Camurus AB

STO:CAMX

Earnings Call Analysis

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to Camurus's Q3 Report 2024. [Operator Instructions]

Now I will hand the conference over to CEO, Fredrik Tiberg. Please go ahead.

[Fredrik Tiberg, executive]

Thank you so much, and hello, everyone. Welcome to our Q3 2024 earnings call today.

Before starting, please note our forward-looking statements. The agenda for today is like previous quarters, a short summary of third quarterly business highlights, followed by a review of our financial performance, and then we will go into commercial and R&D updates and finish off with a Q&A.

I'm joined in today's call by our CFO, Jon Garay; and Chief Commercial Officer, Richard Jameson.

So for those of you who have seen our report today, we had a solid third quarter with strong profitability and operating performance. Our revenues grew by 38%, 41% at constant exchange rate year-on-year, excluding a onetime revenue in 2023 to a total of SEK 480 million.

Profit before tax increased by 125% to SEK 165 million in Q3, our best result so far, again, excluding the onetime milestone. Based on the performance and results year-to-date, we have raised our outlook for the full year 2024, particularly as regards to profit performance. And our cash position at the end of the quarter increased to SEK 2.75 billion, again, with no debt in the company.

We continued focusing on commercial execution with Buvidal sales growing nicely by 22% year-on-year to SEK 421 million in the quarter. In the U.S., Brixadi net sales increased by 39% year-on-year or quarter-on-quarter, I should say, sorry about that, resulting in a royalty contribution of SEK 58 million to Camurus.

Our R&D pipeline advanced with positive Phase III results from our ACROINNOVA 2 study. Our U.S. NDA progressed to labeling. However, after the quarter, we received a CRL from the FDA regarding a cGMP inspection at the third-party manufacturer, which is currently pending classification, and we expect to get clarity about this early December.

In parallel with the U.S. NDA process, the regulatory MAA review moved forward in the EU. Additionally, preparations for the first clinical study of monthly semaglutide depot CAM2056 was completed. Based on the strong performance year-to-date, Camurus remains on track to deliver its 2027 vision.

And with this, I'll leave the word over to Jon for a financial review.

[Jon U. Alonso, executive]

Thanks a lot, Fredrik, and good afternoon, everyone. During the quarter, Camurus continued its development, delivering a strong financial performance, and I would like to share now the key highlights of this quarter.

At the end of the quarter, Camurus achieved SEK 480 million total revenue compared to SEK 384 million in the same period prior year. Excluding SEK 36 million onetime milestone revenues related to Brixadi approval by the FDA in the U.S. in 2023, company revenues grew by SEK 132 million, delivering a growth of 38% versus same period last year, which is in the high range of provided guidance for this year.

Buvidal sales reached SEK 421 million, growing 22% versus prior year and 5% versus prior quarter. Swedish krona appreciation has impacted negatively reported figures by 2 points year-on-year basis and 4 points versus prior quarter. Brixadi sales in the U.S. represented a SEK 58 million royalty income in the quarter, representing a SEK 45 million improvement versus prior quarter.

Company profit before taxes was SEK 165 million, achieving an earnings per share after dilution of SEK 2.16, equivalent to a profit after tax of SEK 129 million in the quarter. Finally, our cash position progressed positively during the quarter and remains strong, ending at SEK 2.75 billion.

Moving to next slide, we can see the main components of our profit before tax. Company gross margin reached 93% in the quarter. Excluding onetime milestone revenue impact, it represents an improvement of 222 basis points versus same period prior year, driven by 3 major factors.

Firstly, supply chain efficiencies driven by Buvidal volumes scale up represented 163 basis points. Secondly, 100 basis points are driven by Brixadi royalty. And thirdly, FX represented a negative impact of 41 basis points.

Total OpEx reached SEK 304 million, representing a 21% increase versus same period prior year, driven by following factors: marketing and distribution investment to support market penetration in own territories, expansion of Buvidal into new markets and U.S. operations grew 19% to SEK 112 million.

Administrative expenses aligned with corporate evolution to substantiate company development grew 155% versus same period last year to SEK 27 million. And R&D investment reached SEK 163 million, growing 10% versus same period prior year, driven by progress in our preclinical and clinical pipeline.

Company profit before taxes reached SEK 165 million. Excluding onetime milestone revenue impact, it represents an improvement by SEK 92 million, increasing 125% versus same period prior year.

