Orexo AB

STO:ORX

Earnings Call Transcript 2022-Q2

[Operator]

Hello, everyone. Good afternoon, and welcome to Orexo's Q2 Presentation 2022. [Operator Instructions] Today, I am pleased to present Nikolaj Sorensen, Joseph DeFeo, and Dennis Urbaniak. With that, I will hand over to Mr. Sorensen. Go ahead.

[Nikolaj Sørensen, executive]

Thank you very much, and good afternoon to all of you in Sweden and good morning to those of you in the U.S. So when I drove in this morning to the office, the Swedish flag was up in front of the building and lack of humbleness, I thought that was because of our Q2 report, which we actually thought was quite good internally. But now looking at how the share price has moved during the day, I realized that, that was not shared by the stock market and also that the flag was actually due to the Crown Princess first day. So that cheeks me a little of humbleness. But I actually think that from an Orexo perspective, we have a decent Q2 report or actually good Q2 report on several numbers.

We have some good development in the sales, not only due to foreign exchange, but also see the particular ZUBSOLV has shown some stabilization. We have moved the other direction on our cash position, which has strengthened from our Q1 to where we are right now, and we continue to see some strong profitability in the U.S. I also realize that there are some areas where we still have to show improvement. But I think there are a lot of good stuff moving at the moment and we're doing that from a very strong position from an Orexo perspective.

So moving into the agenda for today. I will talk a little about the key achievements. I will provide a business update on U.S. Pharma and our pipeline. And we have Dennis Urbaniak with us today to talk about digital therapies, in particular about the fantastic news we had yesterday where we were branded reimbursement on the veteran as best veteran supply schedule, and Dennis will talk a little more about what that means. Joe DeFeo will then talk us through the financial overview, and I will summarize from a company perspective on future value drivers.

So moving into our key achievements for the company. So I think on the headquarter pipeline perspective, the positive thing is that everything proceed as planned. With our OX124, we are planning to file it in the second half that will now be Q4. Our OX640, we have the first participants in the exploratory trial, the first human trial has already been dosed last week, and we have all the participant has been named, so we should be ready to complete this in time during the summer. And we've also seen the first sale of ZUBSOLV outside the U.S. in terms of prescriptions in Spain and Sweden. So our ZUBSOLV sales in Europe and then hopefully soon also some bright income in Europe can be expected.

On the U.S. pharma side, we have seen ZUBSOLV sale stabilized, actually a little growth in the quarter over Q1. That's positive. If we look at our market access, we've seen both New York where we added in March, and Kentucky where we added last year continued to show strong growth from relatively a small base. But again, it is early days, in particular in New York, where the field forces first become in place during the second quarter.

And then we have a very strong financial performance in the U.S. We have seen a little increase in our selling expenses as we have recruited reps back into the organization after COVID-19 and also the investment in New York. And in digital therapies, the arching or the shining star here is that we got the reimbursement in place with Veterans Affairs [ et cetera ]. Future accomplishment from Dennis and his team, we have expected to see some commercial sales for Trinity Health during the quarter. Dennis will talk a little more about that. And I'm happy to know that they are in good progress, and they have identified the first patients that have reached [indiscernible] deprexis and vorvida. And also, we have seen a very good development on our multiyear trial program with now moving 650 systems in the -- that Dennis will be talking about that later also.

Very short on the financials. We have -- in financials our ZUBSOLV revenue growth, a lot of that is explained by foreign exchange, but also favorable price development we have seen compared to last year, both the price increase and a more favorable payer mix. Our operating expenses are stable from a year ago, and that effect despite a very unfavorable foreign exchange development, what helps us on the revenues, of course, cost us a lot of our expenses are dollar-denominated. And we see a lot of these -- our ability to control cost is coming from synergies in the U.S. between U.S. Pharma and PTAs.

And again, our U.S. Pharma EBIT margin is exceeding the 50% guided with 65% (sic) [ 55% ] year-to-quarter. On the cash position, we had a little more challenging Q4 and Q1 because of changes in working capital. And I did say last quarterly call that we expect that to be somewhere, say, mitigated in the second quarter, and that is what has happened.

