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Edited Transcript of ORX.ST earnings conference call or presentation 28-Apr-20 12:00pm GMT

Q1 2020 Orexo AB Earnings Call

Uppsala May 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Orexo AB earnings conference call or presentation Tuesday, April 28, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph DeFeo

Orexo AB (publ) - EVP & CFO

* Nikolaj Sørensen

Orexo AB (publ) - President & CEO

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Conference Call Participants

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* Gergana Almquist

Redeye AB, Research Division - Equity Analyst

* Klas Pyk

Nordea Markets, Research Division - Research Analyst

* Samir Devani

Rx Securities Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Hello, and welcome to the Orexo Interim Report Q1 2020. (Operator Instructions)

Today, I am pleased to present Nikolaj Sørensen, CEO; and Joseph DeFeo, CFO. Please begin the meeting.

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [2]

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Thank you very much, and good afternoon to all of you in Europe and good morning to those of you who follow us from the U.S. This quarterly report or quarterly presentation promises to be one of those, I probably would remember for the rest of my life, not due to the Orexo performance, which was good, but due to the environment we are working in here. Today, I will be joined by Joe DeFeo, and Joe will join us from the U.S. on a different phone line. So if there's any mix up when we get to the Q&A session, I apologize for that.

So I'm going to present our first quarterly report for this year. I would summarize it in a way that it very much developed as we anticipated. The one that was a positive news for us, of course, was the exchange rate development was very favorable for Orexo during this quarter. But apart from that, I think most of it, both in terms of volume of sales and also how we progressed our different projects was according to plan. I will start making the presentation, and we have the legal disclaimers, as usual. So I recommend you to read that because we will provide some outlooks for the business moving forward.

So coming into Page #4, a summary of this quarter. We continue to see an improvement in our cash position. Of course, some of that has been helped by the favorable exchange rate development. But as Joe will talk to you a little later, we have actually realized a decent amount of that favorable exchange rate evolution. But fundamentally, we see a positive development in cash flow from operations and also in our EBITDA, which landed on SEK 39 million for this first quarter. The driver behind that has been a stable revenue in the U.S. in Swedish kroner, of course, the exchange rate has a positive impact. We continue to see a positive impact of our cost program to improve our manufacturing efficiency. That now has a full impact, which improved the gross margins. And also, during the first quarter, we have been quite cost-conscious partly because of the COVID-19 epidemic is holding back some activities, but also in general, Orexo is running a tight ship in terms of cost management.

Our cash position and the development that was seen during the quarter led us to the decision to repurchase a small part of the bond. It was a little opportunistic based on some of the pricing of the bond in the market. And also, we started a repurchase program of 500,000 shares during the first quarter. Again, fortunately, leveraging the weak Swedish kroner. So we had positive cash development despite investing quite a lot in buying back bonds and shares.

What is very exciting from us moving forward and where I think we have a lot of unique opportunities is within digital therapies. And I'll talk a little about that, but there's been a lot of movement in the U.S. to improve and facilitate the implementation of digital therapies as that, of course, in times of social distancing. And in particular, within mental health, where a lot of the treatment is based on a face-to-face interaction. FDA has been pushing for a faster route to market for these programs. And that's something we're looking into to see if we can leverage both to have an accelerated launch of vorvida, but we're actually also looking into an opportunity to launch OXD01 when we have finished technical development, and we'll come back to that later.

On R&D, we were a little afraid that we would have a delay in our clinical programs. That was the message we got from one of our partners on OX125. However, we are basically ready to start it now during Q2. So we will meet our target of finishing that exposure study for OX125 during the first half. And also OX124 is progressing according to plan, and we plan to start the pivotal trial in late this year. So we keep the time line so far despite the challenges provided that comes from the COVID-19 epidemic.

Just to summarize a little. So what are the strategies for Orexo and what are the strategic objectives? What we're really looking at is how can we broaden our portfolio. We have an organization in the U.S., even though they are grounded at the moment, I still think there's a lot of opportunities to improve efficiency from that organization by adding more products. And that can come both from our new therapy area, Digital Therapeutics, where we're now planning to launch the first, maybe 2 new products in 2020, as it looks like right now. We are, of course, going to work with our pipeline, and we see OX124 could be ready for filing next year with then launch most likely early 2022. And then, of course, Zubsolv maintain that as a growth driver in the company despite some of the recent or large -- the volume decline that we've seen in the last year, and we've talked of that many times before, but I will, of course, come back to that now.

