ALK-Abello A/S

CSE:ALK B

Earnings Call Transcript 2022-Q1

[Per Plotnikof, executive]

Hello, everyone, and welcome to today's Presentation of ALK's Q1 results together with the outlook for the full year. And could you please turn to Slide #2 where I will introduce you to our presenters for today and our agenda.

My name is Per Plotnikof. I'm Head of Investor Relations at ALK. And with me today are ALK's CEO Carsten Hellmann; and our CFO, Soren Jelert. And today, we will look at our Q1 performance, sales trends across our regions and portfolio and the Q1 financials. And then we will give you a brief update on our 4 strategic priorities before reminding you our full year outlook. And finally, we will end today's call with the usual Q&A session.

So if you would please turn to Slide #3. And then, I will hand over to Carsten, and we will get started. Please go ahead, Carsten.

[Carsten Hellmann, executive]

Thank you, Per, and thank you, everyone, for joining this call. First, let me give the highlights.

During Q1, we delivered strong results as we continue to execute on our long-term strategy. Growth in local currencies was 11%, which is equivalent to 13% in reported currency, when we add the effects of currency exchange. Growth was primarily fueled by tablet sales, which increased by 24% on broad-based growth, also supported by continued strong performance in Japan.

As a result, tablets now account for 50% of our overall revenue. Meanwhile, overall operating profit EBITDA increased 20% based on higher sales and improved margins. All of this in Q1 was achieved against the lingering effect of COVID, which continued to interrupt the market temporarily. For example, the Omicron variant, did as expected, caused some patients and clinics to postponed allergy appointments in January and February, leading to a delay in treatment for those affected, especially in France.

I would like to stress that the underlying momentum or core momentum, as I call it, is good. And we expect to see European sales momentum improving during the course of 2022. This will also be helped by recovering venom AIT sales. But we did experience a temporary release and distribution stop in Q1 caused by deviations on a single manufacturing filling line. The issue is being fixed as we speak and will return to normal soon. Nevertheless, it was a very unfortunate thing that was happening to our patients affected.

Before moving on, I would also add that we have no significant commercial exposure to either the Russian or Ukrainian markets, although we do have some clinical trials, activities in both markets that I will come back to later.

Finally, we continue to make good progress with our ongoing strategic priorities with important progress towards registering the house dust mite tablet in China, more on that in a moment, and towards our global -- or our goal of initiating Phase I development of a peanut allergy tablet in the middle of this year. In addition, we established a new licensing agreement covering India with Dr. Reddy's that we -- that will see the future introduction of our house dust mite tablet there.

With that quick look at the highlights, I will hand over to Soren now, who will take a look at the Q1 financials in more detail. So please now turn to Slide 4.

[Søren Jelert, executive]

Thanks, Carsten. As you can see, quarter one was a strong quarter for ALK and we saw sales growth from all 3 regions. In Europe, as Carsten mentioned, we saw growth held back by the region Omicron variant as well as low replacement rates for the Jext adrenaline auto-injector. But remember, this is largely a consequence of us extending its shelf life. And this effect should disappear during the remainder of the year.

There was also a temporary hold to the release of some of our SCIT venom injection products due to the rare production divisions in a filling line, which is expected to have a minor full year effect despite supply now being reestablished.

Despite these minor challenges, revenue in Europe was up 4%, fueled by tablet sales growth of 15% and in particular from the ongoing uptake of ITULAZAX which continues to increase the percentage of new patients that is capturing, especially in Germany and the Nordics.

So the underlying momentum in Europe remains good. Once again, ALK's biggest market, Germany, delivered double-digit growth as national reimbursement guidelines reinforced the recommendation that AIT patients should be initiated on to registered products only. And we have just seen the first combatant withdraw from the market as a consequence of these measures.

There was also a double-digit growth in the Nordic region and other places, while sales in France were down primarily due to the previously mentioned impact of COVID. However, we now are in a position where the other markets are compensating for the development in France.

In North America, we saw growth of 8% as revenue from tablets grew strongly on continued strong uptake in Canada where ITULAZAX maintained its positive momentum. Sales in international markets were up 62%. This reflected high levels of shipments to China and Japan, which continued to see a good in-market sales growth in the quarter.

In China, we expect the recent resurgence of COVID to temporarily impact the in-market sales development. However, it is not something we anticipate will significantly impact this year's supply shipments.

