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Orexo Interim Report Q2 2020

Investing in diversification to drive future growth

Q2 2020 highlights

  • Total net revenues of SEK 179.1 m (201.2)
  • EBITDA of SEK -9.0 m (60.4), positive EBITDA of SEK 26.5 m (60.4) excluding accelerated DTx US launch
  • Net earnings of SEK -32.5 m (54.6), positive net earnings SEK 3.0 m (54.6) excluding accelerated DTx US launch
  • US Pharma (ZUBSOLV® US) net revenues of SEK 172.5 m (184.4), EBIT of SEK 88.8 m (83.8)
  • DTx  EBIT of SEK -35.5 m (-)
  • Cash flow from operating activities of SEK -7.2 m (46.1), a cash balance of SEK 677.2 m (697.0)
  • Completed the program to repurchase 500,000 of the company´s ordinary shares
  • James Noble elected Chairman of the Board and Charlotte Hansson elected as Board member at the Annual General Meeting. They replace Martin Nicklasson and Kristina Schauman who have declined re-election.
  • Global IP protection granted for the novel intranasal drug delivery platform until 2039
  • Aquired exclusive US rights from GAIA to commercialize deprexis®, a world-leading digital therapy to help patients manage the symptoms of depression
  • Positive results from human PK-study for OX125 assessing the novel intranasal nalmefene formulations for opioid overdose reversal

Important events after the end of the period

  • US launch of the scientifically proven digital therapies deprexis® July 1 and forthcoming launch of vorvida® July 20
  • Updated financial outlook 2020 as OPEX expects to reach a level of SEK 750-800 m for FY 2020 due to establishment of DTx business and accelerated US launch of digital therapies
  • Orexo US received subpoenas on July 14 to provide US authorities with certain information with regards to ZUBSOLV® and other buprenorphine products. Orexo has no knowledge of the background to the requests (for more information see note 8).
SEK m, unless otherwise stated 2020
2019-2020 Apr-Jun Δ
Net revenues 179.1 201.2 354.2 375.5 844.8 -11%
Cost of goods sold -19.9 -31.3 -39.9 -56.6 -105.6 -36%
Operating expenses -172.5 -117.1 -293.6 -265.1 -508.0 47%
EBIT -13.3 52.8 20.7 53.8 231.2 -125%
EBIT margin, % -7,4 26.2 5.8 14.3 27.4 -33.7 ppt
EBITDA -9.0 60.4 30.1 72.3 272.1 -115%
Earnings per share, before dilution, SEK -0.94 1.54 1.44 1.93 6.33 -161%
Earnings per share, after dilution, SEK -0.94 1.51 1.44 1.90 6.20 -162%
Cash flow from operating activities -7.2 46.1 40.9 97.1 287.0 -116%
Cash and cash equivalents 677.2 697.0 677.2 697.0 816.8 -3%

Accelerated US launch of digital therapies as a response to Covid-19 

This quarter will forever be associated with a pandemic causing countries across the world to lockdown societies and impose restrictions which would have been unimaginable just a few months ago. The key priorities for 2020 have proceeded according to plan and to respond to the pressing need for clinically validated digital therapies we accelerated the launch of our digital therapies.

Disciplined investment sets stage for future growth
Since 2015 we have continuously strengthened the company´s financial position to ensure we have sufficient resources to invest for future growth. Entering the digital therapeutics space, which is set to become an integral part of the global healthcare landscape, was an important strategic decision to ensure the longer-term growth of the business. The Covid-19 pandemic, subsequent social distancing and wider economic impact, has accelerated Orexo’s launch plans for its digital offering, designed to address the surge in associated mental health issues, such as depression and substance misuse, many of which have resulted in an increased number of deaths caused by overdoses.

The launch of our three new digital therapies during the next six months will require significant investment, the benefits of which will be seen longer-term, in line with increased adoption of digital therapeutics. As a result, Orexo has increased OPEX guidance to SEK 750-800 million in 2020 to finance the commercial launch and associated costs of establishing the company’s new DTx venture. We estimate combined sales potential of our three digital products of USD 420-650 million five years post launch. Notwithstanding the investment required, Orexo is confident that digital health presents a compelling commercial opportunity, one in which Orexo is well placed to become a leading player in the key US market, and where sales of digital therapeutics are expected to vastly exceed existing revenues from ZUBSOLV®.

While we remain confident about the commercial potential of our DTx offering, we also realize the market for digital therapies is in its infancy. As such the company will maintain a flexible business model, adapting as required to ensure the new digital treat-ments are adopted and used optimally by patients. The move into the digital therapeutics market will benefit from our existing US infrastructure for our profitable pharmaceutical business, in addition to significant commercial synergies from the commercialization of ZUBSOLV®.

ZUBSOLV® resilience during Covid-19
We responded swiftly to the lock-down imposed in several states in the US and the entire field force has worked from home since mid March. We are pleased to report limited impact due to remote working but saw a slight loss of market share and volume in this period due to the continued decline in demand from United Health Group (UHG), following their decision to reimburse generics in July last year. The wider market for ZUBSOLV® showed an accelerated growth and ZUBSOLV® continued to grow in the “open business” segment year over year, but showed a minimal decline from last quarter of one percent. From July 1 the “open business” is expected to increase as ZUBSOLV® will be reimbursed by Medicaid Louisiana and we are confident the “open business” part of the market will grow when the payers finalize their formularies of reimbursed products for 2021. With the field force slowly returning to pre-Covid-19 working practices, improved market access and the decline in demand from UHG diminishing, we expect ZUBSOLV® to return to growth in the second half of the year. We see an increased uncertainty in the market and for ZUBSOLV® the development of the commercial segment is important and here increased unemployment due to Covid-19 might continue to have negative impact on growth in this segment which will impact our opportunity to grow ZUBSOLV®.

I am pleased to see our US Pharma business continue to show strong profitability with the EBIT margin reaching 52 percent and a total EBIT contribution of SEK 89 m. The continued strong cash flow contribution from ZUBSOLV® is critical to ensure a strong financial base and continued investment in the business to drive future growth.

Positive results from OX125 study demonstrates value of proprietary nasal drug delivery platform
We continued to see pipeline progress, most recently with the announcement of positive results from the human pharmacokinetic (PK) study of OX125. Preliminary results indicate extensive and rapid absorption across all three OX125 formulations as well as good tolerability, supporting the viability of OX125 as a rescue medication for opioid overdose. The results again underline the applicability of Orexo’s novel nasal delivery platform and I am pleased to report the first patent has been granted for this platform, strengthening our IP position and extending patent protection until 2039.

Investment in the pipeline increased as anticipated, as we progressed establishing a commercial supply chain for OX124, our rescue medication for opioid overdose, and the clinical study of OX125.

Summary and Outlook
The global crisis presented by Covid-19 has forced many businesses to significantly change the way they operate. At Orexo we have adapted our business model with agility, embracing the “new normal”. With a foundation in our profitable pharmaceutical business, Orexo has been able to invest and act on opportunities where we are uniquely positioned to help millions of people suffering from mental illness, whether caused by depression, problematic alcohol misuse or opioid dependence. With our pipeline progressing and the launch our DTx offering I am very excited about our future journey.

Uppsala, Sweden, July 16, 2020

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:

At 3.00 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, no later than 11.00 am CET. Please view the instructions below on how to participate.
Telephone: SE +46 8 56 64 27 06 UK +44 33 33 00 90 32 US + 1 83 35 26 83 47
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 July 16, 2020.