Orexo AB

STO:ORX

Earnings Call Transcript 2020-Q4

[Operator]

Hello, and welcome to Orexo Interim Report Q4 2020. [Operator Instructions] Today, I am pleased to present Nikolaj Sørensen, CEO; and Joseph DeFeo, CFO. Please begin your meeting.

[Nikolaj Sørensen, President & CEO]

Thank you very much, and good afternoon to those of you in Sweden. Good morning to those of you who are out in the U.S. So this is our full year report and Q4 record for 2020, a year, which I think in many ways, we have made a lot of transformative actions and made a lot of progress in Orexo. But it's clearly also a year where the COVID-19 have had a little harder grip on the society than we had expected when we started in March, and also had some impact on our business both in terms of our ZUBSOLV business, but also digital therapies. And the unfortunate effect of COVID-19 is that the disease areas that we are working in, opioid dependence and mental health, is something that will be very negatively impacted. And we already now see a dramatic increase in the problems associated with, for example, opioid dependence, alcohol dependence and depression.On the -- so from an Orexo perspective, that is, of course, a major market opportunity and why we see that a lot of patients suffer. Where we have seen this as a great opportunity for -- commercially for the end of the year, we also see now that the health care providers, payers and others in the U.S. are very busy with COVID-19, and a lot of the processes we have hoped went a little faster. It's taking time, but that doesn't mean that we are not making progress. And I think there's a lot of stuff cooking at the moment. So -- and we're really looking forward to 2021.Moving into the report, and I will jump straight into the Page #4, which is the currently, highlights of the year. For US Pharma, highlight of Q4. So the US Pharma, the highlight of Q4 is really that we have been able to increase the U.S. dollar sales. We expected that to happen, and it has happened also in U.S. dollars. And we've seen the Swedish krona strengthen, which is making the net revenues a little lower in SEK, but increased in dollar. However, what I really want to point out is how we are now really starting to optimizing and making the U.S. business efficient, and where we see synergies with the Digital Therapeutics also. So our US Pharma business had a tremendous strong quarter in terms of EBIT profitability. And also the EBIT contribution from Q4 despite a significantly lower top line is nearly identical as last year.In Digital Therapeutics, one of the expectations for the second half of last year was to have some broad insurance coverage for the products. That has taken more time than what we had anticipated. We haven't really seen the insurance companies take the same -- show the same agility as the FDA, where FDA -- early on in the pandemic. So we need to promote new tools to get people with mental health issues access to health care. And Digital Therapeutics is a good way. They gave us this enforcement policy, which enabled us to launch early. However, the payers have not moved with the same agility. That -- positive part is we're still in dialogue with a lot of the payers, but it is moving quite slow. I will come more into that as we move -- coming in later.When we get to HQ and Pipeline, and that's basically our R&D activities and also license agreements outside the U.S. So we have OX124, which will be our new. I expect strong profit and revenue generator in the pharma part. It's on track to be filed in Q1 2022. We are working intensively setting up the commercial supply chain, which is the key area of focus at the moment. So we're ready to run the clinical trial -- pivotal clinical trial next quarter. And then with fast track approved, we would be ready to file it in Q1 of 2022.Then I also just want to highlight that during the last quarter, we did get an agreement with ZUBSOLV in Europe, and we're now working intensively with our code to prepare for the launch in the second half of next -- of this year.Our strategic agenda is basically, say, become a little more concrete now than we've presented before. We are still actively looking to -- for business development opportunities, both for Pharma and Digital Therapeutics. However, at the moment, given the COVID situation, we are a little more hesitant to move forward with some of these opportunities because we want also to see that our own Digital Therapeutics, for example, are getting tractions before we're investing too much in new opportunities. The good thing in this area is that where in the Pharma, we are a relatively small player in the Digital Therapeutics space. We are quite large players. And with our established platform in the U.S., we do see quite a lot of interest from smaller companies to partner with us. But we do want to see that our own products at the moment can get a trajectory before we're moving forward with that stuff.But when that is happening, I think we have a good pipeline of opportunities. So what -- as I'm saying, establishing our DTx business is really one of the main focuses at the moment. We have 3 products in the market, and 2 of them are already revenue generating, although on a pretty low level. But we're seeing a good movement early in January. Modia is technically ready. We are expecting to sign up some agreements with specific customers now during Q1, where we can move it into real-world testing. On ZUBSOLV, profit contribution is really important for us to maintain this as the enabler for both Digital Therapeutics and also for the pipeline. And here, I think this