Now let's take a closer look at the product categories on Slide 5. Revenue from the tablet portfolio continued to grow in line with our full year expectations and increased by 24% in first quarter. As Carsten said, for the first time, tablets now account for 50% of our overall revenue, which is remarkable when you consider that in 2017, the last year before we introduced our current strategy, tablet represented just 18% of revenue.

Those figures make it absolutely clear that tablets are the undisputed driver of growth for ALK. Combined SCIT and SLIT drop sales increased 2%, largely in growth from international markets, especially China, while sales growth from bulk AIT products in North America was slightly held back by temporary back orders. Meanwhile, sales of other products were down 5%, mainly on delayed replacement rates for Jext that is I touched upon a moment ago.

This brings us to Slide 6 and the P&L. I'll go through this slide briefly because we've already touched on the most of the themes. Q1 revenue was up 11% in local currencies at DKK 1,155 million. The higher U.S. dollar, in particular, had a positive currency effect so that the reported growth was 13%.

The gross margin improved by 2 percentage points to 64%, reflecting increased sales of tablets and efficiencies, although this was reduced by increasing shipments to Torii in Japan, which yielded a lower margin. EBITDA increased by 20% in reported currency to DKK 272 million, corresponding to an EBITDA margin of 24%.

Capacity costs increased by 11% in local currencies and, as planned, R&D expenses were up 17% in support of increasing activities related to clinical trials. Sales and marketing spend increased 7% due to investments to support, amongst others, expansion in China.

Finally, free cash flow was positive by DKK 38 million, reflecting changes to working capital, upgrades to legacy production and the build of capacity for tablet production. All in all, however, a positive start to the year.

Now let's move to a brief strategy status on Slide 7 and over to Carsten again.

[Carsten Hellmann, executive]

Thanks, Soren. Let me give you a quick update on the Q1 process -- progress on our long-term strategic priorities, each of which you can see summarized here.

The success of the tablets in Canada remains a bright spot in North America. But we continue to do all the right things to overcome the barriers and build growth momentum for the tablets in the USA too. For example by leveraging our increasing ability to connect with consumers digitally and to mobilize them towards taking action on the allergies at the clinics of an increasing number of accepting doctors.

On our work to completely commercialize the tablet portfolio, we made progress in a number of areas. Most notably in Q1, authorities in China granted us a waiver for the Phase III local registration trial that has been paused since 2022 due to COVID. This waiver means we can supply specific data on Chinese patients after launch, which clears the way for us to apply for regulatory approval later this year, which is 2 years earlier than we hoped for.

As I mentioned earlier, although we don't have any significant commercial activities in Russia or Ukraine, we do have a number of participants from both countries in our pediatric Phase III trial on the house dust mite tablet in allergic rhinitis which recently completed recruitment and randomization above our original target. So for now, the trial remains robust.

We also have a number of Russian participants in our pediatric Phase III trial of the 3 tablet, where recruitment is ongoing and follows plan. Clearly, we expect some Ukrainian participants to drop out of the first trial. But we will continue to supply medicines to allow as many patients as possible to complete their treatment, and we still expect both trials to complete in 2023.

Our consumer engagement efforts continued to mobilize patients via our digital engagement platforms. And we saw the number of patients mobilized increased to almost fourfold to 200,000 over the same period last year. Furthermore, we have now finalized preparations to launch our digital klarify ecosystem in 3 new countries, namely Austria, Slovakia and Switzerland. And we are also testing various new initiatives to convert these mobilizations into treatment. For those listening in from countries where klarify is available or will be available, I will only urge you to download the klarify app. It is awesome. And I'm still convinced that this will be a long-term game changer for ALK.

Meanwhile, we made further good progress on our new horizons initiatives. And we remain on course to initiate Phase I development on our peanut allergy tablet in the middle of this year. And we continue to advance the 2 adrenaline auto-injector projects toward a planned submission to the U.S. FDA in 2024.

Also in Q1, we took a first step to expand the exclusive footprint of our tablets still further by agreeing an exclusive licensing deal with one of India's largest pharma companies, Dr. Reddy's Laboratories. They will lead this into the future introduction of our house dust mite tablet in India. It is important, it is long term, and in return for granting them the rights to GRAZAX for India, we will receive an upfront and milestone payment as well as income from product supplier to Dr. Reddy's.

