Orexo AB

STO:ORX

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Welcome to Orexo Q2 Report 2024. [Operator Instructions]

Now I will hand the conference over to CEO, Nikolaj Sorensen; and CFO, Fredrik Jarrsten. Please go ahead.

[Nikolaj Sørensen, executive]

Thank you, and welcome to this half year interim report for Orexo, quarter and half year, which has been a little of a mixed back with some good progress, but also some areas where we have been surprised by a negative -- recent negative development. So I think the headline of today is probably the complete response letter we received on OX124 on -- very late on Tuesday evening and also the press release we had yesterday.

I would just start to say that for Orexo, that we would receive a complete response letter, was not a surprise. We had expected that. We did talk about that in our last quarter report that we would be delayed, and that was due to the human factor study and the instructions for use that needed to be updated. However, there were some requests for technical data that came as a surprise, and that requires a little more work from our side. But I will come back to that.

But I think the really positive thing is that there's only one problem in the complete response letter with the product, and that was related to the instructions for use, and we have completed a new human factor study after having updated instructions for use, which was very successful. So if that had been the only point, we would have been ready to resubmit that data quite shortly. But now we need to look at some other data requests, which are not prompted by issues with the product, but more that FDA wants more certainty around some of the product or the device reliability, parameters that they're looking at.

I will also say because that has been a question I received during the day that we -- with a complete response letter, it's not like we have to resend the full file. We have to answer the questions that we received, and with that letter comes very specifically what do we need to do to get it approved. So we have received 3 areas that they have asked or they raised concerns, 2 of those 3 areas, we have already addressed because we were aware of them. We have been asked by FDA during that process, for example, instructions for use. So we were ready to submit that answer. And actually, one of them, we have submitted just before the PDUFA date.

The last one, the one that we talked about in the press release is new to us and something that we will need to work on. But also something that we feel is very manageable and it's something that we believe we could handle relatively swiftly, but we need more guidance from FDA before we can come up with a new timeline and guidance on that.

Today, I'm joined by Fredrik Jarrsten, who will take us through the financial overview and financial development. I will give a brief update on the business, both U.S. commercial, but also products under the development and a little around our partnered products where we have royalty income.

So a focus on the key achievements. One thing that is very important for us and important for us long term and where a lot of focus have been internally has been to see how the development was for Zubsolv during the quarter after a, you say, a surprisingly low development in Q1, led by the inventory adjustments we saw from the wholesalers in the first quarter. We've seen now during this quarter that Zubsolv this back where we see an alignment between the sales to pharmacies and the wholesalers. And since the sales to pharmacies in the first quarter was actually higher than last year, that also transfers into the second quarter where we have higher sales in both dollars and Swedish krona in sales to wholesalers and also in net sales.

Overall, we have a positive EBITDA. We did have some headwind in this quarter because we had to do an adjustment in Abstral royalties based on what was included in the first quarter. We also had this new human factor study that we have completed most of it during the quarter, which have cost us some expenses. And we have some increased legal expenses the quarter in the U.S. related to the subpoena, I'll come back to that a little later.

Zubsolv revenue growth, as I said, we had a very strong rebound from the first quarter. Compared to last year, it is a slight growth, even though it's down in the low single digits or 1%. But it is positive compared to last year and definitely very positive compared to the first quarter.

OX124, as all of you probably noticed is now delayed. But I will say that based on the feedback we got from FDA late April, we're basically in 2 months been able to update the instructions for use. We have been able to run a new human factor study, and that has really been a team effort between the Swedish and the U.S. team. And to the extent that we have had Swedish employees flying over to the U.S. with some of the material needed for these human factor study. We've had people in the office in the U.S. helping to package the material needed for the study also.

On the AmorphOX pipeline, so that's very not very much a focus on OX640, but also the partnering projects that we have. And here in the partner projects, we have continued to collect stability data and have seen a very impressive data, in particular on large molecules during the quarter.