last quarter was a pretty good indication that we are on the right way.Finally, we have OX124, which is a big focus for us of launching in 2022. So OX124. For those of you who are new to the company, it's an overdose rescue medication. The potential that we see is about $70 million to $110 million. This is about 1/3 of the market at the moment. We're pretty well positioned to be the first one out with a new and stronger rescue medication with naloxone. Some of the companies who were ahead of us have faced some unexpected problems, I believe, when FDA increased the demands and requirements for these products. And we are still on track to file on our time line. So I believe we have an opportunity to be the first real competitor to Narcan in this market with a nasal overdose rescue medication.If you look at what has happened in the market, unfortunately, as I said, the issue with opioid overdose is escalating. We're seeing 83,000 Americans dying from overdose. Those who have been with us for a while will recall that the highest number we had before was 2 years ago or 3 years ago, in 2019 -- or 2018, I believe, were just was about 80,000. But now it has increased from last year to 21%. And the synthetic opioids are now representing 76% of opioid-related deaths. With synthetic opioids, this is really the focus of OX124 because they require a stronger and more powerful rescue medication to reverse the overdose. We have seen in the market, the market leader, Narcan, is doing record sales every quarter. And now expect that the 2020 full year will be somewhere around $300 million. What is interesting in the market is this market is, of course, big, but what is really driving Narcan sales is where they see states where co-prescription, meaning that you have a mandatory requirement to prescribe these overdose rescue medications to people who receive high dose opioids for pain. In those states, the sales have jumped up dramatically. And so far, I believe, it's only 4 states who are doing that in the U.S., while a lot of other states are looking to do the same.Then I also mentioned the FDA requirements. This has, of course, also been a little delay for us and requires some more investments into our supply chain, but they've now increased the quality requirements of these rescue medication devices. And this has led to at least one competitor have -- had a complete response letter, that means that the FDA rejected their approval. And another competitor who said that they were expecting to get approved, suddenly disappeared from the radar screen. So we believe that it is while it's -- say, create some new headaches and issues for Orexo to address. Now when we are addressing them and it looks good. It's also a situation where the competition will be lighter than what we could have anticipated.So I said, the important part of OX124 is to show a better and stronger and more powerful profile than the established market leader, Narcan. And looking at the red line here, this is a PK curve. So the plasma concentration of the active substance, naloxone, over time. And you can see, it's significantly above Narcan. Moving into Page #10. You will see that the Q4 progress. What we have done is that we have now established a full commercial supply chain. We are now ready to start commercial manufacturing in smaller test batches before we move into the full commercial manufacturing later in the spring. We have filed an IND, that means an investigation new drug application with the FDA. We got that approved with positive feedback that triggered that we could also file a request to pass that designation during Q4, where we were receiving an answer now during Q1. And we have continued to work on our patent protection. We just got -- yesterday, got a new patent granted for OX124.If you look ahead for 2021, then in Q1, we hope to see that we have a fast track designation. This, of course, will be a strong sign of the value that FDA would associate with this product and how important it is. If -- should we not be branded a fast track designation, which from the FDA perspective should be because there's already products in the category, it would mean a delay was somewhere around 6 months for the product.We are then, in Q2, we will start our pivotal bridging study. That, again, is on helping healthy volunteers, where we basically have to show the same kind of data that you just saw we did in our first study, but on a bigger group of people. So we're expecting that in Q2. But I would say, compared to other studies that you normally say in the pivotal bridging study, the requirements here is to be faster and at least as fast and at least as powerful as the existing product in the market. And as you saw, we had a very large margin to the existing product in the market, Narcan. So we feel quite comfortable that we should be able to meet those requirements in the pivotal bridging study.If that is successful, and we get the fast track designation, we will then be ready to file with the FDA in -- very early in '22. And with that, we'll have a 6-month review time with fast track designation, and that takes us into a launch in the end of 2022. So very exciting progress and a very exciting place and unfortunately, an area where there is an urgent need for a new and more powerful product.Moving into our Digital Therapeutics. We are making progress. No doubt that in Digital Therapeutics there are so much things ongoing at the moment. However, I would also say that COVID-19, where we saw that as an opportunity to get accelerated access to the market has turned in to be a little more of an obstacle than