Blau Farmaceutica SA

BOVESPA:BLAU3

Earnings Call Transcript 2023-Q3

[Bruna Gamboa, executive]

Good morning, everyone, and welcome to the earnings call for the third quarter of 2023 at Blau Farmacêutica. Today, we're live with Marcelo Hahn, our Founder and CEO; Douglas Rodrigues, CFO; and me, Bruna Gamboa, IR. At the end of the presentation, we'll begin our Q&A session. [Operator Instructions] Our calls taking place in Portuguese with simultaneous translation into English and the webcast is recorded on the IR website.

Before we begin this call, we'd like to invite you to come to our Blau Day, which will take place on the 28th of November from 8:30 onwards, and it's going to be in person as well as online.

Now I want to pass the floor on to Marcelo so that we can begin the presentation.

[Marcelo Hahn, executive]

Good morning, everyone, and welcome to our earnings call for the third quarter of '23. On Slide 2, I want to highlight that in this quarter, we had an all-time high in investments as well as the amount invested. And the R&D investments and CapEx performed even despite the macroeconomic challenges and strong [indiscernible] market, our financial strength made it possible for us to invest in our long-term growth.

The transaction with Prothya, a European company that performs fractionation of human plasma and the production of highly complex medication and drugs is in line with our internationalization strategy with the search for revenues and hard currencies, internationalization of strategic product lines. And this allows us Prothya as a platform for the distribution of our products in Europe and in the U.S.

On the next slide, we will be giving you more details on this transaction. In this period, we invested BRL 31 million in R&D, which represented 80% of our net revenue. Our project with Smillis Bio is for the production of 4 monoclonal antibodies, which has been progressing according to the stipulated schedule. And in this quarter, we began installing our large capacity single-use bioreactors, P400 at our API plant.

In the quarter, we also began the integration of the Bergamo Laboratory that we acquired at the end of June, with synergies that are going to be captured from the first quarter of '24. During this period, we were also able to capture BRL 121 million in benefits related to the purchase of this transaction.

On Slide 4 of the presentation, we're going to provide more details of the consolidation process at Bergamo. I want to highlight the performance of our last launches, they represent 11% of our net revenue in the quarter, and they have been performing above expectations with an increase in our market share every quarter. About P1,000 in Bergamo at the end of October, we performed the protocol for Sedin, for income tax benefits, and we're going to give you more details about this during Blau Day. Despite the quarter's challenges, we had important recent achievements, and I'm really confident that we're on the right track.

We know that we still have a lot to do, but we have important transformational projects underway that will generate results in the long term and that will position Blau at another level as a company.

Moving on to Slide 3, we're going to present some more details on the investments in Protea. At the end of August, we invested BRL 50 million in Protea, one of the largest plasma fractionation company in the world through a loan agreement that's convertible into shares at the company equivalent to 20% of its share capital. Prothya is a Dutch company, it has over 65 years of history, and it's focused on plasma fractionation and production of medication, including albumin and hemoglobin coagulation factors, [ protamine ] complex, among others, with its own portfolio and it's very much acknowledged throughout the European Union and other countries, including Latin America, where they're distributed by Blau.

Protea also provides CMO services to large companies in blood products such as Takeda, Grifols, Biotest and LFB. They have over 1,000 employees, 4 plasma collection centers in Hungary and production plants in Brussels and Amsterdam. And they have higher capacity to fraction 3 million liters of plamsa per year. They also have their own R&D center with a long legacy of innovation successful products.

The company has shown growth and is going through an expansion moment. In 2022, Prothya recorded a net revenue of EUR 244 million and expected growth of about 20% in 2023 with an increase of operational efficiency, results management and higher productivity in plants.

Now we're going to move on to Slide 4 of this presentation. For those of you who follow the company, remember, at the end of June, we performed the acquisition of the Bergamo lab. And in the third quarter, we began integration process. We're excited with this partnership and this consolidates with one of the more -- most complete portfolios and in this medication line. From the beginning of 2024, we started to capture synergies with operational leverage, combining portfolios and the commercial model using the productive capacity available and increasing our purchase power in both companies.