I will highlight also something we have been working on for a long time at Orexo that's around sustainability. As you know, we raised a corporate social corporate bonds. So we got it rated by Sustainalytics. But that was also turn more on overall Orexo AB sustainability, which has now been reviewed by a company called EcoVadis, which is emerging as one of the leading external or independent assessment companies of sustainability, and we are rated as one of the top 5% of all of the 70,000 companies that they have assessed worldwide.

We have, on Zubsolv in Europe. We have seen some traction. It's coming from a low level, but I think there's a lot of stuff happening for Zubsolv Europe, which is positive, which gives us some hope for the future. And that is needed because we also see that Abstral royalties, with the agreement we signed 10 years ago with -- at that time, ProStrakan, then with Kyowa Hakko Kirin which was then that European arm was acquired by Grünenthal Meds last year, and then Grünenthal have now reviewed the contract and there are some of the countries where we are seeing the contract has expired, and will expire during the next 1 to 2 years. So very good to see Zubsolv coming in, but of course, we need that to replace some of the Abstral royalties that we have been generating.

So a little on the U.S. commercial. Last quarter, we talked about the very dramatic market events seen both by Orexo and some of our colleagues in the buprenorphine/naloxone market, and that was the inventory drop we saw in the Q1. So we have seen that stabilize, but it is still on the same low level as we exited Q1. So we haven't seen a compensation where inventory have gone up. But what we're seeing now is that the sales from Orexo to the wholesalers, from wholesalers to pharmacies and pharmacies to patients is aligned, whereas in Q1, we saw a significant decrease compared to where we were in Q4.

What we think drive this is growing hesitance to carry inventory of controlled substance. So buprenorphine is a controlled substance, and there are a lot of restrictions on the wholesalers and pharmacists on how much inventory they can carry, and some of them have taken quite a conservative approach to that. So we think that is one impact. The other one is basically the cost of capital. So having a high inventory is costing you capital, and by lowering that could improve your -- or reduce your working capital cost.

Then we have seen a trend that started last year and has actually continued to accelerate during the quarter, and that is the disenrollment from Medicaid. That is driven by some of -- during COVID-19, there was I think the main measure was there was an automatic renewal of Medicaid enrollment. So patients who were on Medicaid were automatically renewed within Medicaid without having to renew the application. That was removed when the COVID-19 emergency measures was withdrawn, and that means that some of the patients who were in Medicaid have either decided not to apply for new Medicaid insurance or they have been found not to qualify to Medicaid, and that has triggered the decline in Medicaid.

At the same time, we have seen a significant increase in the commercial insurance this quarter with 19% year-over-year. So -- but -- the majority of that growth, if you look, appears to be from Medicaid patients now moving into commercial insurance. So rather than driving market growth, it has been some market growth, but a lot of it, we believe, is actually patients shifting from one insurance plan to the other. And then in the U.S., there have been a lot of subsidies associated with COVID-19, which have also been reduced as COVID-19 emergency measures were removed.

Taking a little more granular look. We showed this picture in the last quarter. And just to give a comparison. Here, you can see the development in sales to pharmacies and wholesalers, whereas you saw this drop in Q1 with the dark blue line. Then in Q2, you see that the sales to pharmacies, which is the very stable, little yellowish, green yellowish line on my computer at least, is aligned with the blue line. So we have seen that normalization in inventory during the quarter, which is, of course, positive long-term, in particular, as we are on the sales to pharmacies on a trajectory higher than we were last year.

On Zubsolv, we have seen a stabilizing demand also. So it's not only the inventory that, of course, what is most important is how does the demand look like. We still have a very low growth market. It is 3% just like last quarter, 1% up since the last quarter. As I said before, we saw that decline in Medicaid and growth in commercial. And when we look at Zubsolv in particular, we basically saw that we had the same say, number of prescriptions in the second quarter as we had in the first quarter. That's down 4% from last year. But what is really positive is that we see growth in the commercial segment. That is the, what we call open segment.

And we've also seen, for the first time in 5 years, we have seen the previous exclusive payers, Glide Health Group and Humana, grew with 1% from the first quarter. But all in all, it is lower volume in year-over-year. But these previously exclusive payers together was stable or growing with 1%.