Moving to the next page or 2 pages ahead going into the Zubsolv franchise. And so I'm on Page #7. What we have seen is during this quarter, we have seen the market growth has accelerated somewhat. We're now reaching a 15% market growth. We have seen some weeks where [activity] was up at 17%. There was a spike in the market during the last week of March, in particular, if you look in the volume, and that is the number of tablets. If you look at the number of scripts or the number of new scripts, you would actually see a quite significant decline. But what we're seeing in the market in the U.S. that the scripts, in general, are getting much larger. So for example, Orexo's scripts of Zubsolv have increased at nearly 20% during that. So that means before we had a script size, I think, about 31, 32 tablets of Zubsolv on one script, now we are closer to 40. So that's been part of the effect of the COVID-19. And we saw that spike in March the most recent weeks, that the market has gone and back to pre COVID-19 levels, but still, that was -- this maintained a healthy growth compared to last year.

We're now going to monitor, and we're going to that moving forward, the market in 2 segments. One is what we call the open segment, and that's where Zubsolv is reimbursed and have access to the market. And the other one is where it's nonreimbursed, and that's basically why we have no reimbursement often within Medicaid, but we'll also add cash into that. So even though we are reimbursed for people who are paying cash with the availability of multiple generics, both generic Suboxone Film and Suboxone (inaudible). It's very difficult to compete on an out-of-pocket basis so put them into nonreimbursed.

Moving to the next page and see how this has evolved. Here, we're splitting out the Humana health care and Humana, United Healthcare and cash because what happened in the cash segment, why we're putting them into the same group as Humana and United Healthcare is that the trigger of both Humana and United Healthcare to open up for generic was the availability of Suboxone Film generic, and that came during first quarter last year. And that is also what has driven the cash market to move away as there are now a lot of film alternatives available in the market. And if you look at this, we continue to see a decent development in our open access, where we have seen an 8% growth during the last year. In United, Humana and cash, we saw a nearly 30% decline, and that's approximately the same as we have seen in the nonreimbursed. However, the nonreimbursed is much, much smaller part of our sales. The positive part of this is that when you look at the curve for Humana and UnitedHealth Group, you will see that there was this drop in the early Q1, and I talked about that when we had our Q1 call and in some of the interviews I've done afterwards, so we expected to see a decline in the early of 2020. And that's basically because of the system that you have in both Humana and United Healthcare within the commercial segment, where patients are asked to pay a larger part of all of the prescription when we start a new calendar year. And that trigger, we know that from before, that triggers some patients to move to generic alternatives. And as there now were generic alternatives available in the market, we did expect some decline in Humana and UnitedHealth Group and, in particular, in UnitedHealth Group that has led to a decline in the early part of January. But after that, in February and March, and in March, we actually saw a small upward going trend, but I think part of that is explained by the COVID-19 and patients where, you say, holding or building their own inventory. But open market continues to work well.

Looking ahead, what has really been positive for us in the open market has been the Caremark, where we're seeing Caremark being a significant growth driver throughout 2019. And here, when you look at the differences of Caremark and the other 3 large PBMs in the U.S. is that all of the other ones also offers Suboxone Film as part of the reimbursement. Caremark took away Suboxone Film in October 2019, which led to a bump in Caremark demand. While we never know, I actually anticipate that sooner or later, Suboxone Film will also have a challenge to maintain that reimbursement level at Prime Therapeutics, Express Scripts and Optum, and that could give us an additional growth opportunity for Zubsolv.

So looking ahead, despite having some negative volume overall on Zubsolv, again, triggered by the loss of -- or addition of generic alternatives because we're still reimbursed with Humana and United, but with competition, we see that there are good opportunities for us to continue to improve our market access. We still see a large part of the Medicaid market where we are not accessed. We're looking at some of the major states in the U.S. to see other ways around where we actually could get into these states and could have a big bump in our market access. We're not there yet. But if we do, that could give us some quite significant growth opportunities. We lost a little access in Medicaid this year. We gained a little in commercial. But in Medicaid, that was in Pennsylvania, and now Pennsylvania is becoming very at one -- very large state. So of course, we feel, over time, could add on Pennsylvania. That will be a great growth opportunity.