We've seen our cash and cash equivalent position that is short-term investments, and we will talk more about that later, which have improved with SEK 30 million.

So coming into U.S. Pharma, we have -- our U.S. Pharma volume has been stabilized. We have maintained so far all access and that wherever that we say, agreement with payers for the second half of '22. And also those who have been published in '23, we are not aware of any changes to '23, but some of it will be published a little later. When we come to our field force, we have increased our investment in the field force during the second quarter in New York, and that is -- we've also filled the vacancies that we have after COVID-19.

During the COVID-19, when we got vacancies, we didn't backfill them because we have [indiscernible] reaching the positions. And then finally, our field force is continuing. Field force is working with the modia campaign, and that has helped us a lot and we'll show a little more numbers on that shortly. Overall, our development is slightly past just 0.3%, and that is driven by the opioid segment, where we have Kentucky and New York and also the -- we have the non-reimbursed market, which has grown a little. And that is mitigating the decline we've seen in Humana and United Healthcare. However, United and Humana are -- it's a slower decline than we have seen for the last 2 years. And actually, in the second half of the second quarter, we have seen a very stable development.

Looking at Kentucky, we continue to see a pretty good growth over quarter-over-quarter growth with 18% growth in Kentucky from a relatively small, but growing base. And we're basically seeing Kentucky growing for every quarter since we're added last summer. It does take time to get through into -- when you get a new reimbursement in new geography in the U.S., we are seeing -- we need to ensure that the products are on the shelf in the pharmacies. And that is what we need to see in Kentucky, where we have to work with the pharmacies to get it on the shelf. So it will take time before we get the full effect, but it has been pass-through contributor. And the same in New York, where we added in March, we have seen 22% growth quarter-over-quarter.

So within modia, and our modia development, we have some data here showing that when we are adding modia to a sales call, we have seen the access to the position is improving significantly. So when we have modia and ZUBSOLV together in a sales call with a clinic, we see that we get to the doctor in 61% of these calls versus when we just have ZUBSOLV, it's 40% of the call. And if you go before COVID-19, we actually met the physicians in most of the calls. But during COVID-19, due to restrictions, due to a lot of decisions are moved to telemedicine and also a lot of them are cautious about meeting sales representatives, it has been much more difficult for us to get to the physician. And now when we're adding modia, you can see strong synergies, which will benefit also ZUBSOLV as we move along.

So taking a more holistic perspective on what is it that we believe that we're building right now. So we have a portfolio today of 3 unique products. One of them is coming weeks 1 to 4, but we now have ZUBSOLV and modia, where, together, we can offer a much more comprehensive solution to the physicians when they are setting up the treatment for the patients, both with medication, with, when you say, psychotherapy through modia and also soon with [indiscernible] sponsored for a rescue medication. And for us, that is giving us a unique ability to reach out to larger stakeholders, larger hospital systems states in the U.S. to have a dialogue of how we can support as a company to drive the efforts against opioid dependence.

Coming into the overall market development, we have seen a continuous, a little flattening of the sale, the development we saw a slight negative development in Q1. It has grown a little in Q2, but we are still on a single-digit growth with 5% compared to last year. We still believe that some of the effect of this could be explained by COVID-19. But we are now seeing so many activities on a federal and state level that we're still optimistic that we should see an increased growth in the market as we proceed.

And for Orexo specifically, I think for us to be able to win when we see a growing market, the market access for ZUBSOLV is incredibly important, and there, we have maintained our market access position. And when it comes to modia, we have already now seen how modia added to the portfolio is helping us in the work which ZUBSOLV is doing.

Coming to the headquarter pipeline, still is relatively short. So as I said before, OX124, we are on track to be filed in Q4 in '22. One of the things that is when you're using a device is you need to do a human factor study to show that people can use the device correctly. This has been scheduled -- rescheduled to happen down in Q3, and that cause comfort and uncertainty. So if we have a delay, I believe this is one of the -- one of the more significant risks into this is because when you're doing a human factor study, you need to be sure that the people participating are using the nasal device correctly, put it up into the nose, get the dose into the subject, which will be a doll in this case. So the human factor is that -- there is a human factor [indiscernible], of course. So we're doing this in Q3.

