H Lundbeck A/S

CSE:HLUN A

Earnings Call Transcript 2023-Q2

[Operator]

Gentlemen, thank you for standing by. Welcome, and thank you for joining the financial statement for the first 6 months of 2023 of Lundbeck A/S. Throughout today's recorded presentation, all participants have been listen only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Deborah Dunsire, President and CEO. Please go ahead, Madam.

[Deborah Dunsire, executive]

Thank you, operator. Welcome, everybody, to the first half report for Lundbeck. Thank you for dialing in. It's going to be a good conversation. May I have the next slide, please.

You've seen our forward-looking statements many times before, so I won't go over them in detail. I'm sure you'll be glad to know. The first half of Lundbeck has been an outstanding performance across all of our business. We have broken records in revenue, achieving the highest half -- first half revenue for Lundbeck ever in its history achieving approximately DKK 10 billion, with a reported growth rate of 13%, 10% in constant currencies.

I know there's a lot of focus on Vyepti, and I'm very proud of the growth rate of Vyepti at 91% in constant currency. And of course, that's on the back of the U.S. and the global rollout, and you'll hear more about that from Jacob and Tom, who are with us to talk to you about that.

We also -- the strategic brands generally across the world have performed extremely well and achieved DKK 6.6 billion, which are now 66% of the total revenue for Lundbeck. In aggregate, the strategic brands grew 18%. We are also going to be talking to you about promising early uptake with the launches of Rexulti in agitation in Alzheimer's disease or agitation associated with dementia in Alzheimer's disease, I should say, given that is our FDA label.

And of course, Abilify a simplify the 2 monthly version of aripiprazole long acting. The profit has also grown commensurately with the EBITDA margin reaching 33.4%. We do know that there is lower planned spending in the first half than the second half, a variety of reasons that we'll talk about.

The pipeline has delivered very strongly in the first half of this year. Of course, the approvals are the biggest milestones, and we were delighted to achieve the priority review approval of Rexulti in agitation in May on time, and of course, Abilify Asimtufii being approved at the end of April. Those launches went into effect late May and early June.

Johan will be taking you through the results of the DELIVER trial, the long-term follow-up of that trial which confirms the efficacy of Vyepti over a longer period of time. And of course, we were very, very excited to announce the proof-of-concept achieved in a new mechanism of action in migraine prevention with our anti-PACAP. Next slide, please.

You'll see here that all regions are growing strongly and the strategic brands in all regions are growing strongly. And that's, of course, the engine that is going to be driving Lundbeck forward to steady growth in the coming years. On the right-hand side, you can see which regions are growing from which brands because it is a mix. Next slide, please.

Let's talk more about Vyepti. We've got very strong momentum for Vyepti with strong demand in the U.S., and we can see that demand on a continuing growth curve with a 78% growth in constant exchange rates, first half of '23 versus first half of '22. Now there are a number of factors underlying that growth we've fueled it with new patient starts, and that's coming from both physicians who have prescribed Vyepti before and who prescribing more of it because it's working well for their patients and adding new prescribers. So that's a very good construct to be able to see for the future growth prospects of Vyepti.

The number of prescribers has increased significantly. The DELIVER trial, we'll talk about more. That was presented at the American Headache Society. And so we continue to expect strong growth in the second half of '23. The market share now has reached 7% in the first half, looking at the U.S. migraine prevention market or at least the branded market of the CGRPs and gepants. Next slide, please.

Vyepti is becoming a global brand. And we're seeing more and more countries launching. So all told, Vyepti's global revenue was up 91%. When we look externally, of course, it's off a small base, but we've got incredible growth coming for Vyepti with the global rollout extending.

We've launched 7 markets already in 2023 and 9 more launches are expected in the second half. And we're seeing really good uptake. If you look at the left-hand curve we can see strong market penetration in a number of markets, UAE over 14% market share in the prevention market, the branded prevention market in the 21 month. Switzerland, close to 13% in its 13 month and Canada in its 7 month at 11.6%. Germany is very early, but we're looking very favorably upon the growth in Germany.

So I'd like to remind you that this is the first global brand that Lundbeck has launched independently. So it's always exciting to see that not only the U.S. growing strongly, but the global markets contributing to the growth of Vyepti. Next slide, please.

Brintellix/Trintellix is on a great growth trajectory. The principal contributors here are, of course, continued growth in Japan, really great market share together with our partner, Takeda. But Europe has been a standout with extremely strong growth as we've seen the market shift. There's more GP prescribing, but we've had a slightly increased footprint over the last few years as we've experimented with promoting 2 GPs, and that has paid off and has driven strong uptake within Europe.

In the U.S., Trintellix has grown a little slower. First of all, the market it's a -- has fragmented more. There's a lot more nurse practitioners, physician assistants GPs prescribing in the MDD segment than they were before COVID. We do have a well aligned sales force with Takeda, and we are working strongly together focusing on the efficacy of Trintellix, both through our sales force channel and the omnichannel approach to our customers.

So we are seeing new-to-brand prescriptions growing in Q2 versus Q1 of 2023. And I'd remind you that during 2022, we did experience some disruption in promotion on this brand as we, together with Takeda, resized the sales force, Takeda was experiencing a loss of exclusivity on Vyvanse. And so both of us reduced the total number of reps that are promoting but increase the profitability of this brand. Next slide, please.

Rexulti has been a tremendous performer for us in the first half. The U.S., obviously, has been the biggest market for a long time given the approval in both schizophrenia and MDD, which we also have in Canada. We've seen that MDD growth, and we've talked about it in prior quarters continuing in the U.S. and Canada and Brazil, but we are seeing some green shoots from the launch of Rexulti in agitation.

The first, let's say, green shoot coming up in the spring is an increased utilization that we're seeing in the 65-year-old and older patient group. And we don't get fully claims data until there is a lag in us getting that data. So this is the data that we have on hand to date.

