ALK-Abello A/S

CSE:ALK B

Earnings Call Transcript 2020-Q2

[Per Plotnikof]

Hello, everyone, and welcome to this presentation of ALK's Q2 Results and Outlook for 2020. Please turn to Slide #2 for today's presenters and our agenda. My name is Per Plotnikof, and I'm Head of Investor Relations. And with me today are CEO, Carsten Hellmann; and CFO, Søren Jelert. Today's presentation is divided into 3 sections. The Q2 performance, with an update on the effects of COVID-19, a status report on our 4 strategic priorities and the full-year outlook, and then we will, of course, end today's call with a customary Q&A session. And with these opening remarks, I'll hand you over to CEO, Carsten Hellmann, and Slide #3. Please go ahead, Carsten.

[Carsten Hellmann, President, CEO & Member of Management Board]

Thanks, Per, and thank you all for joining this call. First, let me give you some highlights. Despite the very difficult corona environment, I'm pleased to report that ALK's performance in Q2 saw sales that were in line with expectations and earnings that were strong. Sales in our European and International markets remained resilient. Nevertheless, across our markets, visits to allergy clinics were significantly restricted with the greatest sales impact in the U.S. and on SCIT, in general. Despite this, sales remained on a par with last year, not least because of continued strong performance from the tablets, which grew 25% globally. Tablets are now the largest single product group for ALK. Planned product discontinuations reduced growth by approximately 3 percentage points. This means that the underlying like-for-like sales growth of continued products -- continuing products were plus 3%. EBITDA was up 213% to DKK 75 million, as a consequence of savings, operational efficiencies and delayed R&D costs. As a result of all this, we're upgrading our earnings and cash flow outlook. We're maintaining our full-year revenue outlook to reflect our H1 performance and encouraging signs of H2 recovery coming from European and International markets. However, the ongoing impact of COVID-19 in the U.S.A. means that right now, we are -- our -- sorry, our overall growth is tracking towards the lower end of our guidance range. Nevertheless, our working assumption is that we will see things improve in the U.S. towards the end of the year. Also at this stage, we cannot rule out that we'll see a stronger recovery in the U.S. or elsewhere. The key growth driver is still the tablet portfolio, and our outlook for the year is still for tablet growth to exceed 30%. And currently, it looks like it might comfortably exceed that despite the COVID-19. Before I go on, let me take a moment to repeat what I said in Q1 about our assumption for H2. We still anticipate that the majority of allergy patients will once again become able and willing to visit health care professionals without significant limitations. This will mean that patients who are normally treated in a clinical setting, such as those receiving allergy shots can return to treatment. It will also mean that patients who do not have access to online prescription renewals can once again visit the doctor to get new prescription. This will allow ALK to begin converting patients engagement via our klarify and web platforms into patient mobilization in time for the Q4 high season. When the majority of new patients typically begin treatment. And finally, a recovery in the way markets function will also allow our reps to promote our products once again in a more normal way.Before we go into Q2 financials, let me just take a moment to go in detail on COVID-19.Please return to Slide 4. One thing about the timing of COVID-19 is that, it is important to understand that the greatest impact came during what is traditionally the low season for AIT patient initiations. So while these new initiations were lower, the impact was less than we might have seen. Nevertheless, we estimate that sales growth will reduce by around DKK 100 million year-to-date, almost -- mostly from the USA. This was in line with our assumptions back in May.Let me just give you a flavor of the way we saw Q2. The first thing to note is the amazing commitment from doctors to their patients. For example, in Europe, the majority of patients were kept on treating. So they could maintain control of the allergies, while some doctors even found ways to initiate patients onto treatment.In the U.S., the situation was much more difficult and as one point, as many as 50% of allergy clinics were essentially close to patients. When you hear all of this, it is no surprise that the greatest effect was on activities that typically takes place at the clinic, while home-based treatments were much more resilient. We expect that we will be able to return to growth in H2. We see a number of indicators, especially in Europe and international markets that support this view. First, most allergy clinics are now receiving patients, and our reps are also able to visit doctors again. Secondly, sales increased in most markets towards the end of the quarter, including for diagnostic products, which is a leading indicator of intention to treat. Finally, data from our digital klarify and patient support platforms, suggested a backlog of patients that are ready to take action on the allergies as soon as they can. In the U.S., we see that allergy clinics have now reopened, although patient flow into the clinics is still down. In R&D, we are facing delays to our clinical development program. The good news is that those who are already involved in trials have continued to receive treatment wherever possible. And we have seen very few subjects dropping out. We were also just restarted recruitment for one of our pivotal ACARIZAX trials. Even so, the recruitment of new patients is still impacted. For example, we're still not able to fly Chinese patients into Austria for their ACARIZAX exposure chamber trial. Once again, I'm proud to report that there has been no major interruptions to our production. All factories are up and running. Supply has not been materially affected, and our inventories remained robust.With that, let's move on to Q2 sales breakdown across our regions on Slide 5. For that, I would hand over to Søren.

