Orexo AB

STO:ORX

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Welcome to Orexo Q3 Report 2023. [Operator Instructions]Now I will hand the conference over to CEO, Nikolaj Sorensen; and CFO, Fredrik Jarrsten. Please go ahead.

[Nikolaj Sørensen, executive]

Welcome to this third quarter call for Orexo. As most of you probably have seen, it's a mixed bag of news in the third quarter. We have had some good developments in several areas, but we also have some areas which have not really met our expectations for the quarter and where we've been a little disappointed. The big thing for the quarter is, of course, the filing of OX124 in the U.S. It's rare in Sweden that pharmaceutical companies file for product for approval, and we're quite proud that we once again have filed OX124. Even though admittedly, this time was a refiling, but relatively shortly after we received the notification from FDA that they didn't accept our first file.As was said in the introduction, I'm joined by Fredrik Jarrsten, who will go through the financial overview when we come to that, and I will first give a short highlight of the key achievements, the business update, and then I will round up with some of the future value drivers in the company.So the key achievement during the quarter is clearly, as marked with the star here, our OX124 was refiled with FDA in September. We are awaiting the PDUFA date now during November, which will then confirm the actual approval time line. We've seen that FDA during the last couple of years have been a little delayed in some of the processes. So the expectation from us is a 10 to 13 months review time. When we look operationally, we have -- as we have guided and been quite focused on all the time is on how we work with the underlying recurring cost of the company.And again, this quarter we have seen a cost reduction, which is putting -- our EBITDA would have been in a positive position if we exclude the one-time fee we have to pay to the FDA. So when we file OX124, we had to pay SEK 18 million to the FDA. And then we had some legal expenses in the quarter also. But just taking away the FDA fee, we would have had a positive EBITDA in the quarter, and that is based on a continuous pursue of reducing our expenses. And we are seeing here that our operating cost is down 11%. And if we should exclude just the FDA fee, not the legal fees, we are down with about 22% compared to last year.The one thing that is a little disappointing and was a surprise to me, and I think most of the company was that we actually saw that the market for ZUBSOLV declined, and that also spilled over into ZUBSOLV for the full quarter. What explains this is that we have seen some of the holiday weeks during the quarter were lower than unusual, and we didn't see the rebound before the holidays, and we didn't really see the same kind of build up just before the holidays as we've seen before. So these low holiday weeks and particularly around the 4th of July and Labor Day, cost a little more for the market than usual.What is positive is that we have seen some rebound in this during the last 1.5 months where both ZUBSOLV and the market have grown compared to the Q3 average. Our OX640 process is something that we have spent a lot of time on, and we have been in heavy due diligence and negotiations, discussions with a partner. It came unexpected that the leading nasal spray, it's based on a different technology, a liquid technology, [ NEFI ] received a Complete-Response-Letter in the middle of September.Even though it created more certainty about the regulatory process and what is needed, it did require that we go back and we basically adjusted the [ briefing ] package we need to send into the FDA. And also, we need to get some more clarity around some of the requirements in the continued process and what the cost would be for that. It's, of course, the perception of the potential partners, but this has been something that has been quite -- have received a lot of focus in the partnering discussions.So to our commercial update and starting out with ZUBSOLV. So we did see a market decline in Q3. We saw that the market was down with about 1% compared to last quarter. It is still up compared to last year, but compared to Q2, we saw a negative decline. What is a little surprising compared to what we've seen in the last few years is that now when we have seen the Medicaid segment has grown relatively dramatically over the last couple of years compared to the Commercial segment, now it's turned around. So actually, Medicaid is the one that declined when we are seeing Commercial and Medicare growing during the last 6 months about. It switched around April, May time.One of -- this is something that we've seen in other disease spaces as well in the U.S. and some of the explanation is probably due to more people are moved out of Medicaid and into Commercial because they get a job, and we've seen the unemployment rate in the U.S. is going down. But when you move from Medicaid to Commercial, you often come in at a [ 0 ] -- you come in with a high deductible, but you haven't spent anything. So you have to pay quite a lot of money in the beginning before you get up to where you get fully reimbursed for your pharmaceuticals.So if you got a job during the last 6 months and you moved from Medicaid to Commercial, the cost of branded product is probably going to be higher for you compared to the generic alternatives, depending on what insurance company that you're choosing. Over time, that will be positive for us because we do enjoy a broader reimbursement in the Commercial segment. And of course, we also have lower rebates for the Commercial insurance payers than we have in Medicaid. But short term, we think this could explain some of the dynamic.When we just look at Medicaid, we have grown compared to the -- ZUBSOLV have grown faster or have declined less than the overall market, and we have grown on a -- both on a year-on-year and a quarter-over-quarter basis, we are performing better than the Medicaid market overall.What's also positive is that we've actually seen that United Health Group, while they did decline in the quarter, they actually just follow the average of the Commercial segment for ZUBSOLV. Whereas Humana, which predominantly today is in Medicare for Orexo, actually had a lower decline than the overall ZUBSOLV decline, and it was in line with the market development. So we could say the effect of Humana has more or less disappeared, and the effect of United is now following more of the market. So I think we would probably stop talking about these 2 previous exclusive contracts as we go along.As I said before, we did see some rebound in both the market and ZUBSOLV during the last 6 weeks, even 4 weeks and the first 3 weeks of Q4 are all up compared to Q3 average. So that gives us some hope for the fourth quarter, which will be important to meet some of the guidance that we set out, for example, around market growth. I got -- I received the question last at our last second quarter call around how the impact has been on the waivers lifted and the number of decisions. So I brought in a graph showing this.And as you can see, when the waiver was lifted January 1 this year, after that we have seen a relatively rapid increase in the number of prescribers. So the number of physicians who are prescribing buprenorphine-naloxone has gone up from somewhere around in the high 40s up to now 60,000 physicians. But if you look at the details of the graph, the 2 groups or the 2 segments in the bottom where we have more than 26 patients or -- and that's something we calculate based on a number of prescriptions, has not really moved.On the contrary, actually, we've seen a slight decline in that number. And if you convert this over to volume, the 2 small groups or segments who prescribed to more than 26 patients account for nearly 80% of the total