Our fourth and final priority is optimized for excellence, which covers the work we are doing to rationalize our portfolio, simplify our manufacturing processes and to upgrade the regulatory documentation for core legacy products. As a part of this work during Q1, we submitted 266 regulatory changes covering 73 products to 30 different regulatory authorities. Lastly, with the previously mentioned small exception, our quality, supply and inventions remain robust.

With that, I'll hand over to Soren with a reminder of our full year outlook for 2022 on Slide 8.

[Søren Jelert, executive]

Our full year outlook is maintained based on the solid earnings we have seen from first quarter and continued strong tablet sales. So as a reminder, revenue growth is still expected at 8% to 12%, and is expected to be broad-based across all sales regions. Tablets remain key to this and we still see overall global sales growth from our tablets around 20% in 2022, reflecting that growth in Europe is expected to be slightly below 20% and growth in international markets and North America expected to exceed 20%.

In addition, we still expect low single-digit growth from the remaining non-tablet portfolio. The midpoint of the projected revenue range still assumes that the total sales in Europe will grow in high single digits, whereas sales growth in North America is expected at around 10% and growth in international markets is expected to exceed 20%.

As in previous years, we expect product shipments to Japan to fluctuate between the quarters. For example, in quarter 1, we had a high level of shipments. And in quarter 2, we plan for a lower level of shipments.

The higher end of the revenue range assumes continued strong sales growth, including higher tablet growth in Europe and improved sales of legacy products while the lower end of factors in pricing pressures in Europe continued impact from minor supply interruptions and/or increased negative effects from COVID, which may result in some volatility at quarters.

EBITDA is still projected to be around DKK 625 million to DKK 725 million, reflecting an improved gross margin as well as increasing R&D and sales and marketing costs to support current and future growth drivers, including China. The outlook assumes that COVID will not affect home-based tablet treatments and that patients in general will be -- remain able to visit health care professionals.

CapEx is expected at around DKK 400 million. And the outlook does not include any revenue from acquisitions, new partnerships or in-licensing of adjacent products and services, nor does it include any sizable payments related to M&A or in-licensing activities.

With this, I'll hand you back to Per, who will kick off the Q&A session on Slide 9.

[Per Plotnikof, executive]

Thank you, Soren, and thank you, Carsten. And this concludes the main part of our presentation. So we will now move to the usual Q&A session where we'd be happy to take any of your questions.

Operator, Please go ahead.

[Operator]

[Operator Instructions] And our first question comes from the line of Benjamin Silverstone of ABG Sundal Collier.

[Benjamin Silverstone, analyst]

Carsten, Soren and Per, I hope, you're well, and congratulations on the strong quarter. My first question is related to the full year guidance of this year. With this strong Q1, could you please elaborate a little bit about the factors that might negatively impact the year? You do mention that there might be some negative elements from COVID and, of course, also the external environment. But are you able to give us some indications of what you have already seen now with the lockdowns in China due to COVID?

And also, the second question is related to the international markets. Sales here is up 63% on the tablet sales, really gaining quite a significant volume now as well when accounting for 22% of the overall capital sales. Are you able to give us just a bit more understanding of how much Japan is now accounting for? And also in China, if you are here seeing any form of indications from whether or not COVID has actually impacted the sales in Q1 and how you expect this to sort of trickle down into Q2?

And the last question is a follow-up to the international market sales. With the sales being up so significantly in Q1 and your guidance estimating a mid -- sorry, the mid end of the guidance, expecting international sales to be up exceeding 10%, could you just give us an indication of whether or not this quite big growth in Q1 exceeded your internal expectations or if that was sort of expected internally?

[Carsten Hellmann, executive]

Thank you so much, Benjamin. Let me start by saying that remember that Q1 is historically the biggest quarter in ALK with about 40% of our activity. So -- and I would like just to say one thing that this is pretty much within what we expected ourselves, so there's no big surprises to us here.

For the full year guidance, 8% to 12%. We have said we are going to grow 10% in the next 10 years. And of course, our own internal target is still growing 10%. Do I see visibility to grow 12%? Yes, I do. This is about a little bit of momentum, not too many stumbling blocks around there or headwinds. But I don't see today, but that could come. 8%, I don't really see that. But I'm just a little bit cautious right now because I think everybody on this call will agree to the fact that we are a little bit in a turbulent world right now. And whatever happens is just to be a little bit cautious. We have heard some rumbling about some price discussions from authorities in Europe and so forth. So we're just cautious.

