ALK-Abello A/S

CSE:ALK B

Earnings Call Transcript 2023-Q1

[Per Plotnikof, executive]

Hello, everyone, and thank you all for joining this presentation of ALK's Q1 results and the full year outlook. Let's turn to Slide #2 where I'll introduce today's presenters and the agenda. My name is Per Plotnikof, I'm Head of Investor Relations. With me today are Carsten Hellmann, our CEO; and our CFO, Soren Jelert. Following up on our pre-release from the 17th of April, today we will bring you up to date on the detail performance in q1, including the market trends and financials, and then we'll provide an update on the strategic priorities, including a deep dive into the efforts to rebuild our growth momentum for tablets in Europe before we round off with the full year outlook. And as usual, we'll end the call with a Q&A session. And to get started, I'll hand over to Carsten at Slide #3.

[Carsten Hellmann, executive]

Thanks, Per, and thank you all for joining this call. Overall results in q1 supported our full year guidance, which remains unchanged. Revenue was up 7% on growth in all sales regions, and operating profit EBIT increased to DDK 228 million despite significant investments in growth. Moreover, the business continued to prove resilient to inflationary pressure and macroeconomic uncertainties. Having said that, we did see changes to the product mix in q1 with tablet sales approximately DKK 35 million, lower than expected in Europe, mainly related to Germany and Nordics which led us to issue the announcement on the 17th of April.On the positive side, sales of SCIT and SLIT-drops exceeded expectations, and we expect this trend to sustain throughout 2023. Tablet sales from North America and international markets were as expected. Torii, our Japanese partner in-market sales are bouncing back from last year's COVID-led headwinds and in-market sales in Japan were up by approximately 15% in Q1. In Japan, the underlying demand and awareness of allergy is strong, and we still expect full year tablet revenue from international markets to grow in strong double-digits even though it was slightly down in Q1. We're talking here about 25%.Europe is a different story. We saw growth in several markets, but we also saw lower than planned growth in especially Germany and the Nordics, which are 2 of the main tablet markets for us in Europe. To put in plain words, we were short of around 10,000 new tablet patients. And to put things into perspective, we still managed to initiate more than 200,000 patients in Europe, and the doctors and clinics still saw many allergy patients. So we failed to initiate these 10,000 patients during an unprecedented wave of respiratory infections with somewhat constrained capabilities in clinics and crowded out some AIT patients.Also, last year's weak pollen season may also have added to this trend. We strongly believe this is to be a temporary issue and not caused by structural changes in the market. The AIT market in Germany and the Nordics are stabilizing and as we speak, we have launched initiatives to restore growth momentum in both markets from the second half year -- of the year at the onset of the new initiation season. We are the undisputed market leader in both markets and tablets are a well-established clinical practice. So now it's all about commercial execution.At the same time, we work to unlock further European market as meaningful growth contributors. We will detail this during the presentation, where we also revisit the full year outlook, which is unchanged. First, I'll hand over to Soren Jelert and Slide 4.

[Søren Jelert, executive]