In Medicaid, we also saw a decline, but less than the market. So we are taking market share in Medicaid, and that is very much driven by some of the continued growth in Medicaid contracts in New York, can even add Indiana, where I believe our growth is more than 200% year-over-year in Indiana.

So some comments on the products under development and our partner products. So OX124 approval and launch timelines have been extended. And here, the issues that we knew was the instructions for use. We have successfully addressed that, and that has been documented in human factor studies. So we're ready to submit that back to the FDA.

They came with new concerns, and I want to outline that it's not driven by problems that the product is not delivering or the quality in the products are not sufficiently or the clinical trials is not good enough. This is based on the data that we have generated to show the reliability of the device and the secondary packaging is meeting the standards for FDA. And to do this, it's customary in the industry to do some, what you call, pilot-scale manufacturing. So it takes certain manufacturing steps. We do that in a smaller scale than a full commercial scale, and then we are bridging that data into the commercial scale, showing that we don't see there is a difference between the pilot scale and the commercial scale.

Here, FDA had requested more information on the device part, not on the manufacturing part. It's only on the device part, that there's no impact on the device functionality moving from the pilot scale to the commercial scale. We found that it was sufficient data that we have submitted, but we also respect that FDA have a different opinion. So now we need to work with FDA to understand exactly what is it that they are asking for what kind of data is it that we have to generate to bridge between the 2. And we will -- the process works the way now that we will, within the next 30 days, submit what we call briefing book, and that's basically us proposing how we will address those issues raised or concerns raised by FDA. Then we'll have a discussion with FDA, and we will agree on the path forward, and that will guide how much this is.

But since we have not seen any issues in the pilot scale, we don't have any issues documented with the quality. We believe this is more about the documentation part. And of course, FDA, we have to respect that they see a risk moving from one step to the other. But it is interesting, it was only the device people, it was not the CMC people at the FDA who have that concern. So we will seek that advice and that will also guide us on the response.

But we -- I'm very pleased to see that there are no questions on our clinical trials. There were no questions on the manufacturing process or our manufacturing partners quality. So we are quite confident that this is something that we can address relatively swiftly, but there is some uncertainty as we're not certain about how much data the FDA actually require, and we need to work on that during the next 30 days.

Our pipeline, in general, is advancing. We have, as I said before, we are working on some of the partnered molecules. These are large molecules. We are both working on our partnership with Sobi, but we also have a partnership with a vaccine company. And what is really critical here is to see that we can retain activity in the product in room temperatures or even higher temperatures for large molecules that otherwise would require cold chain. And this is a way that you can by enabling that on some of these large molecules you can have a completely different distribution path, and you can also use the products more broadly than if you need to use it in the cold storage. So this is meaningful from a patient perspective, from a health care perspective and definitely also from the manufacturing perspective. So this is positive and something that we hope will lead into a more established partnership with, in particular, Sobi, but also within the vaccine space as we proceed.

OX640. We have continued to work on the formulation, and we're preparing to move to manufacturing up to commercial scale. Our focus right now is on OX124, but we're working in parallel to ensure that we quite fast can move into the commercial manufacturing of OX640. We are now planning a smaller exploratory study later this year as some of those of you have been following the space carefully, have seen that last year, there was a discussion about allergic rhinitis for some patients and what is the effect on these nasal sprays when you have allergic rhinitis. And we are now planning to do a smaller exploratory study in that group of, you can say, patients on or healthy volunteers in the fourth quarter. What we are aiming for is we have seen a good uptake through the nose in that patient group, but what we -- is important for us is that when we launch OX640 together with a partner that we'll have some good clinical differentiation, and that is basically speed of onset and how much and how much effect you get from the product. So we're planning to do that later this year.