Then we have OX640 where we have the first patients have been dosed in our exploratory clinical trial, and we have the results expected in Q4 '22. And finally, we are exploring on OX640. This is outside our disease area focus. So we are looking for opportunities to go into partnerships with this product when we're receiving the results on the clinical trial. Then I will open up to Dennis Urbaniak, who will talk a little about RT2 therapies. So Dennis, please.

[Dennis Urbaniak, executive]

Thank you, Nikolaj. We'll go straight into Slide 15 on Digital Therapeutics. And starting off, if you think about the ideal scenario to build a digital therapeutics business. There's 3 core factors, obviously, reimbursement and access, high-quality products, which we have with our GAIA platform, but we also need awareness and trial because that builds the demand that ultimately drives sales. And I'm very happy to report that we continue to make strong progress, first, in the overall portfolio in terms of the numbers of users that have accessed our therapies. And while we have a couple of key ones driving volume, it's also nice to start to see the diversity of entities and channels where the products are starting to be tried and used. And as Nikolaj alluded to earlier, our execution of the modia early commercial plan as well as the randomized clinical trial is right on track, and we're incredibly excited about the strong response we've seen in the market to modia in both of those areas. Obviously, with modiaONE, we get a lot of feedback from our users directly. And I can tell you, I've been in the field speaking to physicians and office staff myself recently. And feedback from the patients and the physicians on modia continues to be quite strong.

So we really see this fitting a very important need in the marketplace for digital therapy with opioid use disorder.

But with that then, as I said, it's demand, high-quality products and reimbursement. And if we go to Slide 16, 2 critical reimbursement steps that we've taken to improve our overall access position. One, with Trinity Health in North Dakota, they continue to be a very strong partner. I'm very happy to report that all the operational processes, which I'll share with you a little bit more detail on what we've been doing, are complete. We are moving now to physician training. I spoke with the CEO this week. We'll have our first patient in this month with a strong plan to scale as we go across the back half of the year. And I'll share a little bit more detail on what that looks like. So Trinity is a terrific partner and a great example of a model that we can take across this hospital business.

And then, of course, the news this week with the Department of Veterans Affairs, this is a significant access position for us around deprexis, which really aligns to an important need within the VA. And we now have significant access to a population with reimbursement coverage for deprexis. So this is exciting. And I'll share with you our early steps in our plan to build the business within the VA. But let's jump back to Trinity. It's on Slide 17.

Just as a reminder, Trinity Health, North Dakota, what you see here on Slide 17 is a map of Trinity's catchment area. And this is important because they are a network. They have an anchor facility in Minot, North Dakota, just under 500 beds, but they service an area through their hospitals and clinics that's almost 500 miles wide. So it's a massive geography. They have a lot of remote patients and people that have to travel for cure. And so the idea of digital therapy has been a very attractive one to the training management and then working with operations, clinical and executive staff, we see a lot of enthusiasm for that.

The model here that we're creating is based on the American Psychiatric Association's collaborative care model.

And that's important because this collaborative care model is an evidence-driven approach and it has specific reimbursement pathways in the marketplace today that our therapies fit within in terms of satisfying the counseling criteria. And it also recognizes the time and the effort that the hospital, hospital staff and clinicians put in managing these patients. This team-based approach is a bit of a different operational approach than the standard that a lot of facilities have in place. And a lot of the work that we've been doing with Trinity has been establishing these health care teams, one in the area of depression, one in the area of problem drinking. We will move to opioid-use disorder later as we get these first 2 up and running. And implementing those processes, and we now have physician training scheduled starting this month and next month, and we even got a call from them this week to add 6 more doctors to the platform. So a lot of hard work and effort in partnership. But what I'm excited about is, not only how do these therapies will help benefit the patients in need within the Trinity population, but this will inform an approach that we can en-replicate in similar centers across the U.S.