We have seen accelerating the last few weeks that the competition from what we call the preferred authorized generic of Suboxone Film, that will mean the original Suboxone Film packaged as a generic. That will stop supply to be supplied by Indivior by the 1st of January this year. And now we have seen the market share a few weeks ago, it was actually 18%, and now just over 3 weeks, I think, has dropped down to 9%. So it has nearly gone from the market, and this is something we know from the physicians that patients often prefer a branded alternative. And here, we think there's an opportunity for us to promote Zubsolv to patients and physicians who want to be sure that they know what they're getting when they get to the pharmacy. I will say that this is an area where the COVID-19 is having a little obstacle for us because to do that switch, it would be easier if we had full access to the physicians. But still, we're working through a lot of other channels. So we still think this could be a good opportunity moving forward.

And of course, one thing that is important is we are the only one who are out there working with the majority of the physicians in this space. The depot formulations are targeting other physicians. So in that way, we have an open market to position Zubsolv. And for those physicians who like the service we can provide, that could hopefully help us to gain more growth for Zubsolv also.

Moving into our pipeline, and I'm jumping into Page #12. We have 3 pipeline assets where, in particular, OX124 is getting pretty close to market as we are now moving into the pivotal trial, and we are progressing well in establishing commercial and manufacturing processes. And the same will go for OX125. It's based on the same base technology so we can actually leverage a lot of the work we're doing for OX124 and OX125. OX125 is the next one in clinical trial. And it's due to start now in May. OX338, we had the result early this -- early in Q1. We talked about it in the Q4 report for '19. We had very positive data for OX338, and we now work -- continue to work on the formulation for that.

If you look at the potential of these different products, it's quite sizable potential for all of them. And particularly, if you look at just OX124, we think we will have a less competitive situation that we have with Zubsolv in a quite heavily growth market, and we have a product that is clearly differentiated.

And going to Page 13, why do we think that there is a need for this product? It's again, where there is -- fortunately, we're seeing that the growth in number of deaths from opioid overdose seem to have ceased a little in 2018. Then we have seen that the overdose deaths from synthetic opioids have continued to grow. And if you say, why -- what is it that we're coming in with, with OX124? We're coming in with a product that is designed to target overdose biosynthetic opioids by being more powerful, faster to action and have a longer-lasting effect. And when you look at Page 14, these are the results from our PK study of OX124 comparing to the leading product in the market, Narcan nasal spray, and you can see that we have a significantly faster uptake, we had a higher uptake, and we have a longer-lasting effect, and that's exactly what we were looking for. So we feel quite confident that we have a product that is clinically differentiated in a meaningful way because we can address this overdose epidemic of synthetic products like fentanyl.

Moving into digital therapies, our next frontier on our venture that we're working with, which I'm personally very excited about moving into Page 16. So one of the things that we're seeing right now and looking at headlines about which industries are benefiting from the lockdown and COVID-19 pandemic we're seeing right now. It's very clear that the online digital health solutions for patients, whether that's meeting your doctor through an app or other support programs, will benefit from the system where patients and physicians are trying to avoid to meet as much as possible. What that has led to -- was actually now in April, we have seen a new decision in the U.S., which is from the Department of Health and Human Services, where they open up for an accelerated access for what they call digital health devices for treating psychiatric disorders during the coronavirus -- corona disease 2019 and the public health emergency. This is spot on where we are with vorvida. It is spot on where we are with OXD01. This letter coming out from the Health Department, Health and Human Services and from the FDA is something that we're, of course, looking into leveraging and where we think there could be an accelerated path to market for vorvida and OXD01. And that, of course, is a tremendous opportunity. Going to Page 17, just saying what is it that we're trying to do with vorvida? We're looking at a fully automatic digital therapy to help troublesome drinking behavior. It's already been developed. It's selling in Germany. I know from our partner in Germany that the demand has spiked after the COVID-19 lockdown of vorvida and their other tools in Germany. But in particular, vorvida, we think is where it's -- it couldn't be more spot on in terms of some of the aftermath of this pandemic. Just in Sweden, I heard data that the sales of alcohol from Systembolaget has increased to 10%. We saw data from Boston, Massachusetts, where sales of alcohol in the first weeks of the lockdown was spiking dramatically. And that is what we've seen in other crisis like this. People just tend to drink more. And we think vorvida is coming in as a very helpful solution to this. OXD01, same thing. What is needed when you treat patients with opioid use disorder. Today, the counseling sessions, the group sessions are very important elements of that treatment. And coming in with the digital therapy that can actually complement and actually also some data show for vorvida, for example, can replace these counseling sessions, we think could be very important for the health care system in the U.S. So now we are looking to, can we get this to the market much faster than we were planning for initially. And that actually means a launch not in Q3, but maybe even in Q2 for vorvida. And when we've done the technical development of OXD01, which is now planned for the autumn, when we're done with that and we see that it works, we are considering, can we launch it immediately without having clinical data, maybe in collaborations with payers in the U.S.