We're also seeing that our most advanced competitors have now moved forward in Europe, and they see the positive response from the Scientific Advisory Board in Europe. That took away some of the regulatory uncertainty for nasal epinephrine in Europe, which I think is very good long-term for OX640, although, of course, there will be more competition by the other products being -- having a head start. We are continuing with partner discussions. We had the briefing book approved in the first quarter that has transformed into a clinical development plan that we have then presented and discussed with our potential partners. So we continue to be optimistic that we can find a partner for OX640 during the second half of this year.

Then on our partnered products. So here with Zubsolv Europe, we have seen in some smaller European markets have been a very good progress here during the first half of the year, in particular during the second quarter. That's been driven a little by supply issues by other kind of other products, but the positive part is of when they tested Zubsolv, some of the institutions that took in Zubsolv have actually decided to make Zubsolv a preferred choice. So that's very positive in the long-term, when they were forced, you can say, to mega switch and test a new product, they saw all the advantages with Zubsolv.

One of the issues that we and our partner, Accord Healthcare for Europe, is that our product that we're selling in Europe is sourced out in the -- from the U.S., and it's sourced from a manufacturer that we don't use for U.S. manufacturing anymore, but they are the one who are approved for Europe. That means that the cost of goods in Europe right now is much higher than what we pay in the U.S. and it's not really price competitive in terms of what Accord needs to be successful in their commercialization. We work together with Accord to reduce the cost of goods, Accord have shown a very high commitment in this by investing in developing a supply chain and manufacturing capacity in Europe for Zubsolv and we are ending the final stages of that, which would enable our partner Accord to start selling in Europe with a much better cost of goods, which, of course, will make it much more attractive for the different subsidiaries of Accord to launch the product in the market at a price competitive level in a quite price competitive European market.

So we are optimistic. We did see an increase in Zubsolv revenues for Europe during the quarter, but we think that is just the beginning of what hopefully can be rewarding journey for both us and our partner, Accord. That, on the other hand, our Abstral royalties as we have outlined in our reports that we are seeing some markets where the product -- where the contract expires during 2024 due to patent exclusivity expire and also the contract for some markets was a 10-year contract for starting in 2014. We have not received historically breakdown on the different markets. So it's not been possible for us to follow exactly when did the first launch happen and when do the product expire and how much volume do we have by market.

Together with our new partner, Grünenthal Meds who acquired European subsidiary in 2023. We've now gone through all of the markets and we have a more accurate estimate of the royalty for this year, which has led to an adjustment of the accrued royalties that we have in Q1. Fredrik could comment on that later.

We do see that the contract for some countries in Europe will expire during the remainder of 2024, some in 2025, but there are other contracts, which will actually go on for several years. However, those who are expiring right now are some of the larger volume countries. So we do see that the Abstral royalty will decline in this year, but also in 2025 and beyond. But we are optimistic that with the positive news in Zubsolv Europe with lower cost of goods, high commitment and investment made by Accord to reach that and now good tractions in some of the European markets that could compensate for the decline in Abstral royalties.

With that, I leave to Fredrik to go through the financials.

[Frederik Jarrsten, executive]

Right. Thanks, Nikolaj.

On Page 15, we look at our revenue. And if we start by looking on the top part of the page, you can see that total revenue in Q2 amounted to SEK 154 million. Of that revenue, obviously, Zubsolv within U.S. commercial is the main contributor, with SEK 148 million for the quarter. And that's slightly up year-over-year with 1.7%, following especially favorable payer mix and also supported by a positive impact of SEK 1.9 million from a stronger USD exchange rate.

In relation to HQ1 pipeline revenues, we had, as Nikolaj just talked about, lower Abstral royalties for the quarter due to the negative true-up of accrued royalties that we booked in Q1, and that was based on our part in Grünenthal Meds reporting. So we had actually accrued USD 615,000 for Q1. Another royalty report showed actual royalties of USD 358,000, so that resulted in a negative adjustment of USD 257,000 this quarter. And we have then used this lower royalty number of USD 358,000 as an estimate for Q2 royalties.