There's about 5,000 community hospitals. So there's a sizable opportunity there. And then, of course, from Trinity, moving to Slide 18, the news for this week around the VA FSS. And specifically, what this means is we will now have access for deprexis with 3 distinct groups under the umbrella of VA FSS. Our main initial priority and starting point will be in the Department of Veterans Affairs, which is a large integrated delivery system that has a combination of hospitals and outpatient types of care. And these are organized regionally into what's called a VISN, a Veterans Integrated Service Network. There's actually 18 of these around the country, and they serve over 9 million veterans in that care delivery system. So this is where we're going to start. I'll show to you in just a second, our plan.

However, this contract also gives us access to the Indian Health Service and to the U.S. Department of Defense. And so each of these entities are quite sizable on their own. Each of them have their own unique makeup and serve a number of veterans and employees and family members. So it's a large complex system, and we're going to take a very targeted approach. One of the critical things about VA FSS to be successful is you have to really follow their processes and kind of speak their language, if you will. So on 19 -- Slide 19, I'm going to show you here, our plan.

So we're in right now that first 30 days. We literally got the notice of confirming the contract this week. There's some very important administrative setup and logistical steps that we need to take over the next 1 to 3 months. And this is understanding of the rules for each VISN, for example. There's some internal communication components, the permissions we have to engage with each of the centers, how we can communicate the products' distribution, some of those basic administrative setup and logistical work.

As you get into the VISN, each VISN has their own way of operating that you need to adhere to and work with, but we now have full permission and access to do that, which is terrific. And then as we move out of that logistics and setup space, we'll start to implement deprexis within specific targeted VISNs. So we have 2 selected from the initial from the total 18 that we know based on their appetite for innovative therapies, their need for mental health and their proximity, they're good starting points and they are influential to the other VISNs. So we'll start in 2 and 15. And then as we establish deprexis within each of those areas, then we will, in Phase IV, begin to expand more broadly out across the rest of the VI. And the environment here is perfect.

The VA has shown that they are very supportive and very responsive to digital approaches during COVID. They actually immediately shifted to telemedicine, and do about 43 million telemedicine visits today. So their members are used to using digital approaches. They're open to it, which is great, and there's a tremendous need for mental health and substance use services for the veteran population. So we're excited to have the opportunity to serve this group. We're going to take a focused, targeted approach to build the business correctly, follow the processes and then move to scale as we move into next year. So with that, that's a wrap on the DTx summary for Q2. And from here, I'd like to turn it over to Joe to talk about financials.

[Joseph DeFeo, executive]

Okay. Thank you, Dennis. When you go to the Slide 20, which is our revenue. You could see actually the ZUBSOLV sales actually grew quarter-over-quarter, which you could see on the bottom. But when we focus on the top first, our total revenues are higher in Q2 of this year versus Q2 of last year, and the first half is also higher than last year. Part of that is exchange, but also part of that is due to the stabilization of ZUBSOLV, which we show on the bottom of the slide versus Q1 we're actually up. And if you focus on the 3 bars after the Q1 2022, you will see that our demand has actually grown versus Q1. And we do have some negative impact from returns adjustment, but that was because, in the past couple -- 2 years, as you know, we were able to optimize our supply chain very efficiently and reduce our returns reserve significantly. So we successfully accomplished that.

So when you look versus prior year, it would have negative adjustments there. But that's more than offset by the positive exchange rate that helps out our sales as well. So good quarter. We're stabilizing our ZUBSOLV revenue and moving forward.

We do anticipate ZUBSOLV sales to grow in the second half of the year.

Going to next slide, our P&L. As I mentioned, our revenues are up and our gross profit is up. When you look at our operating expenses, we are focused on driving future opportunities, which include OX124 that we're expecting to file later this year, and spending on that, we also have a modia study going on, and we're also developing OX640. So our investments are focused on future growth drivers. You also -- although operating costs are looked just slightly below last year, about 10% of the operating cost is due to the higher dollar. So that really plays and the fact that when you see the operating costs look stable versus last year, without FX, they would actually be down about 10% or 11%, and that affects our EBIT as well.