an opportunity short term. Long term, I, unfortunately, still believe that mental health is going to be a significant issue after the COVID-19, so there's a big need for the product. But right now, we are seeing that it is going to take a little more time than we anticipated to get the payers on board to reimburse the product.So what is that we're seeing concrete and what you say, promising development? One thing is that we are right now, processing requests from payers -- patients who go into our system and request the insurance coverage. And we have a positive feedback from more than 10 payers that they are willing to reimburse the patient for the product. That means that they reimburse it without Orexo having an agreement in place. Some of these payers are based on our new concept that we're testing. And this is a testing product we are running in Pennsylvania where we're testing going to what's called the medical benefit round where the patients have basically put vorvida and deprexis our 2 Digital Therapeutics into an existing treatment plan. And in that treatment plan, we know today there is reimbursement, and we're basically using that reimbursement path to get paid for the product.One of the things we did see during Q4 was that the payment of that reimbursement is coming in monthly installments. And that meant that we had to build up a system to manage these monthly installments, which is something that we launched in December, which slightly delayed the product launch or the launch of that concept. But now we're up and running, and we're testing that pilot in Pennsylvania with a group of patients.So if you're looking at across what are the stuff that we are doing right now to test 2 different pilots or the products. We have worked around the holidays. We did a campaign with some rebate coupons, New Year's resolution campaign. That have given a decent effect now early in January. We started with installments that was needed for managing this medical benefit plan. We also made that available for patients who are paying out-of-pocket that came in, in early December. And we're seeing the majority of the patients who are downloading our products are now using installments as their payment method.So if you take a little -- a step back and say, what have we learned from this market? If you say, where do we start? One of the things that we thought was that the payers would adapt a fast response to the COVID and basically accept flexible offers where we together would find a solution for how to get this paid. What we're seeing is a positive reaction with payers. And I would like to show some of the feedbacks we get both in written and verbal from some of the payers on the medical side, saying, this is really something where you generated convincing scientific evidence that it works. However, when we get over to the more administrative part to get it reimbursed, that's where we see hurdles and where we think it is moving slower than what we had expected. So our response to this has been this test that we're doing in Pennsylvania, where instead of having to work with individual payers, we're now integrating our Digital Therapeutics into an existing reimbursement category from medical benefits where we and the physician can get paid through existing codes in the system and an established reimbursement. So we won't need that individual approval for each of the payers. It is a little more cumbersome way to get paid for the product. It is coming in monthly installments rather than a onetime off. So of course, we would still like to have the agreements with the payers, but it's definitely a feasible route to get reimbursement for the product. And with the positive outcome of the test in Pennsylvania, we will be ready to roll it out across the nation in the U.S. in collaborations with larger health care providers.We -- there's a big debate in Digital Therapeutics space whether we should go for medical benefit or from pharmaceutical benefit. We lean towards the medical benefit route, even though we would be able to manage the other one. But what we have seen is, for example, the medical benefit, you don't get paid everything upfront. You get it in, for example, monthly installments and that was something that we had to build during the autumn and was delaying our broader launch a little more when we realized that we actually exposed the doctor for risk should the doctor pay for the product upfront.We have targeted smaller regional insurers and integrated delivery networks. Integrated delivery networks, that's basically, say, health care providers in the U.S. who also have an insurance responsibility. This is still the aim. This is still where we are focusing. But we do see that there is complexity, and we need for each of these customers to have a more focused and specific approach. And for that, we have hired new people to the organization who have an experience working with these kind of customers, and we're now ready to make that run.Then we have -- we saw that evidence and experience is something that is very important. It still is. But what we also have to recognize is that Orexo is a new player in the field, and we need to build credibility. And some of the stuff that we're doing to build credibility is to work with companies like Trinity Health or health care providers like Trinity Health, like the Texas Nurse Association, where we make our products available to health care workers who can then test -- because who would be the more credible person to test whether the product really works than health care people who work in the health care sector. And that, I