We also have opportunities to export products from Bergamo to our LatAm affiliates transferring registrations to Blau subsidiaries and also other opportunities to gain in the operational production and tax areas with the benefits we had for the very beneficial purchase at the lab of representing BRL 121 million. Thank you all, and I'll pass the floor back to Bruna. Thank you very much.

[Bruna Gamboa, executive]

Thank you, Marcelo. Now moving on to Slide 5. We're going to highlight the product pipeline, which is updated quarterly. And it's important to reinforce that we present preliminary information and that the dates presented are estimates in the company since the registration of this medication really depends on regulatory agencies. And there may be changes that could accelerate or delay the product launch.

This year, we have already achieved the registration for 11 drugs that have a total addressable market of BRL 713 million among which 3 of these have already been launched by September. By 2026, we have 43 more products that are going to be launched, adding up to an addressable market of BRL 7.5 billion. In this quarter, we submitted a new drug to ANVISA and 6 in other Latin American countries, and we were able to achieve 6 new registrations in Brazil and 7 in other Latin American countries.

As you can see in the chart on the right, at each quarter, Blau has been increasing its share of new products. Yes. [Technical Difficulty]

Guys, this is live. And so we had some issue here in our technical aspects, but we're back now and we'll get back to Slide 5, where we show you our pipeline of products that's updated quarterly. We always talk about how the dates for the launches can be modified due to ANVISA and other authority processes. And so we don't have total control on the public launch dates. This year, we've already registered 11 drugs with the addressable market of BRL 713 million. And 3 of these have already been launched by September. By 2026, we'll have over 43 products that are going to be launched with a total addressable market of BRL 7.5 billion. And in this quarter, we've submitted one new drug to ANVISA and 6 in other Latin American countries, and we were able to achieve 6 new registrations in Brazil and 7 in other Latin American countries.

As we look at the graph here at the bottom on the right side, you can see that at every quarter, Blau has been expanding its participation of share of new products in its earnings. And in this quarter, it represented 11% of our net revenue. So we're really happy to mention that until the end of September, the products launched in 2021 had already achieved an average market share of 29% and the launches in 2022 already had an average market share of 10%.

And the products we launched this year already had a market share of 7%. And so now we're moving on to Slide 6, where we're going to show you the main highlights of the plasma collection operation in the U.S., and they continue to have a ramp-up process with the consecutive growth ever since the beginning of the operation, in line with our strategic planning.

In our center, Lauderhill, we've reached the breakeven and now we have the expansion of the volume collected. In the annual comparison and the quarterly comparison, our center in North Miami already received all of the licenses for the beginning of the launch, and it should be opening by the beginning of December.

And in September, we began the construction work at our Flamingo center. The center at Jacksonville also continue to expand the amount of collections. This is a center we acquired 25% stake in. We have the results at the center that started to be part of our results in this quarter through the equity method. So we've also begun prospecting for the 5th and 6th centers, focusing on regions that are more populated with low presence of competitors. Usually, these are locations close to colleges, shopping centers and subway stations.

On Slide 7 of the presentation, we're going to talk a little bit about ESG. This is a quarter for planning, the work planned for 2024. We also donated in this quarter, some donations to homeless people Rio Grande do Sul as they were hit by the rains at the end of September, and our innovation work for the second consecutive year our [indiscernible] augmented reality, received great packaging cases award from Embalagem Marca magazine. And finally, as we move on to the best governance practices for the second year.

Consecutively, we also released our sustainability report presenting the main projects for the company and a different environmental initiatives performed in 2022. The report is available at CVM, and they follow the international GRI rules.

Moving on to Slide 8. We are starting to talk about the earnings and results for the period. In this quarter, we reached the same level of net revenue as we had in the previous quarters. And we've already begun the consolidation for Bergamo that had already added BRL 39 million of revenue in this period and they avoided the drop in the consolidated results that were impacted negatively by the mix of products sold in a scenario with a price retraction and high competition.

