm. Taken together, these developments strengthen our ability to meet market demand consistently while building the portfolio and capabilities required for future growth. Turning to our established franchises, AVT02 and AVT04 continue to provide a strong commercial base for the business. In the U.S., Simlandi remains the number 2 adalimumab biosimilar, with market demand continuing to grow.

The recent FDA approvals provide additional manufacturing capacity and flexibility, which will help us address that demand as supply increases. In Europe, HUKYNDRA continues to demonstrate the longevity of the franchise, with sustained demand across key markets several years after launch. For AVT04, we are seeing relatively rapid biosimilar adoption. SELARSDI is benefiting from the expanding U.S. market as Teva builds formulary access, while UZPRUVO remains well-positioned in Europe as biosimilar conversion continues. Together, AVT02 and AVT04 provide an established commercial base as the contribution from our newer launches begins to broaden. With respect to our newer launches, we are particularly encouraged by the progress of AVT05, our biosimilar to Simponi. Together with Advanz Pharma, we have established a commercial presence in 13 European markets, including all five major markets. We are seeing encouraging momentum in Germany, Spain, the U.K., and France, supported by tender successes and expanding market access.

As the only golimumab biosimilar on the market in Europe, AVT05 benefits from a strong first-mover advantage. In the U.S., we continue to prepare for commercial launch with our partner, subject to the necessary regulatory approval and favorable resolution of a pending patent motion filed by the brand. A hearing was recently held in the Eastern District of Virginia following a motion for a preliminary injunction filed by the brand in an attempt to prevent our launch. While the court is expected to rule on the motion in the coming weeks, we remain confident in our position and that the motion will be denied. AVT06, our aflibercept two milligram biosimilar, has established a footprint across more than 10 European markets and in Japan. The broader aflibercept market is moving rapidly toward high-dose treatment, reinforcing the importance of AVT29 as a potential first-wave high-dose aflibercept biosimilar.

Beyond the progress of our marketed portfolio, we also took an important step in the evolution of our commercial strategy. As noted earlier, we announced a strategic licensing and commercialization agreement with Lotus Pharmaceutical, covering AVT34 and AVT87, our proposed biosimilars to Imfinzi and Hemlibra. This agreement is particularly significant because, for the first time, Alvotech will have the opportunity to participate directly in the commercialization of its products in the U.S. Under the agreement, Lotus will commercialize both products through Alvogen, while Alvotech also retains the right to commercialize them directly. This represents an evolution of our established business model. Our global partner network remains central to our strategy, but where economics support it, we now have the option to participate more directly in commercialization and capture a greater share of the value we create through our integrated development and manufacturing platform.

At the same time, the agreement extends our commercial reach into eight Asian markets where Lotus will have exclusive commercialization rights. The agreement also provides for potential upfront and milestone payments of up to approximately $150 million, alongside future commercial supply revenue. We see this as an important example of how we can continue to evolve our partnership strategy, combining the strength of our established global network with more direct commercial participation where the opportunity and economics support it. More broadly, we continue to see interest in our development and manufacturing platform from potential partners. We are pursuing opportunities selectively, seeking terms that meet our partners’ needs and create attractive value for Alvotech. With that, I will turn it to Joe to discuss our regulatory and manufacturing achievements in more detail and the continued progress of our development pipeline.

Joseph McClellan, Chief Operating Officer, Alvotech: Thank you, Lisa. Let me build on the manufacturing developments Lisa highlighted and explain what they mean for our operations and future supply. In October, we received two FDA approvals that strengthen both capacity and productivity at our Iceland facility. These capacity enhancements had already been approved in Europe. The first approval allows us to manufacture Simlandi drug substance for the U.S. market in both manufacturing suites, DSM1 and DSM2. This effectively doubles the drug substance capacity available for U.S. supply and gives us much greater flexibility in scheduling production. The second approval covers our enhanced manufacturing process, Process 2.0. This is a significant technical achievement of our process development, manufacturing, quality, and regulatory teams. Process 2.0 more than doubles drug substance output per batch compared with the previously approved process. It does so at the same upstream manufacturing scale without compromising product quality.

