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Edited Transcript of SOBI.ST earnings conference call or presentation 13-Feb-20 9:00am GMT

Q4 2019 Swedish Orphan Biovitrum AB (publ) Earnings Call

Stockholm Feb 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Swedish Orphan Biovitrum AB (publ) earnings conference call or presentation Thursday, February 13, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Guido Oelkers

Swedish Orphan Biovitrum AB (publ) - CEO & President

* Henrik Stenqvist

Swedish Orphan Biovitrum AB (publ) - CFO

* Milan Zdravkovic

Swedish Orphan Biovitrum AB (publ) - Head of Research & Development and Chief Medical Officer

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Conference Call Participants

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* Christopher Winston Uhde

SEB, Research Division - Analyst

* Emmanuel Douglas Papadakis

Barclays Bank PLC, Research Division - MD & Head of European Pharmaceuticals Research

* Erik Hultgård

Carnegie Investment Bank AB, Research Division - Research Analyst

* Eun Kyung Yang

Jefferies LLC, Research Division - MD & Senior Equity Research Analyst

* Johan Unnerus

Pareto Securities, Research Division - Analyst

* Peter Sehested

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Richard J. Parkes

Deutsche Bank AG, Research Division - Director

* Viktor Sundberg

ABG Sundal Collier Holding ASA, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Sobi presentation of the Q4 and full year 2019 results. (Operator Instructions)

I will now hand over to Guido Oelkers, CEO. Please go ahead.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [2]

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Yes, good morning, everybody. It's really my pleasure to welcome you to our webcast on the Q4 results. And I think with this, we go straight into the brief. Forward-looking statement as per usual.

Today, I'm accompanied by our CFO, Henrik Stenqvist; and our Head of R&D, Milan Zdravkovic. And this has been -- 2019 has been a significant journey for the company. And before I get into the numbers, I think it's time just to quickly reflect what actually happened. We really grew now our Haemophilia business with the acquisition of Doptelet or broadened it into a Haematology franchise. We got our first launch experience with Gamifant during the year, and $56 million, I think, made our first mark. We had Synagis under -- as the first year -- in the first year under our ownership. And as you have seen, the product has performed extremely well. We did -- we strengthened substantially our North American franchise. Not very long ago, we -- our North American franchise was contributing around 12% to the top line. Last year, it contributed 37%. And we have invested substantially in our portfolio with BIVV001 and emapalumab and avatrombopag. So basically, we have diversified the company into really an Haematology, Immunology company with the help of the investments.

Coming to the next page. 2019 is indeed a year of transformation, as I pointed out, but it is a year of very strong growth. So 56% growth on the top line, 72% at the bottom. Organic growth has been very strong, even though we have some parts in our range, like the manufacturing business or the royalty streams that are not growing as fast. But overall, the product business has performed extremely well. Elocta, 34%; Alprolix, 46%. I'll come back later on how we see this business moving, but the good news is that we see -- we still see very strong patient growth, and that gives us a lot of confidence moving into the future.

In the Immunology sector, we have, let's say, very strong track record now with Synagis. And we'll explain a little bit later on how to view this business. And the Gamifant launch, I think, it at least measured up to my expectations, even though there was a couple of bumps on the way, but $56 million with restricted indication, I think's a very respectable result.

And in addition, with these 2 acquisitions now, we really brought this -- built our pipeline, but also we executed, I mean, obviously, 2 important deals and established ourselves as a credible player in the M&A space. We have recently set up a company in China, and this will be another growth platform for us moving into the future, in particular, for Gamifant, but also for other products in our range. And we are restructuring, obviously, our Specialty Care and Partnering product portfolio. This business used to be, in 2015, 60% of our business. And now over time, it's becoming increasingly irrelevant given its less profitable buyers, and we really focus on the core.

So basically, when you look at the next slide, how we have performed? At constant currency, 48% year-to-date -- last year versus 2018. But here, you can see how this business has transformed over time and how we have now really established 2 very strong franchises that will be the engine for the company moving forward.

And we have -- but we have not only moved the existing business or the on market business, but also our pipeline, as you can see on the next slide. And what is important to note is that with avatrombopag, we have 3 indications. In the U.S., we have today only launched CLD and ITP, a bit forward to become the first TPO-RA registered in CIT, and we expect the Phase III results in Q3. So this gives us a significant platform when you think about internationalizing this franchise. We have BIVV001 in our stable, and Milan will talk more about this BIVV002 in the preclinical phase for hemophilia B. And with emapalumab, we have a bundle of indication expansions, and we still have some ambitions also for anakinra. And as you know, we are participating, what we termed in the past as, MEDI8897 and nirsevimab as well, and we have an option on 2 oncology assets, one in Phase I and one in preclinical as part of the Novimmune transaction. So it's a nice portfolio that should basically bring us into a position of dynamic growth over the next couple of years.

Next slide. And basically, when you synthesize this, we have a very clear strategic ambition. We want to maintain the hemophilia leadership. We think that we have the best EHLs in our stable. And we can sense that Specta business is here to stay. And we have the future with BIVV001, and we have opted in, as you know, last year, and this is now helping us, obviously, to position ourselves as an important play in hemophilia. We are diversifying and building Doptelet to scale with this establishing the hematology franchise. And we are extending Gamifant into secondary HLH, but also into acute graft failure, and Milan will talk about this later; expanding Kineret and growing Synagis, and we'll allude to this how we think about it.

So when we now turn to hematology. Here, you can see the growth. And as you know, already alluded to, we have very strong underlying growth, and we don't see that this trend is discontinuing anytime soon.