Net financial items where you could see a big positive versus negative last year, and this is due to the fact that the majority of our cash is in U.S. dollars. And with the strong dollar, that has given us a positive effect there. We've also, as you'll see in a second, we started to invest some of our money in short term and stable investments to earn some of the interest rate increases that we started to see.

So overall, a positive quarter from a financial standpoint. And also, as Nikolaj mentioned earlier, our U.S. EBIT, once again a very strong quarter, the margin was 55%. So we continue to see strong profit out of our U.S. pharma business.

Next slide is our cash flow. Cash flow from operating activities was positive for the quarter, but negative year-to-date. And as we talked in the first quarter, we did see a negative impact due to working capital. Well, as Nikolaj and I mentioned last time, that does swing and, in this quarter, we saw a positive impact from working capital. So that helped us achieve a positive cash flow from operating activities. And you can also see that we've invested some of our money in short-term activities. Basically, we're investing both U.S. dollars and also some SEK that's not currently needed, we're actually investing in what you would call later, so 3 months, 6 months, 9 months, 12 months. And as each of those roll off, we decide how much we want to push out and invest more. That helps us make sure -- we ensure that we have enough money for our business needs and also take advantage as interest rates move.

And as you probably know, interest rates have -- even since we started investing last month, have moved even higher in the U.S. and they're anticipated to move even higher now that the inflation report came out with a high 9% inflation. So we are investing approximately 65% of our money. We do not speculate on currency. The predominant amount of our business, both our U.S. pharma business, our DTx business and the anticipated launch of OX124, are all in the U.S. So we keep sufficient funds for our U.S. business.

We also keep sufficient fund to fund our Swedish business in SEK. So that's -- you could see from our cash position. As Nikolaj mentioned, we actually increased our cash position from the end of Q1. And you could see in the last column, our liquid funds was SEK 504 million. And right now, they're at SEK 468 million. So we've been able to keep our cash usage to a minimum during the first half of the year, while still moving forward our investments.

With that, I'll turn it back to Nikolaj for the legal update. And then the following slide was just our outlook, we're reaffirming all of the things we've mentioned before in Q1. Nikolaj?

[Nikolaj Sørensen, executive]

So on the legal side, I think the 1 news is that we now have a date for the district court hearing for our ZUBSOLV patent dispute with Sun litigation [indiscernible] pharmaceuticals, and that is now set to the first full week of November, so November 4 to November 11. This is earlier than we had anticipated. Half of it is due to the shift of judge so we have got a new judge some months ago who had a clean calendar, so we were able to come faster than we first anticipated. This will also mean that we will see an increase in the expenses during Q3 and early Q4 for the patent litigations, and expenses that were otherwise was expected next year.

However, reviewing our OpEx guidance, we still believe that we can be within the OpEx guidance. The positive part is that we will basically have the end of the expenses for this IP challenge in November. On the Subpoena case, nothing has really happened during the last quarter. On the financial outlook, we have reaffirmed this, and we have no changes to this. And the only thing we have to review is whether we could still manage the group OpEx given the rescheduling of the Sun litigation process, which is a quite costly process and also the FX effect on our OpEx, but we still believe that we would be able to do this. We are optimistic that we will see the market for ZUBSOLV to increase from the current 5%. So we see a slight higher growth in the second half and also that we will see ZUBSOLV have a good growth opportunity, if you can compare the second half of this year compared to the first half, partly driven by the opportunity in New York and to see new growth in Kentucky.

So looking forward from an Orexo perspective, I believe we continue to have a very strong and profitable U.S. pharma. This is the basis on the financing of the company, both in terms of our continuous profit contribution. But it also is an important foundation for the launch of both modia and OX124. But we see that with the U.S. pharma, we have a very solid ground to stand on.

We have a pipeline that is with OX124 is quite close to enter the filing stage with FDA. And with that, we'll enter market north of -- which is worth north of $400 million. But the platform behind OX124 has turned out to be incredibly valuable for a lot of other APIs. For example, epinephrine and OX640, where we're expecting to get clinical results during the second half of this year. And also for other products outside Orexo, we have an ongoing dialogue, and we're even doing a feasibility study for an external company right now on the platform.

