Orexo Q4 2020, incl. Full Year Report

ZUBSOLV® stable and strong EBIT, despite challenging market due to Covid-19

Q4 2020 highlights

  • Total net revenues of SEK 159.2 m (238.1 last year, 196.2 m excl. Abstral® EU and US)
  • Net earnings of SEK -49.6 m (38.9)
  • EBITDA of SEK 1.0 m (85.8)
  • US Pharma segment (ZUBSOLV® US) net revenues of SEK 143.1 m (190.5), EBIT of SEK 94.4 m (95.5)
  • Cash flow from operating activities of SEK -11.2 m (60.2), cash balance of SEK 505.3 m (816.8)
  • Secured a preferred position for ZUBSOLV® as the only branded product on national commercial and Medicare Part D formularies of the largest PBM in the commercial segment in the US, Express Script, from January 1, 2021
  • Finalized the technical development of modia™, a digital therapy for opioid use disorder, for which Orexo owns the exclusive global rights
  • Entered an exclusive license and supply agreement with Accord Healthcare for ZUBSOLV® covering 29 European countries
  • A new patent for ZUBSOLV®, with protection until 2032, was issued by the US Patent and Trademark Office (USPTO)
  • Financial outlook provided for 2021, see page 14

Important events after the period

  • A new patent for OX124, overdose rescue medication, was issued by the USPTO protecting the technology until 2039
SEK m, unless otherwise stated 2020
2020Jan-Dec 2019Jan-Dec 2019-2020 Oct-Dec Δ
Net revenues 159.2 238.1 663.6 844.8 -33%
Cost of goods sold -11.3 -23.0 -65.6 -105.6 -51%
Operating expenses -158.9 -143.5 -617.9 -508.0 11%
EBIT -11.0 71.5 -19.9 231.2 -115%
EBIT margin, % -6.9 30.0 -3.0 27.4 -36.9 ppt
EBITDA 1.0 85.8 19.0 272.1 -99%
Earnings per share, before dilution, SEK -1.45 1.12 -2.45 6.33 -230%
Earnings per share, after dilution, SEK -1.45 1.10 -2.45 6.20 -232%
Cash flow from operating activities -11.2 60.2 16.8 287.0 -119%
Cash and cash equivalents 505.3 816.8 505.3 816.8 -38%


Progress while adjusting to new market dynamics 

From a management perspective, the most important factor for success is to be an agile company, ready to accelerate development and to capture opportunities when they arise, but also be prepared to shift priorities when the market requires it. The quarter has seen progress on many fronts, with US Pharma showing net revenue growth in local currency comparing to last quarter and improved EBIT margin, Digital Therapeutics (DTx) testing new reimbursement routes and launching new commercialization concepts. Our lead pipeline project, a rescue medication for opioid overdose, OX124, received positive feedback from the FDA on the IND application enabling a request for Fast Track Designation of the product and we also reported an exclusive license and supply agreement for ZUBSOLV® in Europe. 

Strong financial base to enable investments in DTx and launch of OX124
Our full year OPEX was SEK 617 million, which is significantly less than the guidance of SEK 750-800 million communicated in our Q2 report. The guidance in Q2 was based on the significant interest in DTx in the beginning of the Covid-19 pandemic and our expectation that payers and healthcare providers would follow the FDA´s decision to include digital therapies under the Public Health Emergency Policy and find pragmatic routes for reimbursement. While the interest in Orexo's digital therapies remains high, building a new market requires patience. We start to see concrete and promising development with regards to DTx reimbursement, which is a cornerstone to accelerate growth. 

Looking ahead, we expect to increase the investment in DTx as we see a progression in sales and a clearer picture emerges regarding the multiple routes to reimbursement. 2021 will also require significant investments in OX124, as we enter the pivotal trial starting in the summer this year. To ensure we have financial headroom to invest in opportunities when they arise, both internally in our products and our pipeline and through business development, we intend to refinance our existing corporate bond during Q1 2021 with a new corporate bond issue.  