Turning to Elocta. I mean it's very nice to see that we gained speed again in Q4, and this is not only reflected by sales, but also by patient growth. And it's really -- the growth is really driven by EU-5 markets and the Middle East. And product is now well established, but we are still having opportunities to penetrate, and one should not forget that there is a very substantial share still out there to get for us and to convert in the short-acting sector. And very nice for us was that we got just recently, in January, the approval in Russia, which is an important milestone for the franchise.

These are some [bits] that we have picked up at EAHAD conference that took place last week. And I think it's important, these are -- there are, for us, are some important learnings. And these are original quotes from leading KOLs in the sector. And this is not just one KOL who told us this, but many KOLs share this view now that factor replacement remains standard of care. And even in the inhibitor sector, eradication of the inhibitors is a key objective and they see ITI treatment still as a treatment of choice. And risk-benefit ratio depends on the significance on the unmet medical need. So I think there is a growing understanding in the community that with new therapies, you have trade-off decisions. And I think there is a bit of a -- at least in Europe, and this is also documented by the uptake data, you can sense, there is a bit of more skepticism now in the community whether this ratio -- risk-benefit ratio is actually that favorable. In other words, whether convenience will actually top safety concerns. So we are convinced that we have the best-in-class hemophilia treatments in our portfolio, and therefore, we are confident with regard to our future.

Quick snapshot into Doptelet. Here, we wanted to just give you a little bit of a frame on how we think about it because we think that Doptelet is a little bit underrated as a product right now. The main indications are, obviously, ITP, and this is a $2 billion global market. And as you know, we have global rights. The CIT market, based on our estimation, will clearly exceed $1 billion. I mean there are estimates odds that suggests it could be close to $2 billion. And CLD is around $300 million alone in the U.S. We think that Doptelet is a differentiated product, and we believe that the window of food intake that you have to consider with a leading competitor is not trivial. And we believe that once-a-day dosing is very positive for this product or our administration, and also that you don't have to worry about hepatotoxicity. So we think -- we believe Doptelet is getting into a structured market, very sizable, with a strong underlying growth, and we come in with a differentiated product. Hence, we are very bullish about this product.

Now turning to immunology. The -- obviously, when you come to this chart, this chart is pretty much skewed by the seasonal effect now of Synagis. And -- but it's nice to come out on the high. And I think I have commented already. I mean for me, important to note is that Kineret at constant currency is growing at 12%, and we don't see that this trend is diminishing anytime soon.

And now coming to Synagis, I think we are performing very well. We have performed very well in Q4. The overall increased demand and referrals, it really drove this. We have a mid-single-digit underlying growth. And the -- and we have obviously benefited to a certain degree from the RSV season. But let's say, there is also an effect on the -- from the wholesaler side. And I think we guided on this that this year -- or last year -- end of last year, we bought -- we sold in probably around 6 million more than AstraZeneca has done at the same point of time the year before. But I think this is to evaluate this product, which is a seasonal product. You not -- really not need to look at season by season. We guided you that when we took the product, it was a product of around $269 million for the season. We think that when we completed this season in -- the '19/'20 season, we will have sold between 290 million to 230 million, which means mid-single-digit growth versus the '18/'19 season. So we are very happy and basically see a validation of our thesis that this product will perform well under our ownership. This product is 20 years on the market. So we're quite gratified that we can drive continuous growth.

And Gamifant, we have talked about. This is -- this product is still at an early stage. The consumption, obviously, is driven by the weightage, duration of treatment and, let's say, the average does of the patients. It's early days. We are excited about the fact that the natural definition, essentially, the North American Hemophagocytic -- Histiocytosis Society (sic) [North American Consortium for Histiocytosis] is broadening the approach and has broadened the understanding of primary HLH. This will help us in the years to come. And we see strong underlying demand for the product. Yes, it's not yet a linear extrapolation of the product that is possible. But overall, the magnitude, I think, of how we established the product last year was a positive event for us.

And now I would like to ask Milan to talk about the pipeline.

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Milan Zdravkovic, Swedish Orphan Biovitrum AB (publ) - Head of Research & Development and Chief Medical Officer [3]

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Thank you very much, Guido. As mentioned in the past couple of years, we have made a very deliberate effort to strengthen our innovation pipeline within our areas of strength, being within hematology and immunology, and this is illustrated on this slide. We now have 2 ongoing Phase III studies, one for BIVV001 in collaboration with Sanofi and one for avatrombopag in chemotherapy-induced thrombocytopenia. And we have our Phase II/III study with emapalumab in adults. Nonprimary HLH, which is now open for enrollment.

In addition, we have the ongoing Phase II study with emapalumab in MAS.

In the registration phase in Europe, we have the primary HLH indication with emapalumab, the familial Mediterranean fever indication with anakinra. And we have just very recently submitted chronic immune thrombocytopenia application with avatrombopag. As mentioned, we have an option to an immuno-oncology asset in Phase I and financial rights to a potential follow-on molecule within RSV.

On the next slide, I will share more details on pipeline events in the coming period.

So we expect to initiate the pediatric Phase III study with BIVV001 by year-end; obtain Phase III readout on chemotherapy-induced thrombocytopenia with avatrombopag in second half of 2020; submission of DIRA, or deficiency of Interleukin-1 receptor antagonist, in the U.S. in mid-2020 with anakinra; expected approval in emapalumab in EU in mid-2020; complete enrollment of 10 patients in MAS with emapalumab and subsequent meeting with the FDA by year-end; and to initiate a Phase II study with emapalumab in preemptive graph failure by year-end.

If I can have the next slide, please.

On this slide, I'm showing the design of the ongoing Phase III trial with BIVV001 in previously treated patients with hemophilia A above 12 years of age. The study will enroll 150 patients and include the annualized bleeding rate as primary endpoint, but also include additional measures such as ultrasound and activity monitoring to better document the unique profile and ability to normalize the life of patients with hemophilia A with BIVV001.