Company cash position at quarter end was SEK 2.75 billion. Camurus improved its cash position by SEK 184 million in the quarter, driven by following 4 factors: firstly, company operations generated SEK 134 million; Secondly, working capital generated SEK 16 million driven by account receivables reduction mainly; thirdly, financing activities driven by the exercise of stock option program delivered SEK 45 million cash; and finally, company invested SEK 6 million in technological activities.

At the end of quarter, Camurus has no debt. All in all, Camurus closed its third quarter with a strong operational performance and solid financial position. As a consequence of such strong performance year-to-date and Q4 expectations, Camurus outlook for total revenue was increased to the range of SEK 1,810 million to SEK 1,880 million from prior range of SEK 1,730 million to SEK 840 million, with profit before taxes estimated in the updated range of SEK 450 million to SEK 510 million from prior range of SEK 330 million to SEK 450 million, and is on track to deliver the long-range plan vision shared at Capital Market Day celebrated in September 2022.

Having said that, I would like to pass the word to Richard. Thank you, everyone, for your attention.

[Richard Jameson, executive]

Thank you, Jon. So I'll start with an update on the Camurus markets and then move to Brixadi in the U.S.

So in Camurus markets, the third quarter saw further development of Buvidal, reaching SEK 421 million, 24% year-on-year growth at constant exchange rate and 6% ahead of previous quarter. We estimate there are 56,000 patients on treatment at the end of the quarter, a net increase of about 3,000 patients.

Growth was seen across our markets, in particular, Germany and the U.K., which saw good progress as we continue to implement new initiatives to accelerate patient recruitment. Other markets were slightly softer due to the holiday season restricting patient recruitment though as expected, picked up at the end of the quarter as staff return to work. In all countries, penetration is growing in both custodial and community settings.

In Australia, the new distribution and payment system following the recent government changes was fully implemented. This is a positive change as patients have reduced out-of-pocket costs for administration, and we're now focusing on addressing bottlenecks for patient recruitment by expanding pharmacy administration and increasing engagement with primary care physicians.

We continue to address reimbursement hurdles in new markets and expect at least 2 of these to be finalized in Q4 with launches soon after in early 2025. In addition, we have 4 markets undergoing regulatory reviews with anticipated outcomes in 2025.

In 2023, we made a donation to support patients in the Ukraine during the conflict and have now received a positive assessment of this experience and how Buvidal has supported patients during the time. We're now exploring ways to continue to support patients in the country.

Now moving across the U.S. Q3 continued the sales development of Brixadi, demonstrated by the increasing royalty to SEK 58 million, a growth of 39% at constant exchange rate compared to previous quarter. The increasing market share comes primarily from the capture of patients from sublingual buprenorphine products and the remainder transfer from other long-acting injectable products or being direct initiations.

As we've communicated before, the opportunity in the U.S. is significant with an estimated more than 6 million people with an OUD diagnosis and an estimated 1.8 million treated with sublingual buprenorphine. The peak market potential for Brixadi is significantly above USD 1 billion, which only represents 6% market penetration of existing treated patients.

Finally, we continue to be very active in congresses and scientific meetings to share the evidence base for Buvidal and have a full schedule of key meetings for the rest of this year and in 2025. Additionally, we have further publications from across geographies as we expand the evidence base for Buvidal and Brixadi in both community and custodial settings.

And on that brief update, I will hand back to Fredrik.

[Fredrik Tiberg, executive]

Thank you so much, and over to an update on our core R&D programs.

During the second quarter, we advanced our late-stage clinical development programs of octreotide subcutaneous depot, CAM2029 across 3 target indications of acromegaly, gastroenteropancreatic neuroendocrine tumors and polycystic liver disease.

Starting with acromegaly and the ACROINNOVA program. In July, we received positive Phase III results from a 52-week open-label ACROINNOVA study, evaluating safety and efficacy of CAM2029 in newly enrolled patients and rollover patients from ACROINNOVA 1. Key findings and observations in this study included a safety profile consistent with that of current standard of care with first-generation somatostatin receptor ligand products, increased biochemical response rates in the overall population after 52 weeks of treatment with CAM2029, again, compared to standard of care at baseline.

Consistent with ACROINNOVA 1, we also saw improvements in symptom treatment satisfaction and quality of life scores versus standard of care at baseline. Now recently, the main results from ACROINNOVA 1 have been accepted for publication in Journal of Clinical Endocrinology and Metabolism. And after that, we'll see them published very soon or early.