Thanks, Carsten. Let's take a closer look at the market trends in first quarter. Sales in Europe were up 7%. Growth was powered by 14% growth from the non-tablet portfolio. Tablet sales were flat in local currencies and disregarding the temporary rebate increase for prescription drops in Germany [ here ], PEN [ tablet ] sales grew by 2%. Revenue in North America was up 9%, with progress from all product lines. Sales of the largest product line, SCIT bulk extracts were up 6%, although growth was held back slightly by temporary back orders. Tablet sales increased 23% on double-digit growth in both the U.S. and Canada.Revenue from international markets were up 8%, fueled by growth of SCIT shipments to China, where we continue to build the house dust mite AIT market ahead of the planned launch of ACARIZAX. As Carsten said, tablet shipments to Japan were slightly down because of the planned phasing of product [ shipment ]. The in-market development looks good.Let's take a closer look at the product categories on Slide 5. The growth rate for tablets was 1% in local currencies. Sales growth was seen in many markets, but progress was offset by Germany and the Nordics and Japan, as Carsten stated. Combined SCIT and SLIT drop sales increased 13%, driven by strong sales growth in Europe and China.European SCIT sales benefited especially from higher sales of venom products which saw underlying recovery, market share gains and improved pricing. Other products generated growth of 14%. This was mainly due to Jext, but please bear in mind that Q1 last year was a tough quarter for Jext.With these sales trends, let's turn to the P&L Slide 6. Revenue was DKK 1,234 million, reflecting more than 7% growth in local currencies and close to 7% growth in DKK. The 1-year mandatory rebate increase in Germany lowered revenue growth by around 1 percentage point. The gross margin improved by 1 percentage point to 65% based on higher sales, changes to the product mix and continued efficiencies in production.Capacity costs increased 8% in local currencies to DKK 571 million. R&D expenses were largely unchanged, while sales and marketing costs were up 11% in local currencies, especially reflecting the organizational build-up in China and the support of growth initiatives across many other markets. Despite this, the capacity cost to revenue ratio is still expected to improve for the full year.The operating profit of DKK 228 million yielded an EBIT margin of 18%, and the net profit was unchanged at DKK 163 million.Finally, free cash flow was up from DKK 38 million to DKK 65 million. This mainly reflects higher cash flow from operations driven by better earnings and changes to working capital. All in all, results are supporting the full year outlook.Now let's move to the strategy status on Slide 7, and back to Carsten.

[Carsten Hellmann, executive]

Thanks, Soren. I will get back to the tablets shortly, but let me first share a few other headlines from strategic focus areas. Starting in North America, our new independent sales and marketing organization in Canada is expanding the [ contract ] position as the second largest tablet market outside Western Europe. This is an indication of the potential in the neighboring U.S. market if we manage to bypass the financial disincentives among some prescribers. As previously announced, we are refocusing the U.S. tablet organization around building new sales channels without financial disincentives and things are progressing as planned in the U.S.A. On our consumer engagement and new horizon priority, the development of next-generation adrenaline auto-injectors for the U.S. market continues, and the Chinese partnership for our existing adrenaline auto-injector, Jext, is progressing as well.Finally, we continue to expect first readout from our Phase 1 trial with a peanut tablet later this year. On the optimize for excellent priority, efforts are on track to upscale capacity for tablet production and prepare for the commercial supply of the upcoming adrenaline auto-injectors. We also continue efforts to simplify our production setup and pursue other efficiencies across product supply.Now let's move to Slide 8 and take a deeper look at the European tablet sales. The fundamental structural drivers for tablets are still strong, and we continue to see the respiratory tablet portfolio as key to ALK's growth in the future, also in Europe. Accordingly, we are intensifying our commercial efforts to deal with the challenges we have experienced in the past quarters. As I said earlier, we are around 10,000 new patients short primarily in Germany and the Nordics, which are 2 of our main tablet markets. We have started up more than 200,000 new patients confirming that doctors still see a lot of allergy patients.Market data indicate to us that we are facing a temporary [ not ] structural issues. The markets are stabilizing. The patient intonations has started to improve both in Germany and the Nordics during Q1. And more importantly, ALK has further increased its market share by approximately 3 percentage points in Germany compared to last year. This indicates that we still have a very strong offering in this key market.In the meantime, we continue to see several competing products struggling with quality and supply issues as well as reimbursement changes for the older nonregistered products.Nevertheless, we are intensifying sales activities to get back to growth for tablets in Europe, and we expect to see results from these activities from the second half of the year and onwards.The intensified sales execution activities fall into different clusters. The first; mobilization of allergy doctors. We are launching campaigns and sales activities in Central and Northern Europe to mobilize doctors to start broadening the [ invitation ] season to avoid conflicts with respiratory infections and other external factors.For example, in our mailings, newsletter and sales force calls, we are encouraging doctors to get patients initiated on AIT earlier than usual, as soon as possible after the patients allergy attacks. Our partner in Japan has a quite good experience with this approach.Patient mobilization. The digital patient engagement activities are also important in this context. Analysis shows that we are increasingly able to funnel patients from our various digital klarify platforms, apps, websites and other tools, all the way to AIT clinics. So we are now launching campaigns on klarify in Central and Northern Europe, supported by social media campaigns to engage with allergy softwares, identify possible AIT candidates and mobilize them to go and see a doctor who can help them manage their allergies. Furthermore, in Q1, Norway became the 12th country to join the digital klarify ecosystem.Prescriber expansion to increase capacity. Also in Central and Northern Europe, we are launching medical and sales campaigns to collaborate with further -- to collaborate further with ENTs, DPs and selected telehealth providers to expand the clinic capacity and improve allergy care. We're also working on improving pricing, market access and treatment adherence, just as we have activities focused on further driving the industry towards evidence-based allergy care as we work to strengthen advocacy among key opinion leaders and payers.Let's move to Slide 9 and more on the long-term structural growth drivers for tablets. In parallel to these immediate efforts to restore growth, in particular, Germany and the Nordics in the second half of the year, we're seeing a global tablet outlook that remains strong. There are several medium to long-term growth drivers to support this view.We are working to unlock further European countries as meaningful growth contributors. France is already a substantial tablet market. The Benelux region is well on its way to becoming a meaningful growth contributor. Next in line are countries and regions like Austria, Switzerland, Eastern Europe, the U.K. and Spain. It is our medium-term priority to grow volumes in these markets to get more balanced geographical exposure in Europe.We are also advancing the long-term structural drivers for the respiratory tablet portfolio. The first key driver is being able to treat young patients, would -- potentially could lead to a sizable expansion of patients and prescriber bases. Efforts are on track.Results from our pediatric Phase 3 trial with the house dust mite tablet in Europe and North America are now expected slightly earlier, meaning mid-2023. Results from the pediatric Phase 3 trial on the tree pollen tablet in Europe and Canada are still expected in Q4 this year. Subject to approval, both tablets could be available with the indications covering children in [ '24-'25 ]. We expect Japan to have promising long-term growth opportunities also.The next key driver is China, where since February, the authorities have been reviewing our regulatory filing for ACARIZAX. Subject to regulatory approval, ACARIZAX could be launched in '24-'25 in China, which is well on its way to becoming the world's largest market for house dust mite AIT also in value. Then we have the U.S.A. and other markets with untapped potential.To sum up, tablet sales growth in Germany and the Nordic has temporary been challenged over the past month. We're dealing with these challenges. We are intensifying execution activities, and we expect to see results from the second half of the year onwards. All medium and long-term drivers for the tablets are intact, and there is significant unmet medical need, and we continue to see the rest of our tablet portfolio as key to ALK's growth for the foreseeable future.Soren will now end our presentation with Slide 10 and the full year outlook.