We're also getting significantly interested prescribers and some prescribers who have already used Rexulti reporting that they're seeing a tremendous change to the positive for their patients and the caregivers. So we're very encouraged about how this launch is progressing. The unbranded DTC was launched in the second quarter. The branded DTC campaign will launch in the fall once approved through the FDA. Next slide, please.

Abilify Asimtufii is launched in the U.S. and the overall franchise for Abilify Maintena and Abilify Asimtufii has grown strongly, and it's grown in all regions. The LAI market growth has continued, but we are penetrating that market with Abilify Maintena. And you see a good growth in all our regions of the world. The Asimtufii launch was -- Asimtufii was really put into the market in June of '23. So we're very early in the process of that launch.

But we can already see that having that franchise together is lifting the overall aripiprazole long-acting business for us in the United States. I think with that, I'm going to be handing over to the first of my colleagues that's here with me today, Johan Luthman, our Head of R&D. So you take it away, Johan.

[Johan Luthman, executive]

Thank you very much, Deborah. So let's take a look at the further information R&D. So during the first half of '23, in particularly during the second quarter, we had a rich flow on important positive R&D events. So it has indeed been a very productive year so far.

As Deborah already mentioned in her introductory comments, we had two approvals with FDA in the first half year, both of those together with our partner, Otsuka. The one I'd like to start with is the May 10 approval of the sNDA for REXULTI for the treatment of agitation associated with dementia due to Alzheimer's disease for short AADAD. This approval was preceded by a very supportive FDA external expert advisory committee discussion on April 14.

This approval constitutes a critical milestone since it's 20 years since FDA last time granted a full approval of any [indiscernible] for the treatment of Alzheimer's disease. Moreover, this is the first-ever approved treatment for agitation associated with dementia and in fact, for any behavioral psychological symptoms of dementia.

So an FDA-approved treatment of agitation is a very important addition to the care of this devastating disease. In particular, since agitation is one of the most body some symptoms for patients to cope with and not in the least their caregivers. In addition to the U.S., we have ongoing regulatory authority reviews a brexpiprazole for the treatment of agitation and debenture due to Alzheimer's disease in Canada with the [indiscernible] review with Health Canada expected to be concluded by the first quarter '24.

Submissions have also been done in Singapore, Australia and Switzerland. Through the so-called access consortium process. Approval in those 3 countries is anticipated during mid-'24. The second approval we had during the spring was on April 27 for aripiprazole 2 months ready to use long-acting injectable suspension for intramuscular administration. As you heard, it is now marketed in the U.S. under the name of Abilify Asimtufii for the treatment of schizophrenia and others for maintenance monotherapy treatment of bipolar -- sorry, for the treatment of schizophrenia in adults or for the maintenance monotherapy treatment of bipolar I disorder in adults.

That's the same population as for Abilify Maintena. The basis for that approval was a large and robust 32-week pharmacokinetic bridging study, while the efficacy of this product builds on adequate and well-controlled studies of Abilify Maintena.

As previously reported, this new extended-release formulation aripiprazole, has also been submitted to EMA for the indication of maintenance treatment of adult schizophrenia patients. The MAA review is progressing in Europe following resubmissions, a resubmission, which allows CHMP to follow what they consider more appropriate regulatory procedure.

We have a current estimate for H1, first half of the year '24 for finalization of that review. The [indiscernible] review of this product submitted to Health Canada is ongoing, but with an extended review period. The product has also been submitted Australia and Korea.

The other major event during the first half of '23, as Deborah mentioned in the introduction also was the announcement on April 19 that we had a very encouraging positive readout of the first-in-class anti-PACAP monoclonal antibody '222 in the HOPE trial in migraine prevention.

I will get back to that in more detail. However, the next step for this exciting program is to progress to a Phase IIb trial in order to better establish dose range and subcutaneous.

Finally, I'd like to highlight that we had released the new data on Vyepti from the DELIVER trial. The data further demonstrates not only the powerful action of the treatment of Vyepti, but also very nicely confirms its long-lasting migraine preventive effects. So let's take some further look at that data. Next slide, please.

The Phase IIIb DELIVER trial was evaluating the safety and efficacy of Vyepti in hard to-treat patients with 2 to 4 previous treatment failures. The trial included an open-label extension phase. The patients had chronic or episodic migraine. We have previously reported the placebo-controlled part of the trial which showed a robust effect of the drug in patients that have been on other migraine prevention treatments.

Now the open-label extension phase of the trial confirms the long-lasting market and preventive effects of Vyepti and an excellent tolerability profile. As you can see on the graph to the left, at the time of switching, all patients to active treatment, the time point, as you see here indicated by dotted line. There is a clear and rapid onset of the therapeutic effect on the number of migraine days in patients previously treated with placebo.

This is followed by a clear-cut therapeutic effects throughout the Vyepti treatment period up to 18 months. In addition, the treatment during the open-label part of the delivery trial also reduced the severity of headaches and reduce the use of acute medication. Next slide, please.

Naturally, we are very pleased with the performance of Vyepti as a fast onset of action migraine prevention treatment and how well it works in patients that have failed to respond well to previous treatments. However, with the results from the HOPE trial with our first-in-class anti-PACAP monoclonal antibody '222, we are looking forward to further build our efforts to deliver therapies for patients suffering from migraine. That not always find therapies that work well for them.

It's not often in R&D that you get a chance to be part of a positive proof-of-concept readout, but the robust readout in the HOPE Phase IIa trial is indeed a breakthrough for a new mechanism of action. '222 is a humanized IgG1 antibody against the receptor ligand PACAP, which is now act through at least 3 different receptors.