And as we have talked about before, and Nikolaj just talked about this, going forward, we can envision a continued gradual decline in royalties for Abstral as agreements for these individual countries expire. And the decline in Abstral royalties though, partly offset by higher Zubsolv ex-U.S. revenues related to royalties and sales of tablets to our partner, Accord Healthcare. If you look at Zubsolv specifically in Q2 compared to Q1, you can see in the waterfall graph on the bottom part of the page, following the negative effects of the inventory adjustment at the beginning of the year, we had a significant rebound in revenues in Q2 coming from a positive inventory effect, which is the lower inventory destocking, you can see in the graph, almost SEK 14 million. That is the main explanation why net revenue increased from Q1 with 14.4%. The demand for Zubsolv expressed in net revenue terms increased with a net of approximately 1%, as shown in the first 3 bars, which is the same as for the market for buprenorphine/naloxone quarter-over-quarter.

The FX effect was also positive quarter-over-quarter with SEK 3.7 million and when you compare with the average FX rate during the quarters. So in conclusion, you can also see in the graph. And in total currency, the Zubsolv net revenue increased by 11.6% during the quarters.

Next page, our P&L. Happy to show a positive EBITDA for the third consecutive quarter, SEK 5 million. And also when doing the exercise that we usually do, adjusting for non-repeating costs, that would imply an EBITDA of approximately SEK 13 million. To explain this positive EBITDA, first of all, when it comes to cost of goods sold. The majority of the SEK 16.3 million related to U.S. commercial or to be more specific, that is SEK 15.4 million and compared to Q2 last year, we continued to improve our gross margin in the U.S. commercial from 88% to 90%.

Second of all, looking at operating expenses in Q2, they were on par with prior year, following higher expenses for OX124 development and launch preparations, higher admin expenses for legal costs related to the DOJ investigation. And now these expenses though, were offset by lower R&D costs, especially due to the MODIA study that was finalized in Q3 last year. The U.S. dollar strengthened slightly in the second quarter compared to last year, and the total FX effect on EBIT was a negative SEK 4 million.

So in summary, OpEx came in at SEK 153.5 million this quarter. Now following U.S. commercial as a segment, the EBITDA contribution from our U.S. business amounted to SEK 47 million for the quarter. That is a margin of 32%, slightly down from 33% last year. The EBIT margin was 24%.

Finally, in financial items. We had higher bond loan costs of SEK 21.4 million, of which SEK 8.2 million is nonrecurring transaction costs in relation to the refinancing of the old bond, and SEK 13.2 million is recurring higher interest expenses for the new bond. We also have an unrealized FX impact of SEK 0.8 million on cash held in U.S. dollars and lower interest income from bank accounts of SEK 1.1 million.

Moving to the next page on cash flow. We can see that liquid funds, that is cash, cash equivalents, amounted to SEK 140 million end of Q2. That's a decrease by SEK 58 million from end of Q1, but we should not forget that cash flow this quarter was also heavily affected by the settlement of the second and final part of the refinancing of the bond. So we had cash flow from operating activities of minus SEK 6.5 million, primarily impacted by negative operating earnings and also transaction costs in relation to the refinancing of the old bond. And that was partly offset though by positive changes in working capital. Investment activities had a negative impact on cash flow, SEK 2.7 million primarily from investments in equipment for the development organization. Financing activities, negative impact of minus SEK 48 million, and that's mainly due to the closure of the purchase of SEK 30 million of the new corporate bond as well as we had issuance costs, which is fees to advisers and lawyers for the new bond loan of SEK 12.3 million.

Total cash flow then for the period, minus SEK 57.1 million. And of that, as I said, acquisition of the bond, SEK 30 million, adding an FX effect on cash of minus SEK 1.2 million, that adds up to the decrease in cash of SEK 58 million since the end of Q1.

On next page show our financial outlook for 2024. We put that up for the first time in the Q4 report. Based on current circumstances, we maintain our guidance for 2024 on these metrics. We do see some risk to the Zubsolv revenue guidance with the wholesale inventory adjustment that happened in Q4, although we had a rebound in Q2, it's quite significant. The OpEx and EBITDA guidance may also be impacted by nonrecurring legal expenses associated with the DOJ investigation and a potential settlement as well as some additional expenses for a resubmission of OX124. So with the actions present today, explanations are given, we can conclude these metrics are reaffirmed.