Expanding the commercialization model in DTx
The expectations of our DTx portfolio in 2020 were boosted by the FDA’s decision to implement a Public Health Emergency Policy allowing commercialization of digital therapies within the CNS space without the ordinary approval process. We anticipated that the payers would adopt similar pragmatism to the reimbursement processes as a response to the Public Health Emergency Policy, but the reimbursement process is following the pattern we anticipated before Covid-19, i.e. a new disruptive treatment will take time to review and implement. As a result, we are testing several new concepts for reimbursement of our digital therapies in parallel, while making the DTx available through direct purchase for patients. The lead concept is a treatment program where we, in collaboration with selected healthcare providers, offer patients treatment under the supervision of a physician. Provided the physicians and the patients follow certain guidelines, this treatment program is currently available for reimbursement for a large portion of the US population. The program is being tested in Pennsylvania to a limited number of patients to ensure the reimbursement will follow the expected path before we launch nationwide. The same program will also be available for individual physicians to treat patients under a direct contract with Orexo. In addition to this program, we are finalizing a program for employers, working with patient to patient communication, and continue our work with payers to drive reimbursement. 

ZUBSOLV® decline diminishing while impact of Covid-19 continues 
With bipartisan support for the ongoing opioid crisis in the US, I am pleased to see politicians returning their attention to the opioid crisis. The former US administration recently paved the way for all US physicians to prescribe medical-assisted treatment (MAT) for opioid dependence, and we are confident that in the event of changes under the new administration, addressing the opioid crisis will remain a key priority. With the ongoing Covid-19 pandemic having significantly worsened this crisis, there is a pressing need increase access to treatment. Such a change will likely drive a sustained strong market growth, which will benefit Orexo and ZUBSOLV®.
This quarter we had a small net sales increase compared to Q3 and a strong EBIT margin of 66 percent. Apart from some one-time adjustments, this result is explained by minimal decline from former exclusive contracts and stable development in the open segment. When Covid-19 is behind us, we expect a stabilization of the business and growth. ZUBSOLV® is the only promoted daily treatment in opioid dependence in the US, and Covid-19 restrictions have had a severe impact on our ability to promote the product. In combination with our core market segment, the commercial segment, being stagnant due to the unemployment caused by Covid-19, it is a challenging market place during the pandemic. However, the Covid-19 challenges also provides learning of how to be more efficient in the sales process, which will benefit us long term. We expect ZUBSOLV® will continue to be an important EBIT contributor in the years to come and with the broad launch of modia™, our digital therapy for opioid use disorder, in the second half of 2021 we will see increased commercial synergies between our digital therapies and ZUBSOLV®, both from a cost and revenue perspective.  

OX124 development progressing to plan 
As the US death tolls associated with overdose of fentanyl continue, we are confident OX124 is urgently needed, with the promise of being the most powerful nasal delivery of naloxone in the market. I am very pleased with the progress we have made during the quarter. With continued progress according to plan, in Q1 2021 we will receive a decision on the Fast Track application, continue to establish a commercial supply chain, improve the IP protection and register the brand name for OX124. In Q2 2021 we will manufacture the batches required for regulatory stability data and we will start the pivotal clinical trial. If the Fast Track application is approved we will be ready to submit an application for approval in Q1 2022. Without Fast Track the process will be delayed as we expect the FDA will require additional stability data to support proposed shelf life of the commercial product. 

Summary and Outlook
In the last quarterly report I highlighted  the pressing need for Orexo’s products as a result of the Covid-19 pandemic. The Covid-19 pandemic has unfortunately escalated, and the need for our products is even greater than before. The delays to get the DTx products reimbursement is certainly frustrating, especially given the clear demand for such products in the current climate. However, I also have to respect that Covid-19 has had a severe impact on many organizations and their ability to operate as normal. This aside, we are encouraged by the positive feedback we receive from customers and the steady progression we see in the number of patients testing and buying our DTx products in January. I remain confident that 2021 will show the commercial potential of these products, while we continue to enjoy strong and stable EBIT contribution from ZUBSOLV® and prepare the new drug application for OX124.Uppsala, Sweden,

January 28, 2021

Nikolaj Sørensen
President and CEO 

For further information, please contact

Nikolaj Sørensen, President and CEO, Joseph DeFeo, EVP and CFO, or Lena Wange, IR & Communications Director 
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-q4-2020
Telephone: SE +46 8 50 558 358 UK +44 333 300 9267 US +1 833 249 8403 
The presentation material will be available on Orexo´s website prior to the audiocast, view Investors/Reports, presentations and audicasts
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 28, 2021.