Q1 Report 2019

The first quarter of 2019 has been eventful from a market perspective, most notably with the entry of generic competition to Suboxone® Film. In this dynamic landscape I am pleased to see Zubsolv® maintaining strong sales growth and greater profit contribution, supporting further enhancement of our pipeline development.


Strong financial performance – US operations reach 44.5 percent EBIT margin (19.3)

I am pleased to report the business has achieved a profitable first quarter – the first for the company. This was achieved despite expected high legal costs during the period. Excluding the litigation costs, EBITDA reached SEK 60.8 million (SEK 12.0 million including). Profitability reflects the strong growth in Zubsolv sales in combination with improved gross margins due to accelerated reduction in cost of goods sold. The EBIT margin in our US operation has now reached 44.5 percent and contributed to our overall profitability with SEK 71.9 million.

Market dynamics – Zubsolv sales resilient to increased generic competition

During the quarter generic versions of Suboxone Film were launched. We are encouraged to see limited impact on Zubsolv sales, which have remained resilient and stayed at similar levels reported in Q418 and demand increased by 6 percent versus Q118. The main challenge is that some insurers, e.g. Humana and WellCare, who previously didn’t cover Suboxone Film, will now reimburse the generic versions of the drug. Although increased competition can have negative impact on market share, the total profit contribution from these insurers often increase, since the rebates are substantially reduced. When the current turmoil has settled we are confident the market will offer opportunities for Zubsolv.

Operational – increasing the pace of pipeline developments

As previously announced, we received encouraging data on our OX124 project for the treatment of opioid overdose with a nasal naloxone formulation. We are now in a position to progress both OX124 and OX125 (nasal nalmefene formulation), into further clinical studies which will be initiated in 2020. We also received positive in-vivo data for OX338, a sublingual formulation with ketorolac for treatment of pain, and plan to initiate the first clinical study in humans later in 2019.

Legal – no impact on Zubsolv from the negative decision in the Actavis litigation

Orexo is an innovative company and our main product Zubsolv is patent protected until 2032 following a multiyear patent dispute with Actavis. Being an innovative company also requires a fierce protection of our innovations and we are disappointed with the recent outcome to the litigation process against Actavis for their generics of Subutex® and Suboxone® tablets. We will now initiate the first step in an appeal process. This will be associated with significantly lower costs than the legal expenses recorded in Q119.

Summary and outlook

We have had a strong start to 2019. Three of our four internal pipeline projects are ready to progress into the next development phase, our financial position continues to strengthen due to sales growth and our manufacturing efficiency program has had significant positive impact
on the gross profit contribution from Zubsolv. With a continuous improving profit contribution from Zubsolv, we are able to invest more into R&D and business development. The success in these areas will define our future and on all these areas we have made good progress during the period.

Uppsala, Sweden, May 2, 2019

Nikolaj Sørensen

President and CEO