So vorvida on Page 18, we're targeting the 16.6 million heavy alcohol users in the U.S. and we think that the, unfortunately, the COVID-19, this amount of patients are expected to grow. And this is why we think there's a significant opportunity for us to target that group of heavy alcohol users. So very excited about the opportunity for vorvida.

Coming to Page #19, it's OXD01. So why do we think this is important? I think OXD01 is even -- have an even more well-defined path to market than what we are seeing for vorvida. The reason is that today, to treat opioid use disorder with a medication like buprenorphine that we have in Zubsolv, you -- it's compulsory that you should offer psychosocial support. So you basically have 1 leg of the treatment that you can offer with this digital approach. It's very well defined. We're already there with our commercial organization. We know that the opioid epidemic, unfortunately, continues to evolve under the shadow of COVID-19. And Orexo, we are, as we said before, we are already a strong player in this market. We are well-known to most of the physicians. So I think to be able to launch this fast is a tremendous opportunity for us also.

With that, I will lead over to Joe DeFeo to take us through our financial results from the quarter. Joe, please.

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Joseph DeFeo, Orexo AB (publ) - EVP & CFO [3]

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Hello, I'm happy to present another strong profitable quarter for Orexo. And if you go -- we'll start off with our U.S. business. Please, if you go to Slide 21. You can see -- if you remember, generic film was launched at the end of the first quarter of last year. And then also, as Nikolaj mentioned, you know that 2 of our exclusive plants added the generics last year. Despite that, you can see that our sales are still holding up very strongly. Our gross profit continues to improve as we realized the benefits of our cost reductions in our cost of sales of Zubsolv. And our profit margin continues to improve. It's grown over the last 12 months to 47.1%. So another strong profitable quarter for the U.S. business.

If you go to the next slide, this shows our sales. Zubsolv sales did grow slightly, but this was due to currency. And we were -- overall, our sales have flattened. But as I mentioned, we've had, in the previous year, in the first quarter, we had higher sales because of the generic film was just getting launched at the end of last year, and we still had the exclusives on our 2 main businesses. Our Abstral royalties are -- we did have higher-than-expected royalties from the end of Q4 2019. So that extra amount was realized in Q1. Those royalties will go down significantly going forward. So we had flat sales. Let's go more into depth than that related to Zubsolv on Slide 23. You could see that they grew slightly 1.3%, which is mostly due to the positive impact of foreign exchange. However, when you start at the beginning of this, you can see Nikolaj introduced our open business where we're able to compete. We grew 8%. So that was a positive contribution to our sales. We did see some declines in our nonreimbursed and our United, Humana and cash. But as Nikolaj mentioned, we're starting to see that portion starting to flatten out. We also had some wholesaler inventory decreases during -- at the end -- from the end of the year in the first quarter, which negative impacted us. But you can also see, as we mentioned -- as we've shown in the last couple of quarters, we continue to see lower returns. Our trade group has done a great job in managing the inventory that's out there, and we expect to see this continue for a couple more quarters. So that's been a positive impact on our sales. And then our price increase in payer mix has been favorable as well. So overall Zubsolv sales did increase year-over-year.

If you go to the next slide, this is our P&L. We mentioned that the sales were slightly above last year. And I also mentioned that our cost of goods has decreased over prior year, and that is due to the -- due to our efforts, which are fully realized now to reduce our cost of sales and it's having a very good positive impact on our gross profit. And our operating expenses, our selling expense is up. This is primarily due to the cost related in preparation to launch vorvida in the U.S. in Q2. Our administrative costs are down to normal levels. As you may recall, in Q1 of last year, that is when we had the final cost of our IP litigation, which we won, securing our patent until 2032. And then our R&D expenses are increased due to our development projects. And we had some favorable impact in our exchange, which led to the rest of the operating income that you see at SEK 10.1 million. So operating costs are down versus prior year. And overall, this leads to a good EBIT number. Last year, we were fairly flat. We now have a good profitable 34%. And then also, which is positive here is our net financial items, which is SEK 44 million. Now this is due to the strong move in the U.S. dollar and us having a good cash position in U.S. dollar. However, it's important to realize the SEK 29 million of this SEK 44 million is now fully realized because we took advantage of the strong U.S. dollars and converted some of our money into SEK. So that reduces our risk of our U.S. dollar cash position to any strengthening of the SEK in the future. So that's a good, strong realized gain for the month. And you can see we had a nice profitable SEK 82 million for the first quarter.