And with that, I leave back to Nikolaj for legal update.

[Nikolaj Sørensen, executive]

And just a comment on the expenses here. So with the OX124, we don't foresee any major expenses, but of course, there will be expenses that we had not planned for. So this is not like we're looking at significant cost to the OX124. But compared to an approval and just finalized a human factor study, that will be some additional expenses and together with the increased legal expenses and of course, also Abstral royalties is going down a little, and that is reducing the margin even though we still have a margin to our guidance in the financial metrics.

So on the legal update, with the patent dispute with Sun, we are waiting for a hearing date from the federal court. We understand that they have been under heavy time pressure, and there is a long queue of hearings that they're waiting to schedule. So right now, our -- we haven't received any dates, and we wouldn't anticipate this to happen before maybe in the October, November timeframe. But we haven't received a date, and there have not been any expenses related to that patent dispute during the quarter or very, very limited expenses.

When it comes to the U.S. government investigation or the subpoena, we would very much like to put this behind us, and we are trying to work with our lawyers to find ways to -- to find a resolution on this together with the Department of Justice or the Attorney Generals from the Western District of Virginia. That is right now that we have a discussion ongoing, but it's very, very hard to predict where this will end. And the timing of this, we have seen during the last 4 years. Actually, we are passing the 4-year anniversary just a few days ago. We have seen very volatile levels of activity. And now there were a little more activity during this quarter, but then we know that things can happen in the U.S. And we also know there's election coming up in the U.S. and since the Attorney General for the district is political appointed, that could even be changes in who is leading that office during the next half year. So it's very hard to predict. It's very frustrating as it's taking a lot of focus away from some people in the organization, particularly in the U.S., but of course, also here in Sweden.

So just a summary, where are we right now? I think we know that very important for us is to stabilize the Zubsolv revenues. And I think we have done that efficiently during this quarter. I'm pretty confident with our guidance that we just reported sales to pharmacies as we are seeing sales to pharmacies consistently outperforming last year. So what we're actually talking about here in terms of sales is the wholesaler inventory levels that are hard to predict and where we had hoped and some of our colleagues in the industry have guided that there would be a rebound in the second quarter. We haven't really seen that. We have seen that they continue on the same level, although they now follow the sales to pharmacies. But we are seeing a stable Zubsolv sales, which is important.

We also, of course, are expected to see an approval for OX124 shortly. I think that is still obtainable, but we do need to engage with the FDA to understand exactly what kind of data they are requesting. But again, I want to underline that it's not based on problems we have, it's simply more documentation about how you're reaching between the pilot scale manufacturing and the full-scale manufacturing, and some changes we have done to the packaging device or packaging during the development.

Then we have our AmorphOX technology. And here, what we really looking forward to is to see that we can have a partnership in place for OX640, but also to see that the work we're doing with companies like Sobi will come into a real development partnership, and what is very encouraging for us here is to see how we continue to improve the stability data and see they are confirming the outstanding value that AmorphOX can bring, in particular, to large molecules.

We are working also to establish patient support programs for our products. This is something that's important from our sustainability perspective. We're working with our new concept, MatCore, where we have several applications in together with health care providers in the U.S. to see if we can find new ways to improve access to treatment for patients in the U.S., combining pharmaceutical and digital tools. We are working to improve our access to treatment in many different ways and also bringing our products forward. And here, we think that, for example, OX640, it will be important for us to find a partnership moving forward.

So all in all, growing commercial revenues and profit contribution, important to have a foundation Zubsolv, the growth will come from OX124 when approved and also future partnership projects. It is to show that we can create a stream of partnership around AmorphOX technology and most importantly, that patients get access to our medications.

And with that, I will round off our presentation and open up for questions. Thank you.

[Operator]

[Operator Instructions] The next question comes from Klas Palin from Carnegie.

