Orexo displayed yet another quarter of enhanced profitability and cash flow. Zubsolv US and Abstral’s increased volumes in combination with good cost control were the drivers behind this improved performance. The activity in our pipeline was high and there were several instances of important progress being made. We now have a stable foundation for our continuing journey in the development of Orexo.
One of the important objectives for 2017 is to maintain company profitability and sustain our strong financial position, and I am pleased that the Q2 results demonstrate that we are progressing according to plan. In particular, our US business continues to improve, with Zubsolv® US showing a double digit growth (10 percent) in net sales from last year resulting in both positive profit and cash flow contributions in the second quarter on a Group level.
Considerable progress in the pipeline
Another of my key objectives this year is to progress our pipeline. I am encouraged to see that during the second quarter our pipeline has made significant progress. The effort of developing the next generation of our drug delivery technologies has led to one specific project (OX382), an innovative oral formulation, progressing to late pre-clinical stage and is now ready for clinical phase I trial within the next 6 to 9 months. Furthermore, I am encouraged to see that the OX-CLI project, which is managed by our partner AstraZeneca, has progressed into clinical phase I. Our pipeline now has assets ranging from the exploratory phase to the registration phase consisting of six promising internal and partnered projects. The combined potential of these projects provides for new milestones and royalty streams as they evolve, in combination with future assets for our US organization to commercialize.
Zubsolv’s volumes in the US is growing
The US market for our lead product Zubsolv continues to show strong growth, but is also challenging with most of the growth coming from the public segment. Since Zubsolv currently has limited market access in the public segment in several of the growing geographies, it is a challenge to maintain overall market share. However, in the regions where Zubsolv has market access combined with field force coverage, Zubsolv continues to win market share and gain volume. In this market environment, I appreciate that we have managed to grow our net sales year over year and gain volume, although we need to and are focused on improving our ability to compete in the fast growing public segment.
COGS on the way down as efficiency increases
The critical success factor to be able to compete in the public segment is price. Consequently, we have increased the investment in our market access efforts and adjusted our overall marketing mix to optimize the balance between growth and profitability. To improve profitability and competitiveness improved effectiveness of our supply chain has become a key success factor. I am very pleased with the progress we are making in our supply chain and we will be able to significantly reduce our cost of goods sold. We are still finalizing the details of our supply chain for 2018 and beyond, but applying the anticipated future manufacturing cost of Zubsolv to the 2016 result, would have more than doubled our net earnings.
Many indications of improved market access for Zubsolv in the US
Continuing to look forward I am confident that our efforts regarding market access will start to pay off. Most of the existing formulary positions have been confirmed for 2018, to date none have been removed and we have also gained new contracts effective from 2018. Additionally we are making good progress in current negotiations which can further improve our ability to capture the strong growth that characterizes our main market. The journey of developing a growing profitable pharmaceutical company has just begun, enabling a strong financial platform for continued investment in the evolution of Orexo. The strong financial performance, positive signs in market access for 2018 in the US and the pipeline progress in Q2 are important indications that we are heading in the right direction.
Uppsala, Sweden, July 11, 2017
President and CEO