The PACAP biology is quite broad. Thus, this program certainly adds an opportunity for Lundbeck to further expand not only our margin franchise, but also may lead to us to contemplate the molecules potential in other pain indications. The HOPE trial study prevention of episodic and chronic migraine patients not helped by 2 to 4 prior treatments so quite similar to the DELIVER trial in design.

The patients received IV infusion are low/high doses in a 12-week trial. The primary readout, which measures a number of migraine days at 4 weeks showed clear statistical separation against placebo. Both doses tested appear to work. The secondary endpoints were also supportive. '222 was also well tolerated. The HOPE trial data will be presented at the International Headache Congress in mid-September. So we'll have the possibility to see more from this trial very soon.

The path toward the HOPE trial was facilitated by early experimental medicine studies, characterizing the target engagement in humans of '222. Moreover, we have previously shown good pharmacokinetic properties of '222 and given subcutaneously. So we have the potential optionality in terms of route administration.

A Phase IIb study is currently being designed and planned to start in early '24. Key aims of this upcoming trial is to establish subcutaneous efficacy and further explore the optimal dose range. Next slide, please.

In this call, I'd also like to highlight two programs in Phase I that are progressing well towards the possibility to initiate Phase II proof-of-concept trials in the coming year. First, some words about our differentiated CD40 ligand antibody like drug candidate '515. The role of CD40 ligand is well documented, and it's assumed to play a key role in autoimmune diseases in which activated T-cell and B-cell cause pathology. The CD40, CD40 ligand interactions, Mediate T-cell priming and T-cell dependent B-cell responses and promote pro-inflammatory activities.

By blocking the CD40 ligand in its interactions with CD40 and the co-stimulatory signaling, you can block the downstream effects on immune cells. Our drug candidate, '515 is a recombinant bispecific fusion protein that is not only binding to the CD40 ligand, but also the human serum albumin through the so-called SAFA technology platform. '515 aims to provide a long half-life and is expected to show an improved safety profile due to the albumin binding.

The clinical development program for '515 was initiated in March 22 and is progressing swiftly throughout the target engagement and dose escalation studies. Phase II is expected to commence in '24, where we'll explore several potential neuro-immune indications. So we're really excited to bring forward this differentiated CD40 ligand binder. Next slide, please.

I also like to talk a bit more about our D1/D2 agonist program in Parkinson's disease. It's a legacy program from our strong background in [indiscernible]. The new chemical entity, '996 is an innovative orally available prodrug for the dopamine of a broad-acting D1/D2 receptor agonist. Through this mechanism of action, we aim to provide continuous dopamine receptor stimulation. This is expected not only to lead to improved efficacy on reduction of OFF-time in comparison to other D2 agonists, but also improve tolerability against L-DOPA and obviously, substantially improved convenience compared to pump administration of the D1/D2 agonist apomorphine.

'996 is progressing very well and is concluding its Phase I this year with a solid data set that includes regular healthy volunteer studies, but also an open-label experimental medicine investigation of its profile in patients with Parkinson's disease. We are planning to advance Phase II trials next year with '996. Next slide, please.

Regarding other pipeline programs, I just like to remind you that I have previously announced that we finalized the recruitment into the two trial 71 and 72 that are exploring the efficacy and safety of brexpiprazole in combination with sertraline and post-traumatic stress disorder.

We are therefore looking forward obtaining the data from the evaluation of the PTSD indication within this ongoing quarter. So you hear that we are expecting to progress well also in the second half of the year with several interesting programs. This is naturally facilitated by our transformed R&D organization.

We have now a strong presence in our 4 biological clusters. We are also fully employing experimental medicine studies supported by biomarker-driven clinical readouts for stringent go-no-go decisions in early derisking.

Obviously, we are very happy that we have this year already been able to deliver on several critical late-stage life cycle management programs such as Abilify Asimtufii and brexpiprazole in a new impactful indication for Alzheimer's disease patients. But we are also importantly advancing very well in the further buildup of our mid-stage pipeline with the potential to move 2 to 3 assets into Phase II during '24. With that, I'd like to hand over to Joerg.

[Joerg Hornstein, executive]

Thank you, Johan. We have new microphones, okay. Thank you, Johan. We continue to deliver an excellent performance with the strongest first 6 months revenue Lundbeck has ever delivered. The plus 13% of reported revenue growth is driven by a growth of 10% in constant exchange rates coming from the strong underlying performance of all of our strategic brands.

The positive FX effect is driven predominantly by the increase of the U.S. dollar. The positive contribution from hedging is due to a narrowing of hedging rates versus actual rates year-over-year. Our gross margin is 1.3 percentage points lower compared to 2022, negatively impacted by the additional amortization of product rights related to the EU approval of Vyepti as well as by the provision for Vyepti inventory obsolescence of DKK 245 million recognized in the first half of 2023.

For that reason, it's much more insightful to look at the development in our adjusted gross margin. Adjusting for the aforementioned provision and the amortization and depreciation linked to sales. The adjusted gross margin in the first half of 2023 is higher by 2 percentage points, reflecting the positive sales volume development.

Sales and distribution costs grew plus 14% at constant exchange rates. The increase is driven by higher Vyepti sales activity in the U.S., along with its global rollout in approximately 15 countries this year as well as cost for the launch preparation of Rexulti AADAD. R&D costs declined by minus 14% at constant exchange rates, mainly impacted by the planned lower late development and reduced Phase IV activities for Rexulti and Brintellix/Trintellix so far in 2023 compared to 2022.

All of these effects contributed to an EBITDA growth of plus 19% at constant exchange rates. Our adjusted EBITDA that eliminates the provision for Vyepti inventory obsolescence actually grew by plus 32%, improving the margin by 7.5 percentage points to 33.4% compared to last year. Please bear in mind that approximately 3 percentage points of the margin improvement relates to the lower R&D costs as expected. Next slide, please.