If you go to the next slide, this is new that we're doing starting Q1. We're introducing segment reporting to further get some transparency around the parts of our business. As we just discussed the first part, that's our U.S. pharma operations, and you could see that our EBIT improved there. We're also introducing now our Digital Therapeutics. And this will include Orexo development and commercial expenses for Digital Therapies around the world. And then also, there could be some cost allocation. There will be cost allocations from other parts of the organization. Such as when we launch vorvida, we will have some sales force resources allocated from the U.S. Pharma to Digital Therapeutics. In the first quarter, this is part of our startup of our commercial organization in the U.S., the expenses that you see. And then finally, our headquarters and pipeline, which consists of our Orexo headquarters in Uppsala, our pharmaceutical development and then also some royalty income from our ex U.S. pharma products.

If you go to Slide 26, this shows our strong financial position. Yes, you can see that cash flow for the quarter was negative. And that a lot of this increase in cash was due to exchange. However, you can see that our cash flow from operating activity was a good positive SEK 48 million. And then it's also important to note in the financing activity that this was Orexo, during this first quarter, taking advantage of the strong move in the U.S. dollar and buying back some shares at a favorable price -- let's say a favorable price today. And then also, we bought back some of our bonds at a favorable price. That was SEK 40 million. So when you take those away, we have -- we did have a positive operational cash flow for the quarter. And our net cash position has also improved because we reduced our bond by SEK 40 million. This also has led to -- we'll see lower interest expense going forward with the lower bonds amount that's out there at this point. And as I mentioned, we had exchange rate gain and SEK 29 million of this was realized.

So with that, I'll pass this back to Nikolaj to go over the outlook.

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [4]

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Thank you, Joe. I will move immediately onto Page #28. So this one is addressing how we see the impact of COVID-19. And as we said also during our Capital Markets Day in March, we see very limited impact so far from the COVID-19 disease. We do see a risk in development because we are depending on so many different partners in multiple different geographies. But so far, we have been able to work around the hurdles that have come up. And we have progressed as we have anticipated. I think the one part that we can say has the opposite effect is that Digital Therapies are now granted under the public health emergency in the U.S., so we have been -- we see there's an opportunity to accelerate the launch of those. On the supply side, we haven't seen any risk, and we actually don't see any risk moving forward for supply of Zubsolv as a whole manufactured in the U.S.

On sales, we do have the situation that our field reps are not able to move in and visit the offices, and we know that the majority of the offices in the U.S. have moved contracts with patients over to telecalls. So they use -- they talk to their patients over phone rather than meeting them in person. There has been a fast reaction by the U.S. authorities to allow an increased use of prescriptions over the telephone. So we don't see that the established market will have a severe impact, but I do think that looking over time, if this is not the travel restriction are maintained, we think there could be some impact on the growth and access for new patients to come in and also for the new physicians who start treating in this space, of course, more difficult for us to create a relationship with them if we're not able to meet them. But as we have said before, we still believe that if the travel restrictions are lifted now during the first half of the year, we think the impact on sales would be limited. And even if they should continue, I think the impact will be limited, but it could be more difficult to grow in both the market and also Zubsolv. From a financial perspective, as Joe has just talked about, we don't see that there is any risk to the company. And I recognize here we have the numbers of cash from the end of Q4. So this is a little higher cash level than we had in this quarter. Our outlook for 2020 is nearly untouched. The one comment that we have to our outlook is that we find that there is some increased uncertainty due to the COVID-19 and also the quite large fluctuations we have seen in exchange rates. We have decided not to change this compared to where we were last time because we do see -- why we see some of the expenses are becoming more expensive because we're paying in dollars. We also see that some expense, for example, travel is declining, which is so far, is kind of is start equal. So we are keeping our outlook, but there is some increased uncertainty due to COVID-19 than what we had when we first communicated this in January.

