Almirall SA

MAD:ALM

Earnings Call Transcript 2022-Q1

[Operator]

Good day, and welcome to the Almirall's Financial Results and Business Update Q1 2022 Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Pablo Divasson. Please go ahead, sir.

[Pablo Divasson Fraile, executive]

Thank you, Roberto. Good morning to everyone on the call. Thank you for joining us to review Almirall's Q1 results and business update. As usual, you can find the slides to this call on the Investors page of our website at almirall.com.

Moving to Slide 2. I would like to remind you that information presented in this call contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially.

With that, please advance to Slide 3. Presenting today, we have Carlos Gallardo, Chairman and President of the Board of Directors for the interaction and for the presentation and the Q&A, Gianfranco Nazzi, Chief Executive Officer; Mike McClellan, Chief Financial Officer; and Karl Ziegelbauer, Chief Scientific Officer. Gianfranco will review the quarter's business performance and the growth drivers. Karl will provide you with details on the pipeline before passing to Mike to review the financials. Gianfranco will then make the closing comments before opening up for a Q&A session.

Before I pass to Gianfranco Nazzi, our newly appointed Chairman and President of the Board of Directors would like to make an introduction. I would like to pass you over to Carlos.

[Carlos Gallardo, executive]

Good morning. Thank you, Pablo. Good morning to everyone in the call. I am Carlos Gallardo, one of the members of the founding Gallardo family. I introduced myself a few quarters ago. Last week I was -- as Pablo mentioned, I was appointed President of the Board of Directors. So I wanted to take this opportunity to briefly reintroduce myself.

To give you a little bit of background. I have 18 years’ experience in the pharmaceutical industry, both in executive positions and in non-executive positions. In 2014, I was appointed to the Board of Almirall as one of our family's representatives for the 8 years in the Board of Almirall.

I am now looking forward to contribute to take Almirall to a leadership position in medical dermatology. As you are aware, we have a very strong late stage pipeline in medical dermatology. We have a strong management team in place led by Gianfranco. So I'm looking forward to a strong growth trajectory in the coming years and to contribute to take Almirall to the next stage in its development.

So let me hand over now to Gianfranco.

[Gianfranco Nazzi, executive]

Thank you for the introduction, Carlos. And good morning to everyone on the call. I am pleased to say that we have then recorded the start of the year with a good performance from the core business showing growth in core net sales of around 2%. The performance of the core business is driven by our recently launched products and the European dermatology portfolio which we'll comment on later in the presentation. In based on the good performance of the business, we are reiterating our full year 2022 guidance.

Let me highlight the performance of our growth drivers. We continue to see strong performance from Ilumetri with excellent momentum from the anti-IL-23 class, a good contribution from new country launches. Since we launched Wynzora in Europe, we had made excellent progress, we are allowed to gain good traction in the country that we launch, Germany, Spain and the U.K. while approval has been achieved in almost all European country would say that we continue to make good progress with increasing market access and coverage. However, getting back to back to the IL base which we expect will normalize during the course of the year.

Klisyri is gaining traction in Europe following its launch in the U.S., we are seeing improvement in market share and market access. I will provide further details on the growth drivers shortly. We continue to work hard on the late stage pipeline to leverage the significant potential there and as you have seen the Phase III 16 weeks data lebrikizumab was provided at the American Academy of Dermatology in Vienna for this. Karl will discuss this later in the presentation. And we continue to work with our partner Eli Lilly towards the targeted late 2023 European approval. Additionally, Seysara in China Phase III clinical trial competing had been initiating in quarter 4, 2021.

With efinaconazole, we are working towards regulatory submission in order to have this year with the launch targeted in 2023 and finally, we are working to start the Phase I of the Anti-IL1RAP and Karl will provide more color on the pipeline later in the presentation.

Let's move now to the performance of our growth drivers starting with a strong momentum of Ilumetri. Here in this slide you can see the market dynamics of the Anti-IL-23 class in Germany, where the new patient market was driven by Anti-IL-23 class with the anti-TNF losing market share and the Anti-IL-17 class struggling somewhat.

As you can see on the right-side chart, Ilumetri continue to perform strongly with a solid continuation of sequential quarterly sales growth, achieving an overall sales of EUR 27 million. New country launches help drive this momentum and we expect further contribution from new launches to help drive growth during the year. We continue to expect growth in 2022 to be similar to what we've seen in 2021.