[Søren Jelert]

Thanks, Carsten. Let me share a few highlights from second quarter. As you can see, European revenue was down 2%, although this figure reflects reduced sales from discontinued products worth 5 percentage points. So like-for-like, sales of continuing products were actually up by 3%. Growth was seen from tablets and Jext just as we also saw further market share gains in important markets. The picture across Europe was mixed because of COVID. However, some trends that are worth noticing include 22% growth from tablets, 15% growth from Jext as well as a resilient sales of SLIT-drops when discontinued products are executed. We also outcompeted our rivals to gain further market share in Germany. In North America, sales were down 19% organically. Sales were lower-than-expected on the effect of a COVID, which Carsten explained earlier. International markets saw a 56% growth in second quarter with continued strong sales of tablets to Torii in Japan. In China, the effects of COVID-19 were largest during Q1. So that during Q2, the market bounced back strongly and revenue grew in high double digits. Let's take a closer look at the 3 product categories on Slide 6. We have already highlighted the resilience of tablets, which were up 25% in the second quarter. We have also confirmed the tablets are now our largest single product segment. But what you can also see here on this slide is that tablets are now very close to outselling the combined SCIT and SLIT-drops portfolio.Let's now turn to the year-to-date financials on Slide 7. ALK financial robustness improved further in the first half of the year. Gross profit was DKK 1.21 billion and yielded a gross margin of 59%, which was an improvement over last year, reflecting changes in the product mix with higher sales of tablets, but also lower sales of legacy products. It also reflects significant investments in product supply and robustness as well as implementation of the product and site strategy.Capacity costs decreased by 6% in local currencies to DKK 868 million. R&D expenses were up by 12%, reflecting a step-up in clinical development activities however, this was much lower-than-planned due to COVID-19 restricting patient recruitment and delayed clinical activities. Sales and marketing expenses decreased by 11%, reflecting both savings and operational leverage. EBITDA was up 74% to DKK 273 million and significantly exceeded expectations. We estimate a net positive effect of EBITDA of more than DKK 100 million in the first half of the year from savings and delayed activities as a consequence of COVID-19.Finally, free cash flow of plus DKK 27 million was better than expected, mainly influenced by the higher earnings and postponed employee tax payments. This leaves us with a cash reserve of approximately DKK 900 million.With this, I'll hand you over to Carsten for an update on our strategic priorities.

[Carsten Hellmann, President, CEO & Member of Management Board]

Thank you, Søren. As many of you know, we are now in the third year of our 3-year strategic transformation of ALK. And here, you can see a reminder of the 4 areas that have been the focus of our efforts. I'll talk a little more about our progress in each of these coming slides. But as a general point, I'd like to say that the changes we have made have been key to our ability to deal with the challenges of the past few months.Today, ALK is more resilient, better disciplined and has a clear vision of the future than it did 3 years ago. We also have a more focused portfolio and an expanding range of digital tools that are helping us to get closer than even before to both doctors and people with allergies.So let's turn to the Slide 9 for an update on our progress in the first 2 focus areas. On the left, you will see the first strategic focus area succeed in North America. The situation in the U.S. remains extremely challenging, such that in Q2, sales of our tablets in North America actually fell as it was impacted by constraints on the new patient initiations, which is relatively of bigger importance in the U.S. than elsewhere. In fact, sales of all products in the region were affected by COVID. Although we did see sales coming back to a certain extent towards the end of the quarter. We now think that our original full-year target of 10% growth is unlikely even if anticipated recurring, the U.S. is stronger than expected. Even so, we continue to take the actions for long-term growth, and we are targeting an autumn launch in Canada for ITULAZAX following approval of the authorities in April. In Q2, we also launched our clarified digital platform in the U.S.A. and so very encouraging early take up, likely aided by the fact that many people who are staying at home and able to try it out immediately. Finally, we had announced the deal with Otonomy, where we have taken the on promotion of the OTIPRIO product for [indiscernible] with ENT specialists, pediatricians and selected primary care doctors. OTIPRIO is a useful door opener for ALK because it allows us to increase contact with the ENT segment, a fast-growing area for allergy treatment prescriptions, and an important target group for the tablet portfolio in particular. On the right is our next priority to complete and commercialize the tablet portfolio. As you can see, tablet sales growth remained strong, up 25% despite the COVID-19 with the ACARIZAX and ITULAZAX leading the way. We see this growth gaining further momentum as the year progresses. I mentioned the imminent launch of the ITULAZAX in Canada, where it will be branded to ITULATEK, but there are 4 other launches scheduled for second half of the year, covering Austria, Czech are Netherlands and Switzerland. We already covered the effect of COVID on our clinical trials program. But just a reminder that we have now resumed patient recruitment for one of our studies. And expect to have a clear picture of any delays in our programs later in the year. Let's now turn to the other 2 areas of strategic focus on Slide 10.Next, let's look at the patient engagement and adjacent businesses. Our experiences with the award-winning klarify platform, digital patient engagement clearly shows that we are able to engage more closely with many more allergies offers. Helping them improve the quality of life through information, tools and services, designed to help diagnose and manage allergies and connect users with doctors who can prescribe a suitable treatment. Part of this universe is the klarify smartphone app that helps users track and manage their allergies, and it provides personalized allergy information, including pollen count and forecast as well as the latest AAI quality readings. So far, this allergy companion app has now been downloaded more than 500,000 times. The klarify platform has now been launched in six markets: Germany; the U.K.; Denmark; Ireland; Slovakia; and the U.S.A. Our recent efforts have been focused on getting patient insights and identifying the most likely candidate for AIT, so that COVID permitting, we can mobilize them to seek treatment in the autumn to coincide with the high season for the new treatment limitations.As you can see, we made positive progress on this by establishing more than 400,000 relationships with consumers. These are relationships where the consumer has given permission for 2 way interaction with ALK. In addition, we see more than 100,000 people take some sort of action on their allergies, using the tools and resources we provide. These can make many forms, but typically involve using fine adopted tool.The final strategic focus on the right is to optimize and reallocate. Here, we continue to phase out older, less competitive legacy products in favor of documented, registered products, such as the tablets, while also intervening -- sorry, also investing in core legacy products, manufacturing and product supply. So far, we have phased out more than 300 product variants from our portfolio as it stood in 2016, and we continue to progress towards greater site specialization and the added efficiency that, that brings. So let's now move on to 2020 outlook with Søren on Slide 11.

