Q3 2021 – Good third quarter for ZUBSOLV®
I am pleased to report that the third quarter showed continued stabilization and for the first time since 2019, ZUBSOLV® grew both revenues and profit from the previous quarter. The development of ZUBSOLV® is important to enable the continued investments in establishing our digital therapeutics (DTx) business and advancing our pharma pipeline. Mental health issues have grown significantly during Covid-19, which will inevitably lead to a significant increase in patients needing treatment. However, while demand has sharply increased, healthcare providers have been severely impacted by Covid-19 during 2021, resulting in patients suffering from reduced access to treatment, and healthcare providers’ ability to assess and implement new innovative treatment methods like DTx has been limited. Fortunately, as the impact from Covid-19 diminishes, the priority and attention to address the significant rise in mental illnesses is increasing. This has led to improvements in our progress with new healthcare providers to test and implement our digital therapies, such as a new agreement with a leading regional health network, Benefis Health System.
ZUBSOLV® - Rebound to revenue and profit growth from previous quarter
While ZUBSOLV´s revenue as expected declined from 2020, I am pleased to see that ZUBSOLV's revenues after two years of decline had a positive growth from previous quarter. Revenues were supported by additional selling days, diminishing negative impact from the previous exclusive contracts with Humana and United Health Group and growth in other accounts such as Kentucky Medicaid. In addition, the EBIT margin improved this quarter to 58 percent, resulting in an increase in EBIT from Q3 2020 (50 percent). With the launch of MODIA™ I expect significant commercial and cost synergies which will contribute to the continued profit contribution from US Pharma.
While the issues with opioid use disorder continue to escalate in the wake of Covid-19, the overall market growth for buprenorphine/naloxone treatments has slowed down. The main driver is likely to be a combination of reduced access to treatment and fewer patients seeking treatment during the lockdown. With multiple federal and state initiatives to mitigate the escalating increase in opioid use disorder, I am convinced the overall market is destined to increase when the effects of Covid-19 vanish. As ZUBSOLV’s market share is stable, our market access position continues to strengthen and with the launch of MODIA™ resulting in a new and broader value proposition for our customers, there are good opportunities for ZUBSOLV® to grow.
Digital Therapeutics – New partners being onboarded and increased focus on B2B
I am pleased to see our efforts to expand partnerships with healthcare providers and health networks are making good progress. Similar to the agreement with Trinity Health, Benefis Health System has made VORVIDA® and DEPREXIS® available for their staff and in parallel started to prepare implementation of the DTx in their treatment programs for alcohol misuse and depression. We have also signed an agreement with a healthcare provider in Chicago, Justmiine, who is building a telemedicine and virtual care model for mental health where our DTx will be important elements.
In addition to the traditional healthcare providers and health networks, digital therapies enable new innovative partnerships with non traditional partners, such as Sober Grid. The partnership is off to an excellent start and the combination of their more traditional offering with “peer coaches” for alcohol misuse and our novel digital therapies has turned out to be attractive to new groups of customers. Led by Sober Grid we are in advanced discussions with new partners and only two months into the partnership we have made good progress in broadening the distribution of the combined products to new channels.
Our expectations of the commercialization of DTx since the launch have been that the main revenue potential for our DTx will come from healthcare providers integrating our DTx in their treatment programs. This will offer patients a mix of digital intervention and care as usual from established healthcare providers, removing some of the natural hesitance to test novel treatment tools. During Covid-19 access to healthcare providers has been severely limited and I am pleased to see how it’s improving as the extreme burden caused by Covid-19 declines. The agreements with Trinity Health and Benefis Health Systems are very important references and provide Orexo with credibility which is already opening access to new healthcare providers and health networks. In addition they provide important insights into the reimbursement and administrative hurdles we need to address when implementing digital therapies, which will shorten the time it takes to establish new partnerships and reduce customer’s burden. With improving access to healthcare providers and networks, and the significant potential with this customer group, we will prioritize these customers and limit the direct to consumer activities.
R&D – Expanding the platform
In the quarter we initiated the pivotal trial for OX124, which is designed to reverse overdoses caused by the most powerful synthetic opioids, such as fentanyl. According to new data from the Center of Disease Control, fatal opioid overdoses continue to reach record-high levels and 84 percent of these can be referred to misuse of synthetic alternatives. The results from the pivotal trial for OX124 are expected in Q4 and if approved by the FDA the plan is to initiate US launch in 2023.
We are continuing the development of our novel technology with some promising new product candidates and expect to announce the next development program later in Q4. OX124 is a combination product with a nasal device and a patented formulation. We have invested significant resources and learned a lot from this development program which will be valuable in future projects. These learnings are likely to shorten the development timeline, lower project risks and the overall costs.
Summary and outlook
The development and profitability of ZUBSOLV® is the cornerstone for Orexo and our ability to continue to invest in new growth opportunities, like DTx and our pharmaceutical pipeline. The growth in both revenues and profit over the last quarter was important evidence that ZUBSOLV® is competitive and has the ability to grow with favourable market conditions.
With the launch of MODIA™ and later OX124, Orexo will be the company offering the the most comprehensive range of treatment options for patients suffering from opioid addiction in the US. Our commitment is to fiercely continue addressing the hurdles limiting patients’ access to products and services that have the potential to improve their treatment outcome. Our DTx position Orexo as a frontrunner in creating a paradigm shift in the treatment of mental illness, but like all disruptive technologies we need to establish a functioning distribution and payment model to flourish. We are making good progress, but we are still in the early days of a long exciting journey.
Uppsala, Sweden, November 3, 2021
President and CEO