And with that, I would like to turn our focus next to our recent product launches in Europe, Wynzora and Klisyri.

On this slide, let me start with comments on Klisyri for the treatment of the actinic keratosis. We are pleased with the commercial launch of Klisyri in Europe. The product is doing very well and will achieve a very good uptake, particularly in the German market as we continue to gain some traction with early and sustained customer engagement supporting the product launch.

Klisyri offers a good profile, which represent a significant step forward in the treatment of the actinic keratosis due to short treatment protocol, a work daily application for 5 days, proven efficacy and good safety. We continue to progress with the rollout of Klisyri in Europe in the next months.

Moving to Wynzora for patient with moderate to severe psoriasis, we have successfully launched this topical cream in Germany, Spain, in the U.K. where it continues to gain traction. Initial data is very good, and we have already sold 22,000 units in the first month as we successfully execute on the launch of the product. An extensive European [ like ] campaign continues as we had achieved approval in all the 4 European countries and we are confident that we can have a very nice uptake in these markets.

The product is a clear strategic feature within our portfolio as Almirall can now provide a full range of psoriasis products covering the full patient journey. It is also help us strengthening our position in the European psoriasis market. Remember that Almirall is the only pharma company with a full portfolio of psoriasis products. A biological Ilumetri in order systemic treatments [indiscernible] and Wynzora as a topical product.

Now let's take a look at the U.S. product Klisyri and Seysara. Let me start with Klisyri, which continued to make still gains with 3.6% market share. In March Klisyri register is higher TRx volumes since its launch, which is a good result for a new product launch in a highly generic market. The product has gained penetration in the clinical dosing topical market with over 32,000 prescription having been generated since launch. We have made progress on increasing the commercial coverage to over 60% and Medicare coverage is also increased to over 40%.

We differentiate Klisyri from what is already available in the market based on efficacy, tolerability, and convenience. We'll continue to focus on driving demand in gaining market access. But let me remind you that our actinic keratosis is the second most common diagnose made by dermatologists in the U.S. where the existing topical therapies are associated with significant side effects such as pain, inflammatory reaction, hypopigmentation and scarring.

Now let's take a look at Seysara. We improve market access and coverage with almost 140 million commercial lives now covered which equates to almost 73% of the targeted population. In terms of TRx volume in March, we achieved our highest level since December 2018, which drove our market share to 4.6%. We continue to focus our effort on increasing market access and increase the quality of the coverage. We think this is a very good product with good potential and we continue to have on our resolution plan to rebuild prescription, growth and market share by continue to dedicate resources to further differentiate Seysara based on the microbiology level.

with both Klisyri and Seysara, there has been good improvement TRx volume growth and market share. These are related sales growth due to the expensive cost of market access and the higher rebates. We've continue to work to grow the product and expect the debates to normalize in the coming quarter.

And with that, I will pass over to Karl to update you on the pipeline.

[Karl Ziegelbauer, executive]

Thank you, Gianfranco, and good morning to everyone on the call from my side. As you can see on that slide, our late-stage pipeline looks very promising. We are extremely excited that we have announced the detailed week-16 data of 3 pivotal Phase III clinical trials for lebrikizumab for atopic dermatitis at recent scientific meeting.

Furthermore, as Gianfranco has already mentioned, we are launching Klisyri across Europe. We are working on an expansion to large field with a potential launch in late 2024 in the US and 2025 in the EU. For Seysara in China, the Phase III trial that we have started end of last year is ongoing.

For efinaconazole, a new treatment for onychomycosis we plan to submit regulatory filing into 2022 as a planned. As you can see, you're making good progress with our late-stage pipeline and we are on the right track to strengthen our leadership position in medical dermatology.

Let me now turn to lebrikizumab for atopic dermatitis, which we are developing with our partner, Eli Lilly. Lebrikizumab is our most promising pipeline asset. End of March we have hosted an investor call to discuss in detail the week-16 data from the ADvocate 1 and 2 Phase III trials. Therefore today we'll provide a quick recap and focus on the week-16 recite of the Phase III a tiered trial which explored lebrikizumab in combination with topical corticosteroids.

ADvocate 1 and 2 Phase III randomized, it's placebo controlled trial exploring the efficiency and safety of lebrikizumab in moderate to severe atopic dermatitis patients.