[Søren Jelert]

Thanks, Carsten. Back in May, when we reported on first quarter, we were very clear about the expected impact of COVID-19 on our business, and the second quarter was very much in line with these expectations. We also outlined our assumption of the second half recovery in the allergy market. And today, we shared some of the indicators that still support this as well as our belief that the U.S. market will remain unpredictable over the short term. As a result, we have updated the full-year outlook as follows: we still expect revenue to grow organically by 8% to 12%, net of product discontinuations, which reduces this range by approximately 4 percentage points. However, because of the situation in the U.S., we are currently guiding towards the lower end of this range, although we cannot rule out that a stronger recovery in the U.S. or elsewhere at this stage. Meanwhile, full-year tablet sales are still expected to exceed 30%. Revenue growth is expected to be strongest in the fourth quarter, reflecting an anticipated timing of the market recovery, shipments of tablets in Torii in Japan. EBITDA is now projected between DKK 300 million and DKK 350 million, reflecting savings in sales and marketing and delayed R&D spend. We continue to see the gross margin roughly on par with last year, and we now see R&D expenses -- the range of DKK 500 million and DKK 550 million versus our original plan of DKK 600 million. Free cash flow is now expected at around minus DKK 200 million, reflect the higher earnings and changes to tax payments and working capital. CapEx is unchanged at DKK 250 million to DKK 300 million. Our assumption for working capital includes continued buildup of inventories and one-off repayment of accrued rebates.With this, I'll hand you back to Per and the Q&A session on Slide 12.

[Per Plotnikof]

Thank you, Søren, and thank you, Carsten. And this concludes the main part of our presentation. And we are now ready to open the Q&A session. And operator, please go ahead.

[Operator]

[Operator Instructions] Our first question comes from the line of Michael Novod of Nordea Markets.

[Michael Novod]

It's Michael from Nordea. So 3 questions, please. The first is to the development in National Operations and Japan. We know from other areas that Japan is generally a tepid market. Also, if you look at the diabetes market, for example. So what is sort of your discussions with Torii regarding the continuation of a very strong penetration of the tablets in the Japanese market in the years to come? And then secondly, on the cost side and also on the gross margin, better gross margin than expected. Do you just generally see that the product pruning, the margin expansion, in general, is going faster? Or is there anything in particular we should be aware of? And in that respect, Carsten, maybe also can address whether you just see that opportunity on the cost side in general also with COVID to sort of do more optimizations. And then the last thing on the digital strategy, very impressive stats. I don't know whether you can talk to it, but can you say anything what you expect in terms of conversion rate from klarify users that take an online allergy test and then turn into patients? Just to get sort of a feeling because we see these download rates and online testing, et cetera, that they are sort of exploring right now?

[Carsten Hellmann, President, CEO & Member of Management Board]