[Søren Jelert, executive]

Thanks, Carsten. The full year outlook is unchanged, but we have made some changes to the underlying assumptions for the SCIT sales and tablet sales. All other assumptions are unchanged. SCIT and SLIT-drops sales are now expected to exceed our original expectations, together with Life Science products. SCIT and SLIT-drops will lead to growth in the non-tablet portfolio, whereas Jext sales are still expected to decline slightly after last year's extraordinary demand. The number of Jext pens expiring this year is lower and '24 will, on the other hand, be the next year with high replacement rates. Tablet sales are now projected to grow 9% to 14%. The other end of the range assumes a positive outcome to ongoing price discussions in Europe and the lower end of the range reflects a limited recovery in Europe.North America and international markets are expected to lead the way for the tablet portfolio with double-digit growth, while growth in Europe is projected to be in the high single-digits. Across regions and brands, we expect to see additional market share gains, expansion of prescribers and patient bases as well as the increasing influence of the market transition in favor of registered products. Sales growth for tablets will be higher in the second half of the year than in the first half.This leads us to the following revenue outlook. Total revenue is still expected to grow 7% to 11% in local currencies or 8% to 12% disregarding the 1-year German rebate increase in '23. The EBIT margin is still expected at 13% to 15%, up from 10% in 2022 on sales growth efficiencies and lower R&D costs.The gross margin is expected to increase by up to 1 percentage points despite modest cost inflation, the German rebate increases, higher shipments to Torii and lower margins and changes to the product mix.R&D costs are planned to decline to around DKK 600 million as previously communicated. Sales and marketing costs are expected to increase by mid single-digits and the overall capacity cost to revenue ratio is estimated to further improve. So despite the current challenges with tablet growth in parts of Europe, we expect to continue our journey to growth and earnings improvements for 2023.And with this, I'll hand you back to Per and Slide 13.

