Q2 2024 – Strong Zubsolv® recovery and focus on getting OX124 to the US market

I am pleased to report our Zubsolv sales grew slightly year on year, with a strong improvement from the first quarter. This is the third consecutive quarter that we have achieved a positive EBITDA, despite additional costs for a new human factor study (HF study) for OX124, increased legal expenses and a retrospective adjustment of Abstral® royalties. The improvement in Zubsolv sales was expected following the inventory adjustments at the beginning of the year and sales in the quarter to wholesalers and pharmacies have become more aligned. Both also grew slightly compared to last year.

We have made good progress in preparing for the launch of our second medication on the US market, OX124, but close to the publication of this Interim Report we received feedback from the FDA with a request to complement the application with additional technical data from the final commercial product. In the quarter we addressed the initial concerns raised by the FDA in April and have recently successfully conducted a new HF study. We are investigating the implications of the new request, but we are optimistic we can address these new concerns expeditiously, but there will be a delay in the original time guidance.

Continued stabilization of Zubsolv sales and commercial preparations for OX124 accelerates

The buprenorphine/naloxone market continues to grow at a low rate of 3 percent. This is at the lower end of our guidance of 2-5 percent for the year and can be explained by considerable dynamics in the payer landscape. Since last summer, we have seen a trend in declining prescriptions to Medicaid patients and significant double-digit growth in patients with Commercial insurance. However, with the low market growth, this shift is rather driven by patients currently receiving treatment moving from Medicaid insurance to Commercial insurance than an inflow of new patients. Over the long term, a larger market share of Commercial insurance could benefit Orexo due to the excellent market access of Zubsolv in this segment, as well as more favourable pricing. To have a real impact on Zubsolv sales, we need to see growth in new patients since most physicians are hesitant to change medication for patients during treatment.

As expected, Zubsolv’s revenues grew significantly from the first quarter, and even slightly over the last year, in both USD and SEK. The expenses from the US commercial operations are increasing compared to last year, primarily due to launch preparations for OX124, legal expenses associated with the Subpoena and efforts from Orexo to resolv the situation. In general, expenses have increased due to inflation in the quarter and the cost of the long-term incentive program has increased due to share price appreciation in the first half of 2024..

FDA review of OX124 extended

As communicated in the Q1 report, we anticipated a delay in approval of OX124, our high-dose rescue medication for opioid overdose, beyond the PDUFA date, July 15. The anticipated delay was caused by the FDA’s concerns with the Instructions for Use. The FDA requested Orexo to document the effects of the updated instructions for use in a HF study, which was successfully completed recently. However, the FDA has now requested additional technical data from the final commercial product. Some of the data in the FDA application was based on manufacturing in a pilot scale, which Orexo and our advisors found to be sufficient. I am pleased with how the team in Sweden and the US have tackled the concerns with the instructions for use, with significant agility and engagement. The new data from the HF study is ready to be submitted promptly, but due to the new data requested it is not possible to get approval within the communicated timeline of ten to thirteen months from submission of the NDA in September 2023. We will update the timelines when we have more information, but at the time of this quarterly report we do not see this request will change our financial guidance for 2024.

OX124: The new data from the Human Factor study is ready to be submitted promptly, but due to the new data requested it is not possible to get approval within the communicated timeline.

R&D pipeline advancing

We have continued to explore the ability for AmorphOX®, our first-class drug delivery platform, to improve the drug delivery of larger molecules and during the quarter, we have generated additional supporting stability data in protein-based pharmaceuticals. A significant concern for many bio molecules is the need for a cold chain, use of problematic ingredients to keep the product stable and high cost of goods.

We continue to generate data, both with partners like SOBI and with internally sourced APIs, showing that AmorphOX can reduce the need for a cold chain, create stable products with fewer additives. While our exploratory partnerships cover some of Orexo’s expenses, our ambition is to enter partnerships generating milestones and royalty payments. We continue to have intense discussions with potential partners for OX640 and, we are preparing the upscaling of the manufacturing to commercial batches to enable the pivotal clinical development program. In addition we plan to conduct a smaller exploratory study in patients with allergic rhinitis in Q4 this year to ensure we maintain commercial differentiation in this patient group as well. The regulatory pathway in the US has been clarified with the positive response by the FDA to our briefing book earlier this year. With a competing product receiving positive feedback from the EMA´s Human Medicine Committee on a nasal product, the regulatory risk has also decreased in Europe.

Yet another recognition for Orexo’s sustainability work

Working with sustainability has been key to Orexo since the company was founded and this work has, over the years, become more and more formalized. In 2017, Orexo became a member of UN Global Compact, which supported our ability to qualify for a social financing framework when we recently refinanced the corporate bond. I am proud to share that our work has now resulted in a Gold Star rating by EcoVadis. The high score places Orexo among the top five percent of all 70,000 companies worldwide reviewed by EcoVadis annually. The rating is based on sustainability data related to Orexo´s business in Sweden.

Zubsolv EU starts to gain some traction, replacing Abstral contract expiry for some markets

We have worked intensively with our partner Accord Healthcare to establish a competitively priced supply chain for Europe and appreciate the investments and efforts Accord Healthcare have put into this. The European market for daily treatment is highly competitive and attractive pricing is important to win market share. We have seen some individual markets where Accord has made significant progress in the first half of 2024, and we are looking forward to seeing growing royalties as we proceed. Growing royalties from Zubsolv EU are welcome as we are expecting a decline in royalties from Abstral as agreements for some individual countries expire. Based on the reporting of royalties for Q1 from our new partner for Abstral in Europe, Grünenthal Meds, there was a need for an adjustment of Abstral royalty in Q2.

Zubsolv sales in the US is the foundation for Orexo´s financial stability in the short term, but growth is expected to come from the launch of OX124 and business development associated with the AmorphOX technology.

Summary and outlook

Zubsolv sales in the US is the foundation for Orexo´s financial stability in the short term, but growth is expected to come from the launch of OX124 and business development associated with the AmorphOX technology. We are making good progress in our larger projects, like OX640 and partnering with companies like SOBI and are optimistic that we will see progress in business development during the second half of 2024.

We maintain our guidance for 2024, but we see some risk to the Zubsolv revenue guidance with the wholesalers inventory adjustment in Q1. The OPEX and EBITDA guidance may be impacted by the non-recurring legal expenses associated with the Subpoena and a potential settlement as well as some additional expenses for the resubmission of OX124.

Uppsala, Sweden, July 17, 2024

Nikolaj Sørensen

President and CEO