Thank you, Michael. I'll start and then we'll end up with the gross margin question, I'll hand it over to Søren. There's a lot of untapped potential in Japan still. And particularly, if we look at the cedar, they have more than 80,000 patients on drug already which they're converting into tablets plus it’s still an underdeveloped market per se in allergy treatment. So when we talk to Torii without providing their guidance, I shouldn't do that. They are very positive of the years to come in terms of growth rates here. It's not something that we just filled up a hole and then it's going to be flattening out. We're just at the beginning. If you talk to Torii, you also saw their own announcement just a few weeks back, that was very, very positive as well. So that's not one of the biggest concerns we have right now at all. You asked about the COVID further optimization. I'm not sure exactly what you mean by that. I think that in the situation we've been in here, we should be very proud of the employees of ALK, who has been actually managing all of this Q2, mostly from home, including getting ITULAZAX approved in Canada and so forth. And the savings you've seen in sales and marketing is mostly related to not going to congresses and travel and so forth. And the left -- the rest is leverage. If you look at the profit increase we have right in Q2, approximately half of it, you should expect comes back in a normalized environment, either as clinical trials cost comes back or in a normalized sales and marketing environment, is going to be cost that will be ongoing. And the rest of it is actually the efficiencies we do see because also getting the scale, getting the mix right with more tablets and the gross margin, Søren is going to talk to in a second is a part of our plan. And if you talk about the plan, I got a lot of questions this morning about what is the next plan? There isn't a next plan. We promised to stabilize the company, make it more disciplined and focused in these 3 years. We think we're ahead of that plan. And when we go into next year, we also -- we said we will return to profitability and end up in this 20%, 25% range after 23%. There's nothing that indicates we are not getting there, and that's what we are focused on here. So if we can build a company with 10% growth in these profit margins, I think we have, so far, delivered on that, and that's all our focus. COVID is an uncertainty, but also remember, there's been lot of focus on the U.S., relatively to the size of ALK and the numbers. When you are 16% down in tablets in the U.S., it's less than EUR 1 million. So it's not the big swing factors, but we are still focused on delivering on the U.S. and we will get there, and you saw also the ENT entrants we're doing right now. So many activities is going on. And there back to the last question you had about the klarify. We are testing a lot of that going to be the answer to you right now, figuring out and how to do that? There's 2 elements I can bring to you now and then I rather have the clear data when we have them. One thing is, for example, that we're not driving patients to doctors who has not signed up to be willing assured -- that they are willing to prescribe tablet. So that's going to be sort of a general altitude. That's one thing. We have also added, for example, some sort of telephone support groups, where you can call in and get advice and so forth. So it's a little more holistic right now. It's not just AAI. Needless to say, we do see when we have a willing and able doctor to prescribe tablets. And you have a patient who are well educated and a trusting ALK. We have a much better situation, whereas the last part of it is then to support that with these decision tools of the doctors to find out and diagnose and get the patient on the right treatment. So it's a little more holistic, but definitely having a 0.5 million users on [ klare ] right now is way above what we thought. But you're right, it has to convert into both tablets and other sales in the future. And we're on it. And we will -- as soon as we get the data, we bring them on to you. And with that we'll hand over to you Søren to talk a little bit about the gross margin development.

[Søren Jelert]

Yes. Thank you, Carsten. I mean it's clear that actually, when it comes to our gross margin, the strategy is also working. We -- I mean, for the first half of 2019, we had a gross margin of 56.4%. If you look at the same period this year, we had 59.2%, so a 3% up. In all fairness, last year, we had an asset write down, approximately 1.4%. So -- but underlyingly, we are 1.5% up to 2% up on the gross margin. And that is very much attributed to the tablet penetration we have. So overall, I would at least conclude that we're definitely on the right track to improving our gross margin. When we're looking at the full year, we are still targeting the around 58% to 59% gross margin. A couple of reasons for that. We continue to invest in the long-term [ payers ] program, and that is taking still some margin point down. And in addition, of course, the success of Torii, bottom line for ALK is a very good story, but living at gross margin, it's still pulls us a little bit down on the gross margin. However, when you then look to leverage because we don't spend marketing money to sell that in Japan. So overall, it's a really good business for ALK. But sometimes, it can erode the margins when you just look at them in absolute terms, if the Torii is really high. But so far, I think we're on the right track. We are all the time improving the gross margin and the product supply is running extremely smooth even despite COVID. I hope that answered the question.

[Operator]

Our next question comes from the line of Peter Sehested of Handelsbanken.

[Peter Sehested, Research Analyst]

Yes, Peter from Handelsbanken. I have 2. One is regarding your comments in the report regarding your market share gains in Germany. I wonder if you could potentially quantify that and also add more flavor on to -- clearly, it has something to do with the tablets, but perhaps add a bit more flavor on that one? And secondly, you've been talking about your Jext manufacturing capacity being constrained. Yet you reported Jext sales growth by 15%, the quarter. I mean, how much -- is this 15%? Is this something that is sustainable? Or it's just something -- this a fluke or whatever is it? And I mean vis-à-vis your current manufacturing capacity. And that was it for now.

[Søren Jelert]

Yes. Peter, this is Søren. I'll take the -- I think the very good story we've had now for some years in Europe. And I know that, of course, you're speaking to Germany but we shouldn't either forget that we are still doing a fantastic job in France also where we're maintaining the absolute leadership in France. But actually, in Germany, which is a very positive story. I think with the community we have online here, you would all have remember we said that we were going down Germany and we were bottoming out sort of late last year. And I think it really reports out in the stats on the market shares where we are surpassing now the 30% market share, 30.5% year-to-date. And just 2 years ago, we were only at 23%. So clearly a super recovery. And you're absolutely right that the tools acts plays an important role in that recovery, but even on the older skip products there, we are actually also having a very good share, as you will remember, we also did an improvement there to a shorter up-dosing regimen on [indiscernible]. So in many ways, I think Germany is a market where we are clearly winning at the moment and has been for some time and that is solidified in the 30.5% market share. But then Carsten to the other point, Jext?