[Per Plotnikof, executive]

Thank you, Soren, and thank you, Carsten. And this concludes the main part of our presentation. So we will now move into the Q&A session. And operator, please go ahead.

[Operator]

[Operator Instructions] We will go first to Brian Balchin. Please state your company.

[Brian Balchin, analyst]

It's Brian Balchin from Jefferies. Just -- first question, just to help us better understand tablet growth going forward. I know that you mentioned 200,000 patients [Technical Difficulty]. How many -- typically [ no ] patients from 3 years. So if you have these patients now coming off, you really [ need ] people paying a [ charge ] the same historical growth rate. So maybe just help us -- [ about ] the structure...

[Carsten Hellmann, executive]

Sorry, you're breaking up a lot. But maybe if I can -- I think I understand what you ask about. Remember that in ALK's business model, we have patients dropping off every year because it's a 3-year treatment. So even when you say service and growth, we are catching up a lot of patients. And we also have a business model where people are sick in the spring. They're very fresh and healthy in the summer, and then we need to get them to a doctor in the autumn. So that actually also happened this year. We were just short of about 10,000 patients, particularly in Germany and the Nordics, but we still got the 200,000 new patients.So what we will do, of course, is to, as I said, both mobilize more patients -- we'll expand the period of when they can initiate the patient in the autumn, and we mobilize more allergy doctors to bring on the patients. So it's not really a structural issue.What -- then you can ask why did we capture or get 10,000 less patients than we expected this year. We have a number of facts about that. It is a combination about not so many people feeling sick from pollen to more respiratory diseases filling up the doctors' offices. That really were also the fact why we increased our market share even though we had "0% growth" and missed the 10,000 patients.So looking forward, there isn't anything there. And we are just a little more vulnerable -- when we talk about tablet Europe, it's predominantly Germany and Nordics. So of course, what we need to do is continue to invest in expanding our geographical pressures in Europe, continue to invest in the U.S., get our products launched in China and also prepare for the market access in Southern Europe and the U.K. in [ nearly ] midterm. That will sort of more balance it out. So we're not so plain on the steel when there's something happening in one market. So yes, we get 200,000 patients. We'll see if we can catch up these 10,000 patients going forward.And at the same time, remember, we had this rebate we were forced to do on the German market that also caused a little headwind. We hope that will disappear next year. So all in all, I think we are very sad that we didn't get the last 10,000 patients. We didn't see that coming, but we will initiate a lot of initiatives to get them back in -- when the season starts again in Q3 and Q4. I think -- is that fair reflection of I thought you asked?

[Brian Balchin, analyst]

Yes, it is. Yes. And I just have a second one on R&D expense. Your first few [ expense ] implies that you stepped down for the rest of the [Technical Difficulty] million guide. Like you've got 3 ongoing studies. You're [ piloting ] about R&D [Technical Difficulty]?

[Carsten Hellmann, executive]

I think, again, here, it's really hard as you are breaking up a lot. But it's, of course -- when we look into the R&D decline that we anticipated, that actually has been modeled for some years as we now see our large Phase 3 trials coming to an end, as Carsten also spoke to the ACARIZAX pediatric trial that we report out here around summer, and then the tree trial during the end of the year. So the R&D spend here is definitely following the path that we have actually communicated and anticipated for some time. So it's brought on basically where we expect it to be and around the DKK 600 million for the full year. So that is definitely in line with what we've communicated earlier.

[Operator]

And our next question comes from Jesper Ilsoe with Carnegie Investment Bank.

[Jesper Ilsoe, analyst]

Yes. A couple of questions on the tablet development in Europe and your explanations that these are temporary and not structural. So my basic question is, what data points do you have supporting that the slowdown is explained by weak pollen season and the spike in the respiratory diseases? Because I know -- I understand that there's been a weak season. I understand that's in spikes, but why are you certain that this in fact has been the underlying factors? So what hard data do you have that these are the explanation and not something else? And follow up on that. So right now, you explained that -- pollen suddenly as a headwind, but why haven't you called out a weak or a strong pollen season in the past as having a significant effect on sales? So perhaps just help us talk about the correlation between pollen season and the effect on sales and sales growth?And then lastly, just on the spikes in our COVID and flu. Why are they impacting ALK today and not when we had COVID back -- and lockdowns? Because as I recall it back then, you said that this has very limited effect on the treatment initiation. So why does it have an effect now?

