Alaska Air Group, Inc. Price & Performance (ALK)

Results were as expected and in line with the full year outlook. Revenue grew by 11% to DKK 1,500,000,000.0. Europe continued to perform very well and delivered double digit sales growth across all product lines. European tablet sales increased by 32% as we further solidified market momentum. We estimate that that number of new patients coming in, were basically attributed to starting the sample treatment in 2024. [indiscernible] '24 initiation season exceeded last year's number by more than 10%. This should give us some comfort for the growth prospects in 2025 although too early to conclude since the initiation season still ongoing. North America and international markets didn't contribute to top line growth in Q4. [indiscernible] knew that in advance and flagged this during the Q3 earnings call. And in the Q3 report. Consequently, revenue growth was lower than in Q2 and in Q3. Claus will add a few more words to this later on the call. Regarding investments, then Q4 is always our largest investment [indiscernible] due to the initiation season. But in 2024, we decided to invest even more and speed up strategic initiatives We increased R and D cost invested further in both the peanut tablet program and the upcoming Acarasex trial in China.

Sales and marketing costs reflected increased activities to support the pediatric launches. Costs also included one off cost of 26,000,000 related to previously announced optimization initiatives in Europe and the adjustments in China where we reshape the organization, due to the delayed timeline for the Acarasax launch. We also had additional planned costs related to [indiscernible] including advisory fees, Due to these one off costs, the Q4 operating margin ended at 14%, which is still in line with our guidance. Slide four, please. [indiscernible] So let's move from quarterly variations to the more accurate full year picture. 2024 was a record year for ELK. We delivered on short term targets [indiscernible] established a new strategic framework for ALK's long term development. [indiscernible] Revenue was up 15% driven primarily by European capital sales. Growth was higher than what we've seen in previous years, and earnings improved by 65% in local currencies. The EBIT result exceeded DKK1 billion for the very first time. Thanks to solid sales growth, margin expansion and efficiencies across the business. Our very strong set of results which Claus will elaborate on later. Another highlight was the LG Plus strategy execution. Which has started to deliver the desired results.

Let me just point out a few things showing our efforts to unlock further potential in existing markets and expand into new therapy areas [indiscernible] with high unmet needs. Firstly, we are expanding the addressable market in respiratory allergy. We do that when we add new patient groups, particularly children and expand into new relevant segments. Secondly, we took important steps to build new revenue streams in the broader allergy space. We in licensed the nasal spray NEVI to support our ambitions in anaphylaxis. Moreover, in Food Allergy, we have good data readouts from our ongoing clinical development program. The fast initiation of the strategy implementation and the EBIT optimization was made feasible by our successful execution of the plus two fifty million DKK optimization program. 2024 was also a year where LK calibrated its business plan to focus on high potential growth levers. This is reducing complexity and generating savings, which will partly support earnings and partly be allocated to initiatives with the highest potential to generate strong returns and the greatest benefits for patients and prescribers. We'll detail this during the presentation But first, I'll hand it over to you, Claus, the market trends on Slide five. Thanks, Peter.

Let's dive into the performance in our sales regions first. Our main region, Europe, stood out as an exceptional contributor to growth. Sales were up 22% with a double digit growth in most Northern Central And Western EU markets, including Germany and France. Tablets were the number one source of growth. European tablet sales increased by 31% as we activated more patients, prescribers, payers and key opinion leaders. Approximately half of the growth came from higher volumes, while improved pricing and rebate adjustments roughly accounted for the other half. Trading patterns patterns among wholesalers were still a factor. But these movements had a lower negative impact than in 2023.

Sales of our two other product lines also grew by double digits in Europe. Skid and slit drop sales increased by 10% while sales of other products grew by 32% driven by the Adrenaline Pen Gexx. LK consolidated its position as the European Margadita. Revenue in North America was unchanged and we are not satisfied with this result. It was positive to see tablet sales were up 15%, mainly on higher volumes, while the impact from higher average selling prices in The U. S. Declined in the second half year. Sales in skid bulk extracts were flat while sales of other products were down 7%. I'll come back to this more in a moment. Revenue in International Markets was up 4%. Travel revenue grew by 9% although growth was somewhat impacted by phasing of shipments to Japan, where capacity constraints prevented our partner, Tore, from fully meeting demand.