[Carsten Hellmann, President, CEO & Member of Management Board]

And just to add to the German, remember, this is what we've been talking about the last 2.5 years about doing these initiatives. We knew it took some time. And then actually going and eat the competition up by market share point. And I think that's what we see happen right now. On Jext, just remind you that after the optimized reallocate activities, we have almost doubled the output objects already. And of course, there is a -- some parts of the Jext we are trying to address right now. We have a much more sustainable production right now. We have a much stronger footprint in Europe, which means that we believe, actually, if we could produce more, we could actually also sell much more, and that's what we're working a lot on trying to fix right now. And one of the reasons for that has been that having a sustainable, strong and reliable manufacturing actually means a lot for the customers before. What I could see before was happening was that we won business in Jext when the others could not supply. And then with the other guys could supply EpiPen or whatever, we lost it again. Now we keep it because people are actually happy with the Jext, and we have these sustainable and strong supplies. So we are working hard to see we can increase the manufacturing because we believe actually we can sell everything we can manufacture. And then we're working on all parameters we can price, and others as well. So I wish I could double or triple the production tomorrow, but I can't as quickly as that said.

[Peter Sehested, Research Analyst]

I think, while I'm here, I think I'll just pop in the third question if that's okay? Just assuming that you can generate DKK 1 billion in sales in tablets in Europe this year. Are you able to sort of slice down or split it up in terms of GRAZAX, ACARIZAX and ITULAZAX and also just provide a little bit on where ITULAZAX is right now relative to GRAZAX at a similar point in the launch.

[Carsten Hellmann, President, CEO & Member of Management Board]

Peter, I love the question and the interest for our business. And of course, also the details of it. And actually, so far, we still stick to the we have a tepid line, but it's clear that the more mature products being GRAZAX and ACARIZAX accounts for approximately 80% currently. I'll give you that one number to play with. And then eventually, I think you will have to live with the fact that we claim that ITULAZAX is doing a fantastic job and actually part of driving the market share gains in Germany. That's how much I would like to reveal right now with what we have. But overall, we have a fantastic product in ITULAZAX, and I know we have said that eventually, we see cost numbers on that. Probably quicker than grass because we probably don't want to wait 10 years with that. But nonetheless, that's how you should picture it right now.

[Operator]

Our next question comes from the line of Thomas Bowers of Danske Bank.

[Thomas Schultz Bowers, Analyst]

A couple of questions from me here. So maybe just turning towards the pivotal trials. So any...

[Carsten Hellmann, President, CEO & Member of Management Board]

Thomas, Thomas, we're not able to hear you. Your line is really bad.

[Thomas Schultz Bowers, Analyst]

[indiscernible].

[Carsten Hellmann, President, CEO & Member of Management Board]

I'm sorry, Thomas, we're not able to hear you. Let's Proceed to the next dial and Thomas, perhaps you can redial and then me move in to the line again. I'm sorry, we are unable to understand you.

[Operator]

Our next question comes from the line of Benjamin Silverstone of ABG.

[Benjamin Silverstone, Research Analyst]

Congratulations on the performance. The first question is regarding your clinical trials. You mentioned in the report that you would perhaps be able to make up some time. Some notes time at a later date. Would you be able to elaborate a bit on which tools you have available to facilitate this? Furthermore, in regards to the U.S., as we know, the U.S. market is a bit more uncertain. Do we have any update or indication of how the prescriber base has developed in North America, especially the U.S. during corona? And lastly, in regards to other segments, we know that the diagnostic segment has been significantly down due to COVID-19. In regards to others, do you have any indication of whether or not this segment has started to see a recovery? Or how would you recommend everything about this segment going forward?

[Carsten Hellmann, President, CEO & Member of Management Board]

Thank you. The first question is about the clinical trials and catchup. It's a matter of recruitment that's the issue right now. We have initiated some studies also right now, and that's going fine. And it is only a matter if you can accelerate the recruitment of the patients, it will work fine. Or if you take the Chinese study, if you can double down on the people you take to Austria and gain some time as well to get it into the chamber studies that's where we sort of can manage it. The only issue we have in the clinical trials is the recruitment of patients. It's nothing to do with the endpoint, what we expect from it and the outcomes we expect from the studies. It's only in the COVID, be a little bit uncertain on if we can either recruit fast enough or we can recruit enough patients, and that's what we're looking at right now. And of course, when things opening up, we can actually work with the CROs to accelerate the recruitment of the patients. If you look at the U.S. and the prescriber base and the tablets, that actually looks fine. It's pretty much in line with our expectation in terms of the prescriber base and the depths of that. And we also saw almost a doubling of the tablet scripts from April until now. So there's a lot of positive signs as well in the U.S., but we don't know what hit the chicken and the egg right now because in the beginning of the quarter, the clinics were closed. So there was really game over. And now the clinics are open and the doctors in the U.S. are really ready to initiate and treat patients, but they don't see the same patient flow as they normally did. They do a lot of activities, and we help them all, take care of that to see if they get patients into the clinic, but the level of patients getting into the clinic are lower. So we don't know exactly what is that going to opening -- be opening of Mall. But if you look at the tablets, there's the [ antibiotics ] are doubled since April, as I said. And we are also seeing the number of doctors on tablets are good. For the diagnostics and other businesses in the U.S., it's not that good any longer right now on these COVID times. And we also saw in the previous quarters, where we're a little bit down in the U.S., it was normally non-allergy business and it still is. So a part of the drop is also that. And there's not really much you can do about that is its containers even to buy some of that [indiscernible] and not much containers ship right now.