[Carsten Hellmann, executive]

Of course, we were -- we are about DKK 35 million below our expectations in Q1. We have a DKK 2.5 billion -- just remember that what we're talking about is the last 10,000 patients, we did have 200,000 patients in. We, of course, went out and checked a lot of hypothesis about what is going on, why did we not get the last patients. So we, of course, ask the German teams and pulled a lot of data also from competition, so how they were doing, how our market share were developing, how the visit rates were developing, spoke to a lot of doctors. And our hypothesis is right now that this is why [ more ] respiratory disease, it didn't mean that anything else that -- they did start up a lot of allergy patients, 200,000. However, there was a little more occupied in the clinics. And that's also what you can see from the data -- in particular Germany, that there was more respiratory infections calling to the doctors, thereby occupying their offices. That could explain that 5% less new patients we got this year.And you can say, could it be anything else? Yes, we, of course, check the -- what's market share losses, what is the competition coming back. Actually, as I said before, on the contrary, we did get 3% market share -- gained 3% market share point on the German market. And if we look to the -- sort of the German competitor performances, they were doing much worse than us. And when everybody in the market significantly drops or are not growing as much as they wanted, it tends to be a market dynamic hitting everybody. It was not just something that hit us, it all -- hit all our competitors. So I think that's the best explanation we can come out with.And it's not like we didn't sell anything, and we had the [ pollen season ]. We also check whether our reps were going to the right doctors. We did a lot of initiatives to actually call for action because, of course, we are not happy with just being short 5% of the initiations we expected. And therefore, we're just going to double down on the marketing and sales activities to typically catch them up. And this is the best explanation we can come with. There isn't anything like the government are not wanting it, the doctors not wanting it. We did get 200,000 patients, not just the last 10,000.

[Søren Jelert, executive]

And maybe -- to maybe supplement Carsten's points. I think what we have seen both in Germany and the Nordics with a decline towards the end of last year in new initiations, we have actually seen a stabilization here in the first month where we've seen the data readout to a slight positive again. So where we came in negative in the period, of course, where we needed to, in all fairness get to the plus 10,000, as Carsten spoke to, that's where there were the decline. And we've actually seen that balance back again and leveling out now, and even improving. So that's the data points we are actually basing our assumptions on as we speak.

[Jesper Ilsoe, analyst]

If I can just ask one follow-up. How can you be certain that the European market, or the current markets that you have launched tablets in, that, that market is not starting to mature and penetration has sort of peaked because that's, of course, the investor [ fee ]? So what sort of data points do you have that, that's not the case?

[Carsten Hellmann, executive]

Yes. First of all, we know there's a lot of untapped potential also in Germany of unregistered products. We know that we are increasing the market shares. So that by itself is going to generate more sales for us. Secondly, when you talk about the euro, we're predominantly selling in Germany and the Nordics today. And we have so many other markets we can [ move up ]. There is no saturation. We have still, and we have said that before, around EUR 100 million of business just in Germany that are unregistered local products that we can actually capture into.Have we been good enough, fast enough to get into that part of the business? We are and have been increasing our market shares by more than 10% in the last couple of years, and we probably should do even more to gain that.Also, it's still a fact that 1 out of 10 people that should have immune therapy who have a severe respiratory allergy are being treated.2 90% are not. So is it duality both on market expansion via competition, but also continue to educate the market and get more and more people to realize that they can actually be helped by immune therapy on the severe allergies. This is like the strategy we presented 5 years ago. This is the one we're pursuing. That has not changed, not at all.And then you can have a setback where you have -- right now, we have a quarter where you're a little slower than you expected in new patients who missed the last 10,000. But I can only say that we need to prove to you and the market that in Q3 and Q4, it's a good growth again, and that's certainly what I expect.