And then finally, with digital therapies where we recognize that it has taken some time longer than we anticipated. It has been more complex than we expected. We have been fortunate to have a partner like Trinity Health, who have invested a lot of resources together with Orexo to set up a process and care program where we can be integrated in. And now, we finally expect to see the first patients coming through during this month. And that will enable us to build, both within Trinity, but also to other customers. And then, of course, we have our [ buprenorphine ], which is a fantastic accomplishment, but something where, as Dennis explained, there are some administrative steps that needs to be in place before we can [ lift ] from where we are right now.

With that, I would thank you for your attention for this last half hour and I'm open up for questions. And we have received some questions online and also, if I may, but I will open up, operator, for any questions piled up on the call before I check the questions that we have received.

[Operator]

[Operator Instructions]

[Nikolaj Sørensen, executive]

Okay. While we're waiting, I would like to comment some of the -- to some of the questions. We receive some questions on the mail, and I will take this first. So the first question we have is how will the FX rate with a weaker dollar from where we are right now, how we will act if the FX rate has a weaker dollar compared to where we are right now regarding our cash position? If the dollar weakens, does that affect your ability to execute your goals without refinancing? So Joe, I will ask you to answer this one.

[Joseph DeFeo, executive]

Okay. So first of all, if the FX rate were to weaken, currently, we have sufficient funds in SEK to finance our operations in Sweden. And obviously, we have a lot of money in U.S. dollars. We don't speculate on currencies, as I mentioned. We keep our current money where we expect our investments. And right now, we're -- I just looked this morning. If you look at a 3-month U.S. treasury, the rate is 2.3% and the STIBOR is just under 1%. So rates are significantly in favor of the U.S. dollar. All that -- all else being equal, that will be favorable for the U.S. dollar, and there is an expectation for rates to go higher as clearly the U.S. Fed is being more aggressive than the European central banks.

But like I said, we don't speculate on currencies, and it won't affect our ability to execute our goals because, as I mentioned, our DTx investments and then also OX124. And also, if you look at the legal expenses, they're all in U.S. dollars. So we'll keep a sufficient amount of dollars. Yes, it might make our cash position fluctuate some, but we're confident we're in the right position. We also have investment's that we've been making as I mentioned, are in the latter of 3 months, 6 months, 9 months, 12 months. And as each one rolls off, we decide whether we're going to push that out another year or whether we're going to keep some of the money or convert it into the opposite currency when it comes through.

So we're keeping short-term flexibility, and we're also able to earn decent money and take advantage of the exchange rate at this time and finance our -- finance our goals.

[Nikolaj Sørensen, executive]

Thank you, Joe. So next question is for Dennis. It's kind of, you guided in your year-end report that revenues from DTx would increase in Q2, which did not realize. Where -- any new guidance for H2, and your revenues come from Walgreens in Q2? Dennis?

[Dennis Urbaniak, executive]

So thank you, Nikolaj. So 2 key drivers to the Q2 performance in terms of sales. As we mentioned, the main things we identified in the last quarter were Trinity getting started and Walgreens. On Trinity, as I shared, the operational processes were still being put in place and finalized within Q2. We're now moving to physician training. And those steps have to occur before a patient volume comes in.

We do expect initial preliminary patients this month at Trinity, and then we do expect those patients volumes to grow, starting with the practice and then with vorvida through the second half of this year. And all of those patients will be reimbursed patients to the model that we've implemented. So at Trinity, we do expect that in H2.

Specific to Walgreens, as a reminder, Walgreens is a partnership with Sober Grid. Sober Grid has experienced, I would say, some fairly significant management changes internally within the organization. It contributed to a little bit of things slowing down as they were sorting through that. The good news here is we have maintained a very strong partnership with Sober Grid. And just last week, our team has really been driving a dialogue with Sober Grid and Walgreens, looking at ways to leverage Find Care.

We have -- the benefit of working with Walgreens is we have a proposal with them to look at a store-based campaign to complement the online efforts where we can put some signage and some advertisement at the point of sale around common areas and test that.