In practical terms, we can produce the same quantity in fewer batches. That improves productivity and frees up capacity for other products in our growing portfolio. This is a step change in Simlandi manufacturing productivity and significantly strengthens our ability to meet commercial demand. We have already implemented Process 2.0 in AVT02 manufacturing and are supplying commercial product made using this process to the U.S. and European markets for the fourth quarter of 2026. Turning to our U.S. regulatory progress, at our half-year results, we outlined the extensive improvements made across our manufacturing operations and quality systems. The subsequent Simlandi approvals mark further operational progress in Iceland and demonstrate our ability to meet demanding regulatory requirements. These approvals follow our June 2026 FDA resubmissions for two products, AVT05, our proposed biosimilar to Simponi and Simponi Aria, and AVT06, our proposed biosimilar to Eylea, two mg.

Our partner, Dr. Reddy’s, also resubmitted the application for AVT03, our proposed biosimilar to Prolia and Xgeva, during the same period. All three applications share the same December PDUFA date, although the FDA assesses each application independently. We continue to support the agency’s review as we work towards these important milestones. Alongside our progress in Iceland, we continue to expand our global manufacturing network. In October, we announced a long-term strategic partnership with LOTTE Biologics to manufacture drug substance. Under this agreement, LOTTE will produce drug substance for multiple biosimilar products at its Syracuse, New York facility, supplying global markets. The partnership complements our existing relationship with FUJIFILM Biotechnologies, which will provide an additional source of commercial supply in the U.S. Commercial production with Fujifilm is expected to begin in the second half of 2027.

Together, these partnerships are progressively strengthening our network, adding alternative sources of supply, and giving us greater flexibility and resilience. This is an important part of our strategy to support a growing commercial portfolio and ensure continuity of supply over the long term. Let me now turn to our pipeline. During the quarter, we continued to advance our internally developed programs in immunology, ophthalmology, and oncology. There are two particularly important programs I want to highlight. First is our vedolizumab program, which includes AVT16 and AVT80, our proposed biosimilars to Entyvio. Together, they cover both intravenous and subcutaneous administration. The FDA accepted our AVT16 application earlier this year. In August, it accepted our separate AVT80 application, covering both prefilled syringe and auto-injector presentations. In Europe, a single validated marketing authorization application covers both products. Developing both presentations is central to our strategy.

By addressing both routes of administration, we have the potential to compete across the reference product’s full range of presentations. With applications under review in both Europe and the U.S., we continue to work towards the next regulatory milestones and the commercial opportunities these products represent. The second program is AVT29, our proposed biosimilar to Eylea 8 mg. As Lisa noted, the ophthalmology market is increasingly shifting towards higher dose aflibercept. Our development strategy addresses both segments, AVT06, our biosimilar to Eylea 2 mg, and AVT29, our proposed biosimilar to Eylea 8 mg. In October, we announced, together with Advanz Pharma, what we believe is the first regulatory submission worldwide for proposed biosimilar to Eylea 8 mg. We submitted the application to the EMA as a line extension to the existing European marketing authorization for AVT06, our aflibercept two mg biosimilar. The application has since been validated.

This is an important achievement for our development organization, as it demonstrates how we can build on our scientific and regulatory experience to advance complex biosimilar programs. At the same time, our clinical study supporting a future U.S. regulatory submission remains on track. We believe this positions AVT29 as an important early entrant in the emerging market for high-dose aflibercept biosimilars. To close, our recent achievements show continued progress on three fronts: strengthening our manufacturing platform, advancing regulatory approvals, and developing the next generation of biosimilars. Our focus is on turning these capabilities into reliable commercial supply and continued execution across our pipeline, supporting Alvotech’s next phase of growth. With that, I hand over to Linda for our financial review.

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Thank you, Joe. I will now take you briefly through some highlights of our financials for the third quarter and the first nine months of 2026. Unless otherwise stated, the figures represent adjusted numbers. Reconciliations to the corresponding IFRS measures are included in our earnings material that we released yesterday. As we discussed on our last earnings call, facility improvements that began in the second half of 2025 and continued through the first half of the year led to a manufacturing slowdown and temporary constraints on our ability to supply. These activities were completed by the end of the second quarter. Results from the third quarter still reflect that the ramp-up in supply is ongoing, and we expect the fourth quarter to be the strongest this year. I will begin with the third quarter highlights before covering the first nine months as a whole.