And with that, I hand over to Henrik to discuss the financials.

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [4]

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Thank you, Milan. Good morning, everyone. So let's start with the financial summary of the quarter. Revenues for Q4, as we saw, amounted to SEK 4,890 million corresponding to an increase of 90% and 82%, if we look at the constant currencies. Elocta and Alprolix, both saw strong double-digit growth, showing continued momentum in both products. We are seeing this growth across Europe and the Middle East.

Synagis sales of SEK 1,656 million were above our expectations. We see positive signals as a result of the improved commercial effectiveness, but sales were also impacted by wholesaler stocking, positive gross to net impact as well as the severe RSV season. It's important, as Guido said, that we evaluate Synagis in season, and that is really measuring July to June as there can be monthly variations. So for this season, '19, '20, we expect sales of between $290 million and $300 million.

Gamifant sales of SEK 180 million showed a rebound from the SEK 67 million that we saw in Q3. But as discussed, we expect some continued volatility in the quarter -- in the quarters to come due to the nature of the disease and small patient population, although the underlying trend is very positive.

In terms of organic growth, that is adjusting for the acquired growth from Synagis and also Doptelet, we saw year-on-year growth of 20% in the quarter at constant currencies.

In Q3, we discussed our slightly lower gross margin due to the seasonal product mix effect, primarily driven by Synagis and then lower Gamifant sales. But as expected, the quarter-on-quarter increase in gross margin. But this -- we saw a quarter-on-quarter increase, leading to 78% gross margin for the quarter with a full year gross margin of 77%, which is then up from 74% a year ago.

Adjusted EBITDA reached SEK 2,380 million for the quarter, an increase of 160% and this corresponded to a margin of 49%. Again, the margin of the quarter was obviously impacted by the seasonality of Synagis.

Adjusted EPS, that is adjusted for nonrecurring items for the quarter, was up as much as 122%, but also the full year adjusted EPS showed very strong growth of 33%.

The operating cash flow of SEK 976 million for the quarter and SEK 3.6 billion year-to-date signals continued very strong operating cash flow. The net debt as a result of the Dova acquisition increased from SEK 7.6 billion in Q3 to SEK 15.4 billion at the end of Q4. So this increase is obviously driven by the roughly SEK 8 billion acquisition of Dova, but it was also impacted by the $50 million payment to Sanofi related to the early opt in there for BIVV001, but also the positive impact from our underlying business performance.

So if we go to next slide. I also want to discuss our revenue and OpEx development over the last 2 years. The fact that we've diversified now into new areas has -- will have a significant impact throughout our financials. The top blue chart illustrates revenue, where we have 90% growth for the quarter and 56% for the year. And as we can see, approximately 38% of our Q4 revenue related to the new products, particularly the Synagis but also Gamifant and to a smaller extent, Doptelet.

Let's next discuss OpEx. We have a trended view in the bottom gray chart. There are a few key points to be made here. I mean first, the OpEx in our base business is relatively stable where we have increased investments, primarily in hemophilia. Secondly, as we can see, we have invested and we will continue to invest in Synagis, Gamifant and Doptelet in order to drive the long-term growth and profitability, I mean, both in the commercial and the R&D areas and also in the internationalization of Gamifant and Doptelet outside of the U.S.

You can see this trend in Q4 2019 where 36% of our SEK 1.4 billion OpEx relates to these new products. Just as a reminder, even though the Synagis revenue is seasonal, I mean, the expenses are more evenly spread throughout the year.

And finally, a major driver of the Q3 to Q4 OpEx increase was due to the impact of Dova, corresponding to about SEK 160 million in Q4.

So if we go to the next slide. So let's turn to the development of operating cash flow per quarter at our cash conversion over EBITDA on a latest 12-month basis. We see a continued very strong cash conversion between 60% and 70% of EBITDA over the last 3 quarters. The net debt of SEK 15.4 billion at the end of the quarter was a bit lower-than-planned due to the strong operational performance, and this level corresponds to a pro forma leverage of well below 3x. And this level is expected to decline to 2 to 2.5x EBITDA during this year.

Thank you, and back to you, Guido.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [5]

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Yes. Thank you, Henrik. And what I would like to share with you now is really how to think about us now moving forward. And Henrik has alluded to the fact that there is a lot of investment or spend going into Doptelet and Gamifant, our future growth drivers.

And it's a feel -- it feels a little bit like the soccer player who has to kick the penalty. He should not waiver and think about twice whether you should choose the penalty, and we don't need to waiver or shouldn't waver now to invest into these significant growth opportunities moving into the future because we have now products in our hands, and that's the reason why we upgraded also the guidance. Just to clarify, what we see now that there are more than $500 million (sic) [SEK 500 million] sales related to these 2 entities, but they need to be developed, they need to be developed commercially, but they need to be also developed from an R&D standpoint and from a medical standpoint. And these costs of developing the products are reflected, obviously, also in our guidance. And we just wanted to make sure that this is absolutely clarified.

But we feel when you're thinking about the opportunities now moving forward and you have in mind that we think that we can grow our 2 main franchises with the help of these 2 growth drivers at double-digit growth mid-term, and mid-term we mean 3 years, then I think this is worth all the effort. And we also wanted to clarify that our noncore specialty care business, as we have alluded to earlier, we will have an expected negative impact on revenues of around SEK 300 million to SEK 400 million. And just related to the fact that we have discontinued some relationships with some of the partners and essentially focusing now on our core business, which is much more profitable and where we also see the long-term growth.

