Q4 incl. Full Year Report 2018

2018 was a pivotal year for Orexo

Q4 2018 highlights

  • Total net revenues of SEK 227.1 million (191.0), up 18.9 percent from Q4 previous year
  • Zubsolv® US net revenue of SEK 166.7 million (126.5), up 31.8 percent in SEK and 21.3 percent in local currency compared to the same period last year
  • EBITDA of SEK 42.8 million (35.3), EBITDA excluding IP litigation costs of SEK 69.2 million (43.1)
  • US EBIT of SEK 62.0 million (19.8)
  • Cash flow from operating activities of SEK 71.7 million (-23.0), building a cash balance of SEK 589.8 million (327.9)
  • Earnings per share, before dilution SEK 1.49 (0.77), earnings per share after dilution SEK 1.47 (0.77)
  • The US field force, previously contracted, was internalized to further strengthen the commercial organization
  • US Court of Appeals denied Actavis’s petition for rehearing regarding validity of the Zubsolv patent ´330
  • All rights to Zubsolv in all countries outside the US were regained from Mundipharma

Important events after the period

  • Positive results from human PK study assessing Orexo’s new intranasal naloxone formulations (OX124) for opioid overdose reversal
  • The US District Court of Delaware issued a final, non-appealable judgement that Actavis’s generic Zubsolv products infringe the US patent ´330, preventing Actavis from launching their infringing generics in the US until 2032
  • The Board of Directors proposes that no dividend is paid for the financial year 2018
SEK million, unless otherwise stated  2018
Net revenues  227.1  191.0  783.1  643.7  22% 
whereof Zubsolv® US net revenue  166.7  126.5  621.5  485.8  28% 
Cost of goods sold  -43.4  -50.3  -171.8  -164.4  4% 
Operating expenses  -146.1  -110.6  -515.6  -421.9  22% 
EBIT  37.6  30.1  95.8  57.4  67% 
EBIT margin, %  16.6  15.8  12.2  8.9  3.3 ppt 
US EBIT  62.0  19.8  198.3  73.7  169% 
US EBIT margin, %  37.2  15.7  31.9  15.2  16.7 ppt 
EBITDA  42.8  35.3  116.6  78.2  49% 
Earnings per share, before dilution, SEK  1.49  0.77  3.99  0.67  496% 
Earnings per share, after dilution, SEK  1.47  0.77  3.93  0.67  487% 
Cash flow from operating activities  71.7  -23.0  242.0  146.6  65% 
Cash and cash equivalents  589.8  327.9  589.8  327.9  80% 

Delivering on strategy to drive future growth

Overview - delivering our strategy
2018 was a pivotal year for Orexo, with a positive patent litigation outcome allowing us to focus on the future shape of the Company and our ambitious growth strategy for 2019 and beyond. I am proud of the progress the team has made against our strategic objectives, both operationally and financially. I believe 2019 will see further success as we look to expand our US commercial platform, drive sales of Zubsolv® and strengthen our pipeline further.

Operational - multiple highlights
Beyond the successful patent litigation outcome, two key operational highlights during 2018 were the efficiency improvements to the supply chain and the expansion of our pipeline programs. Improving manufacturing efficiency is an ongoing objective for the business, and
I am pleased to see the progress we have made towards reducing manufacturing costs towards the goal of 35 percent cost reduction in the second half of 2019. Our pipeline has also expanded from one project, OX382 (oral buprenorphine) to four projects under development, including OX124 (naloxone for opioid overdose treatment) which reported encouraging clinical data in early January 2019. The strength of this data supports the commercial potential of this program which we believe will address an unmet need provide an improved product for opioid overdose patients, compared to currently available options.

Financials – a record-breaking performance
Financially we passed the SEK 100 million EBITDA level with a full year EBITDA of SEK 116.6 million, an increase of nearly 50 percent over 2017. This growth was mainly due to greater sales of Zubsolv in the US, with an increase of 27.9 percent from 2017, in combination with the EBIT contribution from our US operations, which has more than doubled both in SEK and EBIT margin. Looking specifically at the fourth quarter, I am pleased to see the positive trend in the US continue, along with improving performance and margins reaching SEK 62.0 million in EBIT, and an EBIT margin of 37.2 percent.

Market dynamics - Orexo is well positioned
The US market for Zubsolv is becoming increasingly dynamic, which will present new opportunities for Orexo as we look to expand our commercial operations and attract new commercial stage products in the US as set out in our strategy. Alongside these opportunities, we expect to experience some pricing challenges from the potential launch of the generic Suboxone® Film. We have taken steps to address these headwinds in the form of competitive measures to ensure Zubsolv remains a commercially attractive and competitive product. We believe this proactive strategy, together with improved market access in both the Commercial and Public Segment, strengthens Orexo’s position as a profitable specialty pharmaceutical company with commercial operations in the US in this increasingly competitive market.

Strategic objectives for growth
During our Capital Markets Day in December, our Chairman presented our main strategic objective moving forward, which is to “Broaden the commercial platform to leverage scale and expand sales”. The main implications of this objective is to more proactively pursue business development and M&A opportunities. To achieve this the team at Orexo will continue to ensure the strong performance of our core business and strengthen our financial position to make us an attractive and trusted partner. Considering our strong financial position with close to SEK 590 million in cash and the flexibility we now have with the rights to Zubsolv outside of the US, we are well placed to pursue new strategic opportunities for further growth.

Summary and Outlook
2018 was a key year for Orexo. Winning the patent litigation for Zubsolv allowed us to secure the foundations for our US operations until 2032. The outlook for 2019 is encouraging; we expect profitability to continue to improve both from our US operations and on a corporate level, in line with our ambitious strategic goals to grow the business both organically and through acquisitions. Once again I would like to thank my colleagues in Sweden and the US for their contribution to the business during 2018 - the results we have accomplished together are all due to their hard work and perseverance. Building on a highly successful 2018, I and my team at Orexo look forward to expanding our commercial platform to leverage scale, increase profitability and ultimately provide innovative and affordable treatments to patients suffering from opioid use disorders.

Uppsala, Sweden, January 30, 2019

Nikolaj Sørensen
President and CEO

For further information, please contact
Nikolaj Sørensen, CEO and President, Joseph DeFeo, EVP and CFO or Lena Wange, IR & Communications Manager
Tel: +46 18 780 88 00, +1 855 982 7658 Email: ir@orexo.com

At 2.00 pm CET, the same day as the announcement of the report, Orexo invites analysts, investors and media to attend an audiocast with a web presentation where Nikolaj Sørensen, CEO, and Joseph DeFeo, CFO, will present the report. After the presentation a Q&A will be held. Questions can also be sent in advance to ir@orexo.com, no later than 11.00 am CET. Please view the instructions below on how to participate.
Internet: https://tv.streamfabriken.com/orexo-q4-2018
Telephone: SE: +46 8 50 558 354 UK: +44 33 33 009 267 US: +1 64 67 224 904
The presentation material will be available on Orexo´s website one hour prior to the audiocast.

This information is information that Orexo AB (publ.) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8.00 am CET on January 30, 2019.