Earnings call transcript: Orexo AB sees Q1 2025 revenue growth, stock down 3.45%

Orexo AB reported a modest revenue increase in Q1 2025, with total revenue reaching SEK 146 million, a 3% year-over-year growth. The company’s earnings per share (EPS) of -0.6 missed forecasts, leading to a 3.45% drop in its stock price in pre-market trading. The revenue fell short of the forecasted SEK 148 million, contributing to the negative market reaction. Despite challenges, the company maintains impressive gross profit margins of 87.78%, according to InvestingPro data.

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Key Takeaways

• Orexo’s Q1 2025 revenue grew by 3% year-over-year.
• The company’s EPS of -0.6 missed market expectations.
• Stock price decreased by 3.45% in pre-market trading.
• Positive EBITDA of SEK 5.9 million was reported.
• Subsol U.S. Commercial revenue accounted for 91% of total revenue.

Company Performance

Orexo AB’s performance in Q1 2025 showed a slight improvement in revenue compared to the same period last year, driven primarily by its Subsol U.S. Commercial segment. Despite these gains, the company faced challenges in meeting EPS expectations, which weighed on investor sentiment. The U.S. Business contributed significantly to the EBIT with a margin of 32%, highlighting operational efficiency in that segment.

Financial Highlights

• Revenue: SEK 146 million, up 3% year-over-year
• Earnings per share: -0.6, missing forecasts
• EBITDA: SEK 5.9 million
• U.S. Business EBIT: SEK 44 million with a 32% margin
• Operating expenses: SEK 131 million

Earnings vs. Forecast

Orexo’s actual Q1 2025 revenue of SEK 146 million fell short of the forecasted SEK 148 million. The EPS of -0.6 also missed expectations, contributing to the negative market sentiment. This performance marks a deviation from the company’s recent trend of meeting or exceeding forecasts.

Market Reaction

Following the earnings release, Orexo’s stock price fell by 3.45% in pre-market trading, reflecting investor disappointment with the earnings miss. While the stock has shown strong momentum with a 31.82% gain over the past six months according to InvestingPro data, it currently trades at a high EBITDA multiple of 66.41x, suggesting premium valuation levels. The stock’s current position relative to its trading range indicates broader market challenges and investor concerns about future growth prospects.

Outlook & Guidance

Orexo expects to maintain positive EBITDA for the full year 2025, with operating expenses projected between SEK 460-500 million. The company is focusing on advancing its R&D pipeline and exploring strategic partnerships, with significant developments anticipated for its OX-124 and OX-640 projects.

Executive Commentary

Nikolay Sorensen, CEO, emphasized the profitability of the U.S. Business and the company’s strategy to optimize costs. "We have a profitable U.S. Business," Sorensen stated, highlighting the importance of the U.S. market to Orexo’s overall performance.

Risks and Challenges

• Legal investigation with the U.S. Department of Justice could pose regulatory risks.
• Subsol market volatility and payer policy changes may impact revenue.
• Continued pressure on gross margins, which saw a slight decline from 90% to 88%.

Q&A

During the earnings call, analysts inquired about the potential transition of the OX-124 manufacturing device and the dynamics of the Subsol market. The company addressed these concerns, emphasizing its focus on strategic partnerships and cost optimization.

Full transcript - Orexo AB (ORX) Q1 2025:

Conference Moderator: Aurexo Q1 Report 2025. For the first part of the conference call, the participants will be in Now I will hand the conference over to CEO, Nikolay Sorensen and CFO, Fredrik Jarsten. Please go ahead.

Nikolay Sorensen, CEO, Orexo: Thank you very much, and welcome to all of you dialing into this first quarter presentation. So the first quarter for Rexel, it feels strange, but it feels a little like it’s been less eventful at least compared to our fourth quarter where we both had a legal settlement and also a larger legal restructuring of of our balance sheet. I think this year has started very much in line with our expectations. We did know that there are some challenges from commercial the commercial side and the changes of Medicare system or Medicare policies in in The US. We were, of course, unaware of all of the macro volatility that we are seeing, but here, it actually feels like we have been insulated at least so far from a lot of the changes that has been happening on on a more geopolitical and macro basis, and I’ll come back to that a little later.