After 16 weeks, lebrikizumab 250 milligram every 2 weeks is efficacious in providing clinically meaningful improvement in the signs and symptoms of atopic dermatitis in a diet and adolescent patients with moderate to severe atopic dermatitis. For example, in the ADvocate 1 study, 59% of patients treated with lebrikizumab achieved at least 75% skin clearance at week 16 compared to 16% of patients treated with placebo. In the ADvocate 2 study 51% of patients treated with lebrikizumab map achieved at least 75% skin clearance at 16 weeks compared to 80% of patients taking placebo.

Furthermore, in both studies, statistical significance versus placebo was achieved starting at week 4 for IGA with more than 2 point improvement, EASI-90 and Pruritus with a numeric rating scale score improving more than 4 points. The safety profile was consistent with previous lebrikizumab studies in [ AD ]. The long-term maintenance of response is being evaluated in the ongoing maintenance period of both trials up to week 52 and we plan to inform you about those results in the coming weeks.

Let me now turn the ADhere Phase III trial. ADhere is a 16 week 16 week randomized double-blinded parallel group [ Lotus ] Phase III study to evaluate the efficacy and safety of lebrikizumab in combination with topical corticosteroids in a diet and adolescent patients with moderate to severe [ AD ]. In this study patients [ AD symptoms ] that inadequately controlled by TCS with or without topical calcineurin inhibitor. The study for this to be more reflective of clinical practice, and patients were provided with a mild potency TCS and a low potency TCS for use on sensitive skin area, which could be tapered, stopped or reviewed at the patient's discretion.

The primary endpoints that measured had been 16 final Investigated Global Assessment, IGA score of clear 0 or almost clear one skin with a reduction from baseline of more than 2 points, in addition by at least 75% change in baseline in the Eczema area and severity index EASI-75 score.

The EASI, as a reminder, measures the extent and severity of the [ DC ]. Furthermore, various secondary endpoints were measured such as EASI-90 to provide a numeric rating scale, sleep loss due to Pruritus and the dermatology life quality index.

On the next slide, you see the first set of results. At week 16 70% of patients taking lebrikizumab plus TCS achieved an EASI-75 response compared to 42% taking placebo plus TCS. Differences between patients receiving lebrikizumab in combination with TCS and placebo with TCS that have served as early as 4 weeks got EASI-75. Among patients taking lebrikizumab plus TCS, 41% achieved clear -- almost clear skin ITA at 16 weeks compared to 22% of patients taking placebo plus TCS.

Next slide. Patients treated with lebrikizumab plus TCS also achieved statistically significant improvements across key secondary endpoints including EASI-90 skin clearance and itching interference of itch on sleep and quality of life measures compared to placebo with TCS. Clinically meaningful differences were observed as early as 4 weeks for itch interference and itch on sleep and quality of life measures.

Lebrikizumab 250 milligram every other week plus TCS improved signs and symptoms of [ ID ], producing statistically significant and clinically meaningful improvement in all primary and major secondary endpoint when compared with placebo plus TCS. The use of combination TCS in this study is consistent with clinical practice in the management of ID. The safety profile was again consistent with previous lebrikizumab AD studies.

Now in summary, the data from the [ 3 phrases ] studies readout so far confirm that lebrikizumab may potentially offer a compelling combination of the efficacy and safety reinforcing our beliefs that lebrikizumab test the potential to be the leading treatment option among a new generation of biologics. Our confidence in lebrikizumab follows the strong clinical profile that is emerging. Primary and key secondary endpoints including itch interference of itch and sleep and quality of life met at week 16 in 3 pivotal Phase III trials ADvocate 1 and 2 and ADhere.

We observed the fast onset of action of lebrikizumab rapidly improving skin and itch symptoms within 4 weeks. We expect to complete the ongoing ADvocate 1 and 2, 52 week maintenance phase in the next week. We are optimistic that to be 52 results from ADvocate 1 and 2 will provide further evidence that lebrikizumab can give the much-needed relief for people who are struggling from this chronic lifelong disease. Big 52 maintenance recites from ADvocate 1 and 2 as well as data from the other ongoing studies in the Phase III clinical development program will provide further data about the potential to differentiate with every 4 weeks dosing in the maintenance phase. We plan regulatory filings with the EMA in the second half of 2022 and would expect approval about 1 year in late 2023.

With that, I will hand it over to Mike.