So coming back to the financial outlook. So when you look at our financial outlook of SEK 15 billion to SEK 16 billion on the top line, primarily driven by hematology and immunology growing double-digit and also in the years to come. I think this is how you have to look at us. This is excluding -- or this is including, obviously, the reduction on the Specialty Care business. And our EBITA reflects the fact that we believe in the future, particularly of Doptelet and of Gamifant, and we called out the negative effect of Doptelet, meaning gross margin minusing of the expenses for R&D and commercial expansion, and this delta is around SEK 500 million. So we are confident looking into the future, and I'm very bullish on what we can do as a company. I'm very excited that we have now a much more -- that we've broadened the franchise into 2 areas, and that we have the future in our hand.

And then with this note, I think we are now up for question and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from the line of Eun Yang from Jefferies.

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Eun Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [2]

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Just if I missed it, I apologize. But when you mentioned double-digit growth in Hematology as well as Immunology in the mid-term, next 3 years. Particularly in the Hematology franchise, does that imply you expected double-digit growth in hemophilia? Or do you think that double-digit growth is largely coming from Doptelet?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [3]

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Yes. I mean the -- we -- as you know, we don't typically guide by product. And the -- and what we wanted to make sure is that we are convinced that we have great products in our [portfolio]. I mean 34% growth with Elocta last year feels good. Yes. And we feel good about the continuous expansion of patients.

Now there is obviously uncertainty with regard to the new entrant. We have seen the uptake data in Europe, also now -- particularly from Hemlibra, which are not so convincing and compelling as they are in the United States. It's early days. So what we wanted to say is we stand by our products. We think that we will continuously drive them. But what we want to now steer the discussion towards to is that we say, let's think about this broader. Let's think about Sobi broader and as a company that has -- that can drive its core business double-digit because this is -- and then you can have different views on how strong we grow our hemophilia franchise.

Again, we are convinced that we have the best products in our stable, and that this remains mainstream. But basically, we overlay this with Doptelet and those franchises together, where we are convinced that we can make a significant impact with this product, with a differentiated product in a very well-structured market, and we have demonstrated that we can compete in those environments, also this big pharma has demonstrated -- has shown with the hemophilia franchise that we can have an impact. Yes, so we don't provide guidance by product, but we wanted to make sure that you are left with a view, actually, core business of Sobi grows double digit.

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Eun Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [4]

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And then question on Gamifant. Can you give us -- previously, you said the EU approval is expected mid of this year. So can you give us an update on Gamifant EU approval time line?

And then lastly, on Doptelet. So ITP is an established market. So you need to capture market share. But CIT is a market that you wouldn't need to cultivate. So when you think about uptake of Doptelet in these 2 indications, how do you see uptake to look like? Which one would be easier to penetrate versus more challenging?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [5]

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Thank you, Eun. So let's start with Gamifant, in Europe. We are currently in the discussions with EMA. And we have, at this stage, no new guidance. We have outlined -- we have guided earlier, and we are just now waiting for some responses from their side. We have no new update at this stage either way. The -- with regard to Doptelet, it's true here. We're entering -- we have the product registered today in CLD in Europe. And we have -- and we're expecting in Q3 the approval for ITP in Europe. And basically, Q3 -- end of Q3, beginning of Q4, yes. So just to give us a little bit of flex, but with a bit of luck, it's in Q3.

And then basically, we think this is obviously a significant opportunity because also in Europe, this is a very structured market. We will have to compete now, maybe to your question, how do we think about the competition. Now I just used, for argument's sake, the U.S. market. So it's a give and take. It's a $1 billion market, which is dominated by Promacta and with a significant position by endplate. So we have Novartis and Amgen as our competitors, and we come in with a product that is oral, once-a-day, no hepatotoxicity and you don't have to worry about the food intake. And sometimes, we believe this is a little bit misunderstood or not properly taken -- given justice because if you have to take a product, if you cannot eat 2 hours prior to intake and 2 hours after, well, you have to align your life.

And when you think about an average duration of treatment of 9 months, so that's -- that means you need to juggle this, and this came out of some inside analysis loud and clear. That there is a demand for new product. And -- but this will take some time. So every -- we think that this is a compounding business where we then gradually take share. And towards the end of the year, we'll take a significant share of the total market. And obviously, the -- but in terms of absolute sales, I think it will take probably 2 or 3 years that this market share is very substantial.

And then in addition, you have the readout of the Phase III in CIT in the third quarter. And here, we will be the first to market. And we think when you look at the structure of this environment, minimum, I think, it's a billion-dollar opportunity market, possibly more, let's say, and we now come into this market, and the question for us is going to be how we will approach this market. We know that actually similar to ITP, the hematologist plays an important role for ITP anyway, but even for COD, the existing indication as a decision-maker as well for CIC. So there is some leverage in the -- with the team that we have in place. But we may have to complement the team. And this is something that we are currently thinking of. So we think that we have a -- we will have a very good shot. It's not going to be a walk in the park and competition will invite us to take their share, but we have a strong proposition. I hope that this gives you a little bit of a flavor.

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Operator [6]

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The next question comes from the line of Emmanuel Papadakis from Barclays.

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Emmanuel Douglas Papadakis, Barclays Bank PLC, Research Division - MD & Head of European Pharmaceuticals Research [7]

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Emmanuel Papadakis from Barclays. Maybe just a couple. Hemophilia. I wonder if you could give us any color on the geographic European split of sales for both Elocta and Alprolix, some data we've seen it seems relatively concentrated, for example, in France. Perhaps you can tell us if that's wrong. And if so, sustainability of that concentration would be of so interesting to hear perspectives.