volume. So while we are seeing an increase in the overall number of prescribers, we haven't really seen that spilling into the overall number of volumes. But what is positive is that if you look at the green bar, you can actually see that one is moving. So that's those with 6 to 25 patients.So what we expect is that people -- physicians come in, they start with a few patients, and then they slowly grow their patient base as they become more accustomed to treating this group of patients. So there we have seen -- for example, we have 500 more physicians in Q3 than what we had in Q1. So that one has grown. And if we are optimistic, we will see those coming down into the 2 lower bars and actually start to have an impact on the overall prescription patterns in this segment.We do see that there are several initiatives right now to grow the market. There's no doubt that the opioid use disorder treatment and -- is in high focus on the politicians. There are a lot of initiatives. But as you saw in the previous page, we haven't really seen the impact on the overall volume.But what we do see is that the number of prescribers is growing and as they expand patient volume. That should have a positive impact on the overall growth. The other thing that happens is, of course, there's a significant inflow of funds from the abatement funds or the opioid litigations. It's now -- actually, I think the latest number is $56 billion that is available.What we have seen is quite bureaucratic state. There's a lot of internal fighting in the states and then the countries about who are the ones who control these money. Is it the health care? Is it the governor? Is the [ attorney ] general who should do that? There are different processes by state and countries for how they are allocating the money. But what we do know is that the majority of these money are earmarked to be invested into treatment and prevention. So over time this should have a positive impact.Another thing that I received some questions about is the impact of the depot formulations. And now we have 2 depot formulations in the market for quite a while, we had 1. They have a large turnover, well, that's for certain. But they are priced much, much higher than the daily treatment. And the [ value ] impact -- and we have to do this a little based on estimates because a lot of the volumes from the depots are not available, but we estimate it's somewhere between 4% and 5%, maybe around 4.5% right now of market share and volume. So while they have taken some share, they don't explain the drop from double-digit growth before COVID down to single-digit growth that we've seen in the last year.We do see a lot of the volume in this -- in the depot formulations used in larger institutional settings, for example, correction facilities and also some larger inpatient treatment centers and so forth. And of course, they will probably continue to grow. But I think even looking at the expectations from the depot formulations, they will have a meaningful market share and definitely a very high turnover, but the impact on the daily treatment is -- at least in this foreseeable future will not have a significant impact in the volume, but they do take some of the growth.What we also see now is that we have an increase in fentanyl utilization. As we talked about in some of the previous calls, this have made treatment more difficult based on what we hear from physicians. But what we also hear from physicians is that they are continuously improving the treatment approach and testing different ways of how they can have a different titration, for example, of the medication with buprenorphine. So the induction period has a different approach to an induction period of the patients.So we see that they learn. And over time, we're quite certain that there will be methods and ways to work. And in particular, what we see is that they're using a broader range of dosing for the patients. And that, of course, comes as an advantage for ZUBSOLV because we have, by far, the broadest dosage range of any products in the daily treatment market.Then to digital therapies. As we have shared with them -- with you before is that we had -- unfortunately, the MODIA study didn't meet the primary endpoint, but we do see some promising explorative data, which you could say maybe shouldn't be as a surprise, but to have an effect of a digital tool, you need to complete the full tool. So you can't just do one module and expect it has an effect. You need to complete all of the module or at least the majority of the modules before you will have an effect. And that's exactly what we saw.The patients who are completing all of the modules have a better effect than those who didn't complete any modules. But the way that the study was designed, this didn't count to meet the primary endpoint. But we did see the patients who complete all of the modules appears to have a better treatment outcome. And then, of course, there are different statistical analysis you need to do here to ensure that you don't have a patient bias into the selection of patients. But we do see -- and this is [ assets ] -- like we expect and what we hear from the physicians, if they complete, that will result in better treatment outcome.With this data, we have to review our regulatory pathway. And instead of the 510(k) that we have been aiming at, we will now use FDA's enforcement discussion for mobile medical devices or mobile medical apps. And with that, we will have to change some of the text in MODIA and -- to meet the new instruction for use and also meet the new regulatory status. That is being implemented right now by our partner, GAIA AG.What we saw also is that to get the patients to comply with the treatment and complete all of the modules, we have together with GAIA found ways where we can increase health care professionals' access to patient data to ensure that they can monitor how the patients are using MODIA more closely than what we had before. And we believe that will improve both the patient's benefit of the program because it's possible for the health care provider to ensure that they actually comply and complete the modules. But we also see that as an important access to reimbursement that we can show whether patients have used a tool or not.Then we have both deprexis and vorvida. We have a strong focus on the Veterans Affairs, and [ is ] particular for vorvida, it's something that we're now working to add into the Veterans Affairs work. We have worked intensively to find an efficient distribution and reimbursement process for the last year. What -- our entire module, as this is a digital therapy, is based on -- our model for distribution has been based on e-mails and sharing codes and log-in details by e-mail. But since the Veterans Affairs is part of the Department of Defense in the U.S., it has been an obstacle for us to get access to e-mail codes and be able to send e-mail with links through the VA system.So we are now working with an established VA distributor and will leverage their existing infrastructure and expertise to distribute the codes and log-in features of MODIA. Together with that partner, we are also now pursuing to add vorvida and probably also MODIA into the Veterans Affairs contract.Then to our products under development. So we have our amorphOX platform. And as you know, we have a couple of partnerships with some biological pharmaceutical companies and vaccine companies. We also have one with an NCE project where we continue to monitor and look at the stability data. We're looking at the yield that come out of the manufacturing process. And we continue to see very good data.These are early-stage projects. So this is something that is not into a license agreement, but more into a, [ we ] say, development contract. You will see in our results that under other income and expenses there's actually some positive numbers