[Operator]

And we will go next to Michael Novod from Nordea.

[Michael Novod, analyst]

Just one follow-up question. I still just don't fully understand the dynamics to the replies in one of the first questions regarding the 95%, that you've still been able to initiate 200,000 patients? Because if we look at the tablet growth trend in Europe, it's sort of sustaining the fact that it's been sort of declining for some time now, growth when you look at the quarters. And so, if you're still gaining sort of more or less what you should in terms of starting new patients, does it -- that just mean that we are just seeing that more patients are stopping because you're starting to enter a cycle where -- the [ Tulsa ] has been on the market for a while. Grass has actually been on the market for a long time. ACARIZAX has been on the market for many years. So you're starting to see that your dropouts are exceeding your starts because then, of course, it is more of a structural thing given that you say that you're actually capturing what you should besides sort of 5 percentage points? So just some clarifications on those dynamics, please?

[Carsten Hellmann, executive]

Yes, I think it's -- there could be multiple dynamics, but it is about 5% lower. And remember, this is when -- we have been launching, for example, [ Tulsa ] as you mentioned. And this is the first year -- this is the fourth year for [ Tulsa ]. So there might be the first that drops off. But in terms of initiating new patients, I can't really see that is stabilizing, except that -- we had some dynamics in Q1. We expect that to come back in Q3, Q4. And I think the best proof point we can say is that we expect to come back and also show everybody that these growth rates will come back. But of course, when we have the first year after launch where a category sort of had the first drop out year, it's a little more tough. So you have the price decrease in Germany. You have the first drop off of [ Tulsa ]. And then it looks like there was a weak pollen season and occupied doctors' offices. That's a perfect stone for us.And that's why we probably didn't get the last 10,000 patients. Have we got 10,000 more patients, we wouldn't have had this discussion about tablets. And that's what we're talking about right now. So now we just need to make sure that we take some initiatives in Germany and Nordics to recover that, and maybe we should also accelerate and expand in rest of Europe. So we're not so vulnerable only on 1 or 2 markets as we are right now.

[Operator]

We will go next to Thomas Bowers. Please state your company.

[Thomas Bowers, analyst]

Thomas Bowers from Danske Bank. So just a few remaining questions here. So if we just take the growth outlook for this fiscal year on tablets. So I'm just wondering why you feel the need to have the low end of the tablet guidance at 9%? I guess this does imply some concerns about the next season start in Europe. So that's sort of the first question. And then secondly, what's actually needed from Europe in order to reach say, the middle of the range, excluding, of course, the outcome of the potential price hikes that you are looking at? So are you dependent on a material pent-up demand here in the fourth quarter?And then maybe lastly, just referring to those price hikes. When we will have confirmation and what will the expected impact be from that price hike in the guidance? And what sort of should we be looking for? Is this more of a onetime thing? Or could this be something that potentially could be adjusted annually based on, for example, inflation numbers?

[Carsten Hellmann, executive]

I can start, and then Soren probably can follow up. The inflationary adjustment of 7% is something that's going to roll in going forward. But we haven't got the price confirmation for the adolescents for our dust mite yet. And this plus more normalized inroad and better activity level in Q4 are going to give us the higher range of this. And if everything falls part, nothing happens. Of course, there's the lower range. But of course, we never try to hit that. It's just to give a range to the market because a lot of people misunderstood 0% to say we didn't get any new patients. We actually do. We just need to catch up these 10,000, and that's what we tried to do in the -- end of the year. Soren, would you want to add?

[Søren Jelert, executive]

Yes. I think basically, I mean, this -- we spoke to it also when we did the full year right, that it was a year moving into where we upfront was quite adamant on the pricing costs of the 5% in Germany. And as always, we sort of, of course, hunt for potential additional corrections for pricing of these inflationaries, of course. One opportunity, as Carsten spoke to in Europe. So for Europe, we are hunting the price. Then basically, we've always seen price increases in the U.S. So at least when you look at the SCIT, that's very much driven from price. Whereas in SCIT in Europe, it's much more a mix of volume and price. And then basically in China, it's mostly a sense of volume. And then it's correct also that we are currently in discussions with the German authorities of a price correction linked to GRAZAX and ACARIZAX as we have actually improved our label to add lessons over time, and that should give us an opportunity for a price negotiation or price correction with them.Exactly timing-wise of that, when and how much that comes up, but it could be to 1% to 2% actually additional growth on the tablets, and that's part of sort of the high end of the guidance as we've stated. But as price negotiations can never be set by a date exactly, it's difficult for us to read out. But rest assured that we are on the case, and we are -- we have filed what we believe is what we need to file. And then of course, it's up to the authorities to see when and how much they'll be able to adjust it by.