think, is a way for us to overcome some of that being a new player with a completely new type of treatment than working with established companies or -- and associations, we believe is a good route to show them it works.Then there has been a big question. So how open would consumers be to go into a system on some very stigmatized issue or we can say, highly confidential issues like alcohol abuse, opioid abuse? We do see that, that is not a significant hurdle. But one of the things that we have seen is that a lot of consumers are very prone to listen to other consumers. So this peer-to-peer information where we get existing patients or existing people with alcohol issues or opioid issues to talk about the products have been very important. So we have start-ups something we call -- where we engage mentors, who already today work as mentors and, for example, are holding big groups or managing big groups of peers. And we're working with them to basically spread the news about our products. I think this is a quite exciting opportunity also, something that we launched in December as well.Then coming to some of these Trinity. And some you might saw the Texas Nurse Association came out with a text -- a Twitter message just this week talking about deprexis. So why are we doing this? First of all, I would say, initially, we are offering the product for free. So we are not getting reimbursed for this. But we do see that this is a group who, first of all, have been under extraordinary pressure during the COVID-19. So we have an opportunity to help people who have been in a very difficult time. It's also a situation where we can -- by engaging health care workers, we can get people who carries a lot of credibility in the health care work to test the product. And with that positive feedback, we see that is a route for us to expand into their workers. For example, all of the nurses who works in Texas, if they have a good experience, then there's a bigger chance that their employer will also reimburse the product when we contact them and can use Texas Nurse Association as a reference case.Same thing in Trinity Health in North Dakota. We are getting some overwhelmingly positive feedback from Trinity Health, and we are now moving the discussion into a commercial discussion, how can we make our products available to their patients within the Trinity Health network? Again, using Trinity Health, offering it for free, provides us with a reference case, it opens up both for commercial route with Trinity, but also opens up for Trinity Health to be a reference case for others in the U.S. And that's a way for a new player like Orexo, with a new tool like Digital Therapeutics to gain credibility and trust.During the quarter, we also launched modia. And here are some screenshots from the modia site. I would just say this is not complete and some examples from different screens. And you can see how it's -- product is working with bonding to create trust, how it's working with following, how the patient is bearing. So we can call diagnosing, but also a lot of the scope is around education. So we're quite proud now to have the full technical development of modia ready. And we're now working to get some payers on board to do real-world testing in their patient population, and we're quite confident that we will be ready to announce that during the first quarter.We have, if you look at 2021, some quite high expectations set for this business area. We believe that the piloting of reimbursement pathways and some other commercialization concept is something we continue with during Q1. When we see the positive outcome of that, we have the financial strength to rapidly accelerate the commercial efforts. So -- and here is something I just want to highlight that in the quarter, we were -- yes, in the quarter, we expected to go more broad. But when we saw how the COVID-19 had a negative impact on the business and our availability to meet customers, we took a step back and we start to work more with pilot projects. And we saw that in our financials, where we have spent significantly less than what we expected in the quarter.We also expect now moving forward that we'll have partnership with larger health care providers, who can use those positive -- these reimbursement pathways that we're piloting at the moment. So if we get positive outcome of that, that will open doors for some large health care providers that we're discussing with at the moment. We expect to have some partnerships announced to payers during Q1, where it's either reimbursement, but it can also be pilot programs to test one or more of our products in real-world settings. We expect to announce that during Q1.And then with the positive news we have from -- experience we have Trinity Health as an employer rather than a health care provider, where we see we have a quite large share of the people we expect within the Trinity Health -- among the Trinity Health employees who we have a quite large share of those who are expected to have depression and/or alcohol issues are now using deprexis or vorvida. So the traction within Trinity Health when it was made available for the employees was, I would say, very positive, and it's a large share of the employees that we would expect to have these issues and are using 1 of these 2 products. So that shows that if we can find larger employers who make it available for the employees, there's an opportunity to get a pretty large share of employees with depression or alcohol issues to use the digital therapies and also, of course, a significant commercial opportunity.Moving into ZUBSOLV. So ZUBSOLV