[Michael McClellan, executive]

Thanks, Karl. Let's go to Slide 19. As Gianfranco mentioned in the introduction, we have a good performance in the first quarter with core net sales growth, and we are on track for our 2022 guidance. We have seen good sales growth in Europe, which helped drive overall core net sales increase of 1.6%. We achieved a core EBITDA of EUR 50.3 million through, please take into consideration this is a difficult comparison period due to the product divestment we had in Q1 of 2021, which amounted to roughly $16 million.

In the first quarter, we achieved a gross margin of 66.7% and broadly in line with what we anticipated for the year. SG&A was EUR 102.9 million as we continue to support our newly launched products. R&D increased in line with our expectations, which we anticipate to be between 11% and 12% of net sales this year. This year, we will have Phase IIIb studies for lebrikizumab reimbursement studies in Europe, the Klisyri large field as well as an increase in spending on earlier stage assets, such as the Anti-IL-1 rep, which we recently in-licensed.

Our total EBITDA landed at EUR 59.6 million, including EUR 9 million of the revenue due to the recognition of the AstraZeneca Covis transaction. We finished the quarter with a very healthy balance sheet and 1.1x net debt-to-EBITDA ratio.

On Slide 20, you can see the dynamics of the core business, where the European Dermatology business, in particular, has had a very strong performance with more than 30% increase year-on-year. The decline in the line others EU mainly relates to the previously mentioned product divestment in Q1 of 2021.

Focusing on our U.S. business, it continues to be impacted by higher rebates in generic competition, which I will detail in the next slide as we discuss the dynamics of the dermatology business. Overall, our portfolio has limited patent expiry risk going forward in the near term outside of even Spain, which will be impacted in late 2022, and we are managing the pricing impact. Additionally, Rest of World General Medicine has seen a small decline year-on-year, mainly driven by Imunorix in Latin America, which had a very high demand during the pandemic and winter months in 2021.

Let's take a closer look at the dermatology business on Slide 21. In Q1, we had a very strong performance in Europe driven by the growth of Ilumetri as well as strong trends for our Ciclopoli and Decoderm franchises and growth for Skilarence. Others EU also benefited from the initial launches of Klisyri and Wynzora in key markets. Focusing on our U.S. business, it continues to be impacted by higher rebates as explained by Gianfranco on Klisyri and Seysara slide, even though there has been progress in TRx and the market share of those products. This pressure has translated across the U.S. dermatology portfolio in terms of lower net sales versus last year as well as a natural decline of Aczone from generic competition as expected. In the rest of the world, we've seen growth in that business through a low base, mainly driven by the timing of orders in the Ciclopoli franchise.

Now moving on to the P&L on Slide 22. Core net sales grew at around 2%, and we're on track to meet our guidance of mid-single digit, which is our current pace we factor in the product sale in Q1 of last year that I previously mentioned. I've already highlighted the key factors on the sales performance slide, so let me continue with our focus on the core business by running you through the rest of the P&L. For the first quarter, we achieved a core gross margin of 66.7%, broadly in line with what we anticipate for the year. As we anticipated, SG&A had a small increase this quarter and will accelerate further during the year as we continue to add investment to fuel the successful execution of our product launches.

In terms of R&D, there was a step-up compared to Q1 2021, which will increase further during the year to a level that we anticipate will be between 11% and 12% of net sales. There are a few factors that are driving this increase in R&D spend. First, the Phase IIIb studies for lebrikizumab, which we have to pay the cost for the reimbursement studies in Europe as compared to the development after this point, which was funded by milestone payments to our quarter. Second, the spend on Klisyri large field, which are also shifting on to our P&L as the Phase III was performed by our partner in a similar milestone set up.

Finally, we will increase spend on earlier-stage assets such as the anti-IL-1 brand that we will submit an IND for in the coming quarter. The reconciliation at the end of the P&L reflects the deferred income in the previous year, which has now been fully amortized. Total EBITDA of EUR 59.6 million includes EUR 9 million due to -- mainly to the revaluation of our assets related to the Covis AstraZeneca Pharma agreement following the closure of this agreement in Q1. We expect future quarters to revert to amount similar to the past quarters. Overall, we remain on target with our full year 2022 guidance.

Continuing down the P&L on Slide 23. There are not too many line items to explain. How we'd like to comment that we're expecting an effective tax rate in the low 30s this year due to the minimum tax flow in Spain, which we are -- as we are not able to deduct U.S. tax losses against profitable European business. Additionally, I'd like to highlight that we finished the quarter with a normalized net income of EUR 20.5 million, which resulted in a normalized earnings per share of EUR 0.11 per share.