Still, TUI firmed up its position as market leader with growth of 12% in the in market sales. Revenue from skid in China registered a double digit decline as no shipment was sent to China during the renewal of LK's import license and due to some in market inventory adjustments. The renewal has now been completed and we have started producing new skid products for China that will be shipped from the spring and onwards. Nevertheless, the in market sales in China contribute to grow by double digit. Let's turn to the product lines on Slide six. [indiscernible] Global tablet revenue was up 24% due to the strong performance in Europe, Global revenue from skid and slit drops was up 6% thanks to higher volumes improved pricing and rebate adjustments in Europe. Global revenue from other products increased by 7%. Dx sales recovered nicely from the 2023 supply challenges Oppositely, sales of other products were down in North America as we decided to discontinue some high volume, low margin contracts [indiscernible] In addition, Prepaid sales performed below expectations. We are pleased with the prepend business, which we acquired in January. But the stock up with doctors ahead of the acquisition and the lack of reorders links in the first half year came as a surprise to us.

We expect to see normalized sales growth With these updates, let's move to Slide seven. And the financial results. Revenue was totally up 15% local currencies and exceeded DKK5.5 billion for the first time. [indiscernible] gross profit of SEK 3,600,000,000.0 yield a gross margin of 64.2% an improvement of more than one percentage point. This improvement was linked to volume growth, changes to the sales mix, improved pricing and production efficiencies. In line with our expectations, these factors was partly offset by higher input costs and minor one off cost to optimizations in product supply. Capacity costs increased by 4% to DKK2.5 billion, This figure includes the vast majority of the DKK75 million in one off expenses related to optimization initiatives in Europe and China. Without these one offs, capacity costs would have been flattish mirroring the positive impact from resource optimizations and general cost savings. [indiscernible] Operating profit, EBIT, was DKK1.1 billion, an increase of 65% in local currencies and 64% in Danish kroner. It was first time we exceeded [indiscernible] operating profit. The EBIT margin increased from 14% to 20% and the underlying EBIT margin would have exceeded 21% had it not been for one off cost. Finally, free cash flow was negative at minus DKK204 million, This was as called due to the upfront payment of DKK1 billion related to the strategic license deal [indiscernible] Excluding the upfront payment related to the Navy license agreement, free cash flow ended better than expected and increased to $290,000,000 DKK290 million.

DKK790 million, sorry, driven by improved earnings, lower CapEx and changes to working capital. The two graphs to the right point out two important factors in ALK's earnings journey. Firstly, have managed to increase the gross profit by 15% On average, in the last four years, compared to the 12% top line growth, in the same period. We remain keen on sustaining this trend Although fluctuations may occur from year to year, Secondly, we have managed to contain capacity costs so the capacity cost to revenue ratio is down by nine percentage points Faust. So all in all, a strong set of results that continued this solid traction. Now back to you, Peter, and the strategy on Slide eight. Thanks, Klaus. The annual report gives a detailed account of the execution of the LNG plus strategy. So let me just focus in on a few of the highlights. As a reminder, the strategy builds on ALK's promise to provide life changing solutions for the millions of people living with allergies. 2024, we estimate that around two point six million people were treated with ALK products. A net increase of €200,000 and will continue to target five million patients [indiscernible] by the year 02/1930. [indiscernible] A major event last year was the approval by 21 countries of our HOSTOS MITE tablet at Carisax for children use.

A similar process for our three tablet, Etula Saxx, is progressing so that this tablet could become available for children and adolescents mid 25. By then, all our major tablet products will be approved for all age groups and we expect that the complete portfolio for all ages will open doors to even more prescribers. This will become an important catalyst for our long term growth. Market expansion continued [indiscernible] where our partner, Tori, is increasing production capacity to meet high demand. While also working to bring our grass tablet to the market. The capacity increase is expected to be ready the second half of twenty twenty five In China, the country with the highest number of people with house stocks might allergy worldwide, we are expecting to initiate are conducting initiation trials for Carisax. Key to deliver the clinical data needed to obtain an approval for the tablet. And subject to a successful outcome, expect a launch around '28. In India, our partner, Doctor. Redis, will launch our Houstos My Tablet This Year, Based On The Recent Regulatory Approval. We More We Also Received Very Good News From The UK where the newly NICE recommendation has paced has paved the way for Carisax in the public National Health [indiscernible] successful outcome makes Akarasax the first AIT tablet eligible for general reimbursement in the NHS system. [indiscernible] We hope for a similar outcome for our Treetab at the Tubeless Sacks which has been submitted for review very recently.

UK is currently one of the few major AIT Markets In Europe where ALK's tablets are authorized without adequate public reimbursement. Our key strategic objective is to strengthen the pipeline. In each disease area, our ambition is to build a portfolio of solutions with the potential to establish ALK as a global market leader. And thereby substantially expand our addressable markets Food allergy. Based on the positive Phase one outcome, our trial in peanut allergy advanced into Phase two for dose [indiscernible] Pleased with our first launches. We also recently submitted an application to expand the EU approval of NEVI to also include small children weighing expect skid sales to benefit from higher volumes and market expansions in Europe, supported by improved Pricing in North America. And slip drop sales are anticipated to grow in line with the ongoing AIT market expansion In France,