Moving into the presentation, first, we have the legal disclaimer and a short presentation of the agenda for today where I will talk a little about the summary of the quarter, go through some business updates, Frederic take us through some of our financials and legal overview before I would finalize with some of our value drivers for the company. So a short update on the quarter. We started the quarter the year with a positive EBITDA, which is very much in line with our guidance for the year and how we ended last year with positive EBITDA. It’s quite natural in the way we’re running the business that we see some volatility between quarters,

Klaus Palin, Analyst, Carnegie: not

Nikolay Sorensen, CEO, Orexo: at least driven by inventory changes at the wholesalers as the amount of money that we’re rolling through the system in The U. S. Is significantly higher than our net revenues. Our gross revenues is more than twice that number. So it has a big effect, is the inventory levels of the wholesalers, payment of rebates and others.

But we do expect to have a quite consistent positive EBITDA during the year, and we start the year with a slight positive number despite having some headwind during the quarter with the actually, we forget that today when we’re seeing the dollar weakening to the Swedish krona. But the first two months of the year, we had a quite high dollar exchange rate, which was translating into both on revenues but also on the cost side, had some impact. Subsol, we saw a stable revenue in both Swedish krona and U. S. Dollars compared to last year.

We actually have a slight increase, very much driven by lower decline in inventory. Those of you who were with us for a year ago remember how we saw a quite dramatic change in inventory levels during the first quarter. We have seen that this year also, but not to the same extent at last year, which then in a year over year comparison is advantageous for this year. We also raised the prices in the beginning of the year, which helped us a little bit for the quarter. When we look at the cash flow, which is an area we have a significant focus on, we are quite pleased to see we have a positive cash flow from operations.

Fredrik will talk to that. At the same time, we do have a decent amount of our capital is sitting in U. S. Dollars. So when the and that is measured on the last day of the quarter and as the U.

S. Dollar weakened substantially to the Swedish krona in the end of the quarter, that had a negative impact on our total cash position. Without that decline of the U. S. Dollars, we actually would have had a positive development in our cash position quarter over quarter.

OH640, which is really where we had a lot of focus and a lot of expectations. We have seen now after our second clinical trial, successful clinical trial, we have seen more and more partner interest, and we have several companies in the data room doing a due diligence. And then we hope that would translate into more concrete negotiations during the summer and, hopefully, also a a partnership agreement a little later this year. I will say that all of these discussions, like we have experienced before also with this product, in the end, it takes two companies to agree before we have a signed contract. So there’s always a risk in the process.

But we have a very good interest in the in the asset right now and in particular, following the second positive clinical trial. ORIX 01/2024, we have been struggling with our the testing that we need to do to solve some of the issues highlighted by the FDA. It’s one component to the nasal device that we’ve been waiting for. We now have some some a strong expectation that it will be delivered early in q three, means early in July, and then we can start doing the testing, which would enable us to file a year later. I will come back to some of that dynamic and some of the balancing act we have to work on when we look at works one, two, four.

Then all of the headlines, I think this as I said, we feel a little insulated to all the geopolitical and macro headlines that we’ve seen following the change in administration in The U. S. We know the new administration is highly focused on fentanyl opioid use disorder and treatment. So we don’t think there will be any changes to the worse. On the contrary, we actually saw last time Donald Trump was president that there were some good initiatives on the opioid use disorder treatment that we hope we can see also this time, not only following trying to reduce the source of fentanyl, but we also hope to see some initiatives to improve access to treatment.

But for Subsoil and taking the more concrete is Subsoil is fully manufactured in The U. S, so we don’t see any exposure to tariffs into The U. S. Market. This is a U.

S. Manufactured product since the start. All of the main excipients are sourced in The US for The US market. It’s packaged in The US. So we don’t see the tariffs will have any impact on SubSalt.

On the contrary, we actually think that some of our competitors have manufacturing outside The US, and that could, of course, help us a little in the competition. In Europe, we have sourced in the European product in The US. There is still supply even this quarter to from The US to Europe. But we are setting up the manufacturing or our partner in Europe, ACOP Pharmaceuticals, are setting up manufacturing in Europe, and we expect at least with the next big supply early next year would come from the European manufacturing and also mainly rely on locally sourced excipients. From an exchange rate perspective, it has been very dramatic to see the Swedish krona strengthening to the dollar with more than 10% during the quarter.

But from an Orexel perspective, we have a lot of our cash in expenses in U. S. Dollars, which basically mean that we have this kind of natural hedge and doing some simulations. We believe that about 80% of the impact on net sales when we come down to EBIT has been dampened by the exposure to U. S.