And as we've already mentioned in the last few quarters. Among the important highlights, we should mention the growth of the revenue which grows in the annual comparison as well as the quarterly comparison. And this reflects on the increase of capacity in our new production plant, P210 as well as the improvements in the Sao Paulo and Annapolis production plants. The launches, as we mentioned, continue to grow sequentially, and they represented 10.7% of our revenue now in this quarter.

If we look at last year in the same period, we -- they represented 5.5% of our revenue. So the operations internationally have also gained importance and share in our revenue with the expansion of our Hemarus operation for plasma as well as our affiliates and subsidiaries in LatAm.

So now I want to pass the floor to our CFO, he's going to continue this presentation. Thank you very much.

[Douglas Rodrigues, executive]

Thank you, Bruna. Thanks, everyone. As we move on to our presentation before we move on to all of these slides on the earnings, I want to highlight at the main events, Marcelo and Bruna already mentioned about. So we're talking about the integration with Bergamo, Prothya and even the issuance of debentures are the main factors that we'll see in the next few slides when it comes to earnings and the balance. So some of them have a permanent characteristic and others have a temporary effect in the third quarter.

So now as we talk about the grass margin, we had a step back in the first quarter -- in the third quarter, sorry, compared to the other quarters. So this is mainly due to a mix composition with Bergamo coming in and representing 10% of our revenue. Bergamo is still not a margin contribution in the company at this moment, but there are excellent opportunities. And if we go back to the previous slide, we can see that 20% of the revenue is already related to the new sources of revenue in the company, and each of them are at a different maturity stay for gross margin.

And if we look at the launches, then we're saying that 30% of the revenue in the company in the quarter has a different dynamic in the margins compared to the other 70 in the portfolio. And so the strategy to establish now we're going to also search with the opportunities to leverage the margins and as we look at this.

So Bergamo has a natural dynamic and in the other operations in our portfolio, we're looking at the market and trying to define what the best commercial strategy is, but the strength of Blau and Bergamo will create new opportunities. We want to look in how search for the operational excellence and the company continues to renegotiate. Now the material prices or just the structure, we'll have a quicker turnover on our older stock. And of course, these movements will make the company return to its margin levels that we already had in previous quarters, of course, excluding these events with Bergamo integration at this moment.

So now as we move on to the next slide with the operational expenses, we wanted to show you what is recurring business as usual and what is one time. So if we exclude these factors, and these factors are mostly related to integration processes, the closing of Bergamo, M&A expenses, then we see we have the same SG&A level that the company already operated with. If we get into more details, and we see the commercial expenses, there was really an increase compared to the previous quarters.

And so the commercial expenses had an increase, and this is mainly due to the integration of our sales force at Bergamo and there's another important point. Bergamo currently, the [indiscernible] doesn't have its own logistics. So they use DHL. And so with this operation coming in, we already start capturing the synergy. Blau has its own deposit, it's own logistics. So basically, you already have the leverage when it comes to sales and distribution.

Then for R&D, the dynamic is really related to investments we had in the quarter, considering intangibles and expenses, we had a lower volume in the quarter, but that's basically because it didn't perform [indiscernible] payments because this depends on the dynamic and the milestones that we have. And then when it comes to G&A, the same levels of expense, but here, what's important to mention is that in the quarter, we had some movements towards readjusting the structure. At this moment, we have the impact of these terminations and then we expect for the last quarter that will begin to capture the savings of these operations. So you can see we're already at the levels of administrative expenses really.

And so when we move on to this presentation, this besides the factors I already mentioned in the previous slide for gross margins, we also have the positive effect of this purchase, which leads to a onetime accounting effect, but it demonstrates that Bergamo M&A, even before all of the synergies are captured, was already very positive for the company. And then this already generated an advantage gain of BRL 121 million. So we already have the nonrecurring effects as well as I highlighted with the expenses, closing, et cetera, integration. we also had the expenses for the indemnification and restructuring as well as in this quarter, the provision for losses with 2 customers that are really coming from that post credit crisis in the U.S. as they were trying to reestablish themselves. But of course, in this quarter, this was necessary.