[Operator]

Our next question comes from the line of Thomas Bowers of Danske Bank.

[Thomas Schultz Bowers, Analyst]

Yes. Can you hear me?

[Carsten Hellmann, President, CEO & Member of Management Board]

Yes, go ahead.

[Thomas Schultz Bowers, Analyst]

[indiscernible]. So any color here.

[Søren Jelert]

Yes. Thomas, unfortunately, I'm not sure necessarily it's your line, but the sound quality was still quite bad. We picked up some of it. You picked up some of the clinical trials. In your first part of your question on the MT12. And actually on MT12, we restarted the recruitment there. So that still looks okay. But again, as Carsten said many times, whether we can keep up the pace with COVID and the COVID probably up and down, across the European recruitment base, and in the U.S. for that matter, that's more the uncertainty because actually restarted then we have an adolescence study, also targeting the U.S. MT18 that's actually going according to plans. So there are 2 of the ACARIZAX trials. It's actually running perfectly normal. And on MT11, we actually completed the recruitment on the last cohort. So that's also okay. And so it's more down to the Chinese that is clearly under pressure due to this flying in and out people to Vienna. I hope that this gives you some perspective on that, yes, we think that we are impacted by COVID, but it's uncertain how much it will be yet, but it's clear that if it continues in some of these projects, yes, we could actually eventually have some definite delays. But there are actually also signs that we're opening up on the trial. So that's why we are a little bit still too uncertain to finally conclude on the clinical trials. That was, at least, that was a question we heard. On for, you had 3 other questions as far as I actually heard of. So if you can give me a hint on the them. I can try once again, we have another way of listening into you now.

[Thomas Schultz Bowers, Analyst]

Yes. If you can hear me, it was just regarding the prescribing patterns, so here in Europe. So I'm just wondering if prescribers, they are maybe becoming more prone to prescribing oral-based therapies or tablets. So I'm just wondering if you already could see some sort of tablet acceleration as a consequence of COVID-19. So that was sort of the second question.

[Carsten Hellmann, President, CEO & Member of Management Board]

We do see 25% growth on tablets here in second quarter. I cannot document to you is because of COVID-19 changes and so forth. But I think it is a fair thing to say that we see a trend towards that. And if you think about it, you have a situation, both as a doctor, but also as a patient. And now we have to choose between in this situation to go to a doctor every second week to get an injection or you could get offered a home-based treatment that actually documented in works, no matter where you are in the world. The trend will go that way. So we are hearing from the market and hearing from the reps, but of course, we don't have algorithms in our numbers that can act, it's like where it does come from. But definitely, our expectation is that this is very bad thing for the world and for the patients who are not getting the treatments in many different indications as right now, but on the longer-term for ALK is also a reminder of how good the tablet regime is compared to other receivables. So we certainly believe that, that the pattern we see, the high-growth we see, and the momentum we see is also inflected by COVID. It cannot document how much it is of that. But I think it will continue in years to come as well because this is a reminder to people that we actually have a fantastic portfolio of products. And this is also one of the strengths we do have right now that we're not a one product company. We now cover 80% of respiratory allergies. So it's easier for the doctors to actually take it in as a concept. And even to that, add all the activities, if you downloaded the klarify app in the market, actually, it's very sophisticated tool that also supports individual lead to manage their allergy and give you a lot of information and guidance. So I think you start combining those things, I think we are very, very well positioned.

[Operator]

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

[Jesper Ilsøe, Research Analyst]

Can you hear me?

[Operator]

We can hear you.

[Jesper Ilsøe, Research Analyst]

Perfect. That's good. 2 questions, please. One on Torii traction in Japan and one on R&D afterwards. So starting with the tablet traction in the Japan. Strong momentum is the third quarter, as I recall it, where you have beat consensus. You delivered DKK 127 million in the first half. And you're also right, as you did previously, that shipments are skewed towards the second half. So all else equal, is it fair to assume that the sales in the second half will be higher than in the first half? Or how should we interpret this since it's about skews towards the second half. And perhaps you can also give an update on what is driving sales? Is it these shipments? Or is it royalties? And perhaps also how much is attributable to the pediatrics or children label in Japan. I recall it was approximately 50% or 75% in recent quarters. That's the first question, then I can follow-up afterwards with another deep question.

[Carsten Hellmann, President, CEO & Member of Management Board]

Certainly keep -- Japan sales.

[Søren Jelert]

It's absolutely right that Torii is doing a fantastic job and actually have been doing it for quite some quarters now. And it's also correct that it's still a combination for us of royalties and in-market sales performance. So that's also why it's sometimes a little bit difficult for you, but also for us to sort of predict exactly when these shipments come out. And of course, you see the Torii sales cannot always predict what's the royalty is going to be to us. Having said that, we are in a growth momentum. And yes, we expect second half to be higher than first half on Torii tablets. That will be the straight answer to that. But it's also clear that the children they have now is the driver, and it's also really good and they have had some conversion. So we've also had a benefit on a growth trajectory, but I certainly take away the very, very positive performance of Torii in the first half, and it will continue in the second half.