Dollars on our cost base. When it comes to below EBIT, you come into the financials, and that’s where we have impact from our cash balance. But also a quite high cost for the company is the interest payment on our corporate bond and they’re, of course, in Swedish krona. And as our main profit contributions come in US dollars and we’re paying interest rates in Swedish krona, there is some exposure to the Sweden to the payment on the corporate bond. But overall, we have a much less exposure to the US dollar as one could believe, just looking at our top line, which is more than 90% of that is coming in US dollars because also a significant share of expenses are US dollars denominated.

When it comes to our development program, both OEX one hundred twenty four and OEX six forty has a much more international supply chain than what we have for Subsol, where we have some parts manufactured in Europe, some parts are manufactured in Canada, and then the final packaging is in Canada. So that, of course, could have some impact by the tariffs. We think over time, I’m still I’m quite liberal and believe that we should hopefully find ways so that we have more or less free trade, in particular when it comes to pharmaceuticals. I think there’s a lot of benefits to the health to society and health without trade any trade barriers and tariffs. So I’m an optimist in the sense that I believe that Canada, US, Europe will find a solution that will mitigate more dramatic tariffs.

But we are monitoring this quite closely. We are talking with our manufacturers to see what kind of scenarios and mitigating activities could we do under certain conditions. But right now, without any clear answers on on what tariffs could come, it’s very hard to make any investments and initiatives, but we’re following this quite closely. Another area that is a concern, I think, has has been some of the turmoil on the FDA. We’ll see.

I I think it’s it’s there are some more positive notes coming up from FDA just the last week about some of the activity levels, maybe a more pragmatic view on some classes of pharmaceuticals, which could help increasing the pace of drug approvals, at least in some categories. But we have, during the last quarter, seen some variation in the response time. Some responses have taken much longer than what we have been used to. Other responses have gone relatively fast just as we’re used to. So there are some uncertainty about how the FDA would work with the changes that are made to the agency.

But over time, again, I’m an optimist. I find that there will be solutions to this. But right now, it’s, of course, depending on on issue and topic and who we’re talking to, there have been some delays. We have seen, of course, the financial market has been very volatile even though the last few weeks have been positive. But we have seen that, and we’re talking to our international advisers in business development and m and a, corporate finance.

We have seen that the market is slowing down. There’s been some hesitance to enter into larger deals because it’s right now, there’s an uncertainty about what kind of investments are needed, for example, for to avoid tariffs or to start up manufacturing in The US, how will tariffs impact the the market potential in The US, and, of course, also the general capital market has been a little tough for the Life Science sector the last few months. We have, however, in our partnering discussion with Lloyd six forty, not seen any impact of this, and the companies that we are talking to have not brought this up as a concern. Our U. S.

Commercial business. We have seen, from a financial perspective, a quite stable start. As said, we have slight growth in U. S. Dollars and in Swedish krona.

We do see Q1 is normally a weak quarter. And there are the main reason for that has historically been high deductibles and also some formulary changes. But for the high deductibles have, in particular, been hitting us quite hard our largest payer for a long time has been UnitedHealth Group, and they are applying high deductibles more than anyone else. And that actually means that in the beginning of the year, the high deductibles are reset, so the patients have to pay out of pocket the full amount for the pharmaceuticals. As the price gap between Subsol and the generic versions of Suboxone have increased, then, of course, that price gap is becoming more visible for the individual patient, which could lead them to take a generic at least for the first few prescriptions of the year to avoid the high deductibles or to avoid paying the full price of a branded product like Subsolt.

So we have seen first quarter has been traditionally volatile both for Subsol but also for the general market. This year, we also had a change in Medicare policy in the beginning of the year, which have had some impact on volume. We have seen in particular one payer, which is also our largest Medicare payer, Humana. There are two impacts. One is that we’ve seen volumes go down because Humana have, for some of the patient groups, been promoting generics, and they do that by increasing the co pay that the patients have to pay for to get subsolved.

But also due to this new rebate policy, some of the Medicare players and Humana, one of them, have also negotiated a new rebate system, new rebates from Orexo. So we have both seen a lower price and also some decline in volumes for Humana during the first quarter. That said, Humana has been very highly rebated because we had this exclusive agreement with them previously. And the impact in volume is much lower when you get down to net sales because the rebates have historically been quite high. So the actual net contribution for prescriptions coming from a Humana patient has not been even closely as high as the impact on the volume.

And you see that when you see our sales is stable, whereas the volume decline a little. Some of that is due to Humana, and Humana volume decline is less costly on a sales perspective due to high rebates. We have also seen UnitedHealth Group as they do all every year. We are still reimbursed. But in the beginning of the year, the UnitedHealth Group patients have more exposure to the full price of Sub Sahar, which have had some impact in this first quarter.