[Operator]

[Operator Instructions] And we have a question. Caller, please state your name and company.

[Unknown Analyst]

This is [ Cecile Manus ] from CLK. Could you [ leverage ] on the experience that your broker [ Interband ] has initiated patients earlier? How does this impact patient compliance given that these patients will be longer on tablets before pollen season starts?

[Carsten Hellmann, executive]

This will not impact that as -- whether you start up 4 weeks earlier, later. A lot of people also drop out of the compliance, meaning they don't stay on it for 3 years. It's a natural product. So what we do, we mobilize your immune system to be able to handle allergies better. So there isn't any compliance issues there.

[Operator]

And we have a follow-up question from Jesper Ilsoe with Carnegie Investment Bank.

[Jesper Ilsoe, analyst]

A couple of follow-ups. So firstly, on your expected H2 growth acceleration, what's your visibility into that this actually will occur, that we will see improved sales in Q3 and in Q4? Then perhaps you can also touch a bit upon -- I know it's difficult to convert to, say, estimate quarterly sales, but just some thoughts on how Q2 sales can look for tablets for Europe? Will it still be weak, will there be a stronger growth in Japan and so on?And then lastly, just -- we, of course, had a few of the important pollen seasons ongoing for now. Actually, maybe a comment on the pollen season in '23 to date, what -- whether or not that makes you comfortable that there will be a stronger growth and more initiations?

[Søren Jelert, executive]

Yes, I think it's, of course, all good questions, and definitely, I also understand why we would like to get a feel for it. Carsten actually started off saying that we believe that the dominating change of tablet growth is actually going to be in the second half of this year. We continue to see Europe, although it's normally also a lower quarter, quarter 2 at still lower rates. But then we actually do expect it to come back, again, partly helped by price and partly helped by [Technical Difficulty] that we have had negative, you could almost say, tablet sales in partner markets in first quarter. And as you probably also hear, we are quite adamant that the full year guidance on partner markets is above 20%. Hence, you will see a better contribution in the subsequent quarters. Exactly how that will pan out, we don't know yet. It could be a very good second quarter and then a softer 3 or vice versa. But essentially, that will be good in terms of driving growth.When it comes to North America, I actually think that we have yielded these 23% growth, and that's also well in line with what we have stated, above 20% for North America. So that is quite nice. So I mean without spelling it out, expect lower in quarter 2 in Europe and then back to good growth in Europe for quarter 3 and 4, a strong growth across in partner markets for the subsequent 3 quarters and then a continued good growth in North America.And then part of -- we also spoke to it a little earlier on that we have seen in Europe these initiations coming back. And actually, the report we have, especially on the tree pollen this year is a very strong tree-pollen flight. And that's actually good not only for, of course, people being reminded that they should have gone, by the way, also to get initiated last year. But again, we hope to be able to mobilize and then we're stipulating the engagement with them. We believe that we might be able to sort of harvest more patients as they really are reminded that they are suffering from tree pollen.In addition to that, it's probably also good for our clinical trials on the treetop, that's also helped by strong pollen seasons. So yes, it looks to be a good pollen season this year, and that at least could give us the possibility with the right market approach to catch more initiation towards the fall.

[Operator]

It appears we have no further questions at this time. I will now turn the program back to our presenters for additional or closing remarks.

[Carsten Hellmann, executive]

Thank you, and thank you all for joining today's call. And I would also like to say thank you to Soren Jelert because this is his last call from the ALK side of things. I wish you the best of luck going forward in your new role. As always, to all of you listening in, you are most welcome to call us if you have additional questions. And with that, I will wish you all a very good day in today's session. Thank you.