Moving to Page 30. We see 2020 is a year where we have a steady news flow. And just looking at what's close to us. It's the FDA clearance of vorvida. Now we probably have a backdoor to the market without the clearance that we're asking for so we could start commercializing very rapidly. We are also expecting our patents for our new technology, for our nasal spray technology, to be published. That should happen on Q2. Our OX125 exploratory study is on track to start here in May. Our partner products, OX-MPI, they have their Phase I results anticipated during this quarter also. It's not in our control. So I don't know if they have been impacted by COVID-19, but last time we talked to them, it was all on track, as I understand. So in Q3, we see the launch of vorvida, which I have just flagged. If we see this back door is open for clearance for vorvida into the market, we probably start commercializing already now in Q2. And for FDA, we're expecting Q3 to have a decision on our application to get Fast Track Designation for OX124 given that it's addressing the public health emergency around opioid overdose. OXD01, we expect to see our technical development finished during Q3. And now we're actually considering, should we launch that immediately given the opportunities opened up by the FDA, as I talked about earlier. And also in Q4, we will start the pivotal trial of OX124.

So to round off, so why do we think Orexo is an exciting company for you as a shareholder? There's no doubt we're addressing a market with significant patient need. And I would say, unfortunately, one of the long-term effect of the crisis we are looking at, both from the economic perspective but also from the health care perspective, is that we probably see a growth in number of patients for addiction, both alcohol and opioids. We do that from a strong financial basis and profitability. We have a very strong base of cash that we can now leverage to invest into this opportunity to have an accelerated launch, for example, for Digital Therapies. We have an established U.S. commercial platform. There's plenty of space to add more products into that, Digital Therapies or other pharma products. We have a pipeline that's making good progress. Hopefully, we'll have one filed next year with 124. And then we have our digital therapy, which is, I think, is one of the next big mega trends in the health care space. And in particular, I think it's one of those areas where the development have evolved from probably something we could have expected to take years is now going to take months of evolution. So a very exciting space to be in. A little unfortunate because I would rather be without COVID-19.

With that, we are done with the presentation. And before we open up for questions, I have actually received questions through the Internet. So I will address those first. And then operator, then we can move on to the Q&A session.

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Questions and Answers

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [1]

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So I have received some questions around the public market access, which today is about 35%. And can you address the development market access to public?

Yes, I can. We were up at 37 or 38, I think, last year. And what we lost were some small agreements in Pennsylvania as Pennsylvania have decided to put all Medicaid formularies under one roof before it had what we call Managed Medicaid and fee-for-service Medicaid, and each of them had their own independent formularies. Now it's becoming one formulary, and they were following the fee-for-service Medicaid in Pennsylvania's formulary, and there Zubsolv was not reimbursed. Should we come back in Pennsylvania, that, of course, offers a significant growth opportunity.

What is your long-term view on the market access for public? As I said before, with the exception of Philadelphia, we've actually seen, we've been added to some smaller list. And I do think that there are some large opportunities in the public space where we took sizable pieces of market access, can we get into those plants. So I think there's a good opportunity to improve. But at the same time, it is a little awkward time right now. It's difficult to meet the Medicaid providers, it's difficult to negotiate because people are not allowed to meet. But we still -- we are optimistic. And I would also highlight that we are -- to Medicaid providers, we are offering a competitive price compared, in particular, to the film generic version -- or the generic versions of Suboxone Film. So it's not like we are much more expensive. It's quite highly rebated, but it's an important space because it adds a lot of growth and a lot of patients.

Will the removal of Suboxone Film open up access to public?

I think in public, it's one of the areas that Suboxone Film has already seen that they have also been removed from some areas, but there are some large, in particular, PBMs focusing on the public space who, today, maintains Suboxone Film as the preferred option. If they remove that, it should definitely open up an opportunity for Zubsolv to be added on to more lists.

Then I received another question from another listener, and that's, at the Capital Market Day this year, it was mentioned that vorvida launched in Germany in 2019. How has vorvida been received?

So we are not in -- here we're a little subject to what we can communicate from GAIA. And I know that my advice from GAIA is hesitant to share this data because it's -- the commercialization in Germany is actually controlled by an insurance company called DAK, one of the largest insurance companies in Germany. But I do think I can say that the effect of the COVID-19 lockdown in Germany have had a rapid impact on vorvida. And I have been both on the phone for a long discussion early last week and also have several mail interactions with Mayo during the last week, talking about the opportunity that they have seen in Germany for vorvida and how we could leverage that for the U.S. So no doubt it has had a positive effect the COVID-19 on the product opportunity and how it's been received in Germany, but I don't have any numbers I can share. That's under confidentiality.