And after that, we'll move over to the GEP-NET program. I intend to share an update on the progress of the pivotal Phase III SORENTO study. As a reminder, SORENTO is the largest prospective randomized controlled trial of the somatostatin receptor ligand in gastroenteropancreatic neuroendocrine tumors.

The study is designed to assess superiority in progression-free survival of CAM2029 compared to investigators' choice of standard of care with octreotide LAR or lanreotide autogel. A broad population of GEP-NET patients with advanced metastatic inoperable, well-differentiated neuroendocrine tumors of Grade 1 to 3 have been included in this study.

The trial is powered to a hazard ratio of 0.65 and the primary result will be assessed after 194 PFS events, progression-free survival events. Secondary outcomes include overall survival, multiple patient-reported outcomes and, of course, safety.

SORENTO is a global study with a geographic distribution of patients as seen in this slide. All in all, we included 332 patients across 12 countries, which is 10% above our target recruitment, due to high interest and rapid inclusion.

Having reached an average treatment time of 15 months in the study, we recently performed an updated analysis of the number of tumor progression events or deaths in the trial. This was done to guide the expected timing for reaching the target number of PFS events for reading out the primary endpoint.

The analysis points to longer-than-expected PFS for the patient population in the SORENTO trial, of which a majority had more advanced disease with Grade 2 neuroendocrine tumors, the rest were Grade 1 and a few were Grade 3 disease patients.

Based on better-than-expected tumor control in the study, the estimated timing for reaching the target number of PFS events has been updated from first half of 2025 to late 2025 or early 2026. The next external update on SORENTO is planned for Q1 2025.

Moving over to polycystic liver disease and the POSITANO study. POSITANO is a 52-week randomized controlled trial assessing efficacy and safety of CAM2029 in 2 dose groups versus placebo. The primary endpoint is height adjusted liver volume and secondary endpoints include PLD symptoms measured using a newly developed patient-reported outcomes tool, total [indiscernible] volume, treatment satisfaction, quality of life and safety. Patients who complete the randomized phase have the option to enter a long-term extension, which has been prolonged to 32 months of open-label treatment.

Moving to the next slide. A total of 71 patients with symptomatic PLD have been included in POSITANO. The patients -- the last patient entered into the study in February this year. More than half have completed the randomized treatment phase and switched over to the open-label extension. Top line results of the core randomized phase of the study are expected in the first half of 2025.

Aside from clinical progress during the quarter, we also received a recommendation for orphan drug designation for CAM2029 in autosomal dominant polycystic liver disease from the EMA, which now has been formally adopted by the European Commission.

So as a summary, here is the updated time line for our 3 pivotal clinical programs for CAM2029. Moving over to regulatory and an update in acromegaly. As you are aware, we received a CRL from FDA on the 21st October, that is a complete response letter after having had a late ongoing labeling discussions with the agency. The CRL was solely related to observations during a cGMP inspection at a third-party manufacturing facility and did not raise any concerns relating to CAM2029, including safety or efficacy or for that matter, quality.

Unfortunately, the timing of the inspection precluded resolution of the observations by the PDUFA date. Since the inspection, the manufacturing has answered all the observations and is expecting a classification by early December. Providing this is satisfactorily addressing the agency's observations, Camurus will rapidly resubmit the NDA for review. We are working towards a scenario of Class I resubmission with an anticipated 2-month review period. Otherwise, a 6-month time line would be applicable.

Finishing off with some early R&D developments. We have completed preparations of a randomized dose escalating multiple dose Phase I study of monthly semaglutide in overweight and obese participants, and are expecting a first subject first visit early in the next year. Preclinical assessments of other long-acting GLP-1 agonists have also been performed with promising results, along with the start of 2 new collaboration projects for long-acting peptides using the FluidCrystal technology.

So with this short run-through of activities in the third quarter and wrapping up, I'm pleased with the continued performance of our teams and the progress that we have made during the quarter, which has resulted in robust profitability, solid double-digit growth of Buvidal, Brixadi launch continuing to progress in the U.S., regulatory progress for CAM2029 in acromegaly, along with early pipeline progress, including the CTA submission for our once-monthly semaglutide. As a result of the solid performance to date, we have raised our outlook for the full year 2024.

And with that as my last note, thank you for your attention, and Einar, please take over the call for Q&A.

[Operator]

The first question comes from the line of Christopher Uhde from Nordea (sic) [ SEB].