is still a challenging environment with COVID-19, where we have an issue to meet the physicians. It was also something that hit our digital therapies because our sales force had a small window in Q3 when the COVID-19 went down during the summer. But then now, during Q4, as everyone has noticed, COVID-19 has really had a hard hit on societies, and that makes it very difficult for us to get out to the physicians. So we have had a tougher market, and that have also resulted in somewhat less activities, and Joe will talk to the financial result of that. However, if you look at the overall issue of opioid dependence and -- during the COVID-19, the problem has just continued to grow. We have seen the overall market growing with 13%. But if you break that down, you'll see the majority of that growth is within the public segment, some in cash. And this is where generics have a significantly favorable position to us. Our sweet spot in the market is the commercial segment. It's people with a private health insurance where we have seen the market showed a little growth in Q4. But if you look at the time during COVID, it actually has declined. And that is making it challenging for ZUBSOLV to grow because this is really where we have. We earn most money. That's why we have a 99% access to the patients. But if that's not growing, it is difficult to grow the ZUBSOLV. So -- but however, if you look at the actual sales now during the autumn, it has been flattening out. We saw the impact of these former exclusive contract that's diminishing. We actually had the lowest drop in the Q4 compared to Q3 that we have seen since United has decided to move out of the exclusive agreement in July last year.If you look at the market, as I said, 13% overall market growth, but it's really driven by the public sector. And you can see that with the blue line on Page 19, growing with 18%, whereas the yellow line, that's why we have reimbursement only grew with 10%. But if you break down the yellow line, again, you'll see the growth that we have in that is also nearly all of that coming from Medicaid and Medicare.Breaking down into Page 20, into our product development. If you look at the purple line, I think that's quite interesting because that's the open business. And while it has gone a little up and down, you'll see more or less in the year on the same level of prescriptions that we started the year. So we have, in the market, kept a pretty stable position. But where we have seen a decline during the year has been on the United and Humana sector. That's the green line in the middle. But again, if you look during -- just during the last quarter, you'll see that, that decline is really minimal compared to the trajectory that we saw earlier in the event -- earlier in the year. And in particular, I think what's worth noting here is why we did see a decline of 3% in the quarter? You will actually see that from the last week of Q3 to the last week of Q4, it's more or less a straight line. And again, in the open business, if you see the same, from the last week of Q3 to the last week of Q4, we actually saw an increase in the demand.So looking forward, one of the triggers for ZUBSOLV for growth in '21. One is that, of course, we have a very good market access situation. We kept all the market access from last year, 2020. We've seen that Express Script, CIGNA are now listed, and so are the only branded product in that commercial Medicare formularies. This means that we are now the only branded product that is recommended for more than 60% of the market in commercial. So a very strong position in commercial. We have seen a lot of activities. One of the last things that the former U.S. administration under Donald Trump signed was a removal of the criterias for prescribing buprenorphine products by every physician in the U.S. Would that change? It would be. Every physician in the U.S. could now prescribe ZUBSOLV to 30 patients. That would basically make this product a GP product. You can say that would be available across the U.S. for up to 30 patients.There are some legal issues around this that are being investigated by the new administration. But what is positive is that we see that even the new administration is very focused on improving access to medical-assisted treatment, that means buprenorphine. Our field force has said access gradually improving somewhat in -- during Q4 has really been difficult. Also in Q3, ZUBSOLV was improving. But we are now expecting, as we hopefully see with some of the COVID restrictions are easing up, that we will be able to go back to the same efficiency as we had before.That said, we are working with a lot of new innovative tools for virtual selling. It's a new process for our field force to learn how to work with. But we also think that there would be some of those learnings that we can bring in and going forward in the future. Even when we don't have COVID-19 restrictions, we could improve efficiency of our field force.And then finally, for ZUBSOLV. I do think that our COVID-19 -- our digital therapies would be -- offer a very good synergy, improving the value proposition when we can add on a particular modia, which is a support to ZUBSOLV. This is where we started our digital therapy journey was with modia, and I also think this is where we have our sweet spot in the market. And now when that is ready, I think we have a very exciting offering both to payers and to patients and physicians when we come to the autumn and modia have been tested with some specific customers in the U.S. With that, I will open up to Joe to talk about the financial information.