Maybe a follow-up on Doptelet. You obviously have the ITP approval in the U.S. a while ago, still seems to be relatively slow progress there. So any comments on when you would expect that? Is that a gradual change? Or should we be looking for a step change at some point? And where you're going to be spending that additional SEK 0.5 billion over the coming year? Is that just sales reps? Would be helpful too.

And then final one on Synagis. You've talked about mid-single-digit growth rate for this year. Do you think that is sustainable over the next couple of seasons? And are you anticipating any major changes in the AAP CID guidelines?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [8]

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Thank you. Yes. No -- I mean maybe we start with hemophilia. It's true that we have a high market share in France. But we are having also very high market shares in Switzerland and Ireland. And we are getting significance also now in markets like Germany, Italy, Northern Europe. So you see Spain, you see really a significant ramp-up of our presence. So I don't -- whilst maybe historically it was more skewed towards various markets, I don't think that this is now holding forward-looking. And we have very nice growth opportunities now in Central, Eastern Europe. And obviously, as I mentioned earlier, we just got the approval. We still have to get appraised but we got registration of Elocta in Russia. And yes, so I don't think that basically we have a concentration risk as such, let's say -- yes, I mean we have some markets that are larger but we have growth opportunities in others. And obviously, we are -- I think we are prepared to defend our position and articulate to the community why Elocta is a very strong choice.

Now with regard to Synagis. This is sustainable. When we did an insight, we basically realized that there is still a lot of leakage in the system of people adhering to therapy and even babies therapied. We had a significant stronger demand increase last year than what, in the end, we were able to dispense -- that got dispensed because we were not yet totally synchronized in the (inaudible) hub system. So we think that these opportunities are there also mid-term. So we know -- we don't think that the Synagis and our mid-term growth story will come to an end anytime soon because we still have significant opportunities ahead of us and the AAP guidelines is hard to judge. We are in the hands of others, we will try to make a point. Will our point be strong enough or not, honestly, is out of our hands. So I don't want to speculate.

Yes, I hope -- in this regard to Doptelet, slow progress is correct. I think you need to also recognize Dova, before our ownership, got the registration in July last year. Was probably -- wouldn't say surprised, but probably not as well prepared as you would think. Then they were in discussions with us on the exit. That didn't really enhance the preparation for the launch either. We have not -- last year we have the product and now ownership for essentially 1.5 months. I mean it's not just good enough in order to put the hands on your business and then automatically it's going to increase. But we see signals. We brought a new leadership. We have a very rigorous methodology on commercial effectiveness. We have our metrics overlaid there.

We have -- I was with the team last week. We're trying to create the right excitement. We believe in the product. We believe in the team that we have now in place. And we will -- I think during the course of this year, maybe more skewed towards the second half, but we should already see something in Q2. You will see a very steady increase as this is like overlaying different layers of patients essentially on a monthly basis. So we should see some response. But let's say, more significant, let's say, in the second half, and it's probably more -- every month it's a steady process. And then hopefully we get into a bit of a snowball effect towards the end of the year.

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Operator [9]

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The next question comes from the line of Richard Parkes from Deutsche Bank.

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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [10]

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I've just got 3, I think. Firstly, on the guidance. It's a wider range than you've given previously. So could you just discuss the swing factors to that and your thinking over giving a wider range than in the past? I think historically you've given a conservative guidance range at the beginning of the year and then upgraded through the year. Just

-- I'm just wondering if this marks a change in that policy. Secondly -- and related to that guidance, just wondered if you could help us by talking about the visibility that you've got on Elocta for 2020? Sanofi seemed to get taken a little bit by surprise by the competitive impact of Hemlibra in the U.S. And I'm wondering what visibility you've got going forward? And whether that's helped by certain [trends], et cetera? Maybe you could also help us understand in what territories you're now experiencing full impact from Hemlibra competition where it's fully reimbursed? And how you expect that to evolve over the year?

Final question is just clarification on Doptelet in terms of the sales that you've reported. That 6-week number implies they're annualizing at about $30 million versus IQVIA volumes in sales, which look to be materially lower than that. Just wondered if you could help us understand whether IQVIA volume data is not very good in this category or whether the 4Q number was impacted by inventory changes?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [11]

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Maybe we start with the hemophilia part. I think why do we have a wider range? We have a range because we have a couple of areas. First of all, you establish product essentially new -- you're in a launch phase. With this, automatically you have a little bit more variability. We have obviously -- we face competition in hemophilia. But we have also offered in, in a generic environment. So there are couple of variabilities where we felt it give -- we are -- as you know, Richard, we are not the guys who are talking a lot and promising a lot and then seem to underdeliver. We rather like to deliver what we are doing and that's the reason why we provided a range that covers us and -- but we are confident that we can make a significant impact.

With regard to Elocta. Yes, it seems that I think there was a disproportionate impact on Elocta in the U.S. when Hemlibra launched. And I'm sure you know that Sanofi would love to give you there some explanation of how this came along. But what our understanding is, is that basically there was -- there's a bias for Hemlibra given that convenience features in the -- on the demand pyramid much higher than in the European setting -- and obviously in the European setting you have seen the connection with the centers, with the physicians, which are much stronger. And you don't hear physicians who are probably -- need to be convinced and who are very interested in safety data as well. And then basically comes also this growing time.

And I'm sure you're aware of the [microvascular codes] on even mortality and other issues. So there's now -- I think the community is more realizing now, it's also sometimes timing, that new therapies are not a panacea. We look then -- and then there's also the growing awareness that it's not like when you are on new therapies, you can forget about factor. You still need factor to complement in therapy.