The third quarter showed improvement from the previous quarter in total revenues, gross margin, product margin, and adjusted EBITDA. Total revenues of $112 million were up 5% compared to the second quarter and down slightly by 2% compared to the same period last year. Both product revenues and license revenues rose quarter-on-quarter, but license revenues were down one-third year-on-year, while product revenues were up 78%. Our gross margin was 54%, up 3 percentage points compared to the second quarter, representing an increase in total revenues with cost of goods remaining flat. Adjusted EBITDA was $31 million in the quarter, up 40% quarter-on-quarter, and doubled compared to the same period last year. Turning to the financial highlights for the first nine months of 2026, total revenues were $323 million, down 23% compared to the same period last year.

This can be attributed to the slowdown in production, timing of licensing revenues, and the impact from the launch in the first half of last year of the biosimilar to Stelara in the U.S. Our gross margin percentage during the period was 54%, down 5 percentage points year-on-year, with impact from facility improvements in the first half of the year and timing of licensing revenues. Adjusted EBITDA was $78 million, up 15% from last year, representing a margin of 24%, an improvement of 8 percentage points year-on-year. As noted in our last earnings call, we are expecting Q4 to be the strongest quarter of the year and that we will see continued and stronger momentum on the product revenue side. Further on revenues in the first nine months of the year. Product revenues at $164 million contributed a little over one-half to the top line.

We now have five in-market products in global markets generating product revenues. Manufacturing output continued to be affected until the end of second quarter by improvement activities at our Reykjavik facility. In Q3, our focus has been on supplying to our partners and meeting their continued demand, which remains strong. We will see an impact of these trends in Q4 and as we go into the new year. Licensing revenues in the first nine months were $159 million, and while the split between product revenues and licensing revenues has trended towards 50/50 this year, both milestone revenue recognition and product revenues can be inherently lumpy. Milestone revenue recognition is driven by the timing of new agreements, progress in R&D, marketing authorizations, and other contractual milestones.

Product revenues can also fluctuate from quarter to quarter, reflecting the nature of our B2B model, where the timing of partner orders and shipment is a key driver. Last year, the split of total revenues by geography started to be more tilted towards Europe and the rest of the world. The split remains the same in the first nine months of this year. Turning to cash flow. Cash on hand at the end of the period was $61 million, and $143 million at the beginning of the quarter. Cash used in operations was $89 million during the quarter, reflecting changes in working capital. As you can see from the cash flow bridge, key drivers impacting cash flow in the quarter were $27 million from operations before working capital movements. Working capital absorbed around $116 million, reflecting manufacturing ramp-up. Net interest payments were $37 million in line with past quarters.

Investment in intangibles absorbed $32 million, reflecting continued investment in the advancement of our biosimilar pipeline. The impact of net borrowings, including a new loan facility in August, was $82 million. Looking at the balance sheet, let me start by briefly summarizing key items on the asset side and changes from year-end 2025. Intangible assets are up $93 million, which reflects the capitalization of qualifying development costs. Property, plant, and equipment increased by $11 million from year-end 2025, primarily reflecting investments in facility improvements during the first half of the year. Our inventory increased by $22 million, consisting of semi-finished products, while raw material inventory decreased. Contract assets increased by $45 million due to timing of revenue recognition. Looking at the equity and liability side of the balance sheet, total equity improved by $17 million, strengthened by the June 2026 equity raise.

Non-current liabilities, excluding the impact of derivatives and deferred tax, increased by $91 million, supporting pipeline investments and working capital. Current liabilities decreased by $16 million. This includes a $20 million recognition of a commercial provision, a decline in contract liabilities by $27 million as payments from our partners converted to revenue upon delivery, and a decline in payables by $36 million, contributing to working capital outflows. Turning to our financial outlook for the full year, we target revenues in the range of $650 million-$700 million. Adjusted EBITDA is targeted to be in the range of $180 million-$220 million. As we look ahead to the last quarter of the year and into 2027, we expect to be able to deliver year-on-year growth in 2026, with an expanded product portfolio and development milestones from our expanding pipeline.