Our EBIT grew by plus 38% in reported rates, reflecting the high revenue growth and strong operating leverage, improving our margin by plus 3.9 percentage points. Our net financial expenses decreased for the first half to DKK 138 million. The lower expenses are mainly driven by the nonrecurring DKK 278 million fair value adjustment of the CVR to all the shareholders in Q1 last year triggered by the European Vyepti approval and, of course, lower debt levels. These are partially offset by higher foreign currency exchange effects. The effective tax rate has increased to 23.5% compared to last year's 22%, in line with full year expectation. Reflecting the reduced deduction from the Danish R&D incentive.

Net profit increased by plus 61%, DKK 1.5 billion and adjusted net profit increased by plus 36% to DKK 2.5 billion. The adjusted EPS growth is in line with the underlying performance after adjustments relating primarily to the amortization of product rights and the fair value adjustment of CVR to form Alder shareholders in Q1 in 2022. Next slide, please.

The cash flows from operating activities landed at an inflow of DKK 1.6 billion in the first half of '23 compared to an inflow of DKK 711 million last year. The operating cash flow is, of course, a reflection of the strong EBIT performance further benefited by higher adjustments for noncash items of DKK 1.4 billion, which is driven by higher amortization in 2023 and the provision for Vyepti inventory obsolescence. But negatively impacted by higher change in working capital of DKK 1.5 billion.

This is mainly driven by increased receivables driven by higher sales and increased inventory primarily driven by Vyepti inventory buildup due to the fixed term agreement that expired midyear 2023, partially offset by changes in short-term liabilities. The cash flow from Investing activities were an outflow of DKK 265 million driven by paid out sales milestones. Just for your reference, the first 6 months of '22 in comparison included an outflow of DKK 1.2 billion for the CVR payment to all the shareholders.

The cash flow from financing activities were an outflow of DKK 1.3 billion in the first half compared to an inflow of DKK 480 million in the same period last year. This is primarily driven by the continued repayment in '23 of the last part of the 2022 loan connected to the CVR payment to all the shareholders and of course, the higher dividend payment in '23 connected to the improved net results in 2022.

Our net debt position continues to develop very favorably and lands at DKK 1.4 billion in the first half of 2023 compared to DKK 4.3 billion the same period last year reducing the leverage to 0.3x for the rolling 4 quarters, continuing our progress of deleveraging the company. Next slide, please.

Lundbeck raises its full year guidance on revenue to DKK 19.5 billion to DKK 20.1 billion, while at the same time, increasing the adjusted EBITDA to DKK 5.2 billion to DKK 5.6 billion.

The raised guidance is reflecting the strong momentum of our strategic brands, which is expected to continue in the second half despite the continued erosion of the mature brands. We expect current exchange rate levels, a positive hedging effect of approximately DKK 135 million due to more favorable hedging rates in the second half.

We have some timing effects in the first half of this year from which the mature brands benefited. However, we see, especially around Cipralex/Lexapro in Japan, Deanxit in China and Sabril in the U.S., a bit more of a faster erosion for the second half of this year.

From a profit perspective, let me reiterate the following. The forecast of amortization product rates remains unchanged at approximately DKK 1.6 billion for the full year. The expectations on sales and distribution costs reflect the necessary investments in the important launches of Vyepti in approximately 8 additional markets, Rexulti for AADAD, and the Abilify LAI franchise.

R&D full year costs are expected to be broadly stable, considering higher investments in the second half of 2023, mostly to develop clinical material ahead of planned initiation of clinical study. Finally, as previously mentioned, the provision of approximately DKK 300 million of Vyepti inventory obsolescence is reflected in the guidance for 2023. With that, I hand over to Deborah.

[Deborah Dunsire, executive]

Thank you, Joerg. It's great to be able to report such strong momentum in the business. So we have made progress maximizing our strategic brands. Those 4 brands grew in aggregate 18%. And it's great to see momentum across the world and across the brands. The Vyepti global rollout is on track with 9 more markets to come in the second half of this year. And we're looking forward to the momentum building in those recent launches in the U.S.

I think it's fair to say that R&D has had the most productive first half in -- I'm sure Lundbeck's history, and we look forward to the PTSD results coming in the balance of the third quarter 2023. We've made good progress with a very high potential early development portfolio, rebuilding the Phase II pipeline and potentially more molecules entering that in '24 but also some very interesting additions to the Phase I portfolio coming in.

And that is coming out of the transformed and highly innovative research portfolio. We've seen an improved profitability in the first half. But as Joerg has said, we do expect higher spending in the second half given that we have the full load of the launches, the costs coming in the second half, and we anticipate the startup costs for some of our Phase I and II trials, notably the preparation of the monoclonal antibodies to make R&D costs higher in the second half than the first, given that we finished a large number of Phase III clinical trials during the first half of 2023.

We have been able to raise the financial guidance, given the strong momentum in the strategic brands in spite of some headwinds on some of the mature brands in the second half of the year. So Lundbeck is extremely well positioned to deliver sustainable profitable growth for some years into the future. And so it is with great pride that I look back at the 5 years that I've had with Lundbeck. As you know, next slide, please.

We have announced that I will be leaving Lundbeck at the end of August, Charl van Zyl will join us as of the first of September 2023. He brings a lot of experience in the neurosciences from various experiences within the industry, most recently at UCB. And of course, he has to be good because he's South African.

So with that, I'm going to bring this to a close. A great, great first half for Lundbeck in 2023. So now we'll open the floor to questions. And in addition to Johan and Joerg being with us, we also have Jacob Tolstrup, who you know very well; and Tom Gibbs, from the U.S., who you're getting to know very well who I'm sure will be -- I'm sure you will have many questions for. So with that, let's have the first question.

[Operator]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question comes from Michael Novod from Nordea.