And so it's a trade-off. And I think we are not saying that new therapies are not going to have a market, but we are saying that EHLs will have a market, and we are convinced with our offering. We have the best EHL. So -- and we have a couple of things now in preparation. So we understand, to be honest -- our understanding on what real-world shows has grown significantly. We are also understanding how we can enable patients, and we are working there on digital solutions and allowing them to liberate their life because it's on the move. We have many other initiatives just to make sure that physicians and patients have an option and -- to have an active life and manage their disease as opposed to believe that they are cured. And that it will normalize, for argument sake. So I think that works quite well.

The -- now with regard to the -- what was the other question? On the -- yes, on the sales reported with Doptelet. I mean the Doptelet sales, and this is the unfortunate stories, it's not -- we're not talking about a product that now makes $1 billion. And this is -- you have certain sales. And as you know, IQVIA is a panel that then extrapolates for the universe. And I think that panel right now is not yet indicative for Doptelet revenues. But hopefully, let's say, with growing business, we become more -- this panel becomes more representative.

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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [12]

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And sorry, just one follow-up. So the -- if we take that 6 weeks number that you've reported and annualize that, is that a better guide for the underlying sales at present? Or was there anything lumpy in there?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [13]

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There is -- I think December was a good month. Could there be -- we are talking really small numbers, yes. Could there be the one or the other 100,000 that basically moved into -- was advanced from last year? Maybe. But we don't see it. And I kind of -- also, to be honest, I cannot validate this now. But I think it will appear in our chart, Doptelet, and you don't -- and you won't need a magnifying glass to find it. So it's a -- it will become a significant product, and let's say, that will propel our sales. And the 6 weeks, I mean for whatever it's worth, it's one data point. I think look at our Q1, it will be the next.

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Operator [14]

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The next question comes from the line of Erik Hultgard from Carnegie.

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Erik Hultgård, Carnegie Investment Bank AB, Research Division - Research Analyst [15]

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A couple of more questions, if I may. First on Elocta. Could you talk a little bit about the performance that you've seen for Elocta in Europe so far in Q1? And in particular, whether you're seeing any impact from Hemlibra in markets where they have secured market access and reimbursement?

Secondly, on BIVV001, should we assume regulatory submissions in Europe 2022 similar to the U.S.? Or should we assume that the EMA would require sequential pediatric data as was the case with Elocta?

And then finally, could you talk a little bit about the Doptelet Phase III study in CIT with data due Q3? How should we see the risk -- the development risk in this study? Could you talk about the design? What sort of historical data has shown and the power of the study, just to understand sort of the risk of failure in that important trial?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [16]

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Yes. Thank you, Eric. Pleasure. So Elocta, Q1, we cannot comment. I can only tell you that we come from the last year with very -- with a lot of confidence into this year. And unfortunately, I can't tell you more. We have obviously a couple of markets where Hemlibra had market access last year -- full access, one of them being Germany. And it hasn't affected our patient acquisition. And BIVV001, let's say, the -- they are basically -- we think that this is -- there is a pediatric study need but it's -- our time frame is 2023. Milan, you want to comment?

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Milan Zdravkovic, Swedish Orphan Biovitrum AB (publ) - Head of Research & Development and Chief Medical Officer [17]

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No, I agree. Approval in 2023 is what we have been saying. Yes, there is a requirement in Europe for pediatric data, and we will have to fulfill that.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [18]

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Yes. And on the development risk, I mean we're obviously confident to get it with CIT, but maybe Milan also heard you.

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Milan Zdravkovic, Swedish Orphan Biovitrum AB (publ) - Head of Research & Development and Chief Medical Officer [19]

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Yes. So I think there's a number of data points that supports a role of TPO receptor agonist in the space also of chemotherapy-induced thrombocytopenia. The study has been designed taking all these data points into consideration. There has been FDA discussions around the Phase III design, including the end points. The study is well underway. We have approximately 75% of the patients enrolled. The study is well powered. This -- we are confident around, you can say, the CIT. It was also one of the reasons around -- the attractiveness around (inaudible).

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Operator [20]

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The next question comes from the line of Peter Sehested from Handelsbanken.

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Peter Sehested, Handelsbanken Capital Markets AB, Research Division - Research Analyst [21]

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Peter from Handelsbanken. I just have a few housekeeping questions for Henrik. Could you please help us understand what we should expect for amortization and depreciation cost (inaudible) 2020. Also, in terms of the absolute level of (inaudible) over the [6.3 billion that you had in 2019]?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [22]

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It was a little difficult to hear you, Peter. But I understood your question to be about the amortizations for new rights?

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Peter Sehested, Handelsbanken Capital Markets AB, Research Division - Research Analyst [23]

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Yes. I hope you can hear me better now?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [24]

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Now I can hear you. Yes. Yes.

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Peter Sehested, Handelsbanken Capital Markets AB, Research Division - Research Analyst [25]

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Okay. Sorry. I'll just repeat them very quickly. So just some brief guidance on amortization and depreciation cost for 2020 as well as the incremental spend above the 6.3 that you had in 2019 that we should expect for 2020?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [26]

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Yes. When it comes to amortization of these new rights, you can expect that we amortize intangibles over 15 to 20 years. So if you go into the note in the report, you see the amounts. When it comes to an absolute OpEx number for 2020, we don't give any further guidance than the one we have given with the range, obviously, and the impact from Doptelet for the development and launch costs. So at this stage, we don't give an absolute number on OpEx.

