Orexo Q1 2021 Interim Report
Investing in future growth drivers
Q1 2021 summary
- Total net revenues of SEK 132.3 m (175.0)
- Net earnings of SEK -31.5 m (82.6)
- EBITDA of SEK -23.9 m (39.1)
- US Pharma segment (ZUBSOLV® US) net revenues of SEK 126.8 m (163.9), EBIT of SEK 66.1 m (75.9)
- Cash flow from operating activities of SEK -47.8 m (48.1), cash balance of SEK 725.5 m (861.4)
- A new patent for OX124, overdose rescue medication, was issued by the US Patent and Trademark Office (USPTO), protecting the technology until 2039
- Issued a new corporate bond amounting to a nominal value of SEK 500 m and redemption of the corporate bond issued in 2017
- A partnership agreement was reached with Magellan Rx, the third largest payor for treatment of opioid dependence in the US, to test modia™ with patients and other payors in their network
- A new patent for ZUBSOLV®, with protection until 2032, was issued by the USPTO
No important events after the period
|SEK m, unless otherwise stated||2021Jan-Mar||2020
|2020-2021 Jan-Mar Δ|
|Cost of goods sold||-19.2||-20.0||-65.6||-4%|
|EBIT margin, %||-27.8||19.4||-3.0||-47.2 ppt|
|Earnings per share, before dilution, SEK||-0.92||2.38||-2.45||-139%|
|Earnings per share, after dilution, SEK||-0.92||2.34||-2.45||-139%|
|Cash flow from operating activities||-47.8||48.1||16.8||-199%|
|Cash and cash equivalents||725.5||861.4||505.3||-16%|
ZUBSOLV® demand will contribute to a solid foundation for future growth
During the first quarter of 2021, we made good progress on multiple fronts. I am pleased to see that ZUBSOLV® demand has stabilized compared to the previous quarter, alongside the refinancing of the corporate bond, which has further strengthened Orexo´s opportunity to grow. Within our innovative digital therapeutic venture, several important steps have been taken to encourage growth in this new market and for our sales to start gaining momentum. As US society is moving to post-pandemic conditions, access to our customers is also increasing. This will be an important driver for ZUBSOLV® to return to growth and for the launch of our clinically proven digital therapies.
ZUBSOLV® - continued strong EBIT contribution from US Pharma
We have seen a decline in ZUBSOLV® net sales in Q1 as expected, following the seasonal patterns for Q1 seen since the launch of the product. This year we have fewer shipping days in Q1 compared to Q4, leading to an overall decline in the market despite a positive weekly trend. For ZUBSOLV®, wholesalers and pharmacies traditionally build inventory in Q4 in anticipation of price increases in January. Patients in the commercial payer segment also have their co-pay reset at the start of a new calendar year, which leads to a slow down in this part of the market. Overall, I have been pleased to see the weekly demand, i.e. prescriptions of ZUBSOLV®, stabilizing over the quarter,¹ and in particular to see a couple percent growth in weekly prescriptions in the Open segment, despite the difficulties for our sales representatives to access their customers due to Covid-19.
I am also proud we have maintained a strong EBIT contribution of 52 percent in the quarter, which should be seen in light of increased legal expenses. A stable sales and EBIT contribution from ZUBSOLV®, together with the refinancing of the corporate bond, enable us to invest in establishing Orexo as a leading player in digital health, without impacting the development of our pharmaceutical pipeline.
Digital therapeutics - a high-potential market in its infancy
We have made important progress over the quarter to expand the market for digital therapeutics. We signed an agreement with Magellan Rx, one of the largest Pharmacy Benefit Managers (PBMs) in the US, to conduct a real world evidence study with modia™, to demonstrate its potential as a valuable treatment option in opioid use disorder. modia™ was the reason we entered digital therapies and we continue to see significant value in the combination with primarily ZUBSOLV®, but also other buprenorphine products for patients, physicians and payers, such as Magellan Rx. We have also initiated a pilot of vorvida® and deprexis® with a leading US tech company, and two larger healthcare providers are preparing an integration of vorvida® and deprexis® into their treatment programs during Q2. The latter are leveraging a similar insurance pathway as the one Orexo recently tested with vorvida® in Pennsylvania. The test in Pennsylvania will now expand into new geographies and the insurance pathway will be the basis of the launch of deprexis® to health care providers which has started in April.
Despite the obvious patient need for these ground-breaking treatments, the implementation of digital therapies takes time and we need more awareness and evidence for the therapies before we can expect the market to accelerate. We are therefore focusing our efforts on setting up pilots and trials with well known health care providers, employers and payers to receive their endorsements and recommendations. So far I am encouraged by the positive feedback we are receiving and in particular their compliments to the products when comparing to other digital therapies they have assessed and look forward seeing this translate into a revenue contribution as the pilots transform into commercial contracts.
OX124 - urgent need for new treatment of opioid overdose
New preliminary yearly data2 from Center of Disease Control indicates an increase in overdoses by
27 percent, where the portion caused by synthetic opioids, such as fentanyl, rose by 49 percent. Thus the need for our most advanced development project, OX124, a rescue medication for opioid overdose, is increasing everyday. We continue to make good progress towards initiating the final clinical study according to plan in late Q2. In parallel, minor adjustments were made to build up the supply chain in preparation to launch in the US market in 2023. With the differentiation shown in the first clinical study, versus the leading product on the market, we are confident the commercial potential for the product in the US is substantial.
Summary and outlook
Social responsibility in the pharmaceutical industry is becoming increasingly important, especially in the wake of Covid-19. The number of people suffering from mental illness and substance use disorders is growing rapidly. Orexo's ongoing transformation journey, from a one-product company to a company offering both pharmaceuticals and clinically proven digital therapies, means that we will be able to help many more people in urgent need of help. This mission is fully embraced by my excellent staff in both Sweden and the US, and is underpinned by our solid financial position.
Uppsala, Sweden, April 29, 2021
President and CEO
1 Average weekly prescriptions for ZUBSOLV®, where all prescriptions are normalized to a size of 30 tablets
2 Oct. 2019 - Sep. 2020
Nikolaj Sørensen, President and CEO, Joseph DeFeo, EVP and CFO, or Lena Wange, IR & Communications Director
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