coming in from some of these partnerships where we get paid for some of the activities that we are performing in this exploratory studies. OX124, I did mention before, we have filed now in September and expect to launch it late next year or early '25 depending on when we get the PDUFA date and the outcome, of course, of the FDA review.And then we have OX640. And this is one where we have had expectations of having a partnership in place during the autumn and there have been intensive partner discussions with more than one company during the summer and actually continuing now into the autumn.One of the things that first happened was that we had the advisory committee for [indiscernible] in June, where we saw some of the feedback they got, indicated that could be a need to broader clinical documentations. So we have been looking at that together with the partners. And now when they received the Complete-Response-Letter, we see that there is a need for us to do a different study and change a little in the clinical outcome. There are some of the other parameters in the development program that we -- by reading the Complete-Response-Letter needs to clarify with the FDA whether our expected development plan is meeting the requirement for an approval.What is positive is that we actually see, based on that Complete-Response-Letter there is a clear regulatory pathway for a nasal delivery of epinephrine. But we do need to do more studies than what we believe before the advisory committee, and it's -- now we just -- we have adjusted our briefing package to the FDA based on the Complete-Response-Letter and now want to have a checkmark by the FDA that we're actually meeting their expectations. So we are seeking FDA advice and that has been an important parameter in the partnering discussions for OX640.Now a little more about OX124, as this will be our next product if everything goes as planned. As you know, the issue with opioid overdose is significant in the U.S. And we actually see in the U.S., if you look at the population about 12 years old, about 1 in 5 is exposed for a risk of getting exposed to an illicit drug during 2021. So this is a significant issue that is impacting a lot of people in the U.S. who maybe occasionally use illicit drugs. But what we're seeing now is that all kind of illicit drugs in the U.S. from heroine to cocaine to methamphetamine, you see that the drug dealers are mixing in fentanyl to get a higher effect.And unfortunately, small variations of fentanyl is the difference between an overdose and a high. And then we need more effective treatment. When we look at the market, of course, the number of overdose have also been reflected in a much broader distribution of naloxone nasal spray development. And here, you can see on the right side how this market has developed. There are basically 2 markets in 1. You have one which is the retail pharmacy distributed nasal sprays and predominantly Narcan before, we saw the generics come in last year. But we also have a pretty sizable institutional segment.And while we have pretty good data on the retail market, the institutional segment is more within the data from each of the companies. So this is based on an estimate of how many dosages there are. But as you can see, the growth rate has been quite rapid during the last few years, and we're seeing the market will probably continue to grow. But the issue in the market is, of course, that a lot of these low dose nasal sprays are not meeting the need for a person who is overdosing with fentanyl. And that's where OX124 is coming into play.The other thing that is worth noting in the market is that we have a market that's very dynamic. And that, of course, create a little more difficulties for us to plan for how we're going to launch the product, even though we're monitoring this very closely. So we have a market today which is dominated by low dose nasal sprays. There's a one high dose, KLOXXADO in the market. There are some high dose injectables also. But we have seen that the low dose led by Narcan is now moving into OTC. And with that move, they also reduced the list price quite dramatically.So there is some price pressure from the low dose which have not really spilled into KLOXXADO yet who have maintained their list price, but we see how the pricing dynamic work.The other thing that happens is that Indivior purchased the company developing a product with nalmefene nasal spray. It's called OPVEE, and they are expecting to launch now during the fourth quarter at a -- about twice a high price as the low dose Narcan. But still it is lower than KLOXXADO. Nalmefene has the advantage that it's a much longer-acting product than naloxone. In that way, it meets more the need of fentanyl.The issue with nalmefene, however, is that it is more longer acting, and that also means that some of the patients will experience more heavy and prolonged withdrawal symptoms, which might stop them from using the nalmefene product and rather take a naloxone product, which we know works. And what I think some of the issues today with the low dose is simply just there's not enough naloxone made available for the patient to reverse that overdose. So rather than going all the way to nalmefene, we believe that there's a good space for the OX124 product, which is faster working. But then that said, Orexo also has a nalmefene nasal spray in development, our OX125 project.And then all of this market dynamic needs to have an overlay of what people are dying from. When we started in the market back in 2013, it was very few patients who died from fentanyl to a situation today where the absolute majority, 9 out of 10 are overdosing with some kind of synthetic opioids. And just looking theoretically about how fentanyl attached to these receptors and how much naloxone is needed to reverse an overdose with fentanyl, you would mathematically be able to see the 4 milligram of nasal spray from Narcan or some of the generic versions of that would not meet the need to reverse that overdose. You need to take more than one spray, but optimally, you would need to get more naloxone into the bloodstream faster, and that is optimally given through one nasal spray, and this is where OX124 come into the market.So we do see a significant market need for more effective treatment of overdose, but we need to see that the market converts into a market that recognize that with all of the fentanyl available, we need something that is stronger than the low dose alternatives. Orexo today has a very -- we have a commercial organization who's basically streamlined to work with opioid use disorder. We have field force in most of the large states for Naloxone, that's why you have co-prescriptions when you have an opioid that actually includes ZUBSOLV. We have a long history with all of the payers in the space. We have extensive knowledge in the organization about opioid use disorder.So we feel that our existing organization is well set up to launch OX124, although we will need some new capabilities in marketing and institutional sales where we have very little sales today with ZUBSOLV. It's a dynamic market, as I said. So there's a lot of things we need to monitor during the next year before we basically set our launch strategy.But what we do know is that OX124 is using naloxone, which today is the gold standard in the market. We have a high dose and high bioavailability formulation, which is needed to reverse fentanyl whereby powder formulation in a unique device, which actually makes it possible to use even when it's freezing. And that is not possible with a liquid. So if you have a liquid and it freeze, you won't be able to use that. And now when we're approaching winter time, I think that is something that most people understand is important. And then we expect to have a long shelf life of OX124.With that, I will leave over to Fredrik with the financial update.

