Q1 2024 – Creating a stable financial platform

I am pleased to report a significant improvement in our financial results with an EBITDA increasing SEK 57 million and amounted to SEK 16 million (-41). In addition to less non-repeating activities, it is driven by efficiency improvements and cost control. Improving our financial results was a cornerstone of successfully refinancing our corporate bond in the quarter, and we gained strong interest from investors with close to 100 percent oversubscription.

Our R&D projects continue to show progress, although OX124 is likely to require a longer review than the original PDUFA date in July based on recent request for additional documentation. Our ambition remains to launch the product in late 2024 or early 2025.

Successful refinancing of the corporate bond

The financial markets have been very volatile over the last few years, making the timing for refinancing the corporate bond an important consideration for management and the board of directors. In dialog with our financial advisors, we decided to complete the refinancing process in March, despite a less favourable market in terms of higher global interest rates than the last time we refinanced the bond. With long-term financing secured and continuous sizable profit contributions from our US Commercial operations, we are well positioned to continue with our R&D activities and the launch of OX124.

The improvements in EBITDA profitability last year together with strong cost control were both important criteria for new investors. In the light of that I’m pleased to see our operating expenses are continuing to decline, with a reduction of more than 30 percent from last year to SEK 131 million (SEK 110 million excluding depreciation). This level of operating expenses is well below our annualized guidance of SEK 530 million excluding depreciation.

Recognized sustainability work

Thanks to many years of thoughtful sustainability work and a strong ambition to continue improving the lives of people suffering from opioid dependence, we were able to classify the bond as a social bond. This allowed us to reach out to a growing number of investors who are committed to responsible investments. In addition, it’s a great endorsement of our sustainability efforts, which underwent a rigorous independent review by Morningstar Sustainalytics.

The market for Zubsolv® showed a continued lower growths

The buprenorphine/naloxone market continues to grow at a low single digit rate, with growth of 3 percent from Q1 2023, which is in line with our guidance of 2–5 percent for the year. Zubsolv prescriptions declined by 4 percent from last year and 2 percent from Q4 2023. However, due to our price increase of 4 percent at the beginning of the year, sales to pharmacies increased compared to last year. Our net sales, which are based on sales to wholesalers, have declined significantly due to a reduction in their inventories. This has led to a decline in the overall gross and net sales compared to last year and last quarter. This negative inventory adjustment is recurring in Q1 and follows similar patterns from previous years, although the outcome this year was much higher than last year. Orexo has no influence on wholesalers’ inventory levels but we expect sales in the coming quarters to be more aligned with the sales to pharmacies.

Our US commercial operations continue to make healthy profit contributions with an EBITDA of SEK 43 million corresponding to a margin of 33 percent. The profit contribution this quarter has been negatively affected by the inventory adjustments at the wholesalers, and we expect profit contributions from Zubsolv® to improve in the next quarters. The overall commercial expenses will increase in the second half of 2024 when we accelerate preparations for the OX124 launch.

OX124 - commercial lead onboard

The FDA audit of OX124, our high-dose rescue medication for opioid overdoses, is making progress and audits of the suppliers have been completed. Based on questions and comments recently received, we need to make some changes related to the device and instructions for use, which will need to be documented and tested. With these changes, approval of OX124 is likely to come later than the communicated PDUFA date in July, this is in line with our previous guidance of a review time of ten to thirteen months, based on experience from similar drug-device combination products in the rescue market. We are still optimistic that we are well positioned for a launch in late 2024 or early 2025, pending FDA review schedule and approval of the product.

In parallel with the FDA review, we are starting to form the commercial team responsible for the launch of OX124. A key success factor of the launch is the recruitment of people with experience from the opioid rescue market. In the light of that we are pleased to have recruited a commercial lead who had a pivotal role in the commercialization of the main branded product in the market before it became OTC late last year. OX124 will have significant synergies with our Zubsolv and MODIA® commercial operations, but large parts of the market are in customer segments not addressed by Orexo today. We will continue to grow the team where we need to bring in colleagues with relevant experience in these customer segments as we approach the launch of OX124.

Expanding R&D pipeline in collaboration with other companies

Upon approval OX124 will be our next commercial product, while we also see significant potential in other applications of our drug delivery platform, AmorphOX®. A key strategy for AmorphOX is to work with partners where our technology can add value to their molecules. A good example of this is our collaboration with Sobi. In 2023, we successfully tested AmorphOX on one of Sobi’s molecules and, after promising initial results, the collaboration will now advance into the next phase. We’re going to continue optimizing the formulation, expand the stability studies and review how AmorphOX can enable alternative drug delivery methods to the molecule. In addition to Sobi, we are exploring new application possibilities of the AmorphOX technology and this quarter we’ve agreed to test the technology on additional vaccines in collaboration with a vaccine company.

We’re also continuing the development of OX640, our adrenaline product with nasal administration, and have received positive feedback from the FDA on our briefing book and proposed development plan. This feedback is instrumental in shaping the discussions we’re having with potential partners as it’s given us the clarity we needed to keep moving forwards. This, together with the new patent for OX640 granted in April and which extends its exclusivity in the US until November 2042, elevates the attractiveness of OX640 to potential partners. OX640 was also presented at the American Academy of Allergy, Asthma & Immunology conference, and the product’s stability was of particular interest to clinicians, who provided very positive feedback about the opportunities this provides to patients and healthcare professionals.

Summary and outlook

It’s been a decent first quarter in which we’ve continued strengthening our financial position through EBITDA profitability and successfully refinancing the corporate bond. We’ve also made progress with our R&D activities. Zubsolv® sales to pharmacies have been in-line with our expectations, but sales to wholesalers have been lower due to their inventory adjustments. We expect demand and sales to pharmacies to continue on the current trajectory which is also expected to improve sales and profit contribution from Zubsolv in the next quarters. Maintaining and improving EBITDA profitability is a top priority for 2024 to ensure we have the financial strength to launch OX124 in the US and continue developing projects based on the AmorphOX drug delivery technology.

Looking ahead, the main value drivers for Orexo are FDA approval of OX124 and progress in partnering with projects based on the AmorphOX drug delivery technology, such as with OX640. Advancing the collaboration with Sobi was an important milestone, but attracting new companies to test their molecules with AmorphOX is also critical to enable us to expand the potential of the platform. We continue to expect approval of OX124 in the second half of 2024 and are optimistic that we will both advance existing partnerships and start new collaborations around AmorphOX during 2024.

Uppsala, Sweden, May 8, 2024

Nikolaj Sørensen

President and CEO