Zubsolv® growth in the US drives improved profitability in the
commercial operations
Interim Report Q1 2017
April 20 2017
Nasdaq Stockholm: ORX
US OTC Market: ORXOY (ADR)
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2
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Q1 2017 at a Glance
Six consecutive quarters with positive cash flow from operations and positive EBITDA target confirmed
Financials
•
•
•
•
Positive net sales development of Zubsolv® with 15.9 percent increase compared to Q1 2016
Commercial operations in the US maintain profitability
Cost reduction across all major cost categories compared to Q1 2016
FY cost and EBITDA guidance maintained
Zubsolv US grew 11.1 percent in volume compared to Q1 2016
Commercial
Progress
R&D and
Legal
• Changes in two accounts, UHG and WellCare, led to drop in volume and share in Q1
• Excluding impact of these two accounts Zubsolv would have grown compared to Q4 and gained market share
• Overall slightly accelerating market growth from Q4 driven by public payers and C275 physicians
• Price increase in January compensated for slightly increased rebates
• New infringement litigation commenced against Actavis for their generic versions of Suboxone® and Subutex®
• Negotiations on-going with potential partners for OX51 and OX-MPI projects
• Two new formulation technologies under development, first clinical trials possible in 2017 if in vitro data are
supportive
• Regulatory process for Zubsolv in Europe and OX-CLI projects continue according to plan
3
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Commercial products and development pipeline
We are now developing next generation drug delivery technologies
Discussions on-going
Discussions on-going
4
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Good progress in the pipeline
Zubsolv® ex US
Approval in Europe anticipated in Q4, additional markets are being evaluated by our
partner Mundipharma
OX51
Negotiations on-going, Orexo continue preparation of manufacturing processes and
production of clinical trial material
OX-CLI
AstraZeneca continue development towards first clinical trials. Progress continue
according to plan.
OX-MPI
Negotiations on-going with potential partner
New formulation
technologies
Testing of several APIs on-going, first clinical trials could commence this year if in vitro
results are supportive
5
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
The litigation process against Actavis has been expanded
to additional, and already, launched products
Infringement by Actavis with their generic versions of Suboxone® and Subutex®
• Orexo is seeking compensation for damages
caused by Actavis’s infringement
• Actavis has been successful with their launch
with accumulated gross sales1 since launch of
Suboxone and Subutex Gx exceeding USD 500
million
1Damage
Suboxone Gx Manufacturer NTRx (in thousands) Volume (IMS)
100000
80000
60000
40000
20000
0
Feb 2013
Apr 2013
Jun 2013
Aug 2013
Oct 2013
Dec 2013
Feb 2014
Apr 2014
Jun 2014
Aug 2014
Oct 2014
Dec 2014
Feb 2015
Apr 2015
Jun 2015
Aug 2015
Oct 2015
Dec 2015
Feb 2016
Apr 2016
Jun 2016
Aug 2016
Oct 2016
Dec 2016
• Orexo alleges that Actavis’s generic versions of
Suboxone and Subutex tablets infringe Orexo’s
US Patent No. 8,454,996
AMNEAL PHARM
ACTAVIS
WEST WARD
TEVA PHARMACEUTICA
calculations likely to be based on net sales, Orexo has no insight into the actual net sales of Actavis generic versions of Suboxone and Subutex.
6
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Zubsolv market with slight accelerating growth driven
by the public segment
New legislative changes expected to increase growth rate further
Strong growth in the public segment in Q1 driving overall market growth
1 200 000
Cash
Commercial
Public
1 000 000
800 000
600 000
400 000
200 000
0
2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Overall market grew 9.7% in Q1 year over year accelerating from 7.6% in Q4, 2016
Quarterly
prescriptions
Source: Orexo analysis, IMS data
7
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Affordable Care Act (ACA) main driver for growth
in the public segment
US health insurance
Medicaid
Medicaid
expansion
Commercial
Medicare
Health Exchanges
Medicaid expansion
Health Exchanges
•
Affordable Care Act incentivize states to
offer broader Medicaid i.e. lower the
threshold to get subsidized Medicaid
•
•
States receive 96 percent subsidy from
federal level with no limit
State based health exchanges for people
not eligible to Medicaid and not covered