[Christopher Uhde, analyst]

Christopher Uhde from SEB. No problem. So my first question is on the U.S. market dynamics. What can you tell us about how that looked during Q3, especially with respect to long-acting injectables versus sublingual and maybe reasons for your confidence in a strong Q4?

[Fredrik Tiberg, executive]

Yes. I think overall, if we're looking at the segment, the third quarter was slowing down slightly in terms of growth pattern. And we saw, of course, other progress -- other products not having a strong performance in the third quarter. We believe this is partially due to the seasonality over the period. And we have no information suggesting that we should not have a stronger continuation of the year in Q4. And that is also based on the fact that we saw a pickup in September.

[Christopher Uhde, analyst]

Okay. Great. And then -- so we haven't historically seen clear seasonality in Europe, even though it obviously makes perfect sense that there must be some. Why are we seeing it more clearly now? And then are you still expecting Buvidal to be stronger in Q4 than earlier quarters this year?

[Fredrik Tiberg, executive]

Yes. I think regarding the seasonality for Buvidal sometimes this has been, what should I say, disguised by single orders, which is if we have a single country order that comes in, it may. But we see overall in-market sales in the relevant...

[Unknown Executive]

We seem to have lost Fredrik's line.

[Jon U. Alonso, executive]

You there, Christopher?

[Fredrik Tiberg, executive]

Do you hear me?

[Christopher Uhde, analyst]

I'm here. Now we hear you again.

[Jon U. Alonso, executive]

Yes. I can hear you.

[Fredrik Tiberg, executive]

Did you...

[Christopher Uhde, analyst]

I think we lost you at the seasonality sometimes is disguised by single orders from one country or another.

[Fredrik Tiberg, executive]

Yes, that was -- Richard, do you want to follow-up on the rest of the question?

[Richard Jameson, executive]

Yes. I mean the -- actually, the Q3 growth was the same as against Q2 was the same as Q2 against Q1. So we have the underlying growth there. It certainly is seasonal there. We saw a pickup at the end of the quarter as we usually do in September. So we have confidence for Q4.

[Christopher Uhde, analyst]

Okay. And then I guess, why was there a sequential drop in marketing and distribution? And does the CRL impact your plans for the timing of the ramp-up of SG&A during the rest of the year? And then related to that, well, yes, I guess that's my last question.

[Jon U. Alonso, executive]

Yes. So thanks for the question, Christopher. So just twofolds to answer you. On one hand, from a total OpEx point of view, although you asked marketing and distribution. If we check historically, I've been referring to historical patterns. Historically, the OpEx of the company, '23 and '22, Q3 is lower than Q2.

There are mainly 2 reasons behind it. One is seasonality. Our employees go on holidays. Our consultants, they also go on holidays. So we don't get invoicing from the third-party consultants and the holidays of our employees, they go against the accruals that we are reversing. So usually, it's lower and you can see the patterns in the past.

This year, the pattern is also impacted by the fact that in Q2, our employees exercised around 670,000 stock options that the cost of this, they are not any longer in Q3. So when we are comparing Q3 to Q2, that's an impact on the positive side in spite that we have been increasing our investment in the U.S. and in fact that we are still committed to continue investing in the range of [ SEK 0.6 billion, SEK 0.65 billion ] at the end of the year in R&D as we explained in our guidance.

[Fredrik Tiberg, executive]

And I think if you -- please continue.

[Operator]

The next question from Brian Balchin from Jefferies.

[Brian Balchin, analyst]

Just a clarification on the closing [indiscernible]. It seems like you're able to address those manufacturing issues faster than expected. So when you say outcome in December, I just wanted to clarify if that means you've already resubmitted your BLA because it sounds like you haven't.

And then if you can just give us a sense of whether you're expecting Class I or Class II, I think base case is Class II for a 2Q potential approval?

And then second, just on GEP-NET pushout. Can you just share your thoughts on how we should be interpreting that just as I have thought patients would be accruing events at a faster pace given the skew to the more severe Grade 2, 3?

[Fredrik Tiberg, executive]

Yes.

[Jon U. Alonso, executive]

So the first question was clarification about the [indiscernible] last...

[Fredrik Tiberg, executive]

Yes. So I mean what happened, Brian, sorry, is that the inspection was very close to the PDUFA date. And when you do a cGMP inspection, typically, the agency has a 90 days period for addressing the response to the observations and then issuing a classification. And the classification is, of course, the end result.