[Michael Novod, analyst]

Michael Novod from Nordea. Two questions, please. Two in opposite directions. First of all, on Trintellix. So it's sort of a never-ending story around continued sluggish sales performance and still you're trying to do whatever it takes to amp up your efforts with Takeda and Joerg on the sales force, et cetera.

How should we be thinking about this in sort of the next 2 to 3 years? Is it just that it's at best flat or perhaps even gradually declining in the U.S. And then on the other side of -- with regards to Rexulti in Alzheimer's agitation. So I recall you've been saying something like $500 million to $800 million in alliance sales or up to $1 billion, but your partner is saying significantly high numbers if you calculate on their assumptions for penetration rates in AADAD in the U.S.

So are you willing to sort of give a bit more flavor to how you see your exalting AADAD develop over the next 5, 6 years?

[Deborah Dunsire, executive]

Thank you, Michael. Tom, do you like to start on Trintellix?

[Thomas Gibbs, executive]

Sure, Deborah. Thank you, and thank you for the question, Michael. As you saw, the top line number was a 7% decline during the first half of 2023 versus first half of 2022. However, I think it's important to recognize that there is some noise in the revenue line with some gross to net adjustments that did occur.

So what I'd like to do is focus on demand, which I believe is the most important element to understand brand performance. And demand for the first half of 2023 did decline by 3% versus the previous year.

As Deborah had stated, and I think it's important to put into context back in the first half of 2022, our alliance partner, Takeda, who is responsible for 80% of the promotion for Trintellix did downsize their sales and marketing investment in Trintellix in response to the Vyvanse going off patent and this was with a goal of increasing profitability for Trintellix.

Lundbeck also adjusted the promotional levels of our sales and marketing efforts to reflect the revised sales of marketing investments of our partner. These type of adjustments, as we've talked about previously, do cause some disruptions, especially when you're looking at it through the lens of our customer-facing model.

As Deborah had stated, the strategic choice did achieve the intended objective of increasing profitability of the brand. But however, and not surprising. This strategic choice has created some pressure on the top line demand, which you normally see for a late life cycle product emerging at 6 to 12 months, and that's what we're seeing now.

As we talked about, Lundbeck is working very, very closely now with our partner, Takeda, to ensure that we have our rebased resources optimally deployed from a sales point of view, from an omnichannel point of view, to reignite growth from these levels. And we're starting to see some positive signs, albeit early when we look at first quarter 2023 to second quarter 2023, where we did see an increase in both TRx and NBRx.

[Deborah Dunsire, executive]

Great Thanks, Tom. And then on Rexulti, what we have said is that we believe that across the alliance, gross sales, this product in this indication will achieve over $1 billion.

So we see this as an immense opportunity for the brand. We're investing as a big opportunity, and we intend to grow it as far as possible. Can it be bigger than that? Possibly, this is a very high unmet medical need. And we certainly will do all what we can to grow the market.

And maybe, Tom, I'll hand over to you to talk about how we're thinking about that growth and how things are going?

[Thomas Gibbs, executive]

Yes. Thank you, Deborah. And I think if we look at it based upon the work that we did prelaunch to understand the market and our experience in the market since approval, we believe that there is a substantial unmet need that exists within the AADAD market.

And we are aligned with Otsuka that there is a significant opportunity for this brand with AADAD. Additionally, Lundbeck, along with Otsuka, are committed to investing the necessary resources to maximize this opportunity. And when we think about our first priority to be able to deliver on this opportunity, it's really about driving market penetration of Rexulti in the current diagnosed and treated patient population for AADAD.

And this is going to take significant efforts, as we've talked about in terms of raising awareness and appreciation from both physicians as well as caregivers about the prevalence the disability associated with this disease and most importantly now that there's an FDA-approved agent to treat this debilitating disease.

[Deborah Dunsire, executive]

Thanks, Tom, and thanks, Michael. Next question.

[Operator]

The next question comes from James Gordon from JPMorgan.

[James Gordon, analyst]

James Gordon, JPMorgan. First question was R&D spend and maybe one for you. So you reiterated the guidance for broadly stable R&D in 2023, but I noticed R&D was down 14% in H1. And I heard the comment about preparing some antibody trial material for Phase II but that seems like a lot to R&D to be stable. So can you break out how much of the -- how much extra spend is there going to be on preparing trial material in H2?

And could it be the guidance is also including room for you to do some in-licensing and spend a lot more in R&D on projects that you don't yet have? So the first question, if you can better understand where this extra R&D is going to come from in the second half, please?

And then the second question for Deborah, and as you retire from Lundbeck, thanks for answering all my questions over the last few years. My question is, you've given a guidance for strong medium-term performance in the company. But how are you seeing the company position longer term? So beyond the next 3 or 4 years, do you think the growth can be maintained? Or should we be thinking of a significant slowdown? And what do you think the key challenges are going to be for Charl Zyl?

[Deborah Dunsire, executive]

Okay. Thanks, James. I'm going to hand over to Joerg first.

[Joerg Hornstein, executive]

Thank you, Deborah. Well, I think we don't break out specifically what is the CMC element out of clinical trials. But I think if you go back to the presentation from Johan, we talk about a very promising pipeline with a number of projects that basically we bring forward.

So you talk in the end of the day on starting of trials as well as starting on clinical material. Plus on top, only think that investment is tied to clinical trials and CMC, you also have ongoing significant trials that also have quite some milestones to achieve in the second half of the year, especially around our Vyepti in Asia program.

[Deborah Dunsire, executive]

Great. Thanks, Joerg. James, looking at -- thank you for the question. You always have entertaining questions, and this is a good one. Lundbeck is well positioned as we go forward with these 4 strategic brands, and we are going to be growing mid-single digits through the middle of the decade. And we have a pipeline now that is building to bring in a number of opportunities that have multi-indication potential. So from within our own pipeline, we would see towards the end of the decade, some of those coming into play.

