Q3 2019 Interim Report

During the quarter we saw significant changes in the US market against which Zubsolv® continued to perform well and the company reported another strong financial performance. These results, along with our solid cash position, provide the necessary headroom to advance our promising pipeline of opioid focused products, whilst also embracing the trend towards the adoption of complementary digital therapeutics.

All-Time-High financial performance – EBITDA reached SEK 114 million

Following a very strong second quarter, I am pleased to report another period marked by strong financial results. Also when excluding the Abstral® royalty we show strong numbers, as EBITDA ex Abstral amounted to SEK 71.7 million (-8,9). This is driven by increased sales of Zubsolv in market segments with below average rebates. The results also reflect improved efficiency measures introduced at Orexo and some adjustment of lower returns and rebates relating to prior periods. The financial result has been achieved against some short-term headwinds with three payers removing exclusivity for Zubsolv and expanding reimbursement to include other products. For Zubsolv, the immediate impact is competition in the previously exclusive contracts, WellCare, Humana and United Health Group. Longer term, Zubsolv will benefit from more payers opening up for reimbursement of Zubsolv with lower rebates. I am encouraged to see continued double digit growth for Zubsolv in the plans not impacted by changes in market access and where the rebates are lower than the exclusive contracts.

Market Dynamics – increased funding of treatment will improve the business case

A topic that has attracted media attention is the ongoing lawsuits of manufacturers of opioid pain medication. Orexo is not implicated in any of these cases, but some of the damages from these lawsuits is expected to be used to improve the treatment for opioid addiction. In many states, patient advocacy groups have lobbied for universal access for all treatment options. This has resulted in legislative changes in some states to force publicly financed payers to reimburse all products, including Zubsolv. The increased funding of treatment will also encourage the introduction of new treatment options, which bodes well for Orexo’s pipeline of opioid treatments, including our recent foray into digital therapeutics - increasingly seen as critical to successfully treating opioid addiction.

Digital Therapies – an exciting, growing market set to improve patient outcomes

The use of digital therapeutics is increasing with digital poised to play a key role in most, if not all, future interactions with health care providers. Based on our existing infrastructure and our knowledge of the addiction market, Orexo is well positioned to become a leader in bringing new digital treatment solutions to the market. Our strategy is to focus on solutions with scientifically proven therapeutic effect which will benefit the healthcare system as a whole and more importantly patients. Our partnership with GAIA, announced in August, is a good example of this strategy in action. GAIA has collated evidence from more than 10,000 patients that supports the use of their digital Cognitive Behavioral Therapy in depression and alcohol addiction to improve treatment outcomes. While leveraging the synergies from our existing infrastructure in the US our strategy is to continue with our considered buy and build strategy and complement our existing offering with new digital therapeutics to bring comprehensive and effective treatment solutions to improve patient outcomes.

“Our strategy is to focus on solutions with scientifically proven therapeutic effect which will benefit the healthcare system as a whole and more importantly patients.”

Summary and Outlook

2019 is on track to deliver a very strong financial result enabling the company to execute on the overarching strategy to expand the commercial platform. Our next near term milestones will be the results from our ongoing OX338 study and possibly new business development agreements. Building on the financial success of Zubsolv, we have the resources to both continue broadening our pipeline and product portfolio and to build a presence in the increasingly important and complementary digital therapeutics market.

Uppsala, Sweden, October 24, 2019


Nikolaj Sørensen

President and CEO