Q1 2023 – Navigating troubled waters
As expected, the first quarter has been intensive for Orexo with submission of the of OX124 file to the FDA, completion of the District Court Hearing in the patent litigation and integration of the DTx team into the US Pharma organization. ZUBSOLV® sales in SEK was in line with last year, supported by currency tailwinds, and ZUBSOLV® US sales have stabilized comparing to Q4 in USD. As expected, EBITDA compared to last year is lower explained by the increase in non-repeating expenses. These expenses will decline in the next quarters as we approach the critical milestones for the company with the decision in the District Court and the completion of the MODIA® clinical trial. Removing these non-repeating expenses from the P&L, EBITDA would have been positive in the quarter. I am disappointed with the news right after the quarter ended, that we had issues with the packaging line for OX124 and need to make a new submission to FDA later this year. If the final tests at our contract manufacturing partner are successful, we are expecting to resubmit the OX124 file with the FDA in Q3.
The Opioid Use Disorder treatment in transformation
Opioid Use Disorder (OUD) has for many years been stigmatized and access to treatment limited. Patients have been forced to approach clinics with sub-optimal medical standards and access to life saving overdose drugs were limited to prescriptions to the patient with OUD and not concerned relatives. Important steps have now been made to change this.
Legislative changes removing the DATA2000 certification requirement to prescribe medication, such as ZUBSOLV®, will improve access to treatment over time. The changes were implemented during the quarter, but physicians are still required to complete a training program in addiction and misuse before being allowed to prescribe. The new system covers all controlled substances and when fully implemented, a large share of the physicians in the US are likely to be able to treat patients suffering from OUD and prescribe ZUBSOLV®. The effect of this change is not visible yet, and we continue to see low market growth of 6 percent. Currently we lack clarity in the requirements for new physicians to start treatment of OUD. This problem will be solved, and the new legislation should be an important growth factor in the years to come.
Another important change is the decision by the FDA to approve NARCAN® 4 mg naloxone nasal spray as an OTC product i.e., no need for prescription. This is an important step to increase access to life saving naloxone, but most opioid overdoses in the US today are caused by strong synthetic opioids like fentanyl and an increasing amount of data points toward the standard dose of NARCAN® or the pre-filled syringes is not strong enough to completely reverse an overdose caused by a synthetic opioid. To survive an overdose two things matter, speed of onset of the naloxone product and amount of naloxone you get in the body. In our first study, all formulations of OX124 were faster and showed stronger bioavailability, even with the same dose naloxone as NARCAN®. If you overdose with a synthetic opioid this can be the difference between life and death. For OX124 an advantage from this change will be the clear separation of the low-dose OTC rescue medications and the highdose prescription products, such as OX124. In the reimbursement system in the US today, most insurance companies often require a prescription to reimburse a product and rarely reimburse OTC products.
Digital therapeutics a continued concern
Starting the quarter, we took the decision to restructure our organisation for digital therapies and integrating this into the US Pharma organisation, although keeping our current segment reporting. The change was completed stepwise during Q1 and costs associated with the change were included in the Q1 result. The processes for reimbursement and distribution have been identified as a main issue for commercial traction and the pharma team has made a complete overhaul of this process. CEO COMMENTS Navigating troubled waters Interim Report Q1 2023 4 The initial reimbursement pathways required significant administration of both Orexo and the healthcare providers. For example, with MODIA® we are now implementing a streamlined process which is expected to improve efficiency for both Orexo and the providers. In parallel we have discontinued the modiaONE™ trial program and are surveying participating HCP’s for additional feedback to optimize our MODIA® offering. Also, we are now focusing our efforts on clinics with a genuine interest and capability to enter into a MODIA® commercial contract. Similar efficiencies and efforts are being addressed with deprexis® and vorvida®.
As a consequence of the change our direct operating expenses for digital therapies have declined with about 50 percent in the quarter and expect OPEX to continue to decline in Q2 when the full effect of the restructuring materializes. The vast majority of reported expenses in Digital Therapeutics is allocation of resources from US Pharma, such as the field force to promote MODIA®. We know efficiencies and access to physicians improves when the sales representatives present two products, in this case, MODIA® and ZUBSOLV®, to the providers which gives strong synergies for both revenues and expenses.
A cornerstone in the strategy for DTx moving forward is to make a collective offer of both digital therapies and pharmaceuticals under the brand name MATCore™. First step is the implementation in Arizona among patients, starting late April, and in Q1 this generated SEK 0,5 million in income to support the implementation (recognized under Other Income in Digital Therapeutics). Additional discussions exist in several states, both in terms of grants and a more traditional sales model. The recent Chapter 11 filing of a competitor has created interest from some of their customers and we are investigating how to proceed with MODIA®, which right now is commercialized under a different regulatory pathway than the competitor´s product. With a successful clinical trial for MODIA® we intend to upgrade the product to a prescription digital therapy.
R&D taking two steps forward and one step back
The highlight of the quarter was intended to be the filing of OX124 for approval in the US in February. However, issues in the packaging line force us to resubmit the file to FDA. We expect our manufacturing partners have the new packaging process ready for FDA inspection in Q3, which will trigger a new filing of OX124. In parallel with the OX124 filing, we continue to test amorphOX® in new APIs and continue to see positive results both in vitro and in vivo of all the APIs tested. The data from APIs tested in our drug delivery platform amorphOX®, the established supply chain for OX124 and the excellent data on OX640 have created a strong interest in OX640, where we are aiming to develop a needle-free rescue medication for allergic reactions. Our business model for amorphOX® is to find development partners for most projects, but also to leverage our supply chain and commercial organization in the US to promote some of the future products either independently or in partnership with other companies.
Summary and outlook
We knew the first quarter for 2023 was going to be a difficult quarter, with high expenses and some critical activities both in the pipeline and in the organization. I am pleased with our ability to control and reduce expenses and ZUBSOLV® continue to show resilience in a very competitive market. The company and our share price are suffering from the legal uncertainties associated with the patent litigation and the investigation by the authorities of the ZUBSOLV® promotion. This creates operational complexity and overshadows the significant progress we are making in our pipeline and our success in maintaining ZUBSOLV´s profitability and sales. I am optimistic that we can have a resolution of the legal processes during the summer. This will enable Orexo to fully focus on advancing the pipeline, enter the first partnership agreement of an amorphOX® product, resubmission of OX124 to FDA and develop new treatment solutions to patients suffering from opioid use disorder. All based on the strong foundation of continued financial contributions from ZUBSOLV® many years ahead.
Uppsala, Sweden, April 27, 2023
President and CEO