Is this going to go off the guidance? Absolutely no. This is the first quarter, is within our own expectations, and we think the full year guidance right now, 8% to 12% targeting 10%, is still what we look for. There's a lot of things to do the rest of the year. But I think we are having a very strong core momentum in ALK. And then, of course, there's a lot of things around us that makes a lot of people in ALK very busy.

For the international market, just remind you that we do not sell tablets in China. So this is the [indiscernible] venom products. So when you talk about the tablets, this is a lot about the dynamics of the partnership we have with Torii. Remember, this is not a sale-sale. We get a custom app up and a royalty. So there is some dynamics there. And then we sell them or sent to them in batches and sometimes they fluctuate a little bit from quarter-to-quarter.

If you look at Torii, the Japanese partner's expectation for the year, they are very strong in growth. And they are very positive about the momentum of the tablet sales in Japan. So I don't think there's anything but just some coincidences around that. But this is pretty much what we thought for.

In China, we're still having strong growth and we are now 125 people. We have increased the number of people significantly recently, built a new management team. In some areas of China, of course, we do see an impact simply because of the lockdown. But in general, it's not like we are significantly dropped. We still see growth and the team is still motivated. And now what we are focusing on in China is making sure we're getting fully prepared to understand what it takes and how we can maximize the output we can get from this accelerated launch of GRAZAX into China. So that's what we're focusing on right now.

[Benjamin Silverstone, analyst]

Just to clarify, do we have an idea of how much Japan is accounting for in Q1 in terms of sales? And the new partnership with Dr. Reddy's in India, is that -- just to be sure, is that more closely mirroring your agreement with Torii in Japan or the setup you have in your own markets?

[Carsten Hellmann, executive]

Let's take the last one first. Dr. Reddy's will more look like the setup we have in Japan, like they are acquiring the rights. And then we -- they are actually holding the activities for registration, clinical trials and so forth. And this is something that we expect you will see coming out on the market something like 25-ish. So I think we -- this is more like a Torii deal. This, as I said also to the media today, it's hard to predict what that will bring. But we need to be there. We need to be there with a strong partner and Dr. Reddy's Laboratories is definitely a strong partner.

Soren, will you take a little bit about the split?

[Søren Jelert, executive]

Yes. I think it's probably very close to being super visible in the table in the report, the Japanese sales on the tablets. It constitutes somewhere between 90% and 93% of the tablet sales on the partner markets as Japan is the clearly biggest there. There are very smaller countries beneath that, but it's heavily dominated 90% in the form. So that's a clear guidance to you guys that it is Japan driving that. And it is a combination, as Carsten correctly said, the shipments and underlying very good in-market sales by Torii. And here, that will not fluctuate but the shipments will fluctuate as we also specified.

[Operator]

Our next question comes from the line of Michael Novod at EQT.

[Michael Novod, analyst]

I am not in EQT, but on the Nordea Equities, but that's fine. So it's Michael from Nordea. 2 questions, first, to the slowdown in certain markets due to COVID. So I guess this was mainly new patients. So should we expect that the sort of reuptake of new patients and what sort of trying to capture back is going to be made in Q4 because, I guess, it's a bit too late for certain products into the season. So is this catch-up going to happen mainly in Q4?

And then secondly to ITULAZAX, how do you see -- the product has been on the market now for 2, 3 years. So I guess, some patients also sort of starting to finalize that treatment. How do you see traction in getting new patients on ITULAZAX? Does that remain as strong as seen previously and as you have sort of expected previously?

[Carsten Hellmann, executive]

Thank you, Michael. Let me try to frame the EU question. Predominantly for the COVID effects, it was mostly the drops in France that hurt us as the doctors were mandated to leave their clinics and do a lot of vaccination programs. So that's why we see these sort of mediocre results in France right now. Whereas if you look at the initiations, we do not expect neither for this year, next year, that we will see any slowdown in terms of our sales pickup. There's been strong initiations also in Germany. You could more speculate what would have had we not have COVID, so it's -- it looks good and it looks within our plans. And it could probably have been better.

Soren, will you take a little bit of the ITULAZAX mix?