[Frederik Jarrsten, executive]

Thanks, Nikolaj. So on Page 18, we look at our revenue. And if we start by looking on the top part of the page, you can see that our total revenue in Q3 of SEK 156 million is approximately 3% lower than Q3 last year. Of that revenue, obviously, ZUBSOLV within pharma is the main contributor with SEK 140 million for the quarter, which is down 6.5% from [ SEK 150 million ] in Q3 2022, and the main explanation for that decrease is lower demand in the open segment and an unfavorable payer mix. But the decrease was partly offset by a positive impact of SEK 3.5 million from the stronger U.S. dollar.Now if you look at ZUBSOLV specifically in Q3 compared to Q2, this year, you can see in the waterfall graph on the bottom part of the page that net revenue decreased by 3.4%, and also from a quarter-over-quarter perspective following a lower market growth, the demand is lower, as shown in the first 3 bars in graph.There is also a slight unfavorable payer mix. Within these gross to net items, we also had a higher wholesaler inventory destocking effects of a negative SEK 4.8 million. And that's following an inventory buildup of stock ahead of the 4th of July weekend. The FX effect was again positive quarter-over-quarter with SEK 4.1 million, partly offsetting the decrease. And in conclusion, you can also see in the graph that in local currency, ZUBSOLV net revenue declined by 6.3% between the quarters.So going to the next page, our P&L. I just mentioned the slightly negative development in total revenues for the quarter. But if you look at the first 9 months, though, total revenue grew by 1% compared to last year. And when you look at our operating expenses, we have significantly lower OpEx compared to last year, following lower expenses for IP litigation, and also the new DTx organization with more cost-efficient processes resulted in a 43% decrease in direct expenses in DTx since last year. The decrease in OpEx was partly offset by increased R&D expenses with the refiling fee for OX124 of SEK 18 million and also a negative impact of the stronger U.S. dollar, SEK 5 million.The total effect, though, of the stronger U.S. dollar on EBIT is, however, relatively marginal also this quarter, and that's since we tried to balance both revenues with costs in U.S. dollar. In summary, OpEx came in at SEK 162 million this quarter, which is SEK 21 million or 11% lower than Q3 2022.And if you also exclude the one-time filing fee of SEK 80 million this quarter, the total OpEx is reduced by approximately 22% since Q3 last year. The EBIT contribution from our U.S. Pharma business amounted to SEK 62 million, which is a margin of 44%, down from 47% last year, following mainly larger selling expenses and effects of the stronger U.S. dollar.So we reported negative EBITDA for the quarter of minus SEK 9.5 million. However, that is an improvement by SEK 23 million year-over-year. Then finally, in financial items, we have an unrealized FX impact of SEK 0.8 million on a cash held in the U.S. dollar and also higher cost for the corporate bond of SEK 9.7 million, following an increase in interest rates. That is partly offset though by earned interest on bank accounts of SEK 1.3 million.Next page. We just wanted to highlight the point we usually make of Orexo having a positive EBITDA if we separate what we define as distinct external non-repeating costs. And for Q3, these non-repeating costs amounted to a total of SEK 23 million, out of which SEK 18 million was for the refiling with the FDA and SEK 5 million for legal processes. EBITDA in that case, would be a positive SEK 13 million. And for the first 9 months, these non-repeating costs amounted to a total SEK 110 million, and our EBITDA would in that case be positive SEK 65 million instead of a negative minus SEK 45 million.So these external non-repeating costs now with the conclusion of the clinical trial for MODIA, the refiling of OX124 now completed and the win in the IP litigation case, they have decreased significantly over the last 2 quarters, and will continue to do so in the following quarters. This core EBITDA, excluding non-repeating costs is -- has been the key metric confirming a route to returning to profitability and a balanced EBITDA in the second half of this year.Moving on to next page, cash flow. We can see liquid funds, which is cash, cash equivalents amounted to SEK 184 million end of Q3. That's a decrease by SEK 67 million from end of Q2. Cash flow from operating activities was negative for the quarter with SEK 22 million, primarily impacted by negative operating earnings, and that's mainly due to the filing fee for OX124.And then we had investment activities of SEK 7 million from investments in equipment to the development organization, and we also had financing activities with a negative impact of SEK 39 million, and that comes primarily from buyback of the corporate bond, nominal value of SEK 33.5 million.And then finally, on the financial outlook, our metrics are reaffirmed. But as Nikolaj mentioned earlier, due to the relatively low growth in the buprenorphine-naloxone market in Q3, the growth rate will need to accelerate in Q4 to meet the yearly target of 4% to 7%.And with that, back to you for legal update.