So what we are waiting for is the manufacturer has responded according to the normal schedule for these inspections. And 90 days will be in the beginning of December when they will receive their classification. And provided that, that classification is satisfactory, which we have to pursue, then we will be able to resubmit the NDA. And as there are no other issues relating, so it will just be an update of the safety database to a new updated date. So that's basically the progress.

And our base case is that this would be a Class 1 resubmission, so a 2-month review period. Should the agency decide that they want to have another inspection, then it's much more likely that it would be a 6-month review period. That's my understanding.

So when it comes to the discussion around the GEP-NET and the progression-free survival. So when we did our analysis to guide for the -- reaching the target number of events, we have done that based on historical matched control. So we have looked at all the studies that we have been able to get data from published and unpublished. And we have made our comparison to patients with a similar profile in terms of Ki-67 and proliferation or grade for that matter. So that has been the outset.

And in the study, of course, we had comparing, for instance, to Clarinet, we had a majority of patients, as I communicated, being Grade 2 and even some Grade 3 patients, whereas in other studies, including then Clarinet, they had a much lower disease severity and only maybe 20%. And I should also clarify that we have patients with Ki-67 above 10, so all the way up to over 20, which is the proliferation rate, we can say, of the tumors. Is that...

[Brian Balchin, analyst]

Super helpful. Perfect. Yes.

[Fredrik Tiberg, executive]

Is pretty clear?

[Brian Balchin, analyst]

Yes, it is. Yes.

[Operator]

The next question is from Viktor Sundberg from Nordea.

[Viktor Sundberg, analyst]

So first on Brixadi, there is a bit of a disconnect, I guess, between the wording from Indivior that you're being impacted by competition from Brixadi. But looking at your numbers, they don't really imply that you're taking massive market share or that your partner is in this quarter, at least, we're taking market share in a way that would lead one to believe that Indivior is losing to so valid that you need to guide differently on SUBLOCADE.

But I guess that has to be the case because there are no other main competitors as Vivitrol has quite insignificant market share outside of the PRISM system. So maybe if you can help us understand what you're seeing in the U.S. at the moment or what you hear from your partner in terms of how you are eating into the market share in long-acting buprenorphine? I stop there.

[Fredrik Tiberg, executive]

I think, first of all, I mean, the majority of patients are not coming from another long-acting injectable, but they are actually coming from the Sublingual segment. So I would say up towards 70% of patients are coming from sublingual treatment, which we are very happy with. So in that sense, you're completely right that we are not eating up the long-acting injectable market, at least not numerically. So that -- and I think that's a positive evolution.

Overall, I think that the third quarter, as I said, looking at the entire market, it was a slower quarter. And that's an important comment in addition to that. Jon, do you want to say anything else about Richard?

[Jon U. Alonso, executive]

No, I get the point that [ Viktor ] is doing. We are growing. We are penetrating with Bexadi, but we cannot comment Viktor on the data another company is doing. We continue penetrating the market. We are gaining market share. In fact, I think one of your colleagues, one of the market analysts has published this morning an estimated number of patients already in the range of 15,000 patients. And these are the data we are tracking.

So we can talk about our penetration and our estimated market share, but not about what other companies are talking about, Viktor. We are sure that we continue penetrating 15,000 patients estimated by one of your colleagues, I think it's a decent amount of patients for a product in the market after 1 year.

[Fredrik Tiberg, executive]

Yes. And overall, I think the general sense we are getting from the market is overall positive, and we are expecting Q4 to be strong. How strong? I cannot say at this time point. We will just have the numbers, and I think we'll be able to give more important -- I would say, long-sighted indications after the next quarter. We're still early on, I believe, in the development. But the U.S. market continues to be very attractive, and I think the possibilities are significant. It's a matter of execution, commercial execution.

[Viktor Sundberg, analyst]

Okay. And my second question is on -- also on SORENTO. So I'm bit worried here that we have a poor sense or at least by looking at historical data, how well the control arm would perform in your study design. But can you perhaps help us understand what exactly you have assumed when you designed the study in terms of median PFS that we should expect from the physician's choice of other long-acting somatostatin analogues?

[Fredrik Tiberg, executive]

Yes. Yes, we can do that. I mean our assumptions from start, so to speak, when we powered the study, as I said, was 0.65 hazard ratio, and we were assuming an 18-month PFS in the control group. And obviously, then you can translate that into the PFS in the active arm, which will then be...

[Viktor Sundberg, analyst]

Okay.

[Fredrik Tiberg, executive]

Yes. Is that okay?