by employer to access affordable
insurance
•
Stepwise increased penalty for citizens
not signing up for health insurance
•
Forced to accept patients with long list
of chronic conditions without increased
insurance premiums
8
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
ACA drives growth in the public segment, but
importance for Zubsolv and Orexo limited
US health insurance
Medicaid
Medicaid
expansion
Commercial
Medicare
Health Exchanges
Medicaid expansion
Health Exchanges
• Retraction could jeopardize Medicaid
currently driving growth of Bup/Nal
treatment, HOWEVER Zubsolv has limited
access and profitability
• Limited essential health care benefits may
reduce access to treatment e.g. increased
time limited use of MAT
• Limited federal subsidies may lead to reduced
treatment coverage, HOWEVER cash and
commercial patients moved to Medicaid
• Limited essential health care benefits may
reduce access to treatment e.g. increased
time limited use of MAT, HOWEVER health
economics and political pressure support
treatment
• Increased risk adjustment of insurance
premiums may lead to increased price for
opioid addicted patients
• HOWEVER, limited growth seen in
commercial following the implementation of
ACA and political pressure support continued
access to treatment
9
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Changes in United Health Group and WellCare behind
slight loss of market share
Zubsolv® grew share in commercial adjusted for United Health Group changes
Zubsolv Market Share per Type of Payer (rolling 4 weeks)
9%
7,5% 7,6% 7,6%
7,7%
Mar'16
Jun'16
Sep'16
Dec'16
Mar'17
7,3%
7%
5,4% 5,2% 5,5%
5,3%
5,2%
5%
5,0%
3,8% 3,6%
4,4%
3,9%
3%
1%
-1%
Commercial
Cash & Vouchers
Public
Segment share of
market volume
40%
15%
45%
Zubsolv access
80%
100%
47%
3.3% vs. Q1’16, -1.4% Q4’16
-3.8% vs. Q1’16, 1.2% Q4’16
19.9% vs. Q1’16, 5.7% Q4’16
Q1’17 payer
segment market
growth
UHG caused a 0.6%-point loss in commercial share1 and WellCare a 0.3%-point loss in public share
1:
Some UHG patients likely to be retained with their new insurance plan
Mar’16 data: R4W WE 03/18/2016
Jun’16 data: R4W WE 06/24/2016
Sept’16 data: R4W WE 9/23/2016
Dec’16 data: R4W WE 12/23/2016
Mar’17 data: R4W WE 03/10/2017
10
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
11.1% growth from Q1, 2016 despite loss due to
changes in United Health Group and WellCare
Zubsolv ® Market share (4 week average, %)
Zubsolv Tablet Volume (rolling 4 weeks)
Average weekly sales
400 000
6,0%
350 000
4,0%
3,0%
Maryland
300 000
5,0%
250 000
Tablets
TRx Tablet Market Share1
Average weekly market share
7,0%
200 000
CVS
Caremark
SelfRefind/
WellCare
UHG exit ACA
WellCare
contract
150 000
2,0%
UHG
100 000
1,0%
0,0%
50 000
0
Excluding the events in UHG and WellCare Zubsolv would have shown a ~3% positive growth
Market share in terms of Orexo share of the total market quantity of tablets, film and patch of Bup/Nal
Note: Weekly script data is based on extrapolation and is associated with uncertainties in the launch phase of new pharmaceuticals
Source: Orexo analysis, IMS weekly data
11
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Zubsolv® well positioned to improve share in
2017 despite loss around year-end
Expanded treatment of opioid dependence will bring new growth opportunities
•
Fast growth in physicians certified to treat 275 patients
•
Strong indications of a continued political interest in expanding access to treatment even after
transition of power in US Federal Government
•
First 726 Nurse Practitioners and Physician Assistants have received their waiver to prescribe
Bup/Nal products for 30 patients
•
Zubsolv has taken disproportionate market share of the first growth driven by expansion to C275,
especially among current targets
Market access is a critical growth drivers
•
Market access proven to be main driver of market disruption and market share changes, especially
in public segment
•
Traditional sales and marketing remain important in commercial segment, but reimbursement of
Zubsolv required to compete
•
Negotiations on-going with several large payers for improved Zubsolv reimbursement and market
access
12
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Net Revenues
Q1 2017
MSEK
Q1
2017
Q1
2016
Jan - Dec
2016
Zubsolv® US
114.1
98.4
481.8
-
-
65.9
114.1
98.4
547.7
8.7
8.2
100.4
-
-
2.2
Abstral® – total
8.7
8.2
102.6
Edluar® royalties
4.6
3.6
14.8
Other
-
40.8
40.8
TOTAL
127.4
151.0
705.9
Zubsolv RoW upfront payment
Zubsolv – total
Abstral® royalties
Milestone payment Abstral