So the company continues to have all of its legal instruments for collection. But at this moment, following these accounting rules, we're working on the provision, but we're going to try to reverse this so that it can be just a provision. And as we move on, we have the net income. And here, we're just going to look at the financial results. And clearly, we can see the dynamic of the comparison with last year and other quarters, the debt composition and our cash, the company had super relevant investments as well as the composition of this cash with debentures. And then we have the currency variations.

We had an international cash position that was used to perform the [ MG ] payment, and now we're going to start reestablishing this. And then basically the financial expenses in this cash provision and net debt. So when we look at taxes, you should see that there's an actual [ full ] rate of over 34%. And this is basically the effect of the deferred investment -- income tax of 35%. So with this, it's very important to reinforce that Blau does not intend to incorporate Bergamo. So it's just like a reserve. Now it's almost like a provision for the deferred income tax, and it shouldn't actually become recurring because we're not going to incorporate this operation actually.

Blau's idea is that will leverage Bergamo's operation, generate results, as you'll also see this in the income statements, and you'll see how this was established, and this is also going to bring in some tax opportunities. So this effect of a higher rate in the quarter is very occasional. But the idea is that more and more will be working on this tax planning process and we'll have a low rate. So this should remain even more with Bergamo. All right?

Moving on to the next slide. We're going to talk about the CapEx and working capital. CapEx, basically, the completion of P210, in this quarter, we had BRL 20 million. And so what the company continues to do now is the natural movement with the expansion of these productive units. And so we're talking about a new line, adjustments and maybe improving some machines or so. And then, of course, the maintenance CapEx.

So big transformational projects, we do have some new buildings planned for 2024, but big payments, we're just going to be looking at Bergamo right now.

Then the intangibles, as I mentioned, which I think are really related to the dynamics we have in the quarter and developments. When we look at working capital, I think it's important to mention that even with the integration of Bergamo in this initial moment, we remember that we're in this transition process. But we were able to keep the payment terms and receipt terms, which are stable. So we're going to continue to search for these improvements.

Now when it comes to inventories, yes, -- we had already worked on that issue with having the stock turnover and looking at the deliveries, trying to extend the terms. And so the company continues in this movement but we should highlight that there are some strategic items. We don't have a global supply chain. And so it is demonstrated to be very fragile sometimes when it comes to global events. And so I do think the company continues to know how to do what is strategic and what we need to do to carry on maybe a little more inventory in-house, but we'll continue with these movements. And we've at least reached the levels or the starting point that we finished off in 2024 when it comes to the revenue percentage of working capital.

On the last slide, but not last but not least, because it's the cash position in the company. And so we had some cash fluctuations. We had investments in convertible loans of EUR 50 million. We had a new cash composition and now we have this one with BRL 350 million, 200 years of grace period. And so we're talking about BRL 118 million for the CDI and then the BRL 50 million as well to be paid in the next few years.

But even so, very low leverage, which is really important, and I think the company at this point in time with more turbulent market where a lot of companies didn't really look at investments because they have to sacrifice their operation to pay for the cost of their debt due to high leverage, but the company has the necessary strength to still look at strategic movements and make investments that are going to bring in long-term results. So I think this is super important and in line with our strategic planning process.

So I think I maybe talk too much here, but now we're going to talk -- we're going to open up for Q&A. And then at the end, Marcelo will come back and perform all of his final remarks.

[Bruna Gamboa, executive]

First question is from Vinicius Figueiredo.

[Vinicius Figueiredo, analyst]

You talked about the results here and the effects of the gross margin and some initiatives here as we look in the future. And the nonrecurring amount, with the Bergamo impact, as you mentioned, if you could also talk about the effect you mentioned when you consider recurrency. If you think this could still impact us up ahead? And if maybe this greater competition could impact us more. I wanted to get your feeling on this, please.