On Slide 24, if we look at the balance sheet, there are quite a few comments provided on the slide, so we'll only highlight 2 of the most important factors. Some financial assets have been reclassified to accounts receivable following the agreement with Covis to advance certain milestone payments related to the China Respiratory business. There was also a slight decline in financial debt due to a scheduled payment of EIB loan that's made every quarter. We now have a very simplified capital structure with no potentially dilutive instruments, and we have a very healthy balance sheet. We finished the quarter with a leverage of 1.1x net debt-to-EBITDA and a strong cash position, which gives us flexibility in the environment for additional licensing and M&A activity.

Let's take a look at the cash flow statement on Slide 25. Our cash flow from operating activities is down significantly from Q1 2021 due to lower profit before tax impacted by the product sale I previously mentioned, a high outflow of working capital and the lack of a tax fund refund receipt in Q1 2022. The negative change in working capital is due to a timing impact on accounts payable and accounts receivable balances, which we expect to normalize in the coming quarters.

Tax cash flow turned to a net outflow due to the change in phasing of the refunds of corporate taxes in Spain. In 2021, we actually received 2 years refunded once in the fourth -- first quarter and another in the fourth quarter instead of 1 refund per year as we've seen in previous years. We see this as a phasing impact from the change in how the Spanish government is refunding taxes. We have made key investments during the quarter, including the milestones for the IL-1 wrap in licensing and the launch of Wynzora in Europe. The divestments referred to in milestones and royalty collections for AstraZeneca and Covis. These have been classified as investing activities due to the reduced focus of this business in our operations. And finally, there is a decrease in debt related to the loan repayments to the European Investment Bank.

With that, let me pass it back to Gianfranco to conclude the presentation.

[Gianfranco Nazzi, executive]

Thank you, Mike. And to wrap up, we have had an encouraging start of the year with a good operational performance, which put us on target to achieve our 2022 guidance. We have started this year with strong momentum of annual growth drivers, and we'll continue to work hard to fulfill their growth trajectory as we continue to support regional launches with an expectation to further improve during the year. Ilumetri has had a very strong performance, and we expect increasing contribution from new country launches to continue to grow.

In addition, I am pleased with the initial performance in Europe of Klisyri and Wynzora 2 important products for Almirall. Furthermore, as detailed by Karl, we are progressing well with our exciting innovative late-stage pipeline with prominent developments during this year. We'll be initiating important clinical trials while executing on key market introduction. We continue to execute on the transformation of the company by preparing the business for crucial launches and to support our midterm growth prospects. This year will be very busy for our team, not just with extensive European rollout campaigns, but also as we prepare the business for exciting future launches like lebrikizumab, which will support our mid to long-term sales prospects. Lebrikizumab is one of our most promising assets and will be one of the several new growth drivers in Almirall playbook over the next few years.

And finally, Almirall is also focused on unlocking the value of the early and late-stage pipeline, which will help drive our future growth prospects. We also continue to look for opportunistic inorganic growth from external opportunities by leveraging, as Mike said, our strong balance sheet and flexible capital structure.

And Pablo, with that, let me hand over the call back to you for instructions on the Q&A.

[Pablo Divasson Fraile, executive]

Thank you, Gianfranco. Operator back to you for the Q&A, please.

[Operator]

[Operator Instructions] We have the first question from Jo Walton from Credit Suisse.

[Jo Walton, analyst]

I've got a few. If we look at the European other sales that went from 17 to 24, should we assume that all of that increase was due to the new launches and pipeline filling of Wynzora and Klisyri. I wonder if you could tell us when you would expect to be able to give us individual sales for those? Will they be big enough in terms of in market sales over the next couple of months? And on Klisyri, because you focus so much on the timing of the large field data with the launch in 25 in Europe. Is that when we should look to see a major inflection will that drug be big ahead of that additional data?

On Seysara, could I just ask a little bit more information on the U.S. If we look at some other new launches, for example, we levy as a different sort of new acne product, we do see that seems to have blown through your level of prescriptions. So just wondering whether there is a concern that doctors just aren't buying into this. And maybe that's why you need higher rebates. So just your level of confidence? And on lebri, I wonder if you could help us, do you know whether in the baseline patients who were in the study, there was a decent proportion who may have had comorbidities.