And with that, operator, I would open up for questions.

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Operator [2]

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(Operator Instructions) And our first question comes from Samir Devani from Rx Securities.

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Samir Devani, Rx Securities Limited, Research Division - Research Analyst [3]

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Congrats on a good quarter. I've just got, I guess, a few follow-up questions on the basis of COVID-19 impact. What's the feedback that you're getting from doctors in terms of the number of OUD patients that they are seeing in the current environment? And I guess, you mentioned that it was going to be potentially difficult if this period is relatively extended in terms of the travel restrictions to meet new docs? And then on the other hand, you talked about accelerating the launch of vorvida. Perhaps operationally, you can just explain what that acceleration means for you and how you would then in that environment, try and attract new doctors?

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [4]

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So on the first one, feedback from physicians on how many patients, I think we actually did a survey among some of the physicians that we are calling upon using digital channels as our reps are not meeting them in person. And 25% of the physicians are operating their clinic as usual, and the remaining 75% are either going solely on telemedicine. To be exact, I think that was 34%. And the remaining are using a mix of telemedicine, meeting some patients that they know in a face-to-face manner. So I'm pretty sure, just looking at those numbers that, that majority also it's difficult, at least if you should follow guidelines to start a new patient on treatment if you're not seeing the patients as you need to control whether the patient has -- what products they're misusing, what kind of misuse that they're doing, you need to take a urine test to see if they're using opioids. And to start a new patient that you have never met, I think a lot of doctors would be hesitant to not at least because you're afraid of starting a diversion. So patients who will not have a problem actually claim that they should get a product and then they can start selling it to other people. So I think that is an inhibitor for new patients. At the same time, we have heard that methadone clinics are moving patients over to sublingual products. So methadone today, you need to come often on a daily basis. But as that is basically required that you're queuing up, that is probably one of the reasons why we've seen a decent growth in Medicaid in the most recent weeks is that some of these methadone clinics are moving patients to buprenorphine products. But I do think that patient -- physicians, like the 34% who are only doing telemedicines, I think that will make it difficult to get new patients. And then around meeting new docs, that is true for vorvida. It's -- that, of course, is one of the obstacles you have in the market. At the same time, the research that we have done show that a lot of the physicians really lack an alternative to offer to these patients right now. And we also know that a large share of our Zubsolv prescribers are also seeing patients who have an alcohol addiction problem. So for those physicians, the vorvida sales is going to be relatively easy, but I also think a lot of physicians in the U.S. are quite desperate to have a tool that they can offer for people who are suffering from alcohol misuse and who today can't go to the AA meetings. They can't go and see their counselor and any tool that come in, in particular, if you have some kind of clinical data to show that it works, then you would be more open to test that. And I think one of the positive part with digital therapy is that the side effect of that is minimal. The only side effect is that whatever you have paid out of pocket, you have lost if you don't get any effect. And the time you're using to do the digital therapy, it's not like a pharmaceutical, where there's basically for all pharmaceuticals, there's some kind of side effects that are negative for the patient who we need to monitor. So I think vorvida is an easier product to sell using digital channels than if you have a pharmaceutical. So when the test we have done with vorvida shows that it resonates quite well, it's quite easily sold to the physicians. So we hope that, that is something that can help. I think the larger hurdle for vorvida is to ensure we have a payment structure that works and gets insurance companies involved in this. So that is where we put a lot of our efforts right now is to ensure we have that process up and running. How do we get paid? But to have a product that is insured by the insurance companies, then I think we have a fantastic market opportunity.

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Samir Devani, Rx Securities Limited, Research Division - Research Analyst [5]

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That's great. And just maybe one follow-up. Just -- are there any particular medical conferences in this quarter or the next quarter that you are particularly targeting to promote vorvida?

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [6]

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There would have been. But I think right now, we are in the travel restriction world. We can't travel and I actually think, it's right now that you would have the normal ASAM, American Society of Addiction Medicine would have been meeting right now, I think, in last week of April, normally. So that one has been canceled. So I think that right now, that unfortunately doesn't offer us an opportunity to promote the product.