[Nikolaj Sørensen, executive]

Thank you. So legal update. As you know [ we won ] in the district court on the first day of the third quarter in Sweden, last day of the second quarter in the U.S. And we have now also -- and we've seen that some pharmaceuticals have appealed the decision. And last week, the brief was made public and what we can see is that they have levered the appeal down to some invalidity and some non-infringement arguments. We haven't seen anything in the appeal that is surprising to us, and we feel that the decision made in the district court was very well argumented by the judge. And we are in a very strong position prior to a decision in the court of appeal.Then on the government agents investigation or the subpoena related to ZUBSOLV, nothing is really happening. There is a few times that we have to share some information, but it's going very infrequent and very fragmented. But we're, of course, looking to resolve both of these cases as soon as possible. I might have to mention on the patent litigation with Sun, the anticipated hearing is probably going to take place during the summer of next year. And then depending on what decision they will take, the decision could come -- will come then in the second half of the year, but could come quite late also in the second half of next year.Then a short update on where do we see some of the value drivers moving forward and what's a focus for us in the company. And right now, in particular, in light of the financial market, we have a very strong focus on cost control. We have lowered the cost quite broadly in several areas of the company, but we continue to look for opportunities to reduce cost and meet our ambition of reaching EBITDA balance now in the second half of this year, but that's for something we want to carry on into 2024 also.We're also looking forward to the approval and the launch of OX124. Next milestone will be the PDUFA date, which we hope we can be able to share a little later in this quarter. We are looking forward to see ZUBSOLV continue the sales stabilization. Q2 was a little of a disappointment, but I am encouraged to see the development for the last 6 weeks, and hopefully, we'll see a little acceleration now during Q4, which is definitely needed looking at the patient need for treatment in the U.S.We continue with our partnering of the pipeline projects, and we are advancing and we're learning something new all the time about the value of amorphOX and we're getting confirmation that we're adding stability. We can get high yield out of, for example, biologics and vaccines when we formulate them using amorphOX. So this is something that we, of course, will anticipate coming into real partnering projects later on. And then we have our digital health, where the expenses have been cut relatively dramatic to a level where the direct expenses now in Q4 is going to be minimal or quite low.There are some investments we need to make to ensure that MODIA meets the requirements for FDA and is meeting some of the learnings that we have from the clinical trial. But we are seeing a continuous decline in our expenses for digital health, and we are now focusing on a fewer customers to see that, that works and in particular, Veteran Affairs. We think there's some good opportunities for both deprexis and hopefully also sooner, both vorvida and MODIA. And then we have the legal processes where we are quite certain we will have a resolution on the Sun Litigation, but we're, of course, also trying to find an end of the government investigation so we can put that behind us.And with that, I will open up for questions, and thank you for taking your time to listen to this presentation.