Both milestone revenue recognition and product revenues can be inherently lumpy. As we are ramping up production to meet growing demand and fulfilling already received orders, Alvotech navigates a highly dynamic environment and remains focused on delivering results within the stated range. We now expect performance to trend towards the lower end of our stated range. As we have noted earlier, we expect to deliver healthy deleveraging of our balance sheet in 2027, presenting further opportunities to optimize our capital structure. With that, I will hand the call back to Lisa for a closing statement.

Lisa Graver, Chief Executive Officer, Alvotech: Thank you, Linda. As you can see, Q4 remains particularly important for our commercial and financial performance, and our priorities for the remainder of the year are very clear. We need to translate the progress we have made in manufacturing into planned product deliveries to support growing demand and the continued rollout of our newer products. We also need to execute on the regulatory milestones ahead of us. Finally, we need to finalize strategic partnerships for our growing pipeline of products, especially for key markets like the U.S. and Europe. The progress at Reykjavik, together with the additional supply options we are building through Lotte and Fujifilm, give us a stronger platform from which to do that. Our focus is now firmly on execution, while continuing to build the portfolio and our partnerships that will drive our longer-term growth.

Conference Call Operator: Thank you. We will now begin the question-and-answer session. As a reminder, if you wish to ask a question, please press star 11 on your telephone. To withdraw your question, please press star 11 again. We will take our first question. Your first question comes from Umer Raffat from Evercore. Please go ahead. Your line is open.

Umer Raffat, Analyst, Evercore: Thank you guys for taking my question. Two, if I may. First, how are you thinking about odds of a Simponi launch next year, considering we’re sort of still very midway through the litigation process? There’s technically no ruling in place, and this is as at-risk a launch as would theoretically be. I’m curious how’s your partner sort of thinking about the risk profile for launch. I ask because there appears to be some numbers in for 2027 Simponi contribution, and could that take a little longer just based on litigation timelines alone? Secondly, I’m sure you saw a lot of the stuff around Eylea in the last couple of weeks as it relates to the expert testimony.

Where does that leave you now in terms of the path forward, especially in light of sort of the argument that was presented by the expert, which appears to agree with a case for non-obviousness and the implications for district court and path forward? Would you need a completely new filing or a new BLA? Thank you very much.

Lisa Graver, Chief Executive Officer, Alvotech: Hi, Umer. Lisa Graver. Taking each of those questions. On Simponi, I think what we’ve said in the past, and certainly we maintain, is that we feel very strong in our position, both coming out of the preliminary injunction hearing as well as in total, our position against the patents that have been asserted in the underlying litigation. Nothing has changed. In fact, I would say coming out of the hearing, we are even more emboldened in terms of the likelihood of success around our position. In terms of preparedness, we at Alvotech obviously are prepared and will support our partner at the earliest possible moment to launch the product. We are not in a position to comment on our partner’s intentions in terms of precise launch timing.

What I can say, and what we have said in the past, is that we are working very closely with Teva in this case for the U.S. launch, and that we will be prepared at the earliest possible moment where we both have, of course, regulatory approval, but also are able to clear the preliminary injunction hearing. In terms of AVT29, I think there too, we feel very strong in the invalidity positions we put forward in the PGR. Those invalidity positions relate not only to non-obviousness, but also to lack of written description. We think both sets of arguments are very strong, and we’ve maintained that since the beginning. I think we’ve seen some, of course, red herring positions taken by the patent owner in response.

I think just coming out of the pre-trial or pre-hearing, pre-conference, or the conference, pre-hearing, which is set for December 4th, I think what we heard very clearly from the PTAB judges is that the focus here needs to be on the law and the facts. If you apply the law and the facts, we believe very strongly that the claims of the ’036 will be invalidated.

Umer Raffat, Analyst, Evercore: Thank you very much.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Glen Santangelo from Barclays. Please go ahead. Your line is open.