[Søren Jelert, executive]

Yes. I think definitely, there's no doubt that ITULAZAX has been a core value driver for ALK and have had a phenomenal uptake. And I think we are extremely pleased to see that, that uptake actually continues and is definitely the core driver of growth within the European tech landscape. So in many ways for us, the ITULAZAX success actually continues, especially being led by, of course, the Nordics and Germany where it's most prevalent. So for us, it is almost half a diamond these days. I think we didn't plan it like that. Originally, it was more like ACARIZAX. But now ITULAZAX is doing well in the Scandinavian and in Germany specifically. So in that sense, we are on a good track with the ITULAZAX.

[Operator]

Our next question comes from the line of Jesper Ilsoe of Carnegie.

[Jesper Ilsoe, analyst]

So just to follow up on Michael's question on European tablet sales. So just when you look at the development into the coming quarters, have you seen any improvements here in April and May where I would guess there should have been some easing of the lockdowns in France also? And do you expect to grow tablet sales in Europe by around 20% in 2022? So that's the first question.

Second question, for clinical trials and the ACARIZAX children study in particular on the potential impact from the Ukraine war, so you say that enrollment has been completed above target so there is sort of a build buffer in that? So is that buffer large enough to mitigate the full potential impact from Ukraine? Because when I look at clinicaltrials.gov, you have 143 study locations in total of which 15 are Ukraine, so 10%. So if all those 10% drop out, will you still be able to meet your full completion and therefore be able to meet timelines?

[Carsten Hellmann, executive]

I would say that already now, we know that we have catch-up the lockdown effects on the tablets in Europe. So I don't see any momentum changes there. And I think in general, we will grow around the 20%-ish in Europe for tablets for the end of the year. So as I said before to Michael's question, yes, we had an impact in the beginning of the year. And we were struggling, particularly in France. And I remember the EU numbers were skewed pretty much in the real -- the factor numbers by this issue we had with the venom in Germany and not really a tablet situation.

So I think on tablets, we are okay. I can answer in short and then Soren can elaborate on that one. Even if we lost all Ukrainian patients into this trial and even some of the Russians on top of, we would be okay and we have done all the stats and math on this one. We don't any longer see that as a significant issue. And interestingly enough, we haven't actually lost that many patients in Ukraine, even though there is a war. And now you would argue that probably because is that the centers on the West Coast of Ukraine and absolutely no. The centers are, I guess, gathered around Ukraine. It looks like we have a pretty good adhesion to the trial.

Would you elaborate, Soren, on this?

[Søren Jelert, executive]

No, I can just echo that. I think it's been fantastic to see that the Ukrainian organizations have been able to maintain people adherent to the treatment. I think that's better than what we hoped for and definitely working in the right direction in us being able to complete as we also specified in '23 in these trials. So seen from our perspective, with the knowledge we have today, it's de-risked compared to probably 2 months ago where we feared it would be worse.

[Operator]

We have one further question in the queue. [Operator Instructions] And that next question is from [ Martin Parker ] of SEB.

[Unknown Analyst]

Yes. Correct. [ Martin Parker ] SEB. A couple of questions. Firstly, Carsten, you mentioned the guidance risk from reforms in Europe. But it sounds like you really don't believe it that yourself. But is that something we should take serious for a potential impact going into the next financial year? Of course, it takes some time to get something passed through in that respect. So is something that you're concerned of in 2023. Then on the gross margin development, you're still saying 1 to 2 percentage points this year.

Should we expect 2 percentage points that is the level you can deliver if you see 12% organic growth? Or is there even upside to this, given that you actually delivered 230 basis points in the first quarter with only 11% organic growth? And then on the cash flow side, still guiding negative, but it -- I get the impression that it will maybe not be as negative as you thought in the beginning of the year. Could you maybe elaborate a little bit on that?

[Carsten Hellmann, executive]

Thank you, Martin, and welcome to the call. It's -- good to see you are covering us right now. Good questions. Remember that the thing about the prices was an answer I gave to the guidance, 8% to 12%, what could take us down below 10%, if you could. You know we have been discussing with French authorities for many, many years, and actually, I think for 16 years, we have nothing in the price cuts on our drops in France. And we know something will be happening there. It will be happening by the end of this year and rolling into next year. This is a part of our own planning. What I was alluding to was more that in general and there hasn't been any specifics out there.

