Q2 Report 2019

Following a strong first quarter, I am pleased to report that the second quarter has continued on the same positive trajectory. Zubsolv® remains the core driver of Orexo’s strong financial performance and improved profitability. Zubsolv continues to demonstrate resilience to increased competition and with greater profit contribution from our US operations, we remain focused on expanding our pipeline and product portfolio with new assets.

Strengthened financial performance – EBITDA reached SEK 60.4 million

The second quarter of 2019 marks the first quarter in many years where our legal expenses are immaterial, and where the full impact of revenue growth and efficiency improvements are reflected in the financial health of the business. The second quarter has been the strongest financial period for the company to date, when excluding milestone payments. Isolating the financial performance of US operations, the EBIT margin reached 47 percent and contributed to our overall profitability with SEK 87.5 million (USD 9.2 million), a significant improvement of 58 percent in SEK from last year. With a cash position of SEK 697 million, our main focus is to expand our pipeline and to identify commercially attractive assets to drive future growth.

Business development gaining traction

Today, Orexo is in a strong position to engage in partnering and new business activities, thanks to our commercial platform in the US, a profitable business with strong patent protection for Zubsolv, and a solid cash position. We are actively engaged in new business and partnering discussions to ensure the longer-term growth of the business and we are an increasingly attractive partner in the opioid addiction market and its adjacents treatment areas. We are currently in negotiations for the rights to new and existing products. Assuming the negotiations materialize, we would expect to present our first agreement in the second half of 2019.

Development programs making good progress

Our three most advanced internal projects continue to progress as planned. The next significant milestone will be the phase I study of OX338, a sublingual formulation with ketorolac for the treatment of pain, planned for Q4 this year. For OX338, OX124 and OX125 we feel confident in the clinical development risk profile of these programs and continue to work towards realizing their commercial potential. From an external development perspective, we are also pleased to see our partner, Gesynta Pharma AB, progress OX-MPI (microvascular disease) into a phase I clinical trial.

Market Dynamics – Market access is key

The current trend in the addiction market is for payers to provide more product choice to patients. This would benefit Orexo in fast-growing public markets where Zubsolv currently has fewer reimbursement agreements. However, it also poses a risk in the form of greater competition when it comes to signing and keeping exclusive contracts for Zubsolv. We expect United Health Group will start reimbursing generic products later this year, but will also maintain Zubsolv in the current position as a preferred formula with unrestricted reimbursement. We have recently seen a similar change with Humana, where we lost some percentage points in market share, but our sales volumes have remained resilient and we have seen the Zubsolv demand increase by 3 percent since last quarter, despite increased generic competition. This demonstrates our competitive edge when patients and clinicians are aware of the benefits of Zubsolv over generic products.

Summary and outlook

2019 is on track to be Orexo’s strongest year to date, both financially and operationally. Zubsolv remains a key driver of growth for the business, while management intend to build on the progress made to ensure the longer-term health of the company. To this end we will continue to expand our pipeline and product portfolio to offer best in class treatment options where they are needed most.

Uppsala, Sweden, July 11, 2019


Nikolaj Sørensen

President and CEO