[Unknown Executive]

So yes, I think there's a bit of this dynamic in the mix with these new revenue sources, maybe having a ramp-up process still even Bergamo added 10% of its revenue already. So working on this exercise and looking at this movement is a whole another level of -- and so the idea is that we'll always create new sources of revenue. But when you look at the older portfolio, yes, we do have this scenario, but there are ways to reestablish the mix. So we still suffer a bit with the immunoglobulin deregulated market. So we can't really consider like a normalized market and what level of prices and the margins would be at a healthy level.

But then, of course, we also have other products in our portfolio. But now when we joined Bergamo, we'll have this strategic commercial strategy, and we can really define the best strategy to reposition our prices. The market continues to be competitive, but the company also has new sources of revenue, and we can explore new opportunities. So that's the main idea.

[Unknown Executive]

Well, I wanted to add on that the cost of some of the inputs have been dropping month-over-month, and the speed has been working on. We're still on the wrong side, right? So today we're performing an acquisition, but we don't know if this is a good deal or a bad deal because in the next purchase, we won't know we'll buy it for cheaper or not.

So we're so experiencing for certain products, this kind of situation, and this makes it more difficult for us to mark up the margins. But of course, the company is really in tune when it comes to the different movements, and we've been monitoring all of these processes to bring in the best opportunities for the business. And so despite this reduction in the acquisition values, we can't immediately take advantage of this because we have the stock of 3 months of inputs, and we're reducing the stocks, but the situation is apparently -- a spot purchase seems to be better than a planned purchase.

So we are keeping our eyes open. And we've been reacting to all of this and working on the best negotiations with our current suppliers that will contribute to the best margins in the future.

We have a stock turnover that will take 2 to 3 quarters. So even if we renegotiate today, first, you have the stock turnover, everything you have in house. So that later, you can start reaping the benefits when it comes to margins. And then of course, some quicker revenues and bigger sales make the stock turnover a little bigger.

[Bruna Gamboa, executive]

[indiscernible] Can you hear us.

[Unknown Analyst]

Two questions. One is about the top line. So excluding Bergamo and the revenue for the launches within the historical series, we've noticed that there is a sequential drop in the top line of about 14% quarter-over-quarter. And so we'd say this represents the company's legacy portfolio. And so I'd like to know if this competitive scenario got worse in the third quarter. And if you guys can maybe talk about what the dynamic has been in biologicals and oncological which have really suffered a bit more with the price and volume. This is the first question.

And then the second one is about capital allocation on levels of leverage in the company. So this quarter, we reached a level of the net debt versus net cash in the past, and I want to understand what the level of leverage is they feel comfortable with. And if this would require some revision in the company strategy when it comes to reinvestments in new projects. That's it, guys.

[Marcelo Hahn, executive]

Well, thanks for the question. We'll separate this into 2 questions -- 2 answers, the leverage part. I'll leave up to Douglas, and the market continues to be very difficult. The payers have been pressuring the channel a lot. The payers have been also delaying payments. And so the big change of hospitals and even the government has been buying less and has been making less stocks, the distribution channel chain as well.

And so we've suffered as well. And that's where you can see our earnings. We've been doing our best, and our market share has been growing. The problem is price, so although we are producing more and delivering more, so many of the processes have been contributing to operation. But the challenge -- the market is very challenging. And so as I mentioned, the prices of the have been dropping, but we've been kind of stepping behind in the situation still.

So we seen that it's almost better to the spot businesses than planning our purchases, right? So this is a situation first for some products, you've already hit the bottom line, but further, we see that still very competitive. So we've been trying to find the best performance and this is what we've been doing.

[Douglas Rodrigues, executive]

Well, moving on to our leverage, the company went from a net cash position. Now we have a net debt position, but leverage is still very low. So if you consider the advantage purchase acquisition adjusted EBITDA, we're talking about [ 02%, 03% ], which is a really good level and very healthy. And so this would make the company maybe leverage more with a strategic investment. But we'll always look at these different levels of leverage and there's still ways to deleverage.

[Bruna Gamboa, executive]

The next question is from [ Paolo Amelio ], at GTI.