Clearly, one of the issues with lebri was that it didn't appear to work in asthma. I wonder if you had asthmatic patients in that database, and maybe that wouldn't be a finding that you would have and that, that could help your broader offering there? And the final financial question. At the half, at the first quarter, you did say that you thought your net finance charge would be somewhere EUR 12 million to EUR 15 million of that right, yes, EUR 12 million to EUR 15 million of net finance unless you could refinance something cheaper. Is that still the run rate we should be looking at for the year?

[Gianfranco Nazzi, executive]

Thank you, Jo. I will start, and I'll hand over to Karl for the lebri and Mike for the finance questions. So let me start with the European sales growth, and you are absolutely right. The growth momentum is fueled from the launches. So Ilumetri is doing very well, but also Wynzora and Klisyri, we start to see very good uptake. In terms of individual sales, we are not giving individual sales. We have not commented last time. You know the portfolio value what we are expecting for the different portfolio. And we are very happy to see the uptake of the product following launch.

In terms of Klisyri, large field the data in 2025, yes, the large field data is going to boost the sales and the potential of Klisyri. But nevertheless, we are very happy with the performance so far, especially in the European market. In terms of Seysara information in the U.S. about the rebates. So as you know, Seysara is working on a class that is heavy generalize and the presence of the generic are impacting not only the step-up approach but also the discussion with the PDMs and insurance company. So I think that I answered to your question, if I miss something, let me know. And otherwise, I will pass over to Karl for the lebri one.

[Karl Ziegelbauer, executive]

I mean the question was about inclusion of patients that asthma. I think in the ADvocate studies, there are patients with type 2 disease, including asthma were allowed. However, patients we were uncontrolled asthma are not allowed to be treated in the studies. Therefore, only patients with milder asthma or those asthmas been well controlled and have been excluded. As you may know that in the past by Roche, there were actually studies done in asthma, the so-called LAVOLTA I and II trials, recent further analysis of those trials indicated that the lack of good activity and those trials might be due to under-dosing. I mean, at that time, 70.5 and 125 milligrams were tested where we said in our studies with Lilly 250 milligram, and there might be also not the optimal patient population being included.

[Michael McClellan, executive]

And Jo, on the financial expense, we had a very small benefit from the increase of the stock price on this equity swap that we have outstanding. But I'd say the ballpark of $12 million to $15 million still holds. It could be influenced a little bit by that equity swap as when the stock price goes up or down, we do recognize that against that line. But nothing major in there.

[Jo Walton, analyst]

And just to my first question, would it be fair to assume that the difference between the 17 and the 24 that are the European dermatology that EUR 7 million is the initial stocking into the European market of Wynzora and Klisyri?

[Michael McClellan, executive]

No, it's a portion of that, but it's not the whole thing. We also had a good momentum from other portions of the business. As soon as Klisyri or Wynzora make the top 6 or 7 products, you'll start to see them in detail in that slide. But it's only a couple of million for those 2 products in Q1.

[Operator]

The next question from Thibault Boutherin from Morgan Stanley.

[Thibault Boutherin, analyst]

The first one would be on the AstraZeneca and Covis revenue recognition. Could you just come back on the kind of schedule for this? Is there any more to be expected this year and kind of quantify broadly how much we could expect in coming years as well. Second question on efinaconazole, did you get any feedback from your discussion with the EMA? Just trying to get some color on your degree of confidence that the filing is going to go through in Q2?

And then just last question on the U.S. business, given what we are seeing in the numbers, how open are you to potentially exit this region to look at potential strategic consideration here? Or is the plan still to grow your current assets and potentially bolt-on to leverage your infrastructure here?

[Michael McClellan, executive]

I'll take the first one on the Covis AstraZeneca deal. I need to take you back to the beginning of this transaction in 2020 -- 2014. This was considered a business combination. So it's not a matter of cash equals income. We have to value, the value of the overall transaction on an annual basis and the changes in that value or whether or booked through the P&L. As this agreement with Covis and AstraZeneca closed, we also agreed with them to accelerate some of the milestone payments that were due out in the future, particularly in China for the respiratory business.

