Interim Report Q1 2019

Continued strong performance from the US business

Q1 2019 highlights

  • Total net revenues of SEK 174.3 million (139.7), up 24.8 percent
  • Zubsolv® US net revenues of SEK 161.7 million (131.1), up 23.3 percent in SEK and 9.3 percent in local currency
  • EBITDA of SEK 12.0 million (-16.6), EBITDA excluding IP litigation costs of SEK 60.8 million (-8.5)
  • US EBIT of SEK 71.9 million (25.3)
  • Cash flow from operating activities of SEK 50.9 million (106.3), building a cash balance of SEK 647.4 million (437.5)
  • Net earnings of SEK 14.1 million (-25.9)
  • 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 US District Court of Delaware ruled that Actavis does not infringe in Orexo´s patent ´996 with their Suboxone® and Subutex® generics
  • Updated full year outlook with accelerated COGS reduction, reaching 35 percent reduction on full year basis
SEK m, unless otherwise stated  2019
Jan-Mar 
2018
Jan-Mar 
2018
Jan-Dec 
12 mth
Apr 2018- 
Mar 2019 
12 mth
Apr 2017-
Mar 2018   
Net revenues  174.3  139.7  783.1  817.7  656.0 
whereof Zubsolv® US net revenue  161.7  131.1  621.5  652.1  502.8 
Cost of goods sold  -25.3  -48.4  -171.8  -148.7  -166.6 
Operating expenses  -147.9  -113.1  -515.6  -550.4  -430.6 
EBIT  1.1  -21.8  95.8  118.7  58.8 
EBIT margin, %  0.6  -15.6  12.2  14.5  9.0 
US EBIT  71.9  25.3  198.3  244.8  98.6 
US EBIT margin, %  44.5  19.3  31.9  37.5  19.6 
EBITDA  12.0  -16.6  116.6  145.2  79.7 
Earnings per share, before dilution, SEK  0.41  -0.75  3.99  5.15  0.92 
Earnings per share, after dilution, SEK  0.40  -0.75  3.93  5.05  0.92 
Cash flow from operating activities  50.9  106.3  242.0  186.9  224.4 
Cash and cash equivalents  647.4  437.5  589.8  647.4  437.5 
CEO Comments

Demonstrating resilience and growth in a dynamic market

The first quarter of 2019 has been eventful from a market perspective, most notably with the entry of generic competition to Suboxone® Film. In this dynamic landscape I am pleased to see Zubsolv® maintaining strong sales growth and greater profit contribution, supporting further enhancement of our pipeline development.

Strong financial performance – US operations reach 44.5 percent EBIT margin (19.3)
I am pleased to report the business has achieved a profitable first quarter – the first for the company. This was achieved despite expected high legal costs during the period. Excluding the litigation costs, EBITDA reached SEK 60.8 million (SEK 12.0 million including). Profitability reflects the strong growth in Zubsolv sales in combination with improved gross margins due to accelerated reduction in cost of goods sold. The EBIT margin in our US operation has now reached 44.5 percent and contributed to our overall profitability with SEK 71.9 million.

Market dynamics – Zubsolv sales resilient to increased generic competition
During the quarter generic versions of Suboxone Film were launched. We are encouraged to see limited impact on Zubsolv sales, which have remained resilient and stayed at similar levels reported in Q418 and demand increased by 6 percent versus Q118. The main challenge is that some insurers, e.g. Humana and WellCare, who previously didn’t cover Suboxone Film, will now reimburse the generic versions of the drug. Although increased competition can have negative impact on market share, the total profit contribution from these insurers often increase, since the rebates are substantially reduced. When the current turmoil has settled we are confident the market will offer opportunities for Zubsolv.

Operational – increasing the pace of pipeline developments
As previously announced, we received encouraging data on our OX124 project for the treatment of opioid overdose with a nasal naloxone formulation. We are now in a position to progress both OX124 and OX125 (nasal nalmefene formulation), into further clinical studies which will be initiated in 2020. We also received positive in-vivo data for OX338, a sublingual formulation with ketorolac for treatment of pain, and plan to initiate the first clinical study in humans later in 2019.

Legal – no impact on Zubsolv from the negative decision in the Actavis litigation
Orexo is an innovative company and our main product Zubsolv is patent protected until 2032 following a multiyear patent dispute with Actavis. Being an innovative company also requires a fierce protection of our innovations and we are disappointed with the recent outcome to the litigation process against Actavis for their generics of Subutex® and Suboxone® tablets. We will now initiate the first step in an appeal process. This will be associated with significantly lower costs than the legal expenses recorded in Q119.

Summary and outlook
We have had a strong start to 2019. Three of our four internal pipeline projects are ready to progress into the next development phase, our financial position continues to strengthen due to sales growth and our manufacturing efficiency program has had significant positive impact on the gross profit contribution from Zubsolv. With a continuous improving profit contribution from Zubsolv, we are able to invest more into R&D and business development. The success in these areas will define our future and on all these areas we have made good progress during the period.

Uppsala, Sweden, May 2, 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

Presentation
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-q1-2019
Telephone: SE: +46 8 505 583 50 UK: +44 333 300 9274 US: +1 833 526 8381
The presentation material will be available on Orexo´s website 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 May 2, 2019. 

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About Us

Orexo develops improved pharmaceuticals based on innovative drug delivery technologies. The focus is primarily on opioid dependence and pain but the aim is to address therapeutic areas where our competence and technologies can create value. The products are commercialized by Orexo in the US or via selected partners worldwide. The main market today is the American market for buprenorphine/naloxone products, where Orexo sells the product Zubsolv®. Total net sales for 2017 amounted to SEK 643.7 million and the number of employees at year-end was 90. Orexo is listed on the Nasdaq Stockholm Mid Cap (ORX) and is available as ADRs on OTCQX (ORXOY) in the US. The head office, where research and development is also performed, is situated in Uppsala, Sweden.