[Joseph DeFeo, Executive VP & CFO]

Hello, everyone. It's Slide 23. This shows our revenues. We did have lower ZUBSOLV net revenues versus prior year, as Nikolaj mentioned, predominantly due to loss of our exclusive contracts. And then also, we had lower revenue due to the ceased Abstral royalties in the EU and the U.S. However, we did see some stronger-than-expected Abstral royalties in the rest of the world. So we did get more than expected revenue there. So you can see the revenue there. One thing to point out, as Nikolaj mentioned, is ZUBSOLV revenue has stabilized, and we actually had a 3% growth in Q4 over Q2 -- Q3. So we are seeing stabilization so that -- in ZUBSOLV. So that's strong and resilient brand.If you go to the next slide, you can see where the declines come from. You could see the 2 majority items. The third one over, which is demand for UH, UnitedHealthcare and Humana, which is big firm exclusives. And then also, we've been negatively impacted by exchange in Q4, really in the second half of the year, with the weaker dollar. The first one, the open business, there has been a decline in demand. This has been mostly due to COVID and its impact on the commercial segment not growing. So it's given us less growth opportunities there. Otherwise, the other ones are small amounts. We did get a benefit from our price increase. And also to note that we took a 3% price increase on January 1, 2021. So we'll have another price increase for this year.If you go to the next slide, this really shows you our US Pharma business. You could see that the net revenues, yes, they've been declining, but they have been starting to level off. You'll see as we get to the segment P&L, so the gross profit impact is much less because we have much lower cost of sales. Significant improvement there. And then on the right side, you could see that the EBIT is holding up very well, very stable, actually growing EBIT when you look at the last 12 months for Q4 versus Q3 and our margins, very strong margin. We had a 66% EBIT margin in Q4. And then the last 12 months, it's 53.1%. So very strong, profitable U.S. business. Next slide. This is our P&L. We talked about the revenues. But you can also see that the cost of sales is 50% lower than last year. Some of that's due to sales. But we have, as we've mentioned before, manufacture efficiency program, which has made our cost of sales significantly lower and made the gross profit impact much less than the revenue impact. From an operating expense standpoint, we obviously have higher selling expenses due to the launch of vorvida and deprexis for digital in the U.S. So we've increased expenses there. We've had lower selling expenses in US Pharma, somewhat lower than expected due to COVID. The difficult situation has made it difficult for the sales force to earn incentives. So there's some savings there. Plus, there's been some territories that have not been viable because of, as you may be aware, with COVID, there's significantly different restrictions depending on what state you are. So some territories have been viable during COVID and -- but they may be viable going into 2021, after COVID goes away. So that's the selling expense. Administrative expense is mostly down due to lower cost from our long-term incentive program and due to the lower share price.Research and development is flat. However, we are spending to develop OX124, and we're really prioritizing that. So you can -- we're definitely doing everything we can to move forward this project, but we're prioritizing that while saving in other areas, so that R&D is flat.And then you could see our EBIT is a nominal amount of loss. We did have a net financial items because a lot -- most of our money is in U.S. dollars, we took a negative there due to the exchange rate of a weaker dollar. So our EBIT -- our EBT is a bigger loss. Our tax position, we have some timing differences there, plus our deferred tax asset. We took that up because we're investing in the business. So we're not showing profits over the near term. So we took our deferred tax asset off the books. This is related to -- we have a very large deferred tax asset, related tax loss carryforwards. So in a way, what you're seeing is, as we've had a negative EBIT. In 2020, we've actually had a tax impact by reversing out the deferred tax asset. When we start again reporting profits, we'll actually see a tax benefit because there is no expiration on our tax loss carryforwards. So once we start earning profits again, we will also be able to take that benefit that we won't be taxed on it. So our EBITDA is basically flat, which is down, but we're managing our expenses appropriately and making sure that we do the right things from an investment standpoint. We're not hindering our ability to grow the business, but we're also not wasting money. We're being very financially conscious to ensure we have a good P&L while we go through our investment period.Next slide is our business segment. And you can see right away, probably one of the biggest highlights from a financial standpoint in Q4 is the very strong US Pharma EBITDA. It's basically the same, and EBIT are the same as last year despite the revenue loss. Did a great job managing the business. Some of the infrastructure, as we mentioned before, has been available to go on to different projects. And in this case, with Digital Therapeutics, we were able to use the existing infrastructure to help that with the digital business. So that's been very efficient. And like I said, very strong profitability, resilient profitability for US Pharma.Digital