Glen Santangelo, Analyst, Barclays: Yeah, good morning. Just two quick ones for me. I wanted to follow a similar line of question as it relates to Entyvio, right? There’s another IP debate where most people are expecting Entyvio to run into the 2030s, but you all seem to have a very different view. I was curious if you could comment at all on your IP position as it relates to that product. Secondly, I wanted to talk about the Q4 guidance. You’re basically reiterating the revenue guide maybe at the lower end of the range. I appreciate the lumpiness of sales, but I’m curious as we sit here in mid-November with the quarter half over, how much visibility do you have on that fourth quarter expectation at this point?

Could you comment at all about maybe the licensing or milestone revenues that may be attached to the approvals in December so we can get a sense for the mixed contribution of revenues in Q4? Thanks so much.

Lisa Graver, Chief Executive Officer, Alvotech: Thank you. I’ll start with the question around Entyvio and the patent challenge that’s underway. I think from our perspective, and we certainly have said that previously, we believe we’ve developed a strong position. The patents that have been asserted are primarily relating to method of treatment or dosing regimen patents, as we refer to them. We have developed strong invalidity positions with respect to those, with the claims in those patents. We certainly believe that we will be successful in advance of any patent expiration, and we’ve stated that multiple times. I think in terms of likely outcome here, we do think we’ll be in the first wave. We filed first, both in the U.S. and Europe, and we’re well-positioned in both regions to protect and defend our position. We’re certainly preparing for success in both major markets. I’ll turn it to Linda on

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Yeah, absolutely. As I covered a bit earlier, both milestone revenue and product revenues can be lumpy, and of course, we are in a very dynamic environment. But looking at where we are sitting here today, taking everything into account, also likelihood of new deals coming in, and then looking at the total picture, we are confident in the lower end of the guidance range that we issued yesterday.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Jason Gerberry from Bank of America. Please go ahead, your line is open.

Jason Gerberry, Analyst, Bank of America: Hi, thanks for taking my questions. Another one on Entyvio. I guess, if you get timely approval and if there is freedom to operate in the U.S., I am just curious about how you see the opportunity. I know, in the past, maybe buy and bill products have been healthier biosimilar markets from a, I guess, a pricing and a revenue perspective. But, if you are able to secure an exclusive position in U.S. Entyvio, I wonder if the biosimilar opportunity from a price share perspective could be perhaps healthier than some of the more heavily competitive, sort of Stelara, Humira-type opportunities. Just curious how you think about that. Then my second question is just more of, in the advent of changes in regulations in terms of the clinical burden to develop a U.S. biosimilar, how are average program costs trending for you?

Just trying to think through the ability to absorb more programs over time. Thanks.

Lisa Graver, Chief Executive Officer, Alvotech: Perfect. I’ll take the first part of the question. In terms of, I would just say that we agree with your premise that with respect to Entyvio and how it’s reimbursed in the U.S., we do think that we will see, especially as a first wave entrant, the ability to do well, to be able to maintain and grow volume, and be able to see healthy margins. Certainly, as we work with our partner on the opportunity, we will be taking every advantage of Teva’s ability to contract and contract favorably in the U.S. market. We’ve seen that in past successes with our biosimilar to adalimumab, the biosimilar to Stelara. Even if more competitive, we have been able to reap very good dynamics just based on Teva’s ability to commercialize and do so in a very disciplined fashion.

I think first wave entrant into Entyvio, given the size of that market, how it’s reimbursed, fully align with your thoughts on that in terms of it likely contributing very well at both top line and at revenue, or at margin. Maybe I’ll turn it to Joe a little bit to talk on the clinical-

Joseph McClellan, Chief Operating Officer, Alvotech: Yep. Thanks, Lisa.

Lisa Graver, Chief Executive Officer, Alvotech: cost evolution.

Joseph McClellan, Chief Operating Officer, Alvotech: Yeah, absolutely. So, from a development perspective, there is still the requirement to develop a high-quality manufacturing process, demonstrate that manufacturing process at your commercial scale, and then demonstrate analytical similarity between reference product and your product that you want to be a biosimilar approved, plus do the PK study. So, those core aspects are still there, and those have always been more than 50% of the overall costs, for sure, to develop a biosimilar. So, the savings is on not having to do the clinical efficacy and safety study, yet there still is a significant amount of work. And from a timing perspective, no real change, at least the way that Alvotech does the development, because we always drive that CMC is really what is rate-limiting for our success to get to a molecule approved.

