• Sellout Growth: 11% in Q3 2024, driven by normalization of demand for flu, respiratory pain, and fever products.

• Gross Margin: Maintained close to 60% despite lower revenue.

• Marketing Expenses: Increased by 6% with more investments in media and medical visits.

• Selling Expenses: Increased by 5% compared to last year.

• General and Administrative Expenses: Increased by 10% due to higher consultancy and IT project costs.

• Free Cash Flow: Grew by 23%, exceeding BRL550 million.

• Net Debt Reduction: Reduced by over BRL250 million in Q3 2024.

• CapEx Investments: BRL107 million, focusing on production capacity expansion and brand internalization.

• R&D Investment: Higher than 7% of net revenue, supporting portfolio innovation.

• Warning! GuruFocus has detected 6 Warning Signs with HYPMY.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hypera SA (HYPMY) reported an 11% growth in sellout for the third quarter of 2024, driven by the normalization of demand for flu, respiratory pain, and fever products.

• The company achieved a 10% increase in its Dow Jones Sustainability Index score, highlighting its strong corporate governance and ESG initiatives.

• Free cash flow generation grew by 23% in the quarter, reducing net debt by over BRL250 million.

• Hypera SA (HYPMY) is leading in new drug registrations in Brazil, with over 12 registrations for medications in 2024.

• The company is investing heavily in R&D, with expenditures exceeding 7% of net revenue, reinforcing its commitment to innovation.

Negative Points

• The working capital optimization process led to a reduction in net revenue and impacted income, affecting short-term operational leverage.

• General and administrative expenses increased by 10% due to higher consultancy, digital, and IT project costs.

• The EBITDA margin and net income declined this quarter due to lower short-term operational leverage.

• The competitive scenario for generics remains intense, with high competition affecting growth and profitability.

• The company's CapEx for 2025 is expected to be higher than in 2024, indicating ongoing significant investments.

Q & A Highlights

Q: How has the inventory adjustment process affected Hypera's growth levers and legacy portfolio? A: Breno Toledo Pires de Oliveira, CEO, explained that demand for seasonal products, including their mature portfolio, has been growing, bringing them close to or above market levels. New product launches are a significant growth driver, and Hypera continues to invest heavily in them. The inventory adjustment process is neutral for clients, enhancing efficiency without requiring additional investment from Hypera.