[Unknown Analyst]

I would like to know if you could give us some more granularity on how amount is added to costs without revenue exchanges. So if we look at -- if we eliminate Bergamo, the loss in margins was really significant. So if you consider your operating margin of about 40%, we could say that maybe half of the revenue -- the net revenue came from the gross margin that was almost 0 or maybe a smaller percentage of the revenue or negative margin. So for us, it's really difficult. So to assess this without greater granularity. And so I don't know if there's any product line, you'd have to sell with a negative margin. If this is like a one-off effect or if it's something that permits all of the different levels of products. If you could talk about this, but help us a lot on our side.

[Unknown Executive]

So all of the machines and today, there's a link with this trading system and [indiscernible] these are the sources and then the company will have this dynamic with the leverage of the gross margin. So when it comes to the price in the market, we're also in the internal aspects so we consider the operational leverage.

[Unknown Analyst]

I didn't hear the beginning of the answer. It was mute for everyone apparently.

[Unknown Executive]

All right. You had asked about [indiscernible], which currently has a revenue share, but in the breakeven and so this operation internationally, we're at the first center. We have the breakeven, then we operate other centers. And so it's natural that we'll always consider the effect in the consolidated margins a lot smaller and unfavorable to the company's margin. So Bergamo has 10% of revenue with no margin contribution. So we're starting off with this process to capture synergies, leverage both portfolios, the commercial strategy, repositioning ourselves in the market and many other things.

[Douglas Rodrigues, executive]

If you talk about the new sources of revenue, there is different dynamics for consolidated margins. So it's important for the company to always have revenue sources and look at the best possible mix. But there's also these different effects in the consolidated margin composition and the rest of the portfolio, as Marcelo mentioned, the market is still competitive. So we have this movement with trying to capture some renegotiations, but we have to have the stock turnover, which is also something gradual. And so all of these movements together will take the company naturally to reestablishing the margin levels that we've already performed in other quarters.

[Bruna Gamboa, executive]

Our next question is from Wagner at [indiscernible].

[Unknown Analyst]

I have two questions here. And I would like to understand what the margin impact is, especially the gross margin. So I know you guys had some public information. There was a third thresh of the alpha contract that the government called on and I want to understand how much of this was delivered in the third quarter. And so from this third thresh, what's the percentage that was actually billed in the third quarter? so we can understand how much of this could have contributed to the drop in margins?

And the second question is you had already mentioned that Bergamo had since it was a unit here in Brazil, the multinational, they had an accounting process that was really different than the local standards. And it was seen as like a cost center with a factory. But could you maybe mention if you eliminate all of the Bergamo [indiscernible] else done with Bergamo this quarter, what would be the gross margin ex Bergamo and our interpretation, this gross margin could maybe even be negative according to our interpretation. So I want to understand what the gross margin is. And how much of that thresh you guys were able to deliver in the third quarter?

[Marcelo Hahn, executive]

Well, I'm going to split this answer between me and Douglas. Thanks for the question. And we signed an agreement with the Ministry of Health to deliver in 3 threshes basically. So one part is in the previous quarter, another part in this quarter and then on the next one. And recently, we also were -- we were communicated about possibility of another additional agreements. So we consider the consumption of this drug is growing and the public health system in Brazil continues to supply this entire supply chain.

So I think that it's a mistake to imagine that the company's profitability comes from a single product. So the company has been talking about this and how we've been suffering with the prices a lot. But we've been selling more quantities to be able to keep our volumes and revenues.

So we've been gaining market share. But on the other hand, we have been suffering with prices. So we're also a little bit behind when it comes to the utilization of these inputs that we bought that were cheaper. So to give you an idea, there is some inputs that maybe sold like in 1 kilo on about $90,000 in the beginning of the year, and I can buy at BRL 45,000. So in between, I may be bought it BRL 70,000, BRL 60,000 but as I mentioned, I'm always a little bit behind. So it's really incredible.

So as I mentioned, the idea today is that you'll be almost at spot levels because I don't know if I'm at the bottom. Not with all of them, but with some of them. So you could say what kind of reputation did this manufacturer have right? So there's a situation of adjustments in the Brazilian market worldwide. And so the company really depends on these. The company always had margins in all of the products commercialized.