Jason Gerberry, Analyst, Bank of America: Yeah, thanks.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Dennis Ding from Jefferies. Please go ahead, your line is open.

Dennis Ding, Analyst, Jefferies: Hey, guys. Good morning. Thanks for taking my questions. Two, if I may. Number one, on guidance, maybe talk a little bit about what is driving the low end of revenue and EBITDA guidance. Is it just the timing of certain payments and orders that is being shifted into 2027, and that underlying demand still remains strong in the U.S. and ex-U.S.? Number two, for 2027, what are the different levers that could impact 2027 guidance? If you focus solely on the current base business without contributions from the new U.S. product launches, are you confident that revenue and EBITDA should continue to grow year over year? Thanks so much.

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Yeah, sure. Perhaps I start on the 2027 one. We are very confident in that we will see substantial improvements on the EBITDA side, between 2026 and 2027. We haven’t, of course, given out any more detailed guidance, but that’s perhaps a direction I can give to you. On our current guidance and why we’re towards the lower end, I think, as I referred to the dynamic environment, I think it’s fair to say that we have been dealing with a number of factors this year. We are finally now seeing that volume is ramping up on our end, and we are looking towards Q4 to be the strongest quarter of the year, which is, of course, extremely good to see, and we see the recovery taking place.

There are some timing impacts that are moving us towards the lower end of the range compared to what we saw earlier this year.

Lisa Graver, Chief Executive Officer, Alvotech: Maybe, Linda, just to add on to that and to underline the strong demand. Not only are we seeing that now through the end of the fourth quarter, but we are assuming that to continue into 2027, especially with respect to what we’ll call our base business in Q2 and Q4. Given just the general erosion and biosimilar penetration increasing in both of those molecules, I think we’ll see AVT02 probably trending towards 65% biosimilar by the end of the year, AVT04 probably greater than 50%, and in Europe, it’s even bigger. I think those dynamics are going to continue to help us feel comfortable in the growth that we’re going to see in 2027, in addition to the potential for new launches. Those launches, again, are both for two major markets, the U.S. and Europe.

I think there’s enough to build confidence, but again, as Linda pointed out, we haven’t yet guided for 2027.

Dennis Ding, Analyst, Jefferies: Perfect. Thank you.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Ash Verma from UBS. Please go ahead. Your line is open.

Ash Verma, Analyst, UBS: Hey, great. Thanks for taking our questions. I just wanted to go back to the Simponi discussion that a lot of people have asked about. Just trying to understand, as a part of this agreement with your partner, Teva, do you have any contractual obligation from them that they will launch, given that this is going to be an at-risk launch? I know they framed this as a 2027 potential launch yesterday as well, but generally we’ve seen Teva has not been very aggressively following generics, and focusing more on brands, so not really critical for them, but a big factor for you. Just wanted to understand if you have any confirmation that they will, in fact, launch while the litigation is going on.

Lisa Graver, Chief Executive Officer, Alvotech: Yes, Ash, thanks for the question. I mean, I think certainly what we’ve seen from Teva as a partner in biosimilars is a very strong and interested and engaged partner. This is an important piece, not only for our business, but for theirs, and it’s why we aligned and entered into our relationship in the first place, and we’ve only seen that grow. So, I have every confidence that we’ll continue to work with them in a very strategic way and make sure that each of the opportunities we’re bringing forward in the next several years will be maximized. That’s across the board, whether there’s IP, whether it comes to the commercial dynamics and contracting. I think we work very closely, and it is very much a partnership and a joint decision-making across the board.

I think the best way to underline this is that I think we are both aligned that there is real opportunity here. We have worked lockstep on our strategy, both from a regulatory and an IP perspective, but also as we look forward to the commercial event. For us, it is important, but I can tell you just based on our partnership dynamics, it is very much important to Teva and is a focus.

Ash Verma, Analyst, UBS: Thank you.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Arvid Necander from DNB Carnegie. Please go ahead. Your line is open.