In general, many governments in Europe are wondering about who's going to pay for the bills. And I was just saying, okay, what could hit you that could take it below 10%. Yes, that could be something like that. I think we are well covered with -- have covered our basis. And of course, if something massive happens from somewhere, which I don't know what it should be right now in a big magnitude, of course, we'll address that as a single one event. But when I look at it, we are still expecting to grow 10% next year with increasing profitability.

And back to the gross margin, Soren, can fill you in on that more and -- but also on the cash flow. But I would just remind you that it's more than just the sales mix. We have 2 big programs we've been running for the last 3 years. One called Fit for Growth in or the compass, which we took out 15% of the turnover to take complexity out. We have done a lot of things to be more efficient as an organization. So it's actually a combination of better tablet sales, better mix but also by a lot of initiatives, a myriad of activities we're doing internally to take the gross margin up.

So to more think about it that we want to get to the 6% to 8%, 70% level as soon as possible in gross margin. And then we'll stay there, and then we'll just get the money down to the bottom on every time we sell more. And that's a very good explanation to the cash flow.

Maybe you can just figure on this?

[Søren Jelert, executive]

Yes. Just to maybe a little bit on the gross margin. I mean, normally, in high quarters, be fair enough tend to have a little higher gross margin. I mean 64% is definitely a very nice one to have in the books and still confirms that what we are doing is a step in the right direction because it's still also a fact that the quarter was impacted by these higher shipments.

So underlyingly, we have a strong momentum in our ability to build a more efficient company. Overall, we planned for it, as Carsten actually opened the call with that we would have this performance. So it's not a surprise to us. And we actually very much follow the plan that we have laid out.

And with the compliance investments we are doing, we are still looking into this 1% to 2% on a yearly basis margin improvement points. So we are following it. But one good in the books is never going to go bad away. And I think that's, in this case, very much the truth.

Coming cash flow also here, as we have maintained guidance and actually the first quarter with DKK 38 million in free cash flow was bang on where we thought ourselves. We still expect, of course, if you take the midpoint of our earnings guidance that would probably add another DKK 400 million or so to the current EBITDA levels.

And then we have an investment guidance out to you guys on DKK 400 million of those. We've spent DKK 50 million, so that's a negative DKK 350 million the other way and then lastly, we had the repayments of DKK 175 million to the German authorities. That can be a speculation on whether this is going to be paid back this year or not. We have assumed that it is paid back. And if it's paid back, then we are still negative cash flow around DKK 100 million. So in many ways, we are on the same level as we all the time have anticipated.

I think what can positively surprise us for this year could be that these repayments will have to be proposed to next year. But in the long run, it's the same money, whether it's paid this year or next year. So we remain the same outlook when it comes to cash flow.

[Unknown Analyst]

Okay. And then maybe since there's no other questions, then I can take one more then on the venom production issue. Carsten, did you say it was fixed or it was getting fixed?

[Carsten Hellmann, executive]

I'm saying the product is underway to Germany, and it is fixed. But it caused some distribution issues in the first quarter of a certain magnitude. And we are not going to catch all of the sales up for the year. But the patients are being fully supplied from next month. So it's not a recurring issue. It was a filling line issue that we have addressed. So it is fixed. And we are resuming the sales by June. So that's the good news. But it was bad news for the patients affected in the first year. And if I had any of them on the call, I would apologize deeply, but that was the way -- was venom is a serious allergy. So it's a big deal when you cannot supply that. But it's fixed and now we can do it.

[Operator]

We've had a couple more questions come through. The next is from the line of [ Malcolm Petrofac ] of Jefferies.

[Unknown Analyst]

Just a quick one on the digital mobilization of patients. You mentioned it's kind of -- it's up 4x. But what are we kind of -- what are we taking from that? Is it kind of -- in affect, what's the conversion, I guess, of that kind of ramp-up in kind of digitalization?

[Carsten Hellmann, executive]

Is that a question? Okay. So if you look at the -- clearly, if we're going to expand the reach of ALK, it has to be digitally. You have 500 million people were respiratory allergies that were 10% of those should have an immune therapy.

And what we're doing right now, we have now proven that we can actually get a lot of downloads to the app and they stay on it and they're very happy. And we can also see different functionalities in the app that we can mobilize them to take action on the allergy and go to a doctor.

What -- we have some gates that are still causing some troubles in 100% conversion into tablet sales a tablet prescription, so to speak. One is the diagnosis part. We can drive them down to an online consultation. We can also ask them to there to take a blood test.