So the company has the [ principal ] actually heard this question about the negative margin. It doesn't make sense for the company to do this. So I wanted to mention that we're always going to be defending the interest of the shareholder, which is myself and you as minority shareholders and will always try to bring profitability into the business. We're not satisfied with the situation, but it's a market situation [indiscernible] situation in the company. So we've been producing a lot operationally, delivering the demand, and we've been -- we're in a very occasional situation. So maybe in the past, they paid with the dollar that was higher than what it is now. So the market is a little bit confused. So it's a very atypical situation that we've been experiencing with high interest rates. And so this is what's going on. And Douglas please?

[Douglas Rodrigues, executive]

We always highlight the effect of all of these sales where you have to look at the effect because you could have the LTM with bigger volumes, you always have to compare the -- comparing an isolated quarter is not a good view. And then Bergamo to add on, I think that the dynamic and the way that Bergamo is compared maybe -- could maybe simplify your guys' assessment. If you look at this, and then this is at our income statement about Bergamo's results would be assuming that this comes from the gross margin. And I want to remind you all that we have many different effects that are nonrecurring.

We had expenses that took place that operated through the earnings with the closing characteristic that became an adjustment to the price paid. And so after we're going to have to give you guys all some more color on this, we tried adding this in the release in the presentation with the amounts that are like onetime amounts in this quarter and what's more recurring. But there is a different dynamic even with the expenses with cancellations of contracts, et cetera. So we also had some indemnification and other aspects as well. But I think that maybe to simplify things, you could adjust all of this result in the gross margin.

[Unknown Analyst]

Well, I confess that I understand you guys' answers, but that is not what I had asked, but it's all right. Another question is the NPL. Well, Wagner, let's clarify this, please. It's important for us. Well, we performed a calculation and understand all of the market aspects you guys mentioned. But what I wanted to understand is within the different business lines, you guys have, we understood before the biologicals had a margin that was above average in the company. So we wanted to understand that since you guys are not going over the lines of revenue per type of medication, we'd like to know how much lower revenue in Alpha could be contributed to lower consolidated margin. But we never set Alpha has more margins than other products.

[Marcelo Hahn, executive]

Yes, it's my own interpretation based on the numbers we consider with the information published. So I can't answer an interpretation you have because we have products here, for example, that have margins that are even higher than Alfa's margins. So the business -- the company's business involves multiple products. We are involved in over 100 different molecules that we're trading and so I can't say that the company is going to survive with a single medication or drug. We don't have this kind of approach in the company, which is why we never stop investing in new products. We have feasibility studies for each drug. We launch in each these have its own profitability.

So there's no point in having a situation with a company where you have like 100 products with the structure we have with a single product.

[Bruna Gamboa, executive]

Well, now we do not have any other questions. So Marcelo, do you want to move on to any final remarks?

[Marcelo Hahn, executive]

Well, I just want to highlight that it's very gratifying to see the ongoing transformation Blau in the last few years despite the huge economic and political difficulties, but we continue to invest even in this very challenging quarter. We had an all-time high in investment.

Another point to have is the ramp up of these new operations, which still contributes relatively little to the current results, but there's a great potential for growth, demonstrating that the investments we're performing have already been materializing in our results and this also demonstrates around the right path. And in December, Blau will complete 36 years of existence, and I'm really proud of the history we built so far.

I know we have a long path of success up ahead. but I'm not satisfied with the financial results in this quarter, but I'm sure that everything Blau can deliver and where we're headed. So we know that 2023 has had additional challenges that were mapped out, but our pillars are solid, and we are confident that we're addressing this long-term growth. And so throughout this quarter, we also consider different initiatives to have the gradual recovery of historical margins in the company, renegotiations with the main suppliers, gains in operational efficiency, restructuring our teams and the rational use of our cash position. Our path is clear. We know where we're headed. We're only starting. So thank you all very much, and have an excellent day. Thank you very much. Bye-bye. Thank guys.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]