And so we look forward to implementing that and to help that inform how we could drive more targeted pull-through within Walgreens Find Care as we go forward. So that will also initiate, later in the second half, with learnings probably towards the end of the year that we can apply as we move into '23.

[Nikolaj Sørensen, executive]

And we have one more question, but I can take that, also could've gone on to you, Dennis, but it's when will we see the first sales from what we are expecting that to happen during the second half. Right now, we're working with several decisions on implementing a reimbursed system for modia also.

And then to some other questions I've received online. One is that can you discuss opportunity and your approach regarding partnership with amorphOX, amorphOX platform project? I can do that. We are talking to other companies, both in terms of small molecules and larger molecules. And the approach we have is simply we will do a feasibility study on the amorphOX technology and see if it works from a chemical perspective. And then the partner would need to test it from a clinical perspective. If they're moving into clinical, that will, of course, be based on an agreement between the companies, which would be published.

And what we are doing right now is we do have one ongoing study right now, actually in the office for a U.S.-based company on a small molecule, where we're testing whether the amorphOX platform could work for their product. If it then moves on, it will become some kind of traditional license agreement where we will be paid some milestones, and that would probably be a royalty in the back end, all depending on how much risk we are going to take in those projects and what kind of project it is.

Then we also have another question here. The main risk to the time line for OX124 was human factor study, and what kind of risk are we talking about? This is a study that has to be done for all medical -- technical devices that are to be used by, say, lay persons, so people on the street. So what we need to do is to take a certain number of people who have no background in pharmaceuticals, give them the device and they have to -- we have to test that they can understand the instructions and use the device as intended.

So for example, if they should come across a person with overdose, they should be able to get the dose with the device in the correct fashion. We are, of course, testing this on -- in several different ways to ensure that we have as good instructions as possible. But in the end, we need to do a study. And that is a human factor with a random group of people, there's always some uncertainty to what the people could -- how they could use it.

And we have seen some strange examples during the first trials we have done with lay persons where people have used it in the run rate, which we, of course, have done everything we can to mitigate by making even better instructions on how to use it. But there is always a risk when you do these studies that a couple of people are misunderstanding the way that they're using the dose and that, that could result in the negative outcome.

Then there's a lot of questions here, and there's one that Mylan is a partner for marketing and sales [indiscernible] in the U.S. has OX640 is a head-to-head competitors to Mylan's Hevia in the U.S. as well in the U.S. Mylan's business is to see that the optimal partner for Orexo OX640? We are not planning to reach out to them within the development of OX640. We considered that hostile towards Mylan, an existing partner to Orexo. First of all, amorphOX is a very small product for Mylan. So I don't think anyone on Mylan's sublevels were really of the product. And we are, of course, looking at Mylan or Viatris because Mylan was acquired by Pfizer, who then spun off the part of the business, which is now called Viatris. So we have a discussion with them. I don't see that there's any controversy of them also looking at this product together with [indiscernible] should be on the list of our partnering opportunity.

Then we have some comments about how we are growing in Kentucky and New York, but still have a slight decline in our U.S. sales in the quarter. So how does that come, we are growing in one, we have to lose and some others? I think the basic here is that both Kentucky and New York are both growing. Kentucky has been growing quarter-over-quarter. But remember, when we started in Kentucky, we had a very -- we didn't have any sales person, and I've never had that in Kentucky. So we have to build everything from scratch. So they're coming from a small base, showing good double-digit growth quarter-over-quarter. But at the same time, we have a large part of our business has been for years. And even though it's diminishing, it is still a quite significant part of our business, it's within United Health Group and Humana.

So the increase in those 2 are somewhere outweighed by the decrease in Humana and United Health Group. Now this quarter is actually the first quarter for quite a while where our overall demand increased compared to last quarter, and that is due to a slowdown in the decrease in United Health Group, but also a positive development in our other plants, and they are definitely Kentucky and New York as they are important drivers for that growth. But even large players like CVS Caremark and ESI have also shown a positive development in the quarter.