Then finally, last year, this time, I was talking a lot about inventory. We have seen, as we’ve seen every year, inventory goes down during the first quarter, but not to the extent as we saw last year, and Fredrik will come back to that a little later. And based on that and based on this first year starting in line with our expectations, we have not changed any of our guidance for the year. Just a little exemplify some of the volume changes. As you can see here in the graphs to the right, you see this dip down, which is actually a bit more dramatic.

We saw the same in 2020, but that was kind of similar to when COVID start hitting us. But we did see a decline across all retail segments. We saw a little increase in institutional. We normally don’t talk about retail and institutional because institutional is quite small. But this quarter, they actually increased a little, which is compensating for the full market.

But the retail segments, commercial, Medicare and Medicaid, which is dominating the market, we saw a negative growth in all of these three segments. And that have an impact on the total market and, of course, also translate into an impact on Sub Solve. We have seen that, as you can see, just following the Q1. Nearly every year, we have seen that dip a little more dramatic this year, but then it’s gone back to growth, and we believe the same will happen this year. So to our pipeline and products under development.

ForEx one to four, last quarter, we had some uncertainty about the time lines. I think most of that uncertainty is gone, but I want to see that we have all the components in house before I can say that we have solved the full problem. But we do know that our manufacturer of the components have now successfully gone through the validation of the manufacturing equipment, and that means that they can start manufacture the components we need to do the testing that is required by FDA. One of the things that we need to balance doing this is our time to market. We can go through faster, try to come through the testing faster.

That will have a negative impact on the shelf life we will have at launch, and it also increases the risk at approval because FDA has not specified exactly how much stability data they want to have to to both approve and also to give us a certain amount of shelf life. So we have to take this, should we go fast, to have a short shelf life at launch, have a high risk to approval, taking a little longer time to get more stability data, risk increasing the chances of approval, but also increasing the amount of shelf life at launch. And and while we right now won’t go all the way, we’re not taking the fastest path to approval because we actually believe we can have a positive impact on the overall shelf life by actually including some of the accelerated as something we use in the pharmaceutical industry that we can accelerate the stability data by increasing the temperature. It’s easier to get that through the approval before the actual approval than after approval. So right now, our expectation is to file in the mid of twenty twenty six, and that will then lead to an approval, hopefully, during the second half of twenty six and launch early twenty seven.

Quite slower than we anticipated first round, but I think we have the process under control. We have the steps that we need to take under control. And by taking a little more shelf life or stability data into the file, we also think that the regulatory risk is quite low. Long term, it’s been very suboptimal to be in the situation where right now we have ordered this component we need from the nasal device already at the time of this the complete response in July with expectations of of supply in August, September. Now we are here nearly a year later, we will get the supply.

Part of the issue is that our manufacturer has moved to a new version for the one commercial product in the market using this nasal device. And even Orexel for our OX six forty project have moved to the new device. So we are looking at a plan to move over for OH one two four to this new device also. The differences are minimal. It’s more about the handling for the patients than the actual critical part of the device that meets the nozzle and the compartment where we have the powder.

So we are moving that way. We don’t see that will have an impact on the time line right now, but I would just highlight that as a mitigating activity to reduce our supply risk in the future. Again, just as a caveat, in the end, this is up to FDA to approve, and I can’t guarantee how FDA will look at this as we have received relatively vague guidance on what’s required in terms of stability data to get a certain label in the end. OH640, we concluded in the beginning of the quarter, so we include that in our Q4 report for last year, but it was finished in the first part of the year, our OH640 study. We’re also seeing our competitor, the first liquid nasal device on the market has been launched with some success, even though I think there were some expectations to an even faster uptake in The U.

S. Market. That said, we have saw the same with naloxone when it first came. It took time before it took off. And today, the nasal naloxone is dominating the market.

We have seen a good interest from large international companies in OIC six forty. We have several companies looking at the asset right now. We are in concrete discussions with several companies, and we are based on that, we’re quite optimistic that we can reach an agreement during the year. But as we’ve seen before with week six forty, you need to have a signed paper before the deal is done. So of course, there’s some some risk to the process.

But we have a good interest from several different companies, and I think that give us comfort in in the process and the future for week six forty. Then we announced late right after the closing of the quarter, we have some good data in a RAT study, in deeper study for our collaboration with Abira, where Abira is a very innovative Swedish biotechnology company focusing on a new types of vaccine platform. We took that platform and formulated an amorphous. We compared the formulation, the powder formulation with a liquid formulation, and we saw that there were no difference. Using a powder comes with a lot of different advantage advantages, for example, that you can avoid the coaching that is otherwise needed for for this platform.