[Klas Palin, analyst]

I have at least 2, maybe more. My first is related to -- that you mentioned that you have initiated launch preparation for OX124 in Q2, and just wondering if we should expect such costs to remain going forward given the update you have given for FDA and the process?

[Nikolaj Sørensen, executive]

So on the -- what we have done, we've informed about that in our last quarter call, we have recruited a very seasoned manager into the organization to lead the OX124 work, and she has done some market analysis and testing of different concepts around the product. She has also been working on the brand profile. And that, I think, is normal work in preparation of the OX124.

Given where we are right now, I believe that there will still be cost associated, of course, we have an employee we didn't have it in the first quarter. There will be some cost in the second half of the year. But compared to a situation where we had received an approval today, the expenses are, of course, going to be lower in the second half. And some of the activities that, for example, recruitment of sales personnel is something that will probably delay a little further than what we have planned, until we have more certainty about the timelines for when we can submit the updated data for FDA.

[Klas Palin, analyst]

Yes. Okay. Perfect. And also, you mentioned that the review period following a resubmission could be either 2 or 6 months. Could you perhaps elaborate about these 2 alternatives?

[Nikolaj Sørensen, executive]

So unfortunately, FDA does not have not issued any guidance on what is the difference between 2 and 6 months. And that depends a little on how much work they see that is needed and how many parties that are involved. And of course, as we are moving from one we had, if it had just been the human factor study, I would have been more confident that we could do it if we would be in the 2 months category.

But with the new data, it's again hard to predict. And I will say the answer we got from FDA is not specific in what data -- just what categories of data that they're looking at more documentation. So now it's up to Orexo to come up with a proposal on how we're going to show that in a different way than we have already done. And that will -- I think the amount of data coming in will define whether it's a 2 or 6 months review time.

So unfortunately, I'm not able to give any predictions on that, and we will know, I think, about a month after we have submitted the answer to these questions.

[Klas Palin, analyst]

Okay. And then my last one is just about on Sun appeal process. And because you have been talking previously that you expected this hearing to be in the sort of mid-2024, but you don't seem to have a date now. Is there any reasons for this process has been delayed? Or is it just something you need to take into account that these things happen?

[Nikolaj Sørensen, executive]

I think there are 2 steps. So one is that when we received the -- when the appeal was first made, then we -- that was last summer, so also about a year ago from now. At that time, there is a certain process that we have to follow, and that process took longer by agreement by the 2 parties. It was delayed over the -- particularly over the Christmas time, but also our counterpart was asking for some extension of timelines. And that has driven some of the time. But the main reason is the workload for the Federal Circuit, a number of companies appealing or a number of cases being appealed to the Federal Circuit. And in addition, I've heard that they have been rebuilding or they've been doing some renovation of the facilities. So not all of the courtrooms have been available during the last this -- during the first half of this year.

So there are a lot of different factors playing in. And there's nothing we really can do about it. We're just waiting to get a message that you have been scheduled. So there's no -- nothing in the case. It's more, I think, on the Federal Circuit with workload and capacity.

[Operator]

The next question comes from Samir Devani from Rx Securities.

[Samir Devani, analyst]

I guess, first one, just really on OX124, maybe some sort of generalization of the business. If we assume now a modest delay to 124, I'm just trying to work out, in light of Indivior cutting their OPVEE guidance in their recent results and their trading update. And they're sort of mentioning that a lot of the revenue comes from a BARDA contract. Have you explored -- or what's your expectation in terms of when OX124 launches, your ability to access those types of government contracts?

And linking into that, I think -- it looks to me, excluding a sort of DOJ settlement that you'll have around about SEK 100 million at the end of this year, is that enough going into a launch a new product launch year? Or do you think you'd need to raise some further capital?

[Nikolaj Sørensen, executive]

On the OX124 with Indivior. And so right now, just first, I would say, the delay is -- it is hard to predict because we have to -- we have to talk to the FDA to understand exactly what's needed, and that will drive the amount of work that we need to do. But we do believe we have a decent amount of data available, and we have also continued to generate data that we believe could be relevant to address some of the questions by FDA.