[Carsten Hellmann, President, CEO & Member of Management Board]

And one good thing, if I might add to the Torii performance and our future prospects are that, as we see it right now, that, as we said, more than 50% of new patients are children. And the investments we're doing are in children studies in Europe and the U.S. is actually some of the platforms for future growth for ALK as well. So we can just get even close to that uptake. And as you probably heard today or also in the news that we are thinking that children, as such, the tablets are really, really a good treatment for allergies. And with the numbers from Torii the 50% of new patients being children is very encouraging for us for the future.

[Jesper Ilsøe, Research Analyst]

Then just on R&D. And then I can just follow-up on Thomas' questions on R&D. And just try to ask in a different way. So would it be fair to expect the data in 2022 under China and children study with ACARIZAX? Or could it be pushed further out, say, 2023, depending on the recruitment status? And then also one question on the Windgap. You mentioned there could be data out in 6 to 8 months. So is it fair to assume that this clinical data that you will report in 6 to 8 months, is that potential data that could be filed to the regulatory agencies. Is that correct?

[Carsten Hellmann, President, CEO & Member of Management Board]

Yes, for the R&D, it's not our expectations that we will push it by years the data outcome from the clinical trial. We're just signaling to you right now that the COVID-19 give us some delays in the recruitment. But we don't know how much we can catch up later and what can happen. No, it's not Torii postponement of all of it. There might be some issues of the Aspen trial for -- that could be in that range, 6 to 12 months, but that's what we are talking about. If you look at the Windgap, what we're talking about in the Windgap and we -- is simply the fact that now we have the different components right now, we're testing it, the dilutant, the powder and the device altogether. And we'll have the next readout of how its working in stability and the solvent and so forth in December. And from there, we will decide when to file, whether that's going to be in '22 or '23 or whatever happens. We don't know that yet. We just have the next readout for that. It's not the data that means that we -- at the beginning of '21 we'll file.

[Operator]

Our next question comes from the line of Yiwei Zhou of SEB.

[Yiwei Zhou, Analyst]

So most of my questions have been answered. Maybe a follow-up on Japan. Based on your discussion with Torii, could you please give us an indication on how much the current strong growth in Japan attributable to the patients switch from the [indiscernible] treatments to tablet? And how much is driven by the increased number of patients?

[Carsten Hellmann, President, CEO & Member of Management Board]

We don't have the exact data for that, but it is a company. Most of it is actually new patients, but we also know that Torii had some drop product, in particular in cedar, where the cedar development projects they had was the base of converting their own patients first, but they are also developing the market rapidly across the new patient intake and the growth rate. And Torii is very much over and above this conversion of all products.

[Operator]

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

[Jesper Ilsøe, Research Analyst]

Just 1 question on the revenue guidance. So you say that Q2 was in line, also given the COVID headwinds, but with that in mind, what has really changed here in Q2 and the outlook to '20 versus what you saw in Q1 in May, where you did not see the revenue trending towards the lower end. So perhaps you can just help us balance this? Is it reopenings in H2 that are more uncertain. I fully understand that there are uncertainties in general and that the underlying momentum is intact, but it's just whether or not there's any change -- things that have changed here in Q2, given that you actually see this quarter is in line?

[Carsten Hellmann, President, CEO & Member of Management Board]

Yes. It's simply us being transparent and cautious as we normally are. Remember that 1 percentage point growth for us is around DKK 40 million, right? So we're just saying that looking at the U.S. right now on the SCIT products, will U.S. recover and give DKK 30 million or DKK 40 million or DKK 50 million more of back to normalized levels will be fine again. We just are in a situation with a lot of expectations or rumors about COVID in different pockets. We don't expect the full close down of Europe again. But what type of uncertainties do we look into, all we are saying is we're trending to the lower, we're still keeping the guidance, but we're also saying that it doesn't take much of recovery or momentum. So we are back on track again. We're just a little bit cautious there. And there is a continued outbreak in the U.S. and just 1.5 months ago, we were fine in Taxes, and it -- was -- vary last year, and we are locked down and sold nothing in Florida. Now it's the opposite, now takes us at the outbreak, and we don't see dust mite products there, but now Florida is opening up again. It's just -- it's still be cautious, particularly about the SCIT products in the U.S. than drive that trending towards it. If you look at the rest of ALK, it is actually a solid performance of -- there's nothing there we really are concerned about. It's a lot of hardware because it's just difficult times with the COVID. But it's predominantly the SCIT in the U.S. and a little bit for Europe SCIT as well, but that's it. That's what we're talking about. We're just not trying -- we're still trying not to over promise under the label, but doing the opposite.

[Jesper Ilsøe, Research Analyst]

Sounds good. I have one more follow-up, if I may. So on SCIT, SLIT-drops, I know tablets are probably the most interesting things to discuss in the future. But still if you can just put some color on how you see the SCIT, SLIT business delivered towards 2025. Should we expect this to be a flat business globally or it's a single-digit growth? What is fair to assume when you are done with all your product discontinuation? And when you are over this COVID-19 headwind. How should we see the underlying, say, like-for-like traction in this business?