And we think this is very strong data both for us and for Barbera. So something that we can use both in that collaboration, but also something that we are happy that we’re able to present to other vaccine companies as a proof of concept of how amorphous can be used in large molecules like vaccines. Then to our financial and legal, I will let Fredrik take over the computer and the work. Thank you.

Fredrik Jarsten, CFO, Orexo: Thanks, Nikolay. So on Page 15, we look at our revenue, and if we start by looking on the top part of the page, you can see that our sorry, total revenue in Q1 for the group amounted to 146,000,000. And of that revenue, subs sold within U. S. Commercial is the main contributor with SEK 133,000,000 or 91% of total revenues for the quarter, which is slightly up year over year with approximately 3%.

And as you can see in the waterfall graph on the bottom part of the page, the growth in some Solu’s net revenues is primarily a result of lower reduction of wholesaler inventory effect amounting to SEK 7,000,000. It’s a positive USD FX impact of SEK 3,600,000.0 and the price increase on SUBSAULT products from the beginning of the year. The demand for SUBSAULT in net revenue terms is though lower year over year with approximately 7% reflecting the traditionally challenging Q1 due to formulary changes and reset of patients deductible, as Nikolay described earlier. Subsole sales in USD were very similar to q one last year at 12,500,000.0 US dollars. If we look at the distribution of other revenues in HQ and pipeline, again, we had significantly lower ABSA royalties accrued based on lower expected sales following the gradual decline as we have seen when the agreements for ABSA royalties for individual countries expire.

Also commenting on Subsol ex U. S. Revenues for the quarter were much higher than last year, which is explained by higher sales of tablets to Accord from a onetime buildup of their inventory that is awaiting approval of their own manufacturing capacity of Subsol for the ex US market. Going forward, the low margin product sales of tablets to Accord is expected to be exchanged with increasing high margin royalties from Accord on their own sales. Going to next page, our P and L.

We are happy to conclude that we had a good start to the year in relation to our EBITDA in Q1, which landed at a positive $5,900,000 following higher net sales and stable operating costs compared to last year. The increase in COGS is, to a large extent, explained by negative FX effect within U. S. Commercial and unfavorable production cost for Subsol U. S, giving us a slight reduction in gross margin year over year from 90% to 88%.

Besides that, the increase in COGS is also a result of the higher S. Subsol sales to Accord in this quarter. If we look at our operating expenses in Q1, they were very much stable compared to same period last year, amounting to 131,000,000 In the quarter, we did have some higher legal expenses within admin due to the DOJ investigation, but they were more than offset by lower cost for the IP litigation that we had last year. The decrease in R and D cost was mainly a result of lower amortization costs for the impaired intangible assets in Q4, but partly offset by some high costs for o x six forty and the Amorphox platform.

Average USD FX rates strengthened year over year from ten thirty nine to ten sixty eight in q one. In general, that had a positive effect on cost in the p and l, but the FX effect was, though, negative with 7,000,000 from revaluations of foreign currency balance sheet items, reflecting a weaker USD FX rate of 10.02 at the end of the quarter. Total FX effect on EBIT was a negative SEK 11,000,000. Total EBIT amounted to minus SEK 5,200,000.0. In that number, depreciation is lower by approximately SEK 10,000,000 for the impaired intangible assets.

EBIT contribution from our U. S. Business amounted to SEK 44,000,000 for the quarter, which is a margin of 32%, an improvement from 25% last year. Moving to next page on cash flow. We had a strong quarter in terms of cash flow from operating activities of 33,000,000, primarily a result of a major positive change in our working capital of SEK 43,000,000, partly offset by negative cash flow from operating earnings.

We paid interest on the bond of EUR 11,500,000.0. That’s EUR 1,200,000.0 higher than last year. And within noncash items, change in provision, which is payer rebates and returns, showed a negative effect of 12,000,000 SEK due to the timing of payments of these payer rebates. Total cash flow for the period ended up at plus 7,000,000. That was also impacted by minus SEK 7,000,000 from amortization of lease liability as well as the effects of the closing the transaction that we signed in Q4. That had a positive impact of SEK 90,000,000 in Q1 on working capital, but then offset in its entirety by a negative SEK 90,000,000

impact on investment activities. And then adding an FX effect on that, on cash of SEK 11,000,000, that adds up to the decrease in cash of SEK 4,000,000 since end of Q4. We should not, though, forget that we also have SEK 30,000,000 exposure in our own bond as a potential source of funds. On next page, show our financial outlook for 2025 stating we expect market growth 2% to 5%, subs on net sale in within the interval of $50,000,000 to $55,000,000 OpEx interval of SEK $460,000,000 to 500,000,000. And finally, group EBITDA to be positive for full year.