Then on Indivior and OPVEE, we have to remember that OPVEE was -- the development of OPVEE was financed partly by BARDA also, and they buy it for national security reasons. And we do think that nalmefene and OPVEE is quite well suited for that.

And as one of the arguments we have had around OX125 also, our nalmefene product, is that due to the long half-life of the product, should someone come up with a dreadful idea of using some of the opioid derivatives like [ Guaifenesin ] or even stronger versions in some kind of terror attack or similar, there would be a benefit for having something that have a long half-life. Also for police SWAT teams and others who are breaking into manufacturing places or packaging places, fentanyl it would be an opportunity to say nalmefene as a precautious measure to ensure that you don't get an overdose when you get in. I think that has been part of the strategy for OPVEE and also one of the reasons why BARDA had an interest.

Of course, we're looking at that kind of opportunities. I think OX124 is quite well suited, particularly for the police officers and others. And that is some of the work we've been doing during the summer is to test different marketing and positioning concept with, among others, institutional buyers. So when we get it approved, we think that, that is an opportunity, and it's definitely an area where we need to strengthen our organization compared to what we have today. Even though [ Lisa Moore ], who have joined us to lead the work on OX124, have a decent amount of experience from this from her previous employers.

When it comes to our cash position, I think there's a -- so if you look at it this time, there was a lot of financial expenses that are not recurring. And our revenues and our cash position is going very much up and down depending on how much sales we have. And we have significantly higher gross sales than what we have net sales.

And what we did see in the last quarter was we saw a very low inventory exiting the last quarter, which is the cash we get paid during the second quarter. So there's a lot of volatility in our cash position, if you go historically. So I think the -- to use Q2 as a predictor and just say this is where we go from and then we look at the cash flow is not -- I think it's not the right approach. That's very much depend on how much we are selling to gross -- to how much we are selling to wholesalers.

And the other part is that we are looking to do business development agreements for both OX640, also for some of our other molecules. And that, of course, is expected to generate some good income to the company and cash flow to the company. So we are definitely working in -- from a starting point that we should be self-sufficient. And I will also remind that we do have SEK 30 million in the corporate bond that we actually repurchased during the quarter. So those SEK 30 million is something that we could decide to float should we need the additional cash.

[Samir Devani, analyst]

Okay. That's great. Can I then just have one follow-up on OX640. And you've indicated today that you're going to look at doing an explorative Phase I in Q4. Would you do that study if a partner is not on board by that time?

[Nikolaj Sørensen, executive]

The answer is yes. We have that approved, and we think that, that particular question was something that was a lot of focus on in the U.S. approval of process of [indiscernible], and we think that to show that we have similar superior properties on OX640 in that patient group is something we find is important.

It is a relatively small exploratory study, and it's not binary in the outcome because we do know that the product is working. What is important for us is to ensure that the dose that we decide to go forward with is also within the frameworks or the high level and minimum level that we need to see for approval in the U.S. And that we see that we -- just we know our formulation is very, very fast, and we want to show that also for the commercial product.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

[Nikolaj Sørensen, executive]

So we have received a question here is whether we -- we are now planning to do one more study without a partner, and that is different from what we have communicated previously. That is correct. But since the partnering discussions have taken somewhat longer time, we have seen this question around allergic rhinitis patients have come into the partner discussions. We think that, that is a relatively small task we can do to make that happen.

One of the things that is important for these small exploratory studies is that we have the manufacturing capacity in-house. So what we need to do is to test it in a smaller group of healthy volunteers. So it's not a large undertaking, but it's something that we believe would be important, should we not have a partner in place at that time. But even with a partner, we believe this is very important to show we are choosing the right dose when we go into the more pivotal studies and manufacturing of the product in next year.

Okay. As there are no further questions, and then we are heading towards the hour, then I thank all of you for your participation today, and also wish you a good summer. For those of you who have not been on vacation yet, I hope you'll have a good vacation. Those of you coming back, I hope you had a good vacation. So thank you a lot for dialing in to this meeting, and I wish all of you a good day. Goodbye.