Then we have a question about when deprexis will be available in Italy and Spain? So we don't have the rights for the deprexis in Europe, and it's noted by GAIA, together with different partners in different parts of Europe. So I'm actually not aware of the plans for deprexis in Italy and Spain.

Let me go here, see what we have more. So what's happening in Kentucky, and I have answered that question, I believe a couple of times now. Those were all of the questions we have received. Any other questions on the call before we hang up?

[Operator]

Yes, we have received 2 questions from the telephone line. The first question comes from an anonymous speaker, which line is now open. Please go ahead.

[Nikolaj Sørensen, executive]

Okay. Anonymous speaker remains anonymous.

[Operator]

Yes, we will take the next question, which is from [ F.N Levana ] from Redeye.

[Unknown Analyst]

So I have a few questions. And the first one is, when do you believe we will be able to see the effects and results from your hard work with Trinity Health regarded intensifying a reimbursement path base for deprexis and vorvida in terms of revenues and profit?

[Nikolaj Sørensen, executive]

Thank you, Ethan. So we are expecting the first patients to come in now during July. And as Dennis said, they will be fully commercial, they will start with a smaller group just to ensure that the process is working as it should be. The majority of the payment will be done upfront, and that is really the confirmation we are looking for that works up. So we do expect to see sales from Trinity Health coming in Q3, and then it will build over the next quarters. And that, of course, depends that we don't see any hiccup in the administrative process, but we have been very thorough in the work which Trinity Health has been one of the reasons why it's taken 2 times. So this quarter.

[Unknown Analyst]

And after the launch of OX124, and in light of Orexo having data force in the U.S., what are your thoughts on Q2 sales and the marketing costs?

[Nikolaj Sørensen, executive]

So OX124, it is a product that would require some new resources compared to where we are right now. But I do know that the makeup of Narcan when they started in the U.S., being an Irish company, the entire organization, I believe, was around 10 people. And some of those 10 people are, of course, overlapping with people we already have. So I don't believe that this is a major addition to the sales force that we have today. At least we are not planning, we would not be starting with a big investment. We will build and see that we can get traction with the resources that we have and then move from that.

While I do think we would need some additional resources on institutional sales because more than half of the volume in this space is for institutional selling, so you're selling to first responders, police officers, fire -- fire departments, to community houses, schools and other public installations where they don't have rescue medications available. And that's a new area for us, where we'll need some additional resources, but they are [indiscernible].

[Unknown Analyst]

And the last question. So with regards to reimbursement and especially the testing of reimbursement models, [ galvanic ] program, what do you -- what are your hopes in terms of the combination of the reimbursement model? And do you see any risks that could cost the modiaONE program to not be reimbursed into commercialization of modia?

[Nikolaj Sørensen, executive]

I actually think in modiaONE or modia, modiaONE results are what we label our trial program. So when they come to modia, we believe that we have identified an even smoother reimbursement opportunities than what we have for deprexis and vorvida. And we are working with physicians in some of the regions in the U.S., more specifically in Michigan and Maryland, I believe, to set up the reimbursement system and test that on the patients. I think the one uncertainty, of course, is how it will be received from the payers and also to see what kind of documentation is needed? Do we need to build more documentation into the system than what we have, which is actually one of the drivers of the delay with Trinity Health? So we needed to build a system to collect the documentation needed from the payers. So that needed to be basically build up a new system for collecting that data from the -- from our [indiscernible] RT2 therapies.

So there are some uncertainties, but at least the reports I'm receiving from Dennis and the team is that it is more smooth and should have less hurdles than what we're seeing with vorvida and deprexis.

Okay. Thank you, everyone, for the last -- taking the time to listen to us for the last 45 minutes. I can see we have quite a few large audience online and probably also some people dialing in. So thank you a lot for taking the time. This call was actually the last call for Joe DeFeo to work with us as a CFO as Fredrik Jestin will join us after the summer, so our Q3 you'll be able to meet Fredric Justin for the first time. So thank you, Joe, a lot for the last few years. You've made a big contribution to Orexo in your role as a CFO. Thank you. And good summer to all of you. Goodbye.