Now with the actuals presented today and the explanations given, we can conclude that these metrics are reaffirmed. And finally, comment on the FX rate assumptions going forward. The financial outlook 2025 is based on a forward looking assumption of a USD versus SEK exchange rate of $10.50. And the average USD versus SEK exchange rates during q one, as you heard, was 10.68. Going forward, volatile market could lead to changes in exchange rates.

So in a currency sensitivity analysis, including a 10% decline in this FX rate, the negative impact on U. S. Commercial net sales will be dampened at the EBIT level from a natural hedge on the cost side covering over 80% of that reduced net sales. And with that, back to Nikolay for legal updates.

Nikolay Sorensen, CEO, Orexo: Thank you. So I’m very pleased that I don’t have to update about patent litigations, and we’re now down to one process in The US. But that does take a decent amount of time because it’s the subpoena and investigation that was started now soon five years ago. We have been been seeking a settlement in in the late later part of last year, but due to the change of administration and that the US Prosecutor who’s leading each of the offices in The US is a politically appointed person. There’s a a gap in that decision making.

And and right now, there’s no the there’s only an acting US prosecutor in place in office that leads the investigation, and that slows down the the process. But we are trying to find a resolution and have a an active ongoing discussion. We are still convinced and have not been presented by any convincing evidence that we’ve done something wrong. We have been working very diligently with our work in The US, including external legal advisers, regulatory advisers to review all marketing material that we’ve been promoting, and we can’t see that we’ve done anything that is severely wrong or wrong at all in the marketing of SubSup. But the process is taking a lot of efforts, and we are working to find a solution to this.

Summing up on the future value drivers. We, of course, are working intensively to both maintain subsol revenues with no knew that first quarter is always a challenge, in particular, comparing to the fourth quarter the year before, which traditionally is one of our strongest quarters. We expect the same development this year, and we did see the first quarter going down a little, but compared to last year, actually being very stable. Looking at our growth drivers, then weeks one to four is, of course, important. Now I’m getting some comfort that we have the process under control where we, until recently, didn’t really have a fixed date of supply, but now it feels like we’re getting quite close to be able to get the missing components, and that would be important to drive additional sales.

Then, of course, milestones and royalties both from our existing projects are important, but in particular, coming into our new projects like OH six forty, we think that is could become a highly valuable product for the company in the future. So growing revenues and profit contributions continue to work to improve access to treatment is important for us to see and that’s particular in The U. S. Context, how do we get reimbursement both to Subsol, maintain the reimbursement we have and also get reimbursement for new products. And then Amorphox is really where we think there’s a lot of unlocked value potential, both partnering with other pharma companies to co develop new products, just like we’ve done with Abira, we’ve done with several other companies, tested Amorphox on their molecules.

And every time, Amorphox have actually scientifically delivered on the expectations. We are looking at the partnering of OX six forty and have good interest as I talked to. But we also work on on other areas to see how we can apply Amorphox on new products. And we did announce in the quarterly report a new project we called OX three ninety. That is an opioid use disorder where we are testing a new treatment of a synthetic illicit drug that is growing in The US.

And but before we take it in into these kind of presentations, I would like to see it takes a few steps forward in the development and also in the discussions with The US authorities. That said, we will open up for questions, and thank you for listening to this presentation.

Conference Moderator: The next question comes from Sameer Devani from Rx Securities. Please go ahead.

Sameer Devani, Analyst, Rx Securities: Hi, guys. Thanks for taking my questions. I think I’ve just got a couple. Just coming back to OX-one hundred twenty four, it’s obviously positive that you’re feeling a bit more confident in when you’re going to get this critical component. But I guess I’m slightly a bit more interested in the transition to the new device and what sort of work you would need to do that and how long that could take?

I guess that’s question one. And then just on OX-six 40, just wanted to check whether there was any other work that’s currently ongoing with that program. Was it everything that’s now that you’ve done is in the data room and that’s what we’ll go forward with in terms of partnering? Thanks very much.

Nikolay Sorensen, CEO, Orexo: So, Oix, one to four. So the the the device that is coming in, it’s it’s you you need to look careful to see what what are the differences and how much work we we can use the existing supply chain. We don’t need to make any major changes to the supply chain that we have right now. And we don’t think that that will be a lot of work. We’d like to start that work right now.