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Peter Sehested, Handelsbanken Capital Markets AB, Research Division - Research Analyst [27]

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Okay. Just have -- each have one question on Hemlibra then. Just sort of understand the dynamics in the U.S. -- for product in such a disease [line,] as I see it, that can only happen if you have patients switching out of Eloctate and into Hemlibra. Is that also how you understand it? And Roche at their call said that the underlying patient dynamics are unchanged in Europe, but until now it's been a question of lack of access in market. Is that also how you see it?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [28]

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I mean the -- I mean there is -- I mean we are -- based on the data points that we have obtained is, they suggest that there were switches from Eloctate to Hemlibra. And you need really to ask Sanofi about further explanations. Now yes, I mean Europe there is always a question of market access, absolutely. And I'm sure that this may or may not have influenced Roche so far. That's basically in every European launch the case. But I think our point was more, yes, there will be -- to be [proven] obviously, there will be more market access as they go along. And the -- but the next 6 months will already be quite indicative, yes, because what basically is going to be the game. And so you don't have to wait maybe for 18 quarters to figure out whether there is an impact or not. The -- you may see this faster. And I'm not -- and again we're not professing here that they won't have an impact; we're just saying that we feel we have a good therapy.

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Peter Sehested, Handelsbanken Capital Markets AB, Research Division - Research Analyst [29]

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Just one additional for Henrik and I'll jump out. Tax rate for 2020. Is there anything we should think, some of your amortizations that are not tax-deductible, et cetera?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [30]

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Yes. So what we expect for 2020 is slightly lower tax rate than we've seen in 2019.

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Operator [31]

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The next question comes from the line of Johan Unnerus from Pareto.

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Johan Unnerus, Pareto Securities, Research Division - Analyst [32]

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Some follow-ups mainly. Gross margin 78% in '19. Is that a fair level also for '20?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [33]

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If you look at the full year, it was actually 77%. So yes, I mean that's a fair view also going forward here for 2020.

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Johan Unnerus, Pareto Securities, Research Division - Analyst [34]

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Yes. On Elocta royalties, obviously, your quarterly number is sort of a best guesstimate or proxy for the underlying. Is there any true-ups or adjustment that you want to highlight? Perhaps you've done that in the beginning of the call. But anyway, is there anything to point out there?

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Henrik Stenqvist, Swedish Orphan Biovitrum AB (publ) - CFO [35]

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No, not really. Not really for this quarter.

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Johan Unnerus, Pareto Securities, Research Division - Analyst [36]

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Good. And on Synagis, I remember from the acquisition, I think, you were talking about slight growth sort of 2% or thereabouts, from memory, and now you're pretty clear about mid-single digit. That's a more positive take given the strong ending in '19. Is that also something we should have in mind for next year? Of course, there will be seasonal variations; excluding that, I mean. But clearly couple of years out, 3 years out, if that's what we should look at for the midterm? Mid-single digits is clearly higher than 2%, anyway.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [37]

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Yes, yes. No, it's higher than 2% yes. And let's say, so we -- I mean at this stage we haven't given out the guidance for Synagis midterm. But on the immunology franchise -- but as we alluded to earlier during the call, we have lot of opportunities still to grow the product. And therefore we are going after these opportunities, and we think that we -- that this is not just another year. But we're not giving you guidance for the product.

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Johan Unnerus, Pareto Securities, Research Division - Analyst [38]

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And the message you get from Sobi and the impression is clearly that you're more focused on your core business, or your 2 main divisions, and you're talking about both midterm double, single -- -- double-digit growth, and that seems to be the case also for this year. I think that's very good to have that sort of clarification. Should we continue -- should we expect you to continue to guide for the annual outlook on these 2 core businesses going forward?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [39]

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Yes. I think the nature of these things is when you -- once you start, it's very difficult to stop, yes. So we will continue, yes.

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Johan Unnerus, Pareto Securities, Research Division - Analyst [40]

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Okay. It's like taking a penalty, I guess. And the -- and also, just sort of Elocta. Clearly, Germany is reimbursed for Hemlibra. Did you say that you see no indication of [Synagis] switching at this stage in Germany?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [41]

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Yes. I mean we have -- no, we haven't found it. But with -- but normally we don't comment even on a country basis. But the impact has been, let's say, what we can see, has been very limited. And we -- and what we see for sure is how many patients we have net gained, and there is a positive trend.

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Operator [42]

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The next question comes from the line of Viktor Sundberg from ABG Sundal Collier.

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Viktor Sundberg, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [43]

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So on Gamifant, maybe you could add some reasoning around the raised sales -- peak sales projections. I guess as of now the product is quite lumpy since it has a limited patient population and you're in Phase II, I guess, for secondary HLH. So when would we expect a more stable or linear sales trajectory for that product? And on Synagis, since the RSV season, I guess, is behind us right now, if I look at the CDC data, what do you expect from the first quarter since the peak of the season sort of peaked? And could you comment if wholesalers are already stacked up in anticipation of that peak since before? Yes, just a comment on Q1 would be helpful.

And also -- just a final question also. Just in terms of what gives you most confidence that you could reach your sales target for 2020? I mean Gamifant is still quite lumpy. On Doptelet, we haven't really seen the sales trajectory yet. And Synagis will, in some ways, depend on the RSV season, I guess, for next year. This is mostly hemophilia where you have the greatest visibility for your guidance for next year.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [44]

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Thank you. Yes. Let's start with Synagis. We -- when you look at these -- the product by season, then basically we bought -- we gave guidance to the market of $269 million for the -- when we bought it and this was the '17/'18 season. Last season, '18/'19, yes, which basically ended in April, the business was then around $276 million, already starting to benefit from the change of ownership. When you look at the '19/'20 season, we think that we can grow this franchise and also in the now -- the last remaining 2 quarters of that, let's say, it's mid-single digit. And then when you compute this, that basically gives you a view. So there's always this inventory movement. But the good news is that over the entire season, this becomes irrelevant because it is always flushed out towards the end. And so I think -- but what we see -- what we believe is a single digit.