[Viktor Sundberg, analyst]

Yes, that's clear. And maybe I'll sneak one in on guidance also. What's the major reason for upgrading your sales guidance given the slightly softer Q3? Is it forecasted Brixadi sales pick up in Q4? Or is it Buvidal ex U.S. that you think -- that make you confident enough to raise top line guidance?

[Jon U. Alonso, executive]

In the end, the increase in the top line, Viktor is very modest and what it makes us strongly believe on it is the performance of both Buvidal and Brixadi. There is not only one main driver. As you try to point is both products, it's the same product, but both of them, they are performing equally strong we think since the second half of this year. So it's both of them. But again, the top line increase, as I think someone of you have written this morning, is modest.

[Operator]

The next question is from Mattias Haggblom, Handelsbanken.

[Mattias Häggblom, analyst]

I have 2 questions, please. Coming back firstly to the phasing of OpEx. I thought one of the consequences of the [indiscernible] for CAM2029 would be that you paused the build-out of the U.S. organization during the remainder of '24 to ensure that you get the FDA approval early '25 and then you speed on.

But I guess my first part of the question is, what does guidance really imply? Because it sounds to me that you're sticking to what you've said before in terms of commercial build-out as well as the R&D spend at similar level compared to last year?

And then second question related to long-acting GLP-1 for obesity, what comments do you have in relation to Novo's recent choice to partner with Ascendis Pharma to develop a monthly semaglutide for obesity using Ascendis' TransCon technology? And would you mind comparing and contrasting TransCon to FluidCrystal as a platform?

[Fredrik Tiberg, executive]

Yes. I mean, do you want to start with the first question, Jon, or...?

[Jon U. Alonso, executive]

The OpEx. Yes. So we -- on the [indiscernible] impact of our OpEx estimate for Q4, we have always been transparent that the sales force team will join upon positive outcome of PDUFA date, and we were expecting 21st of October. And I think when we were having prior earnings call, we were sharing that the sales force will be joining mid-November, second half of November.

So the impact of postponing this is limited modest in our estimate of the OpEx for this year because it's only 1 month of the sales team on the field. Let's not forget that we have already made public that many of the strategic positions and payer access and market access, they are already on board.

So that's a limited impact in our OpEx estimate. And yes, we are committed to invest SEK 0.6 billion, SEK 0.65 billion in R&D following the development of our pipeline. I think we are already in SEK 560 million as of the end of September. So we think we are going to deliver it. So this is a bit of a summary of Q4 investment.

[Fredrik Tiberg, executive]

And I think we should also comment that we are really continuing to invest in the U.S. buildup. So as Jon said, we are not onboarding the sales force. However, we have very positive signals from the ones that we have identified and continued interest, and we will onboard as quickly as possible. But we have actually built out the organization and have new employees joining since the CRM. So we have a very strong focus and believe in that in the U.S.

With regards to the agreement between Novo and TransCon, I guess I have only seen some comments from a press release that was shared with me by an investor. And I mean, we have our focused strategy in this field. Comparing the TransCon technology to the FluidCrystal one is lipid-based, as you know, which is the FluidCrystal technology, whereas the TransCon technology is based on a hydrogel. To my understanding, it requires the formation of chemical bonds. It's been successfully applied to at least 2 approved products at this stage, a PTH product and also human growth hormone.

I think it's an interesting, however, different technology. But when it comes to the agreement between the 2 parties you referred to, I don't have a comment. We are very clearly focused on our own agenda at Camurus.

[Mattias Häggblom, analyst]

That's very helpful. One quick follow-up. Conceptually, how should we think about R&D spend linked to SORENTO given that it's now assumed to run into late '25, early '26. Is the vast majority of the cost already taken? Or help me think about that at least conceptually?

[Jon U. Alonso, executive]

So when you are talking about the vast majority of the cost, it depends on which are the costs you are assuming. But internally, our assumption is that the latest part of the milestones, they will go with extension of the project, and we will have continued running expenses for more 6 to 9 months, bearing in mind the statement Fredrik made in his letter. So yes, we are going to have additional running expenses, but we are well equipped to finance and to invest on them and still our ambition for 2027 remains intact, there's no change.

[Operator]

Next question from Dan Akschuti from Pareto Securities.

[Dan Akschuti, analyst]

Congrats on the continuous progress. I just have one question that is left, and that would be if you can share that with us, what kind of patients are you getting in the U.S. that have not previously been treated to kind of understand the uptake in that bigger market that you mentioned that is out there. How is Brixadi penetrating into these kind of new patients?