We will have are about to receive batches of of this new device so we can start preparing that manufacturing switch before we get the final version of the the previous device. The timeline is really up to discussion with the FDA. We know that there’s one other com product in the market called Baqsimi, which is using the same device. They have moved, and we can’t really see that they have done a lot of work to do that transition to the new device. And the critical part is that the the actual change is into the handling of the device.

So it’s the plunger that you’re pushing on that has a different device design compared to the the one that we’ve been working with with OX one two four. But the actual nozzle and the compartment, which is the critical part and the the way that the powder is straight out of the nozzle, that mechanism is exactly the same with the new device. So in a normal setting, and we would not see this as any major work, and we would not expect that FDA would require any major analysis of doing this. That said, we were quite surprised with some of the requests that we received at the complete response letter last year where they were asking for much more data than we and any of our adviser So before I I can say anything around timeline, we need to get a response from FDA.

But we’re using the time right now that we got from getting a delay in the this missing component in the original device to actually adapt and and look at how we we do from a manufacturing perspective with the new device. So to shorten that timeline. And and I don’t see that that has any commercial implications because we would be able to to launch with a new device and then simply just switch as it as it goes along. There would probably need to be some changes to the instructions for use, but that should be minimal. So that’s why we have I think it should in a normal setting, I would not see that as dramatic change.

But given our experience with FDA on these rescue medications devices, then we want to get that input before we can give a timeline. OIC six forty, there is a work ongoing with some part of the work we did in the Phase II study was looking at the doses. So we were looking at different dosing also for the in our last study, so our second study. And with that change, based on the results, we have decided to change the dose a little compared to our first study, and that has some implications on the manufacturing process. So right now, we are preparing to upscale the manufacturing that’s ongoing.

And based on the results, we have been adjusting a little the manufacturing process to adapt to a different dose than the one we had in the first study. But we are ex before we start the real manufacturing, we’d like to have a partner in place partly because some of the partners we talk to are likely to want to take more control of the supply chain than what we would do if it was an other partner. So we we’re waiting a little to see where we are, but there is work ongoing at the moment. I think that was the questions. Did I miss anything, Samir?

Sameer Devani, Analyst, Rx Securities: No. That’s great. That’s that’s great.

Conference Moderator: The next question comes from Klaus Palin from Carnegie. Please go ahead.

Klaus Palin, Analyst, Carnegie: Hi there. And thanks for taking my question. So question at least. And I just wondered if you could elaborate a little bit further about the Upsol market position because it seems like your volumes are down a bit more than the overall market? And is this just due to seasonality?

Or should we expect sort of a you’re losing some market share?

Nikolay Sorensen, CEO, Orexo: So Sub is down. But if you look at the main reason for the decline, it is UnitedHealth Group, and we have seen that in Q1 repeatedly since 2019. This is where we lose most of the market share from soft soil has been in q one. And I think that’s because it’s when patients are reminded about the the full price and and see that they can go from a script that maybe cost them 3 to $400 to a script that would cost them about a hundred dollars. So it is a a significant difference in price in the first quarter.

And the other one is is actually in Medicare where Humana has declined a decent amount. Whether that will continue, it’s it’s I think with United, we have seen this every year and then has been flattening out. We even saw some growth between in United at one of the quarters last year after the first quarter. With Humana, it was really changed that was implemented here the January 1. Will will that continue or not?

We we will see. But I I will say Humana, from a value per script, has much less impact because of the rebate levels. In general, in the market, it’s a little early to look at the trajectory. I think our market share has gone down, but it’s a tenth of a percent during the quarter, and it’s been relatively stable in the last part of the quarter and into the second quarter. So we haven’t seen any changes in markets.

And our formulary position has been maintained. So I think that is helpful

Fredrik Jarsten, CFO, Orexo: for

Nikolay Sorensen, CEO, Orexo: the rest of the rest of the year. So first quarter is volatile normally. And then this year, we we have seen also that we’re a little more sensitive when the market goes down, and we tend to see that we actually have a little more impact than than the full market. And the full market did go down this this quarter. And we’ve seen that so many times in q one and then has bounced back in q two, q ’3, q ’4.

And I don’t really see a reason why that wouldn’t happen this year.

Klaus Palin, Analyst, Carnegie: Okay. Great. And maybe if I could add one more question about your strategic overview. I guess you alluded to that it’s perhaps affected somewhat about the volatility. But is it possible to say anything more about this process and where you stand?