The net of that and all of the new forecasts and everything came to an asset value, which allowed us to recognize this EUR 9 million. I think as I said in my comments, going forward, we'll see the usual income of EUR 2 million to EUR 3 million a quarter. I think for the overall year, we'll probably be slightly above the EUR 10 million that we kind of earmarked for this line. But we're also facing inflation, higher energy costs. So overall, it really doesn't have an impact on our guidance at this point. So a little more in this line, a little less than a few others.

[Karl Ziegelbauer, executive]

Maybe I'll take the question on efinaconazole, let me just remind you that this is not a central procedure going through EMA, but a decentralized procedure where we work with the individual Europe countries. I think at this stage, we are optimistic that we can do the filing with the existing data. And as mentioned earlier, we plan to do the first filing in Germany and in other European countries within Q2 as mentioned.

[Gianfranco Nazzi, executive]

And I will take the last on the U.S. So you know that the U.S. business is a difficult one in terms of market access and consider also that our 2 main product Seysara and Klisyri are in a class with a heavy presence of generic. And for Klisyri on top of this, the practice in the U.S. is very different from Europe, where we have procedure where the dermatologists are making a lot of money. Let us say that we are keep focused our efforts in order to gain market access to strengthen our position.

We re-segmented the market, and we are very sure we are sure that with all this measure, we are going to see some good results in the months to come. In terms of your question about M&A, so we are still open and looking, you remember how Mike said, our balance sheet is in a very good order. We are looking for bolt-on niche acquisition and if there will be something in the market that is going to fit our strategy and our go-to-market model, we will look at it very careful.

[Operator]

The next question is from Guilherme Sampaio from CaixaBank.

[Guilherme Sampaio, analyst]

So 3 if I may. So the first one, if you could provide some color on Ilumetri market share within the IL-23. The second question, market share in the U.S. has shown a very good progression last year. But since the beginning of the year, it seemed a bit more slow. I remember last year, you mentioned over 2.5% at the beginning of this year, 3.7%, now 3.6%. So any additional color on this slowdown? And then in terms of M&A, just to complement in terms of region, where are you looking at continue something in Europe, something in the U.S.? If you could complement on this one?

[Gianfranco Nazzi, executive]

So in terms of Ilumetri market share on the IL-23 class, you saw the market, the IL-23 is growing very fast. And Ilumetri on the new patient is almost 1/3 of this market. So the market share goes up and down. The latest one was 26%. So I can say that 1/3 is roughly representing properly well our performance in the German market. In terms of the U.S., the Seysara market share, as I said, was 4.6%. But looking to the week 13 data is very close to 5%. Klisyri as well was 3.6%.

But looking again to the week 13 data is very close to 4%. As we already commented, we are working very hard in order to gain assets from one side but also market share on the ADhere. So I'm pleased with the performance, although we need to work very hard in order to go back to the basics and make this happen. In terms of M&A, our focus in Europe because we are very present, we are very strong.

So the market, the M&A in Europe can be much more stronger than what we can have in the U.S. In the U.S., as we said before, if we can look for some niche or boutique product, while for Europe, we are very open to compete with big multinational and large multinational because as we demonstrated with Ilumetri, we can do a lot and we can compete quite well. So 2 different type of M&A, but let's look for the right opportunity.

[Operator]

The next question from Lucy Codrington from Jefferies.

[Lucy-Emma Codrington-Bartlett, analyst]

So first up on lebri, is your expectation then that it will be primarily used in combination with cortical -- topical corticosteroids in the real-world setting. And just whether you could comment on the much higher placebo response rate you saw in the ADhere study compared to the Dupixent combination studies. And secondly, on Klisyri, and could you give us your kind of target coverage for that product within the U.S. by the end of the year? And is there any seasonality in prescribing for this product? And then finally, on Seysara, just to clarify, did you say that you expect the rebates to normalize during the course of the year or actually as early as 2Q?

[Karl Ziegelbauer, executive]

I can start with lebrikizumab. I mean in the ADvocate I and II study, we showed that lebrikizumab shows very strong activity versus placebo. I mean, clinical practice sometimes involves topical corticosteroid and sometimes not. In the ADhere study, I think what you're referring to with respect to placebo is that we observed that patients who just use topical corticosteroids had a very high percentage of them actually achieved in EASI-75.

From our perspective, but we cannot point to a specific reason. However, what is important that we see a very consistent activity of lebrikizumab on top of topical corticosteroid. The way topical corticosteroids were used in the ADhere study was trying to reflect the clinical practice that both medium and the low potency corticosteroid was actually provided by the sponsor and could be used by patients as needed. In contrast to competitor studies where the tariff was not provided and a very strict schedule was prescribed on how the patient should use those topical corticosteroid. That might explain some of those observed difference. But as I said earlier, there is no specific reason that we observed, and so it is a little bit of speculation at this stage.