We have always said that our business will be built in both internal and continued external licenses, partnerships or M&A and with the preference for the sort of bolt-on M&A. So and that's nothing has changed about that. I think what you've seen over the years at Lundbeck, before I arrived and since I arrived is that the management working together have been very successful bringing in good assets through the years from the evasion acquisition, the Chelsea acquisition, the Otsuka partnership, there's a number of successes. We've had -- I believe, a great success with the Alder acquisition. Of course, that's still growing and adding to our portfolio.

So the future will, in some ways, be that of the past that our business will build from the inside and the outside, which the company has successfully done over many years. So I would say bed on Lundbeck to continue growing. Next question please.

[Operator]

The next question comes from Marc Goodman from Leerink.

[Marc Goodman, analyst]

First, can you give us an update on '909 and how you see that product differentiated versus some of the competition, it's a little bit ahead. And then can you give us a little more color on the agitation indication and just the confidence that you're actually seeing some uptick because of that indication. You mentioned something about some data that you had if you can go into a little more detail on it.

[Deborah Dunsire, executive]

Sorry, you were a little hard to hear there, Marc, but I'm going to ask Tom to start on the agitation question. Did you hear it adequately, Tom? And then Johan, you can comment on the pipeline assets.

[Thomas Gibbs, executive]

Thanks for the question, Marc. As we all know, it's still very early in the launch, but I would say that the launch is progressing as we expected. And I'll first speak from a quantitative perspective. As I stated during the last earnings call. The best data that we have to look at until the claims data become available is the 65-plus weekly TRx data, which Deborah spoke about during her presentation.

These data suggest there's a meaningful uptick in this segment, which is having, in my view, a positive impact on the overall brand performance. And I think as you probably have seen, for the week ending July 21, Rexulti achieved its highest record to date TRx share highest NRx share, and we also achieved our highest recorded new-to-brand prescriptions. So all very positive signs, both from the 65-plus, but also, more importantly, on the overall brand performance.

And then I think from a qualitative perspective, our experience is that to date is that it confirms that the AADAD market is a large opportunity with significant unmet need. However, and we've talked about this, it's also a nascent market that's going to require developing this market, both from a Lundbeck and also with our partner, Otsuka and we are committed to making those necessary investments to make this a truly substantial opportunity for Lundbeck and Rexulti.

[Deborah Dunsire, executive]

Thanks, Tom. Over to you, Johan.

[Johan Luthman, executive]

Yes, I believe you asked about '909. Can you confirm that? Okay. So that's the program I didn't talk about in this presentation today, that's the anti-ACTH antibody that we got through the Alder acquisition. And we're taking that into man. It's being evaluated in congenital adrenal hyperplasia patients right now, and we are progressing well with those panels there. It's a really exciting program. I couldn't talk about everything we do in Phase I.

It's a little behind the ones I talked about that are more closer to Phase II starts, but it's not so substantially behind because this is obviously a mechanism going for the so-called HPA axis and going for hormonal modulation. So we go quite quickly into patient studies and expanding patient studies. What we've seen so far in the very early data we obtained are actually very promising findings. So it looks like it's very much a molecule that is alive.

[Deborah Dunsire, executive]

Thanks Johan. Next question.

[Operator]

The next question comes from Dominic Lunn from Credit Suisse.

[Dominic Lunn, analyst]

So following on from the earlier question on costs. So clearly, the adjusted EBITDA at 2Q was much better than the market expected and guidance was raised only modestly. So that kind of implies a step-up across into the second half. So would it be fair to assume that the second half cost level is a good proxy for next year given you'll still be needing to support the launches and fund R&D?

And then could you also provide an update on the timing of the transition to the lower-cost cell line for Vyepti production? And then secondly, on the overall Abilify franchise. So there are a number of moving parts looking forward. So we'll see the [indiscernible] formulation ramping up the European LOE for the maintainer version kicking in from '25 and then U.S., I know you potentially after that.

So how could we think about the sales profile for the rest of the decade given the moving parts, i.e., can we expect continued year-on-year growth for the franchise? Or should we factor in some erosion in the latter part of the decade from the generics.

[Deborah Dunsire, executive]

Great. Joerg, would you comment on the cost profile.

[Joerg Hornstein, executive]

Yes, absolutely. I think you had a couple of questions. I think the first one was whilst the adjusted EBITDA in the first half better than consensus and probably growing a bit stronger than EBIT. First of all, keep in mind, we have booked DKK 245 million of inventory obsolescence. We originally guided towards more than DKK 200 million for the first 2 quarters.

We're not changing the full year guidance that remains in place at DKK 300 million, but you had a bit of higher adjustments than originally anticipated in Q2 around the Vyepti inventory obsolescence. The second piece is we also had pretty much DKK 15 million of restructuring costs we booked due to the closure of the [indiscernible] plant in France. So these adjustments you have probably not to the full extent factored in.

The second part of your question was, I think, around phasing. We've always talked about fully supporting the launch of AADAD in the U.S. And having had launch commencing in May, you see predominantly the full launch costs in the second half of this year. Of course, you have a little bit as well in H1 because you start to hire reps, et cetera.

But of course, the guidance reflects, as originally communicated more of a spend level in the second one. I don't think we give further guidance on SG&A ratios next year. So with that, I would hand over to Johan around your question on the transition.

[Johan Luthman, executive]

Yes. If it's more technical scientific question I can answer, it's also, of course, a cost estimate in this, but I think it's very important to say that we are progressing well with this. This shows us switch from pitch up stories, which is the cell manufacturing platform we have right now to the Chinese hamster ovary platform is a critical one because that brings us into a much more established type of cell platform to work on.