Nikolay Sorensen, CEO, Orexo: I I I think our our discussion is that we have done a lot of work on on, in in particular, R and D pipeline, where should we put the focus. So there, we will focus our our MorphoS efforts more on the certain size of of molecules and and certain types of molecules. We’re looking at partnering strategies for MorphoS and how that will evolve. So that’s something that we are in active discussions even potential partners on how we could how we could broaden the use of of Amorbox. But before we get to the actual outcome, I would like to see that we make some progress.

Then it comes to more looking at the different assets in the company. And here, we have no hurry. We have a profitable U. S. Business.

We even though our gross margins were down a little, we actually see that our gross margins are likely to increase as we proceed. We continue to cost optimize, and and I think a lot of this is basically saying, if if we see a value, for example, for parts of the business that is more higher in partnership in some shape and form with another company, we should look at that compared to go alone. But the go alone scenario from where we are, we have a quite stable business. We can still work on our continue to work on our cost base to optimize expenses. And we have a good and stable U.

S. Business. And I think this that we’re not in a hurry. But should there be opportunities, for example, where we can work together with another company in The U. S, I think that’s something that we would consider.

But but right now, I think the market is quite volatile, and it’s not the best time to do such a move.

Klaus Palin, Analyst, Carnegie: Yeah. I understand. Thank you so much for taking my questions. That’s all all for me.

Nikolay Sorensen, CEO, Orexo: Thank you. Any more questions? So we have a question which came in as written, which is about R and D, which I think looks like that is lower in our US commercial and higher in in The U in our headquarter and whether that will continue. So r and d is primarily so the R and D we do in The U. S.

Is connected to commercial products. R and D we do in Sweden and headquarter is all of our pipeline projects. Even though some of the projects are in tight collaboration with The U. S. For example, our new project, ORIX three ninety, is very close to The U.

S. Authorities. It’s very engaged involves a lot of our U. S. Resources, but a wall is financed out of the Swedish headquarter.

So when you look at r and d cost in US commercial, it’s actually related to products on the market, for example, regulatory fees, some medical affairs expenses in The US where all pipeline projects are in Sweden. Then you can say all pipeline projects that we are running is designated for The US market, and in particular, an opioid use disorder designed to The US market. Then there’s a question about unmet working capital. Maybe Frederic can take that one.

Fredrik Jarsten, CFO, Orexo: Yep. So there’s a question on on net working capital going forward and and whether we need to tie up more capital in the business again. And as Nikolay explained, we have a a profitable business in The US. We have a fairly stable net working capital position, which obviously fluctuates with with the working capital along the way. But we feel quite comfortable at the moment, and we are continuously looking at improving cash flow from a cost optimization point of view.

And obviously, flow is the primary focus to us

Nikolay Sorensen, CEO, Orexo: to improve. And then there’s a final question we got in writing here. Can you give an update on the process around potential sale partnership of U. S. Commercial?

And as I said before, we’re quite pleased with the financial performance of our U. S. Commercial business, but we also realize that having one product in the market is is not optimal. And that could be benefits to, in some shape and form, work with other companies to broaden the the commercial base with more products and get better economies of scale into the business in The U. S.

There, the global market during this quarter has been slowing down that. And since we are not in a hurry, I don’t think we will this is not the time when you will actually go out and and and push for such a process. At that’s the same time, I I will say, historically, when we have not had a patent litigations, there has been a continuous flow of interest from companies who would like to either work together with us in The US or have an interest in maybe acquiring rights to subsolve in The US. And I don’t see a reason why that wouldn’t happen right now. But at the moment, I think the volatility of the market makes that a little less attractive to put a lot of efforts behind right now.

But I hope that what we’re seeing in the global market, both on the financial market and with trade trade tariffs and others is a is a will be a a short term issue, and and over time, we’ll see a more stable market. And and clearly, the last few weeks have been a little more positive in in that instance. So right now, the process is that that we are open to have discussions if companies are are interested, but we are quite pleased with the performance of of our US business so far, and it’s a good contribution to our r and d that we’re working with on our pipeline with Amorphrox in particular. With that, we have not received any additional questions in the system that I can see, and no more questions from people dialing in. So I want to thank all of you to spend forty five minutes with us today and listen to our update of a relatively stable first quarter for the company, but also with good optimism for the coming quarters, in particular, looking at some of these inventory changes that we always see volatility and the volume in The U.

S. Market in the first quarter normally diminish in the quarters to come. So thank you very much for your attention, and have a good day. Bye.

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