[Fredrik Tiberg, executive]

Thank you so much. That's a good question, Dan. Unfortunately, I can't give you a granular answer on that. I mean the focus initially has, of course, been on the switch patients. I believe that is your kind of traditional -- that's where the large pool of patients is. There's a lot of activities going on in the U.S. though, I mean, in terms of investigator-initiated trials and so forth involving also even going into the ER setting.

But I would say that it's -- at this time point, it's still a small fraction of the overall number that at least from the data we have seen, and we have access to public data we have access to. It's still a small fraction if you're looking at the direct initiations. But it's a big opportunity.

[Operator]

The next question from Oscar Haffen Lamm from Bryan Garnier Banarer.

[Oscar Haffen Lamm, analyst]

Regarding the upcoming semaglutide trial, I was just wondering how many patients in the Phase I you plan to recruit? And if you would already be able to guide on how much that would cost approximately? And then maybe as a quick follow-up question, how do you think in terms of later-stage clinical development plan for this trial -- for this product?

[Fredrik Tiberg, executive]

So in terms of the number of patients, I can only refer to -- we haven't gone out with any information. But if you look at our similar trials that we have conducted that are dose escalating trials and, in this case, also with the comparator, you're not talking about 10 patients, but rather up towards the 100 number. So I don't think we have disclosed anything more than that, but that's the order of magnitude.

Aside from that, we have not gone into our detailed continued development or long-range plans for this. We are conducting the study, and we will be looking at the next steps along with the performance of the Phase I and other activities that are ongoing in this space.

[Operator]

The next question from Erik Hultgard, Carnegie.

[Erik Hultgård, analyst]

I have 2, if I may. First, on Buvidal. Can you say something about your confidence level in hitting the 100,000 patient target that you have set up for 2026? If we look over the past, I guess, 3 years, it's been quite steady increase of around 3,000 patients per quarter. And I assume hitting that target would require an acceleration to around 5,000 patients per quarter.

So I was just wondering if you could highlight the sort of key catalysts or events to get to that accelerated number of new patient starts?

And then secondly, on Brixadi, maybe I understand and acknowledge that you're not in control of the launch and don't have all the details. But I was just wondering if you could share something about new market NRx shares for Brixadi compared to SUBLOCADE in the U.S. and how that has changed since the last quarter?

[Fredrik Tiberg, executive]

Yes. With regards to the first statement, I'll leave that over to Richard. But I mean, we have not changed. We have still -- our target is still 100,000 patients. And obviously, there are 2 components of that penetration and market expansion.

So maybe, Richard, you can go in.

[Richard Jameson, executive]

Yes. I mean what I can say is certainly the demand for Buvidal remains high. We see from clinicians and from patients that we get growing numbers there. There are some hurdles at the moment that we're addressing around funding and reimbursement in new markets. And I mentioned earlier that we've got some new markets that we think will come over the line at the end of this quarter.

So our plan is based on addressing some of those hurdles that free up the access because we know where we have freed up the access, the penetration is very high. So you can look at some of the countries like Australia and the Nordics where there isn't a hurdle, we see high penetration. So our activity now is to address those hurdles so we can grow faster.

[Fredrik Tiberg, executive]

And one thing we are doing also in addition to that is that we have a huge opportunity in the methadone market, and we are working now increasingly with a focus on the -- both the methodology for switching patients easy and conveniently as well as building up that market because we believe that is a large opportunity going forward here.

So can you repeat -- I didn't hear about the Brixadi comparison you wanted, Erik. I missed out on that. I'm sorry.

[Erik Hultgård, analyst]

No worries. So my question was basically around new prescription share compared to SUBLOCADE in Q3 compared to Q2. I acknowledge that you don't have all the details maybe, but if you can share what information or intel you have from external market research, that would be helpful?

[Fredrik Tiberg, executive]

Yes. Well, I mean, the market share is growing. It's been -- we can say that from a total patient perspective, it is above 20% at this point in the U.S., which I think is a good number and higher in -- what should say, the new-to-treatment group or new-to-treatment population.

But I don't think I can share anything more detail because the data sources are -- we are having access to a few data sources and it's difficult to give more precise information at this point. But that's the order of magnitude.

[Erik Hultgård, analyst]

Great. And just a follow-up on the methadone sort of converting patients from on methadone, when do you expect that to happen? Is there a specific event? Or will that be gradual progress over the course of the next year?