[Operator]

[Operator Instructions] The next question comes from Klas Palin from Erik Penser Bank.

[Klas Palin, analyst]

And my first question is about [ partnering ] [indiscernible], and this was mentioned in the report that you seek additional advice from the FDA. Is it possible to give some -- certain [ light ] on, would that be -- how much of a -- and what's ongoing in the partnering discussion in parallel, are they active still?

[Nikolaj Sørensen, executive]

So, Klas, I hope I was the only one who had a little bad reception here. But I think I got your question. So the first one was related to the [ NEFI ] and the FDA advice. So, we have [indiscernible] and a briefing package with the FDA during this quarter. And what we learned from the Complete-Response-Letter is that there is a need to improve some of the -- to review some of the clinical plans we have [Technical Difficulty], particularly around repeat dosing and also allergy challenge, so how it is received by people who have allergies. So there are some of the details in the [ NEFI ] Complete-Response-Letter, and that actually go broadly because it was not only the clinical study. There were other comments made in the Complete-Response-Letter that we just need to reflect in our briefing package [indiscernible]. And that will teach us more about what the development program will look like moving forward.I think this is a new category, and there has been some anxiety around how FDA will receive the entire category and how much data is required. We will also learn a little more about how we should prioritize some of the studies, because you could take -- making some of these studies in parallel or you could do it in sequential. And that depends a little on what FDA is looking after and what risk we see in that study if we should do that. So, there are a lot of details. But what we are pleased with is that it actually shows that if we're meeting the FDA requirement, that should be a valid regulatory path forward. But it's pretty clear the clinical development program, the size and scope of that has increased after the advisory committee, I think to some extent, even after the Complete-Response-Letter.And then around the partnering discussions, we have several companies who are global. We also have companies who are more regional in Europe and the U.S., who are looking at OX640 and where there is an active process ongoing. So there are companies who have come in actually after the [ NEFI ] decision also into the data room. So it's not only companies who have left, but we have new companies who come in after the [ NEFI ] decisions. I don't think I can share that much more detail on these processes. But it is more than one and -- that we both have global and regional interest.

[Klas Palin, analyst]

And then I would jump to the amorphOX platform. And also, you stated that you have multiple discussions. Is it possible to also update about the 2 other collaborations that you announced earlier, if they are still running and could perhaps lead to some sort of a deal?

[Nikolaj Sørensen, executive]

So, the activities that I'm referring to around stability data and yield and manufacturing, that is actually from these programs, so -- And you also see that there are some income in our operating income which is related to one of the projects that we have talked about earlier. So we have -- we got paid some of the activities we have done in one of the projects. So it is ongoing. But as it's biologics, it has taken a little more time than we would have done with a small molecule because even the Orexo facilities need to meet the requirements to work the biologics, so we have to operate our quality systems at Orexo. But that's done now. And so far, the data looks good.

[Klas Palin, analyst]

And my last question then is related to ZUBSOLV sales in the EU that you reported an increase at least compared to last quarter. Could you perhaps update us on what is happening in the European market?

[Nikolaj Sørensen, executive]

So there is a higher income where the majority of the income is based on supply to different markets in Europe. It's some of the South European country, or more particularly Spain, where I think it's tracking a little, where the launch is ongoing decently. We also have some royalties but not that much, but going to actually supply. What is positive in the first deliveries of ZUBSOLV to the EU, we didn't have any margin, we actually had a little loss reported on the sales of the tablets based on the pricing agreements we have with the supplier and what we could get it for in the U.S. But in this time, we actually have a profit in the supply of these tablets.So, we see that it's adding a little profit, but as the majority it's based on the supply of the product, the profit margins are relatively low. We should earn our money on the royalties. But we do see some roles coming in also on a low level.

[Operator]

[Operator Instructions] The next question comes from Samir Devani from Rx Securities.

[Samir Devani, analyst]

I think I've got a couple. Just returning to OX640. I just wondered if you could tell us when that FDA meeting is scheduled for? And just to confirm, I'm not sure if I heard you correctly, Nikolaj, whether you would be doing any of these further studies yourselves? Or is it just really for clarification of the partner so that you can properly cost out the program? I guess that's the first question.And then my second question is just on -- just as we go into 2024, thinking about R&D, and obviously, there's been sort of the end of the MODIA study filing of OX124. I'm just trying to think about where do you see your R&D spend in 2024? And what sort of projects beyond sort of the amorphOX platform deals that you have? Is there anywhere else that you feel that you could be directly investing in?