[Carsten Hellmann, President, CEO & Member of Management Board]

I would say, single-digit growth would be my answer to that. And that's out of the assumption that you can see we gain market shares. You can see that we have a registered portfolio also of the SCIT and SLIT products. It's a little bit different between the drops and the SCIT products. The SCIT will probably be growing. And then the normalization of the drops in France is give and take that will stabilize. But in totality, I think we'll see low single-digit growth in the legacy business going forward.

[Operator]

Our next question comes from the line of Peter Sehested of Handelsbanken.

[Peter Sehested, Research Analyst]

Yes, it's Peter, again. I think it's a bit of old story about the U.S., I mean, I'm not particularly optimistic about the U.S., but nevertheless, I mean, your tablets are doing very, very well in Europe, also doing very well in Japan. Clearly, I mean, patients cannot be treated in the U.S. because physicians are thinking more about their wallets than they think about patients, they're not giving them home treatments like tablets. I mean, there are so many stuff here. I mean, that if you were really aggressive I mean, you could have the potential to sort of change some things. I know that's a difficult situation as you have people making money, which at the same time, write the guidelines, et cetera, et cetera. But there is so much stuff now that sort of indicates that these guys are sort of not getting away with murder, but at least thinking more about their own math, economic welfare than about patients' health. So does this in any way open up for you in the U.S. and we have some kind of game plan that sort of in order to make you utilize that what has come out of COVID-19?

[Carsten Hellmann, President, CEO & Member of Management Board]

Yes, we think so. And we think that the new segment outside the allergist, the digital platforms, and the other activities we're doing right now is going to take us there. I am optimistic, but I'm not aggressively on the timeline. Optimistically, in the sense that I don't think that U.S. will suddenly swing because of COVID and everybody saw the light. But we certainly see, as I said, the script doubled since April, we suddenly see that are actually more and more patients are asking for it and insisting on it. And we also see the arguments for the doctors at this moment. But I think actually that it will take a few years more, but the work we are doing are definitely progressing. We are having more than 25% of our cores now are on the ENT segment. And one of the things that we also keep it pushed this way is that, what we just talked about in Japan on children. In a few years from now, we have the children indications on ACARIZAX, we haven't write it soon, meaning that we're now entering into the whole child segment. And as I have said that taking a 3-year old child for the second shot at any allergy is like putting your cat into a bath, right? It's not flying. So there's a lot of momentum we also expect coming out of pediatrics and ENTs and also allergies on the whole children segment. And that will also drive another momentum because why would a -- very often, the children with allergies has parent with allergies. And why would you go down and take a shot every second week if your child is fine, taking a tablet. So we are playing the long game here, the long-haul game, which we think is necessary. And you're right that people do not pay out of their own pocket, to the -- right thing for the patient, the U.S. necessary. But that's just the facts we have to deal with, but I believe that what we're doing and the way we're investing and what we're pushing it, I understand the disappointment of comparing to future prospects, but I think actually, we were ahead of that. After Q1, in doing very well in the U.S. Yes, COVID happened. But I think on the back of the COVID, we have more arguments. We will still have the children studies coming in. I think a lot of things coming in. And as you can see, we are strongest selling company, despite the fact that it's not the dream scenario in the U.S. right now.

[Peter Sehested, Research Analyst]

Just a follow-up to that. I know it's a bit futuristic modeling, but when you do have your children indication in U.S., particularly with the house dust mites tablets? Should we also anticipate -- I guess, it would be natural to anticipate a higher level of investment in sales and marketing costs in the U.S. I mean, is that how we should think about it, let's say, more top line potential, but also some initial investment to support that? And can you sort of anyway add some color on what you're thinking in terms of commercial initiatives when you have those 2 indications? Or that...

[Carsten Hellmann, President, CEO & Member of Management Board]

I don't -- yes, it's a good question. I don't think it's something you will see on the P&L as such. But of course, you will spend some money on launching that and so forth and promoting it, but you're promoting to the same target group, or the target group, we have decided to develop the next 2 years anyway. So it's not like you should think about new sales channel, sales force and stuff like that. It would be within what you said normalized budget.

[Peter Sehested, Research Analyst]

Okay. And we should not exchange the idea that you will repartner the product in the U.S.?

[Carsten Hellmann, President, CEO & Member of Management Board]

Partnered? Is that the question? If I would...

[Peter Sehested, Research Analyst]

Yes, a repartnering when you have the children indication.

[Carsten Hellmann, President, CEO & Member of Management Board]

No. I think we now are spending a lot of time and money on making sure we get the gross margin, and we have control of that market for the future. I think that is what we want to continue. And I can't really imagine somebody taking one product indication like this one and one with -- I don't think that's realistic. And I don't think it's the right thing to do either.

[Operator]

And we have no further questions at this time. Please go ahead, speakers.

[Per Plotnikof]

Thank you very much, all. And thank you for participating in the call. And thank you for all of your good questions. Now we have a series of virtual roadshow meetings lined up for the coming months. You can see some of them here on the slides. And we hope to see you in one of these meetings, if you are not able to attend that, please do reach out to us and we will be happy to set up meetings if you have any interest in doing so. In any case, thank you very much for today, and goodbye.