[Fredrik Tiberg, executive]

Yes, we are progressing both from, I would say, interaction because, I mean, there is -- if you're looking at the labeling and so forth, there is -- it's a little bit more cumbersome. The approach right now, you have to come down to low methadone doses before you can switch over to Buvidal or another buprenorphine treatment.

So there is a lot of activities going on in that area to try to develop the methodology, but that's kind of outside this, we are focusing on -- and there is a large demand among methadone patients to switch to a long-acting treatment. That I -- that's -- it's from a commercial standpoint, that's our focus.

[Operator]

Next question from Patrik Ling from DNB.

[Patrik Ling, analyst]

Great. Just 2 short ones. Just wondering, I mean, you mentioned that there's been an independent safety committee that has looked at safety in the SORENTO trial for -- at the 6 points in time. Have they also, at some point, looked at some sort of futility analysis for the trial?

[Fredrik Tiberg, executive]

Good question. We don't have any futility analysis in the trial, Ling. So they are exclusively looking at safety data.

[Patrik Ling, analyst]

Okay. Great. Understood. Then my second question is, I mean, since you're guiding on the pretax profit, what are your thoughts on interest rates coming down globally and you have a huge pile of cash. I don't really understand actually why you're guiding on pretax instead of operating profit. But maybe you can share some light how you think we should think about your large pile of cash?

[Jon U. Alonso, executive]

You are asking 2 different questions. I'm not sure which is the one you are raising, Patrik. But I will try to reply. I'm here and I'm listening to you. So sorry for that.

But your question is the amount of cash the company is building up a solid position, and we did an ECM in January. The use of proceeds was very transparent. It was written there. And we are doing the job to accelerate GEP-NET as much as we can. We are trying to enhance our capabilities in manufacturing area.

And we continue the search of trying to find assets that they can be synergistic to us that so they can accelerate our growth, also increasing the return of investment of our sales forces because then we have also process the capacity for another product.

To find these assets, it takes time. It's not difficult to find an asset. It takes time to find the right one and with quality. And when this comes, we will be prepared to execute the transaction. So that's our strategy for our cash. Our guiding principles for capital allocation have not changed. So they are transparent. So that's why we are building up this, Patrik.

[Fredrik Tiberg, executive]

But n we take -- we'll take your [indiscernible] continue.

[Patrik Ling, analyst]

Sorry. I mean that was not really what I meant. I mean it's kind of unusual that you guide on pretax because in your case, right now, you have a big pile of cash. And when you do an acquisition, you will probably not have that. So the question is really why are you guiding on pretax rather than on operating profit?

[Jon U. Alonso, executive]

So the question is when we prepare this year financials, we thought it would be easier to provide pretax because it's closer to the earnings per share. Bearing in mind the deferred tax losses that are in our balance sheet, which is transparent information for any shareholder.

The main dynamic on our P&L is gross margin, and we are very transparent in the gross margin performance. I think we have been improving it quarter-on-quarter. And the second one is surplus control, and the third one is cash management, but the cash is temporary until we are able to deliver on what we have promised.

So we don't see any big difference, Patrik, on operating result or on profit before taxes. In the end, what we are focusing in the earnings per share for the shareholders.

[Operator]

The last question, I don't have the name here. Please state your name and company.

[James Osborne, analyst]

It's James Osborne from Stifel. Just firstly, a clarification. I think you believe you said that 70% of patients coming on to Brixadi were switching from sublingual formulations. If you could just clarify that, that would be really helpful.

And then secondly, just sticking with Brixadi in the U.S., perhaps if you can give some color on Brixadi's progress within the criminal justice system versus other channels, as you say the switching and new patients, if there's any color there, that would be helpful.

[Fredrik Tiberg, executive]

Yes. I think in the first case, this is public data from a public data source, so I can confirm that. And when it comes to the second question, I don't think I can provide, unfortunately, any granularity as to the contributions from the different channels at this point. I'm sorry to say. But on the first point, I can confirm your question.

[Operator]

There are no more questions at this time. So I hand the word back to you, Fredrik, Jon and Richard, for closing comments.

[Fredrik Tiberg, executive]

Thank you so much, Einar, and thanks, everybody, for your attention today. I particularly want to thank you for coming with great questions, which makes this much more interesting event. So thank you all for that. And looking forward to the next update in the Q4 call coming here. So hopefully, that will be a very strong result as well. So thank you very much.

[Operator]

This concludes today's call. You may disconnect your lines.