[Nikolaj Sørensen, executive]

So the first on OX640, we don't have a meeting scheduled. We are just finalizing the briefing package, updating that with what we learned from the Complete-Response-Letter, and that will then be [ to a ] meeting. So we don't have a meeting in the book set. And then whether there's something we expect to do -- So what we are working on and -- is upscaling some of the manufacturing processes for OX640. But we have not made any plans of any clinical development within the company right now. Not said that, that couldn't happen.But one thing that is important for us right now is, again, back to the financial situation, that is to ensure that our investments in R&D is followed by or is reflecting the amount of income we receive from partner projects and also from ZUBSOLV. So right now, the activity that we have is focused on the FDA briefing package, and then it's particularly around the -- it's around the upscaling of manufacturing because you do need to have commercial scale and manufacturing for the next clinical trials. So that is where we're putting the efforts.And then around 2024 R&D, and that's a little the same question. I do think the last -- if we do -- if we remove the FDA fee, then I think the current spend in R&D is a good guidance for where we will be during the next year. There could be some quarters where we go up a little and there could be quarters where we dip a little compared to where we are right now. There are, of course, some expenses outside the FDA fee for this quarter related to both preparing the file as we're working with consultants to do that, and also some work. But there will, of course, be some work with OX124 next year also. But I think the current spend is a good starting point.And then with regards to other projects, our focus is, of course, OX640, but we're also doing some work on OX125, so our nalmefene project. And then we are looking to see what happens with some of the partner projects and what activity level Orexo will have in those projects. It could be projects where Orexo have a more active role and it could also be one where we have a very passive role where it's more like a tech transfer after Orexo have the initial formulation work. So that is the focus again right now.And we do have several other ideas of where we could apply a amorphOX, but again, back to the financial reality right now is -- it's important to have an EBITDA in balance and being able to finance our own activities.

[Samir Devani, analyst]

And maybe just one follow-up. So on that basis, is it fair to assume that you would still expect to have a deal done for OX640, say, first half of next year?

[Nikolaj Sørensen, executive]

So I will actually repeat because I do get questions even -- because -- we have been quite optimistic about our ability to get the deal, in particular, after the positive advisory [ route ] for [ NEFI ]. And we have had some very advanced discussions with different partners where some of them -- or actually all of them are still in the game right now. So there are good reasons to be optimistic about our ability to close the deal. But a deal is never closed before the ink is dry, and there could be things that are completely out of our control related to the partner that could stop that. And it's not like we have 10 companies with all active bidding that are attractive.We also have some companies, which I would put into our own second priority, where we need to consider whether we're willing to work with them in the process moving forward, or we should take it a few steps further to address some of the uncertainties that were raised in the Complete-Response-Letter you could consider to do. It started to show that we can manage those. But in -- based on the interest and where we are right now, I think there are reasons for optimism, but again, a deal is never done before the ink is dry.

[Operator]

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

[Nikolaj Sørensen, executive]