Arvid Necander, Analyst, DNB Carnegie: Good afternoon, and thanks for taking my questions. The first one on deliveries and gross margins. I guess manufacturing returned to more or less normal levels in late June, and accounting for batch release lead times and the approval of the new Process 2.0, how should we think about the timing and pace of recovery in deliveries and gross margins through Q4 and into 2027? Secondly, on the R&D spend, at the end of Q2, you indicated R&D spending of roughly $200 million, but half of that capitalized for the full year. Is that budget still holding up, or have you had any reason to revise this? I will start there. Thanks.

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Mm-hmm. Okay, yeah. On the, like you mentioned, gross margin, but perhaps I focus on the product margins, because of course the gross margin is then very reliant on the licensing piece. But on the product margin side, I mean, that’s heavily dependent on a number of things, both just like the market mix and the competition and timing. But looking at where we are today, we have started to see stabilization. You see that already in our Q3 numbers. We still expect margins to remain somewhat compressed through 2026 because of everything that has been moving this year here on the facility improvement side. But then as we enter into 2027, that will be with a stronger product margin profile compared to where we are at now. On the R&D capitalization, I would say outlook for the year remains roughly the same.

Total R&D spend in the area of $200 million, with 50% capitalized.

Arvid Necander, Analyst, DNB Carnegie: Great. Thank you so much. Just the last one. I guess the lower end of the guidance still implies a very strong finish to the year, and you have previously indicated that deleveraging should follow in 2027. So, can you just give us a feeling for how much of that deleveraging that will come from profit growth versus cash generation, and do you view Q4 as the starting point for cash generation and deleveraging, or is there a risk that 2027 could be a bit more backend loaded again due to launch dynamics and phasing of partner deliveries?

Linda Jónsdóttir, Chief Financial Officer, Alvotech: On the deleveraging point, I mean, we have been indicating towards healthy deleveraging towards the later half of 2027. So I probably don’t want to go into too much details there since we haven’t given out the guidance yet for 2027. But looking at the total picture, we should be in a totally different level in the second half of 2027 from leverage point of view. It will be coming from a mix of things, so I can’t put it all on one piece there. So, I’ll probably leave it at that for now until we come out with more clarity for 2027 guidance.

Arvid Necander, Analyst, DNB Carnegie: Perfect. Thank you so much. Those were all my questions.

Conference Call Operator: Thank you. We will take our next question. Your next question comes from Christopher Uhde from SEB. Please go ahead. Your line is open.

Christopher Uhde, Analyst, SEB: Hi there. Christopher Uhde, SEB. Thanks for taking my question. I guess the first one would just be a quick clarification. Based on what you said earlier, I wanted to confirm that licensing revenues still are not, from the new approvals, are not in the low end of the guidance, and still. Secondly, thinking about your cash flow and your balance sheet and interest payments, last time you had this level of cash on the balance sheet, you took in capital. What is the situation now? Obviously, a different dynamic with a strong Q4 coming into play. What can you say about your operating cash flow for the year, the expectation there, and your interest rate payments going forward? Should we expect it to be at the same level as Q3 or higher or lower? Thank you.

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Yeah. I will start on the cash flow point. I mean, as you see in the cash flow bridge, the primary driver is working capital growth. I mean, it is very much related to that we are ramping up on the inventory side, on the supply chain readiness ahead of our launches and increasing demand, generally speaking. We are, of course, preparing for the anticipated regulatory approvals, including our December milestones, and we are also seeing just overall strong demand, for example, for Simponi in Europe. I would say, we are coming out of a period where we had limitation, and now we are ramping up for what is coming towards us. I think that explains the main trends on the cash side.

Looking towards the remainder of the year, and the trends on the working capital side, we will see accounts receivable building up towards the later half of the year since we have quite some shipments out in Q4. Then inventories will start to go down. This will even out a bit, but you see clearly the dynamics of ramp-up, which is ahead of us. In terms of the question on the guidance, we haven’t really been very specific about exactly what’s coming from milestone revenues versus the product revenues for Q4, even though we did guide as we did the range in the beginning of the year. I would probably just want to leave it at that at this point in time as we navigate through Q4. But as I said before, we are confident in the range, in the lower end of the range.