Net revenues for Q1 2017 amounted to SEK 127.4 million
15.6% increase over previous year when excluding the SEK 40.8 million OX-CLI milestone payment earned in Q1 2016
 15.7% decline over previous year when including the OX-CLI milestone
 Abstral royalty grew by 6% in Q1 2017 over previous year, driven by continued strong growth in RoW


Zubsolv US revenues for Q1 2017 amounted to SEK 114.1 million
15.9% increase over previous year; primarily driven by increased demand fueled by market growth and market share gains.
 11.0% decline over previous quarter explained by two isolated market events

13
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Zubsolv® US key trends Q1 2017 vs Q1 20161
114.1
MSEK
+11.1%
15.9%
98.4
Several drivers:
+ Price increase
+ Dosage mix change
- Gross-to-Net
Volume increase
higher than market
growth.
Q1 2016
1
Demand 1
Stocking
Net Price
Currency
Q1 2017
Orexo analysis using IMS demand data plus institutional sales
14
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Zubsolv® US key trends Q1 2017 vs Q4 20161
MSEK
128.2
-11.0%
114.1
Positive growth in
other parts of the
business.
Several drivers:
+ Price increase
+ Dosage Mix change
- Gross-to-Net
Market events outside of Orexo’s control:
- UHG exit from ACA Health Exchange business
- SelfRefind clinics exit from WellCare
Q4 2016
1 Orexo
UHC + Wellcare
Other Demand
Stocking
Net Price
Currency
Q1 2017
analysis using IMS demand data plus institutional sales
15
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Underlying profitability significantly improved
P&L in Summary, Q1 2017
MSEK
Net revenues
Cost of goods sold
Q1
2017
127.4
-46.2
Q1
2016
151.0
Jan - Dec
2016
705.9

Gross Profit for the quarter lower by
31% vs prior; more than explained
by the of OX-CLI milestone of SEK
40.8 million in Q1 2016.
-32.5
-149.6

Operating Costs significantly below
prior year mainly driven by targeted
investment strategy in US, R&D
projects running in early phases and
lower legal fees from IP litigations.

Selling expenses reflects a targeted
investment strategy with focus on
geographies with good market
access and potential for growth

Admin expenses includes lower costs
related to ongoing IP litigations.

R&D expenses are lower than
previous year due to the early stage
of development projects.

Other operating inc/exp primarily
relates to exchange rate gains from
revaluation of balance sheet

EBIT/EBITDA significantly improved if
excluding OX-CLI milestone from
2016 numbers.
Gross Profit
81.2
118.5
556.3
Selling expenses
-48.3
-68.0
-240.6
Administrative expenses
-26.3
-35.1
-161.6
Research & development expenses
-30.3
-45.0
-132.3
0.5
-3.8
29.9
-104.4
-144.7
-504.6
-23.2
-26.2
51.7
-6.6
-6.4
-16.1
EBT
-29.8
-32.6
35.6
Tax
-4.8
-1.9
-6.5
Net profit/loss
-34.6
-34.5
29.0
EBITDA
-18.1
-19.4
73.1
Other operating income & expenses
Operating Costs
EBIT
Net financial items
16
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
Financial position further strengthened
Financial Position, Q1 2017
Cash flow
MSEK
Q1
2017
Q1
2016
Jan - Dec
2016
Cash flow from operating activities
28.2
33.5
156.2
Investment activities
-0.3
-0.1
5.4
Financing activities
-59.0
0.0
-90.6
Cash flow (excl exchange rate differences)
-31.1
33.4
71.0
Liquid funds
250.6
233.0
282.4
 Positive
cash flow from operating activities for Q1 2017 – now the sixth consecutive quarter!
SEK 48.2 million positive contribution from changes in working capital (primarily a reduction in receivables and inventories)
 Financing activities for the first quarter included second bond buy-back with a nominal value of SEK 59 million

 Strong cash
 Net debt
position at the end of Q1 with SEK 250.6 million
reduced to SEK 88.8 million
17
Q1 Overview >> Products & Pipeline >> Key Market & Sales >> Financials >> Outlook
2017 set up to be an eventful year!
Development
 Announcement of
new OX-xx project,
following successful
proof of principle in
H2
 Approval of Zubsolv®
in Europe anticipated
in Q4
Supply
 Complete
establishment of
global supply chain
and confirmation on
future COGs reduction
Commercial
 Addition of commercial
product to US organization
 Increased market share
during the year and
disproportionate share
capture of C275 growth
 Zubsolv revenue growth in
2017 in the US
 Decision from the appeal of
the first decision in the
litigation against Actavis late
Q4 or early 2018
Forward looking statement:
This report includes forward-looking statements. Actual results may differ from those stated. Internal and external factors may affect Orexo’s results.
18
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