Thank you. So we have a question here, which is around the ZUBSOLV. I just need to read what we have here. So there is -- first question is about the top line of ZUBSOLV where we have seen some of the segments which are declining and others which are increasing. So Humana and United, I think, in particular, [ Med ] is not declining that much right now. And then we have increasing markets such as New York, Kentucky and Indiana.So the question is how much do these different segments contribute to the overall market?I would say Humana and United are still quite big. We don't break down on specific segments [indiscernible] communication. That's more for competitive reasons. New York, Kentucky and Indiana are growing in importance, but of course, some of the percentage increase is because we were not reimbursed that before. So we're starting from a relatively low level in both New York, Kentucky and Indiana. So there -- so far, they are still a smaller part of the segment.The most important segment for us is still the Commercial segment, even though Medicaid is growing quite fast. Overall Medicaid, I believe, is about 1/3 and the Commercial segment, it's somewhat more than half, and then we have some cash and institutional sales in some Medicare on top of that. But we don't break down the segments anymore.The other one is around repurchase of the bond of Swedish SEK 33 million. And the question is because do these -- they run until February 2025, and why do we decide to review this right now?So of course, we -- at some point in time, we need to refinance the bond. And you would normally start looking at the refinancing before the bonds expires, which would be in February next year. The situation here in the quarter and actually in previous quarters has been that we were offered a relatively good deal with a yield of about 10% if we repurchase the bond. And that needs to be compared to what we could get. We also see that there is some currency risk because most of our money are in U.S. dollars. The bond is in Swedish kroner.And since the U.S. dollar has been pretty strong for the last few months, we saw that we could leverage the situation with a U.S. dollar at a high level, and then we could use that advantageous exchange rate to repurchase the bond to a price which was below [ $100 ]. So we do pay the full nominal -- the full price of the bond. We actually got a discount on the bonds. So this is, say, fully transactional. We could actually sell the bond again if we want them to get the money back, but we saw that this is better than having the money sitting on a bank account, earning significantly less interest rate, in particular, looking at our cash needs for the next year.Then there's a question about Robin Evers coming into the Board, which is positive, and how he can add to -- based on his role in Novo Nordisk that he can help us. And -- then the question is here that companies like Novo Nordisk would normally not approve Board engagement of the pharma companies for executive to management because there's a risk of a conflict. And there's a question of whether this means that Novo Nordisk have some strategic reasons to include Robin in our Board?I honestly don't know what the discussion have been within Novo Nordisk. We were using the network of Novo Holdings to get presented a few candidates for the Board because we agreed in the Board and with the nominations committee that we need people with more R&D competence into the Orexo Board. And there, Robin, I think, was unparalleled with some of the other candidates. Exactly how that approval process has looked like within Novo Nordisk, I don't know. But I think Novo Nordisk probably see that -- we are somewhat smaller company, and we are working in opioid use disorder predominantly, whereas Novo Nordisk is in obesity now, but predominantly within diabetes. So -- but if there's any other discussions, I would not be aware of that.Then there's one more question. Can you elaborate on the other operating income line and the collaborations that you mentioned? Do you expect some revenues from these in the coming quarters as well, and when could we learn more about these projects?So the activities that we do have a financing for is some specific activities where several of the activities are external, or predominantly there's external expenses, but also with some coverage, but not much for one of the projects within Orexo. But this is much more activity driven and not a recurring income. So, I think whether that will come something in the fourth quarter, I can't go into details right now. But I do think there was one activity in the third quarter which will definitely not reoccur in the fourth quarter. And I don't think you should expect some of these other income to be repeated in the next quarters. But neither will the cost.So the other income is more or less the same as some of the cost lines that you would see about. So on an EBIT level, this is more or less of a scratch. And when we can learn about these projects, that is when we have signed an -- that's when we're advancing into a more partnering like agreement. And that's a bigger step, of course, for these companies because then they really need to start a project where we right now work more with their R&D departments. If we move into a real partnering agreement, that becomes a little more official for both companies with a commitment of advancing the project to the definition of the contract, which often have time lines and [ all this ] defined.Then we received some questions by mail before the meeting. So one was around the Complete-Response-Letter and [ NEFI ] and why we need to contact FDA? Didn't we know what came out in the Complete-Response-Letter before that was received?We did get some indications about that during the -- from the advisory committee, where we saw -- where some of the questions were headed. But if you go back you, and even follow ARS Pharma who's behind [ NEFI ], they also need to have an FDA meeting to get clarity about what is needed now for them to get approval, what study design is needed to get it approved. So one thing is what we think how the study would look like, but it's not there before it has been confirmed.Also, as we are entering into a space where there are several other projects, you need to look at the development program in light of the other company's development programs. Maybe some of the activities would not need to be repeated because it would look more like a glass effect, whereas other areas would need to be reinforced or maybe even investigated further due to differences in formulation and dosing. So I think it's natural that we need to have more information to be able to define the full development program.There's a question about, do we have more than one company?And I think I've answered that. We're interested in [indiscernible].Then there's a question about MODIA and the study and whether we can use the results from the study towards customers and the regulatory authorities, and whether we will redo the study?And I say there's no plans of redoing the MODIA study. But of course, we will continue collecting data from MODIA both through real-world data, but we could even consider to do some minor, more directed studies, which are more like other digital health programs where we direct you more to customers and patients who are really interested in the program.We can use the data in the dialogue with customers. We have already done that. I think most -- the customer dialogue we have had, they understand how the differences between the study design and how the treatment is done in reality. And I think they are more focused on the outcome of the patient to actually complete the full study, also recognizing the weaknesses that are for that.However, in every presentation, we, of course, need to present the full data. So we can't just cherry pick the explorative parts of the study, but need to explain how the full study has been designed and the outcome of that also. And with regards to the FDA, we do see that using the enforcement discretion for medical -- mobile medical device apps, we don't need to share the data with the FDA. FDA has an opportunity to review the commercialization and the product, but it's more on us to ensure that we comply with the regulations for that regulatory pathway. That does force us to make some changes to the program to comply to the enforcement discretion, which we are doing right now.And if FDA comes back, of course, we will need to show the data and some of the important part of the data, which maybe is not that surprising, but is that there are no side effects coming out of MODIA, because if there were any side effects -- and you can question why that would happen in a digital therapy, but if there have been that, then, of course, the FDA would need to be much more focused on that.Then there's a question about amorphOX and why we don't announce the partners who are testing their APIs and whether we receive any compensation for that?I think I've addressed both of these in the previous questions and answers. I would say that it is the norm in the industry. And even Orexo have run several exploratory studies with other pharma companies that we have never disclosed because we're testing ideas, looking at some other companies, have technologies which can add value to some of our projects. And we don't disclose that before we convert them into real projects. And I think that's the same for some of these companies. And some of them are working on projects, which are not publicly known. And therefore, it's natural that they wouldn't disclose the information.With that, we have no further questions, I believe. Okay. Thanks a lot for taking your time. And for those of you in Sweden, I know if you have kids, this is the autumn break week, but this is when we could schedule our call this year. So I wish all of you a pleasant rest of the day and thank you for your attention. Goodbye.