We have generated very, very strong in vitro data, the Psychopharmacologic of the drugs are really supporting very much what we're doing. But at the end of the day, it's really data-driven and regulatory-driven switch. And when I say this is all going well. I think we are looking forward to look -- to see that switch occurring in the coming year.

[Deborah Dunsire, executive]

One thing I would add on that switch. Remember, we have this contract that delivered all of the pitches supply within 5 years that is just sunsetting now. So it is our intention to utilize as fully as possible that pitches supply before transitioning to delivering on the show supply. I think you should also bear that in mind.

And then on the Abilify franchise, would you like to comment from the U.S. and perhaps you from the ex U.S. perspective.

[Thomas Gibbs, executive]

Thank you, Deborah, and thank you for the question, Dominic. As we see the Abilify long-acting injectable franchise, we see this as a important growth lever for the U.S. over the coming years and the addition of Abilify Asimtufii has really enhanced the overall clinical value proposition that we bring to physicians and patients, and we see this as an important contributor to growing the overall franchise.

[Deborah Dunsire, executive]

Great. Over to you, Jacob.

[Jacob Tolstrup, executive]

Yes. Similar comment also from my side. It's an excellent addition to our franchise. And I think there will be many patients that will be suitable and will benefit from a [indiscernible] version. Longer term, I think that was also part of your question.

We have had tremendous success with the Abilify Maintena one month. And I think it will be too much so hopeful that you can expect the total franchise to continue to grow once we see generics under one month when and if that happens.

[Operator]

The next question comes from Charles Pitman from Barclays.

[Charles Pitman, analyst]

Charles from Barclays. Could I just ask on Rexulti as we're coming up to the readout of the PTSD trial, whether or not you could just give us any more insight into how confident you are and the potential for a positive result on this trial, what you're really looking for in terms of benchmark results, and maybe if you could speak to what your expectations could be in terms of any sort of commercial opportunity for the indication relative to the other indications results already approved in?

And then just secondly, on Vyepti, looking at that global -- the geographic rollout chart. I was wondering if you could just dive a little bit more into the key differences of growth for Vyepti share in Europe and why Germany and U.K. share gains seem a little bit more limited, whether or not there's kind of anything we need to appreciate here in terms of increased competition and whether or not you can really get to that same level of share seen in those other geographic areas.

[Deborah Dunsire, executive]

Thank you. I think, Johan, you can start on the PTSD clinical side and then Tom on the opportunity, and then Jacob will take the Vyepti question.

[Johan Luthman, executive]

I've been commenting on this before every time. So obviously, I can add a little bit more element to it, but not much. As I said, we finished the enrollment and we're just waiting for getting the results. So it's really -- it's too late to speculate. It could be 0%, it could be 100% and nothing in between, right?

There could be a gray zone version, of course, because there are 2 trials ongoing. But important for all these kind of estimates, what could work out and not work out is prior information. And that's what I've been talking about before for the Alzheimer agitation indication, we had substantial prior information and very, very solid data package already from 2 prior big trials. Here, we are working with much less from an exploratory Phase II trial. So it's definitely coming with higher risk as it does when you have less prior information.

[Deborah Dunsire, executive]

Over to you, Tom.

[Thomas Gibbs, executive]

Thanks, Deborah. And if the data are positive, we do see PTSD as a meaningful opportunity to really enhance the overall value proposition of Rexulti. If we think about the magnitude of the opportunity, I think we start with the prevalence of PTSD, which is about the annual prevalence of about 3.5% in the U.S., and that compares to an annual prevalence of 8.3% for MDD and then something right around 1% if you look at schizophrenia and schizoaffective disorders.

So we see the magnitude of this opportunity between that of the schizophrenia indication as well as the MDD indication.

[Deborah Dunsire, executive]

Great. Thanks, Tom, and over to you, Jacob.

[Jacob Tolstrup, executive]

Yes. And on Vyepti, we showing the volume market share is always good to give an indication of the progress and the performance in the different markets. It's also important to say that every market is different, and the volume market share can be distorted in different ways and one example being Germany, where our competitor Aimovig, had an expansion of the market due to a clinical trial that did.

And that means that the whole market has grown tremendously in Germany, but also mean that our market share looks more depressed than for other markets, I would say both for the U.K. and Germany, we are ahead of our internal plans.

[Operator]

The next question comes from Michael Leuchten from UBS.

[Michael Leuchten, analyst]

Two questions, please. I was just interested in your comment on the U.S. rep count. Do you think that is a Lundbeck to [indiscernible] specific issue? Is this actually more broad across the industry as everybody tried to go down the digital path and is now figuring out that boost underground is actually the more effective way of marketing products in the U.S. still, whether we like it or not. And a question for Johan. PACAP, you're very firm that this is a Phase IIb that you're thinking about. So is that a plan with not a Phase IIb dose range study? Or is there a potential Phase IIb/Phase III trial design that would still allow you to accelerate the program?

[Deborah Dunsire, executive]

Thanks a lot, Michael. I'm actually going to ask Tom to comment on the Trintellix and the sales force question for you.

[Thomas Gibbs, executive]

When we look at Trintellix, we may have talked a little bit about the rebasing of our overall sales footprint. But I see that as more of a surrogate for the overall promotional spend that we put behind the brands.

And I think philosophically, what we do know is that the sales force continues to be an important element to the overall marketing mix, but it is not sufficient. And we are seeing greater efficiencies and effectiveness with complementing sales force efforts with omnichannel customer engagement.

[Deborah Dunsire, executive]

Thanks, Tom. And over to you, Johan.

[Johan Luthman, executive]

Yes. Thanks for the question. Yes, we call it Phase IIb because we're actually shifting the exploration now from an IV dose that we had prior in the HOPE PoC trial. Now to a subcu exploration. So it's an element of sort of technical transition here. Of course, we have good data to support that transition, but there is a certain element in this.