Christopher Uhde, Analyst, SEB: Okay. But just to try to clarify a couple things. Firstly, if you don’t get the approvals, then do you risk missing the range? Secondly, coming back to the interest payments, what kind of rate-

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Oh, yeah.

Christopher Uhde, Analyst, SEB: should we be thinking about?

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Yeah. So, I would say, we will keep the range despite the approvals. Again, we are confident in the approvals, but we will keep the lower end of the range. On the interest payments, I mean, I would say, until we start deleveraging, which is more in 2027, we will have around this level of interest payments. So, I would say that’s also why I highlighted the deleveraging point, because I think towards the second half of 2027, we will be in a much better position to navigate the optimization on that front. But it will not happen in the coming period, I would say.

Christopher Uhde, Analyst, SEB: Okay. If I could just rephrase my original question. Are you fully financed to cash flow positivity?

Linda Jónsdóttir, Chief Financial Officer, Alvotech: Can you say it again? Are you

Christopher Uhde, Analyst, SEB: Fully financed to cash flow positivity?

Linda Jónsdóttir, Chief Financial Officer, Alvotech: I would say in general, we are expecting cash flow positive, to be cash flow positive in Q4 of 2026. But if capital is needed, we are confident in securing that, and we will just approach that both strategically and thoughtfully. But, yeah.

Christopher Uhde, Analyst, SEB: Thank you very much.

Conference Call Operator: Thank you. Once again, if you wish to ask a question, please press star one on your telephone. We will take our next question. The question comes from Adithya Venkat from Morgan Stanley. Please go ahead. Your line is open.

Adithya Venkat, Analyst, Morgan Stanley: Hi there. Thanks for taking my question. Adi from Morgan Stanley on for Tivo. Just a couple of questions on Humira and Stelara. You have previously said that neither franchise has peaked, so where do you see further share gains in 2027, particularly in the private label channel for Humira? To what extent do you think price erosion could offset volume growth? In terms of the near-term U.S. launches, assuming both Eylea and Simponi launch in 2027, how should we think about their commercial potential? Particularly on Eylea, how much share can you capture given Amgen’s head start and shift to high dose? Thanks very much.

Lisa Graver, Chief Executive Officer, Alvotech: I will take the first part. I may just need to ask for clarification on the second question. But in terms of Stelara and adalimumab, we certainly think that the biosimilar share is going to continue to grow through 2027. We are not predicting a peak just yet, so I think 2027 will still be a growth year. In terms of channel dynamics, I do think that private label, while still present, it is going to be difficult to predict sitting here today the ability to grow the private label channel. I would say our focus has been on growing formulary, and that has been very successful for us and our partner. And I do think from a price erosion perspective, we always assume some erosion. We have not seen significant through 2026.

I think conservatively, and again, we have not given guidance, but to talk high level, we do think there will be some erosive pressure, but nothing unanticipated from our perspective. On your second question, could I clarify, are you talking about Eylea or Entyvio? I missed the product name.

Adithya Venkat, Analyst, Morgan Stanley: Just clarifying, Eylea. Thank you.

Lisa Graver, Chief Executive Officer, Alvotech: Eylea. I think from the market dynamics for Eylea, obviously HD is growing. It is why we developed the program and why we are pursuing it. We still see a healthy component in the low dose, and we are projecting obviously continued growth of HD in 2027. But we do still think that there is opportunity, of course, in the low dose in our AVT06. For us, I think while the market is more formed, it is still not at a point where we do not think there is opportunity. Both just general market overall dynamics for the low dose remain positive for us, so we do think there will be contribution. But certainly, we are looking forward and will be prepared to take every advantage of the growth in the high dose once our product is approved and able to enter the market.

Adithya Venkat, Analyst, Morgan Stanley: Thanks very much.

Conference Call Operator: Thank you. This concludes today’s question and answer session. I will now hand back for closing remarks.

Benedikt Stefánsson, VP of Investor Relations and Global Communication, Alvotech: Great. Thank you. So on behalf of the Alvotech team, I want to thank everybody who listened and everybody who was asking questions on the call today, and wish you a wonderful rest of the day. Goodbye.

Conference Call Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.