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Operator [7]

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Our next question comes from Klas Pyk from Nordea.

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Klas Pyk, Nordea Markets, Research Division - Research Analyst [8]

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So it's also on vorvida, and you addressed most of it already in previous questions. But just a follow-up on that. Is there -- if I understand it correctly, vorvida has been launched in Germany and Switzerland in the EU? Are there additional launches planned following that?

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [9]

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That's a good question, Klas. And I know that GAIA is looking aggressively into that right now, the rights. And here, again, I don't know how the rights are looking for the products. But I know for the markets it is sold in, it's commercialized through the insurance company, who is actually commercializing it to their clients. So it's not through the normal channels of medical devices or pharmaceuticals. And I would assume that DAK is only present in these markets, and that's maybe why they're there. But if there's a restriction or other reasons why it's not been launched in other markets, I'm actually not aware because Orexo, we have only been focusing on the U.S. market and not for Europe. Sorry, I can't give you more details on that. But I know that they are right now very enthusiastic about what they've seen in Germany, in particular. So I'm pretty sure that our friends at GAIA are very actively looking at opportunities to promote vorvida in other markets in Europe at the moment.

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Operator [10]

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Next question comes from Gergana Almquist from Redeye.

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Gergana Almquist, Redeye AB, Research Division - Equity Analyst [11]

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I have a question about reimbursement as well. What is the time frame there? When will you know whether and how much will you be reimbursed for vorvida and the (inaudible) treatment?

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [12]

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Yes. So the U.S. system works in a way that you have, I think, is 2,000 insurance company or employers who are reimbursing pharmaceutical and medical devices. So it's -- so I think there's a time line. There are some of these insurance companies where you can get access to pretty fast, depending on what category you end up in, and there are others where it's a much longer process. This kind of -- in our original launch plans, we were planning to get approval or clearance for vorvida in -- now in early Q2 or during May. And then we would start contacting insurance companies with that clearance in the back. But last week, basically, the letter that I had in the presentation where we were offered by the FDA and a backdoor to the market for these digital therapies that came last week, so we're right now actually looking at how we can accelerate that reimbursement process. As I say, our original plan was, when we talked about launching in September, would have been to add some insurance companies during the summer and then do a targeted launch, together with these insurance companies, during the autumn to ensure that all of the processes were up and running and then expand stepwise. Where we are right now, it's a little upside down. So we would need to go out and talk to the insurance companies, but the thing is, for us to talk to them, we need to have a product that we know we can commercialize. And that's what we're looking together with the lawyers. Right now, we're looking into how are -- what are these new exceptions for digital therapies? And are there any things that we need to be concerned about before we can start commercializing broadly. But we have done a lot of research with insurance companies in the last few months, and it's quite universally positive, even, of course, some of them have questions that need to be addressed. So we're optimistic we can get insurance coverage quite shortly after we are launching. And a lot of the insurance companies are desperately looking for alternatives for their clients, which could help us also. So I would say when we launch in Q2, we hope to have some insurance companies covering that, but I'm quite certain that, that will not be universal coverage of the product in the U.S. I think that will take a few years before you have that in place. But again, COVID-19 will accelerate that.

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Gergana Almquist, Redeye AB, Research Division - Equity Analyst [13]

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And do you know how much would that reimbursement be approximately? Do you have an idea?

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [14]

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So this is a little competitive information, but what we have built our models on is that we had at the Capital Markets Day was a price of $600 per patient for one treatment, and that means basically a 6-month treatment with vorvida. That was -- we also wrote that was in the lower end of this band that we were communicating. But as this is competitive information, I don't want to be more exact. So I can say we put a flow around $600 per patient, but it could be higher also. I think we said $600 to $1,000 in range.

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Operator [15]

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Thank you, and as there appear to be no further questions, I return the conference to you.

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Nikolaj Sørensen, Orexo AB (publ) - President & CEO [16]

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Okay. Thank you very much for joining our call. It's -- as I said, it's clearly unusual times. The positive is for Orexo is that we are pretty well positioned. We haven't seen a lot of impact from COVID-19, and we feel very comfortable that we are in a place where some of our pipeline is really coming in at the right time to address some of the issues that we've seen in the market right now. So thank you for your attention. And we will return with any further questions and you can send those through e-mails, and we will reply to them on e-mail. Thank you very much for your attention, and stay safe all of you. Goodbye.