But we have too much leakage when people -- when you have more processes that you ask to go down to blood that will come back again too much leakage. And then we have -- the other thing is that you have to be initiated with the tablet in a health care setting where a health care person is supervising you or have many people under supervision taking their first tablet.

So we now are working on a lot of different models on both mobilizing people to take action on the allergy. I'm personally convinced even though due to DPR, I don't know exactly what happens in a doctor's office that a lot of the strong growth we have at tablets is actually partly also because we have mobilized so many more people with knowledge to go down to doctors and asking for tablet.

No doubt about that. You cannot prove exactly what happens to the doctor's office. I can prove in U.S., we can mobilize a lot of people to go down to an allergist and say they want a tablet and the doctor gives them a shot.

But in the rest of the world, it's actually different. So for us, it's more about positioning ourselves as the strongest player within the whole digital health care space that is emerging right now. And you do see, in particular in the U.S., where the world brands and the CBS and others are really trying to figure out how they could build heath hubs to compensate for the losses for the digital pharmacies that are emerging digital prescription that are coming out and the digital onboarding.

So in order to have a digital presence and having all these people with allergies in a good dialogue, driving them down to the right place is really going to be the future. And what we're just commenting on here with the fourfold is that we can see a strong increase in that.

But if you look at the big numbers, you can imagine what if we had 25 million people on our digital platform, engage people with allergy mobilized, which is like 20x more. What is the value of that? And that's what we're working on. But there's no need to go out and get that if you don't have the whole funnel of activities outlined.

So that mobilization actually leads to a tablet initiation. It does that many places in the world, but we rolled it out cautiously. We test and try. It's also -- there's some local differences from country to country. There's also some countries where other platforms -- but we can see that platform klarify, which you should try to download, it's actually pretty awesome, is really working in us getting known by people with allergy, mobilizing them, engaging them.

And this value of these 100,000 people, both are valued to the pharmacies for the future is a value to the patient organization and is a value to us. And I think we just need to do more of it and we will continue to invest in it. I also think when we look a couple of years ahead, having built this is also going to be a strong platform into China.

I think the digital play in China and the way they're operating over there, the klarify universe also go to be important. So you're right. You cannot say 385,000 have conversion rate to tablet to 6% and so forth. Those numbers are not really available because of this black box at the doctor's office.

But when you can see, you can drive them to the doctors. You can see the sales increases. But we could do much better as soon as we fix the diagnosis part and the onboarding to the tablet part and that we're working on.

[Operator]

And our next question comes from the line of Jesper Ilsoe also at Carnegie.

[Jesper Ilsoe, analyst]

Just a question on the market changes in Germany. So you mentioned in your prepared remarks, you've seen a company withdraw in Germany due to these changes. So can I just ask, was that a large player or a smaller player? And also, can you put some words on how you see this develop in the coming years with all the changes you see in that market; so just an update.

[Carsten Hellmann, executive]

This was one of the smaller players with -- but an important player in German market. But this is in line with what we've been talking about the last couple of years. But we did expect that when 80%, 90% of every single region, they are requiring that you can only initiate new patients on documented products and the local producers do not have that.

It's only a matter of time. And what you see now is this is starting. So I think this overall potential of EUR 100 million of the old SCIT market that are going to emerge in Germany, that's up for grabs. And we believe that we will still be a major grabber of that one, if you may say so.

And what you just saw there that news was that now it's happening. It's not only a matter of everybody of those local producers that try to get their products approved failed, none got them approved.

Now we see the first one folding. So this is about not something that necessarily will be happening all in Q2. But long term, we want to make sure we take some solid steps to make sure that we grab as much as this one. And of course will help us much to facilitate that, that happens as fast as possible too.

[Operator]

And as there are no further questions at this time. I'll hand the floor back to our speakers.

[Per Plotnikof, executive]

Thank you very much and thank you all for your good questions and for joining today's call. And as you can see from the final slide, we have a couple of presentations scheduled over the coming weeks. We hope to see you at some of them or more of them and also shown here are the dates for our Q2 and Q3 results.

And in addition, as always, you can call me, Soren, Carsten, ask you please, if you have specific questions, and we will do our best to help you. With that, I wish you all a good day and end today's session. Have a good day. Goodbye.