With Gamifant, let's say -- I think you need to realize, I mean $56 million for a limited indication from a start. Yes, it was lumpy. But it became a reality, yes. So I'm not -- I'm actually confident that this -- and satisfied that this was actually a good launch. Yes, I mean would I have wished that this is more, that this launch would fit into more of a spreadsheet of a linear model, I agree. It would make my life much easier. It would make your life much easier. But it doesn't. So it is dependent on the patient who is coming in. Now there will be various trends. Obviously, the big trend is the enabling of secondary HLH in adults and in children, and with the first readout of the MAS data that will come sooner. So basically that's the regulatory pathway. And then there's another pathway, which is the new definition of primary HLH, which basically says, in a nutshell, you do this by exclusion, because there's data out that suggests that even patients with infection-related HLH have a genetic predisposition, yes. So as such, being classified as primary.

And so there is a debate ongoing. And this is not as structured as other areas. Furthermore, the debate and the leaders -- thought leaders in this area, who are strongly advocating to think this way, the more the debate is swaying this way, the more -- the broader, let's say, the target audience for our -- for this business is going to become. And so I would say, towards the second half of this year, hopefully we see little bit less lumpiness. If that would lead to a significant growth versus previous year, I would -- I could even live with a bit of lumpiness, yes. But I think bottom line is Gamifant will be a significant contributor.

And then we -- you look at Doptelet entering into a significant category and you come with a better product, and with a sharpened organization into this year, you would assume that the challenger will take some share. I'm not saying that we will be already a leader, but that you take some significant share that should be -- that should resemble then also in our P&L. So there is growth. Yes, it's not a guarantee here. But that's the reason why we're also now investing into the product, investing into the development, into CIT. And the more we invest into clinical experience, medical marketing activity, the stronger the halo will be, the stronger it will be clear that this product has -- is clearly differentiated. So that's really how we think about it. And we think that hemophilia will be good for us. And I look forward to present to you the Q1 number. And whatever they will be, but the -- but I think we are coming into this year with a broad chest.

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Viktor Sundberg, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [45]

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Yes. And just on Doptelet. Do you have a full sales force in place for that product? Or are you building that as we go here in 2020?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [46]

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No. We have. That's part of the investment. So it's -- part of the investment is commercial and the other part is really R&D related, indication related and medical related. We have a full field force in place that is absolutely competitive in size and definitely -- and also in qualification with best-in-class.

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Viktor Sundberg, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [47]

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And that sales force was not in place after June when the product got approved last year?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [48]

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Yes. Yes, it was to a certain degree in place. But the -- well, I would say, the field force orientation and also -- we invested, obviously, in further expansions and -- so there are more team members now on board. But it is primarily also now the way we will bring in -- to be proved, yes, I mean that we are really better than the previous state. But you would think that an organization that focuses on exit and not on sales and that was a little bit, I wouldn't say surprised, but came to this launch in a little bit -- in an accelerated fashion was not so prepared, that this now should pay dividend. So we -- for the team, there's no excuse. We now will be on par, and we are convinced by the team. I mean I met them all. We had a pretty large team event recently in the U.S. and they are fired up.

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Operator [49]

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The last question comes from the line of Christopher Uhde from SEB.

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Christopher Winston Uhde, SEB, Research Division - Analyst [50]

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Lots of analysts these days. So I just have some questions. Well, first -- so Russia, what would be a typical time to reimbursement to launch, let's say, for rare disease products after approval? And then can you share the switch rates for Elocta and Alprolix right now? And I think then I have some questions for Milan on Gamifant. And we can cover those 2.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [51]

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Yes. I mean, basically, Russia will be a 2021 event. It takes around a year to get appraised and then launch. And we're using all the time to prepare, obviously. And the switch rate, we don't comment really on this, but we have -- we -- you have seen, because -- you've seen recently patient conversions that we have mentioned in one or the other context and they provide you with a good orientation on how many patients we are gaining. And maybe -- then I give the floor free to Milan. Maybe you fire off your second question, Christoph.

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Christopher Winston Uhde, SEB, Research Division - Analyst [52]

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Yes. Okay. So for the, I guess, secondary HLH in kids, have you seen -- well, how does the initial dosing and dose escalation compare to what was done in the registration trial? And then can you also comment what proportion of those patients are getting stem cell transplants. And then also what was the reason for the delay for the secondary HLH study in adults (inaudible), please?

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Milan Zdravkovic, Swedish Orphan Biovitrum AB (publ) - Head of Research & Development and Chief Medical Officer [53]

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Yes. So the secondary HLH study in MAS has a starting dose of 6 mg per kilogram. They have -- we have very good response rates from that study. So I can't really comment on transplantation. When it came through the adult study, we are doing everything we can to get it started. We have the approval now to get started at the first site and now we're waiting for the first patients to enter hopefully.

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [54]

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Christoph, anyhow, I hope our answers were complete, yes, hopefully.

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Christopher Winston Uhde, SEB, Research Division - Analyst [55]

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Yes, that's great. No, I think -- I would ask one last question actually about Synagis. Last -- I guess when you got the rights, you commented that there was not the usual price increase in 2019. Have you secured that for 2020, something more in line with historically?

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Guido Oelkers, Swedish Orphan Biovitrum AB (publ) - CEO & President [56]

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Yes, yes, secured this.

Thanks, everybody, for your interest. It was an exciting year, and I hope 2020 will be not less exciting. Appreciate it, yes. Thank you.

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Operator [57]

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This now concludes our presentation. We do apologize for any sound issues you may have experienced. The full presentation will be available on demand in a short while. Thank you all for attending. You may now disconnect.