[Gianfranco Nazzi, executive]

Thank you, Karl. So I will move to the laser one. So you were asking about the coverage. So today, we have 60% of the commercial line and 41% on Medicare. I think that the coverage will represent also what is our target by year-end. So we can increase a little bit. But what we want to really achieve is the quality of the coverage, so moving more or restricted, and that's what we are looking for. You have a question about the seasonality. You are right.

We are moving towards the summer where we can see the market maybe not growing at the same pace as we saw in the past. But our goal is to continue gaining share on the market, although the market is not going to grow as spent during the winter season. In terms of Seysara, you are asking if we see some normalization of the rebate on the year. The answer -- the short answer is yes, we are working on this direction. You saw a rough quarter 1, but we are working toward more normalization during the following quarter on the year to come.

[Operator]

The next question is from Jo Walton from Credit Suisse.

[Jo Walton, analyst]

Just a couple of follow-ups, please. I wonder if you could tell us a little bit more about the design of your reimbursement and other Phase IIIb studies that you're doing? Are you going to be doing a head-to-head with DP? The second one is could you tell us -- just remind us on the FX impact for the group. So your constant currency growth was slightly higher than your actual growth, and that's presumably reflecting the fact that you make a loss in the U.S.

Would you expect that to be continuing for the rest of the year so that unlike other pharma companies who are benefiting from the strength of the dollar versus the euro, this would be a small headwind to you? And finally, on SG&A, it was flat year-on-year. You say that it's going to grow in the rest of the year. It seems surprising to us that it was flat when you had launches to make. Was there something that you were spending in marketing in the first quarter of last year that you didn't need to repeat so that the underlying investment was higher. It just seems very strange to have no growth in a quarter with strong launches.

[Karl Ziegelbauer, executive]

Yes. Maybe I'll start with your question on lebrikizumab Phase IIIb study. We have started end of last year, the first study, that is a study where we explore lebrikizumab in combination with topical corticosteroids in agile and select patients having atopic dermatitis that are not adequately controlled with cyclosporine or for which cyclosporine is medically not -- this is a study that is recruiting back total about 300 patients. The primary endpoint will be the EASI-75 after 16 weeks.

And this study will allow up to about 20% of patients that have been pre-exposed to biologics. So we'll also generate some data in this patient population. With respect to additional studies, including head-to-head versus standard of care this is an ongoing discussion with our partner, Eli Lilly, as we're still waiting to see the full data set, including the 52 maintenance data of the ADvocate 1 and 2 trials as mentioned earlier.

[Michael McClellan, executive]

Yes. So I'll take the other 2. The FX impact, it's not very significant, and we don't expect it to be very significant. We do have the business in the U.S. We would expect there to be a slight positive due to the strengthening of the dollar by the end of the year. I remind you that Q1 is always the high deductible season. So you don't have necessarily the same spread of the income throughout the 4 quarters. So we'll see -- I think we'll see a continued strong dollar that should benefit us a little bit on the top line.

It will also have a little bit of a drag with the expenses, but a net very small positive. In terms of SG&A, it's just a little bit of timing. I think by the time we get to the half year, you'll see we'll be progressing versus last year. It's really quarter-by-quarter, there's so many activities going on that there's just a slight difference. And I don't think it's an issue. We will see an increase throughout the full year.

[Jo Walton, analyst]

And could you give us some help on higher expenses from, I don't know, energy costs, freight, whatever? Is that something that you will see that's material for you this year?

[Michael McClellan, executive]

There'll be a couple of million in the cost of goods lined. We're keeping a very close eye on it. The first quarter, as everybody has experienced, we've seen energy prices shoot up. We've seen transport prices shoot up, cost of oil, you've seen inflation. We think it's manageable within our guidance, but it will be a couple of million here and there on different lines.

[Operator]

I will now hand back the conference over to Pablo Divasson.

[Pablo Divasson Fraile, executive]

Thank you, Roberto. We are now going to close our Q&A session. And with this, we will complete our conference today. We want to thank you for your participation. You may now disconnect.

[Operator]

That does conclude the conference for today. Thank you for participating.