Q4 2022 – Important steps forward in a challenging landscape

In the quarter we saw steady progress in our pipeline, in particular the broadening of the application of amorphOX® to new categories of molecules, in partnership with leading international biopharmaceutical companies communicated early in 2023. It is also encouraging to see new market opportunities for ZUBSOLV® and MODIA® in the US due to the largest change in legislation for treatment of opioid use disorder (OUD) since the launch of ZUBSOLV®, removing most restrictions on the prescription of buprenorphine for the treatment of OUD. As expected, EBIT in Q4 was affected by high non-recurring operating costs and the continued strength of the USD. On a full year basis, our financial development compared to last year is positive with improved revenues and EBIT, although both affected by FX fluctuations. The main concern in the quarter is our digital therapies and consequently in beginning of 2023 we have re-organized our US commercial operations in the US to increase focus on sales and improve efficiencies.

New market opportunities in OUD

I am pleased to see a continued stable ZUBSOLV® demand comparing to the previous quarter. Market growth has been lower than our expectations in H2 resulting in a mild decline in USD net sales comparing to H1. Since the launch of ZUBSOLV® in 2013 we have faced a market with restrictions in who can prescribe ZUBSOLV® and, to how many patients. Late in December the US congress passed a bill to open up for most physicians in the US to treat OUD with buprenorphine i.e., removing the DATA 2000 waiver and cap on how many patients can be treated. This imminent change will over time transform the treatment of OUD in the US, creating growth opportunities for Orexo.

MATcore™ - a digital platform collecting Orexo´s offering within OUD

Orexo is uniquely positioned to leverage this new legislation, with our ability to offer both medication and psychosocial treatment with MODIA®. As a first step we have developed a new concept MATCore™ where we are collaborating with healthcare providers to develop a customized comprehensive digitized service to patients enabling access to medication, psychosocial support and general OUD resources. In Q4 a healthcare provider in Arizona has received a state grant to work with Orexo to implement MATCore™ customized for the regional patient population. In combination with the legislative changes, this new concept will open new avenues to expand the business, but requires a more integrated approach to the market across our business areas, US Pharma and Digital Therapeutics.

Changes in the Digital Therapeutics business area

In Q4 we have continued to see a high utilization of MODIA®. Orexo expects to receive the first payments in Q1 as reimbursement pathways are confirmed. MODIA® sales is highly complementary to our sales of ZUBSOLV® (and soon also OX124) and with the introduction of MATCore™, we envisage additional synergies between our pharmaceutical business and DTx. We have not yet seen any material revenues from our contract with Trinity Health and we are working with them to improve their primary care physicians´ confidence in the utilization of our digital therapies.

The main issue has been the need to “pull-through” the products with the physicians, which is similar to any pharmaceutical product i.e., we need sales people to educate and remind physicians about the benefit of these new products.

"Orexo is uniquely positioned to leverage this new legislation, with an ability to offer both medication and psychosocial treatment with MODIA®"

Orexo has this capability in our US Pharma business and together with a broader opportunity to use ZUBSOLV® and MODIA® due to the legislative changes, we see increased synergies between our US Pharma and our Digital Therapeutics businesses.

Consequently, we have now taken the step to integrate the two businesses into one organization with one manager, Bob DeLuca. With this change the existing US Pharma business will take full responsibility and accountability for driving sales of digital solutions and the resources in the Digital Therapeutics business area will be integrated into the US Pharma. As I will continue to follow up the businesses separately, we will keep our current segment reporting. Expenses for Digital Therapeutics will decrease primarily due to lower costs related to senior management positions. More importantly the re-organization will increase our agility and ability to prioritize resources across the business in the US to the areas with the greatest opportunities.

"With this change the existing US Pharma business will take full responsibility and accountability for driving sales of digital solutions and the resources in the Digital Therapeutics business area will be integrated into the US Pharma"

Capitalizing the amorphOX® drug delivery platform

Our main focus in R&D has been on OX124, our highdose medication for opioid overdose, and the objective of filing with the FDA before end of 2022. This is now planned for early Q1 2023, primarily due to the delay in administrative processes and responses from the FDA. We are confident we will be ready to file early in Q1 2023 and the ambition is to launch in H1 2024, if the application is approved according to expected timelines.

In addition to the work with OX124, we have continue to strengthen the documentation of the benefits of our drug delivery platform amorphOX® when it is applied to new small molecules and large biomolecules. To fully test and develop differentiated products that go beyond our lead therapeutic areas in mental illness and substance use disorder, Orexo seeks collaboration with partners. Our partnerships with two leading international companies in biomolecules announced January 9, 2023, confirms the potential of and interest in amorphOX®. In 2023 we look forward to evolving these relationships and entering new partnerships with other leading companies.

Summary and outlook

With a solid cash position and profitable recurring ZUBSOLV® business Orexo stands on stable ground, enabling us to capture new market expansion opportunities in OUD and to leverage our new technology platform amorphOX®. In 2023 we expect to reach several major milestones for the company: including, potential FDA approval of OX124, data from the MODIA® clinical study, amorphOX® partnerships, launch of MATCore™, and the conclusion in the District Court of the SUN IPlitigation. The latter is scheduled for a court hearing starting January 30 and a decision is expected during the summer.

2022 has been a challenging year for the world, the life science industry, Orexo and our shareholders. My colleagues and I are confident that 2023 offers multitudinous opportunities and we are well positioned to have a more successful year, aiming to reach profitability in Q4.

Uppsala, Sweden, January 26, 2023

Nikolaj Sørensen

President and CEO