So we're not rushing into a pivotal trial directly based on that shift. And obviously, we need to find the dose range that is most fitting for the product. And whether we're going to have 1 or 2 doses eventually in a Phase III, that's still up for discussion, but we really like to make sure we're picking the right doses.

So that's why we call it IIb. The shift I mentioned that we're still sort of working on the design. So the shift between the two could be within the same protocol or 2 different protocols. That's always possible. But I think we like to have a clean data set first on the subcu and the dose range before we really make any further decisions.

[Operator]

The next question comes from Vineet Agrawal from Citigroup.

[Vineet Agrawal, analyst]

Just one more on Rexulti. I think in the past, we said. That the subnational data shows that the utilization for ages

above to be pretty consistent around 12% to 14%. Can you just share any sort of utilization data post for the AADAD indication launch.

And then the second question is just on Vyepti. Can you provide us any sort of update on the [indiscernible] as the heading side, we should be expected more chart.

[Deborah Dunsire, executive]

Vineet, we were really having trouble hearing you. We make out that there's a question on AADAD and one on Vyepti, but we really can't tell what the questions were. I don't know whether you're on a headset, and you can take it to get a better connection, but could you try to repeat your question?

[Vineet Agrawal, analyst]

I was just checking on the -- in the past, I think you've said that the subnational data showed the utilization for ages and above to be pretty consistent around 12% to 14%. I was just curious if you can share any sort of utilization data post the AADAD indication launch?

And then secondly, on Vyepti, I was wondering if you could provide any sort of update on the SUN-studies than the [indiscernible] had price in terms of when should we expect to get more on.

[Deborah Dunsire, executive]

Okay. Great. I'm going to have Tom start on the update on the AADAD.

[Thomas Gibbs, executive]

So thank you for the question. And you're right. If we looked at the overall utilization for 65-plus prior to the indication, it was teetering between 12% and 14%. What I can say, and you saw within the data that was shown by Deborah is that there's been a meaningful and significant increase in the overall 65-plus utilization.

[Deborah Dunsire, executive]

And then, Johan, when can we expect to hear data from the cluster CHRONICLE and ALLEVIATE?

[Johan Luthman, executive]

So for the cluster indication, which obviously is an attempt to have an indication expansion really go into a new indication, which has been a really, really hard indication to track [indiscernible] several of our competitors have struggled with this. And it's also hard indication to run quite frankly, trials in. But we have 2 trials ongoing, the CHRONICLE and the ALLEVIATE trial. The chronic is in chronic cluster headache and ALLEVIATE in episodic. And both trials are basically ongoing. We're waiting for data to see out of some of these trials, and that's going to guide us in the future.

[Operator]

The next question comes from Manos Mastorakis from Deutsche Bank.

[Manos Mastorakis, analyst]

Question on the CD40 assets. I want to clarify if that is going to be a single trial a basket trial, including multiple indications or if it's going to be multiple Phase IIs. And basically, what are you thinking in terms of which indications that will include in general as well on CD40. What can we expect in terms of readouts?

[Johan Luthman, executive]

Thanks for that question. As you heard, we are very excited about this molecule. When it comes to technically progressing this forward, we are contemplating a number of neuroimmunology indications.

And yes, I'm a big fan of basket trials, if it's possible. But when you go through the indications we are contemplating, they are pretty distant from each other. In basket trials, you have generally a benefit of when you have similar readouts and a similar sort of disease course. So that's the benefit of doing basket trials when you have very closely associated indications.

Here, we're contemplating more distant from each other. So it's most likely going to be separate patient studies that we're going to initiate. And in terms of what indications, we are going to gradually look through a big box of various things. As you know, there are prior information in this field that we obviously take care of and look at carefully. But we also like to explore new indications here.

[Operator]

The last question comes from Suzanna Queckborner from SHB.

[Suzanna Queckbörner, analyst]

I'd like to ask about the monthly fluctuations that you have in your Vyepti sales. So when you look at the U.S. hospital data, is this down possible purchasing pattern? Or is there any seasonality when patients actually seek treatment in hospitals. Perhaps you can give us a bit more insight here on biopsy.

And then the second question relates to the mature brands. So you said that you're seeing fast erosion in the second half, perhaps you could expand on this and specifically how we should think about that going forward?

[Deborah Dunsire, executive]

Great. Tom, will you take the Vyepti question and Joerg, the mature brands.

[Thomas Gibbs, executive]

Sure. When we look at the performance of Vyepti over the course of the last 7 months, what we have seen is a continuing strong momentum upwards in terms of overall demand. Now there could be some fluctuations, for example, when a price increase is taken where you could see some additional purchasing prior to a price increase.

But as it relates to any seasonality, we just don't see that in the data.

[Joerg Hornstein, executive]

Well, your question regarding mature brands. I think it has, in principle, two components. The first component is that, yes, we see a bit faster erosion, especially in Cipralex in Lexapro in Japan in Sabril and in Deanxit in China.

And then, of course, mature brands are always a bit impacted by timing effects -- timing effects related to government tendering a full year volume already in the first half or changes you have in your distributor structure. There are certain timing effects also in the Q2 numbers. I think if we would specify a number here, we would probably talk around DKK 100 million to DKK 200 million that we may not see materializing in the second half besides the topics I just mentioned on Sabril, Cipralex, Lexapro and Deanxit.

[Deborah Dunsire, executive]

Great. With that, I'd like to thank you for your questions, for attending the Lundbeck first half results. It has been my privilege and pleasure to work with this team at Lundbeck and also to meet and answer your questions over the years that we've interacted.

So I appreciate your continued interest in Lundbeck. And bet on Lundbeck to drive the frontier in neuroscience and to grow. Thank you.