Therapeutics, clearly shows the investment into the business. We did have a little bit of revenue, SEK 30,000. One thing you should know is that based on accounting rules and also some of the things Nikolaj talked about, installment payments, we -- with digital products, we have to recognize the revenue over the life of the product. So if you sell something now, we can't take all the sales, we'll have some deferred revenue going forward. And as this number grows, we'll highlight that number of -- about deferred revenue. But we can't recognize from an accounting standpoint all the revenue upfront when we receive it.And then the headquarters and pipeline that -- the revenue, as we mentioned, is due to the lower Abstral royalties losing U.S. and EU. And then the operating expenses is predominantly related to R&D.Next slide. This shows our financial position, obviously impacted by our investment in DTx and our development projects, but we still show a very strong, over SEK 500 million of liquid funds. And then we have a net cash position of SEK 280 million, after you look at the bond that we have on our books. So still a very strong liquid cash position.When you go to the next, we just highlight that -- to remember, early in the year, we took some opportunities around buying back some of our corporate bond at a discount and then also repurchasing some of our shares, which is predominantly due to finance some long-term incentive plans in the future. So when you take those out, we're really close -- our liquid funds would have been close to SEK 600 million and our net cash position over SEK 300 million. We have initiated a process to renew our corporate bond and refinance it. The market is very strong right now. We think this is an excellent time to go to market to renew our bonds, instead of waiting till expires at closer to the end of the year in November. So that's the position. We remain with a good, strong financial position, and we're very optimistic about being able to renew our bonds as we go into the -- in this Q1, we'll be able to do that. So I'll pass it back to Nikolaj to talk about the subpoena.

[Nikolaj Sørensen, President & CEO]

Thank you, Joe. So very short on the legal spacing. Nothing has really happened, not on subpoena. We haven't heard anything more from the authorities. So we'll see what will come out of that. The other one is our patent infringement case with Sun Pharmaceuticals. And I think the only noteworthy change is that we have filed a new patent in our orange book got listed this week. That got approved in December and is now listed in the orange book, which further strengthen our IP position in the U.S.So a little on the outlook. If you look at the outlook for 2021, we think that the situation right now with COVID-19 is making it very difficult to make firm outlooks. And there is a lot of uncertainties both associated to how the top line market opportunities will move. But I think that, as you have seen during the last quarter, it's also reflected in how we are spending our money. So if we see a loosening up in the market and growth opportunities for digital therapies, our OpEx will actually increase, and that will probably have a negative impact short term on our EBIT. But if we are seeing that, it takes time before the COVID-19 restrictions are released and time before we get our reimbursement in place. But digital therapies will slow down in investments, which will lower the OpEx and which will actually improve EBIT short term. Long term, of course, EBIT growth is -- will be driven by growth also in digital therapies.When it comes to buprenorphine market, we think there's a strong opportunity for this market to continue to grow. And just to remind, we're talking actually, even new -- completing new news about the Biden administration and some of the initiatives they are taking to improve access to medication. So we really believe that this market is going to continue to grow. From a ZUBSOLV perspective, I think the important part when you look at ZUBSOLV is to look at the quarterly projections or progression. So Q4 is the starting point. When you look into Q1, we would normally see that Q1 is a little lower than we do in Q4, partly because wholesalers tend to stock up a little in Q4 in an anticipation for price increase. Same in the pharmacy chains. And also, we know in the commercial market, the commercial markets generally go down in Q1 compared to Q4 due to some of the reimbursement rules in the U.S. When we pass Q1, we do see that as a good opportunity for stabilization and growth on a quarter-over-quarter basis. So when you compare to 2020, we, of course, started somewhat higher when we were into 2020. So I think the real way to look at ZUBSOLV sales is not looking year-over-year, but on a quarterly -- quarter-over-quarter progression. On our OpEx, we do expect to see some increase. We know that OX124 is going to drive increased R&D expenses, and that is more or less fixed until the time we -- if we should encounter some problems. But right now, we see no reason why we wouldn't be on track to file OX124 early next year, 2022, and that will increase the expenses during the year.DTx investments, also likely to increase. It's not certain, but they're likely to increase, but that will really depend on the sales progression and the market environment. Our US Pharma EBIT margin, we've said a little conservative. I think there are some good chances for us to beat this target, 45% to 50%. The reason for being -- is lower than Q4 was that Q4 was a perfect storm in terms of low cost of goods and cost of sales. We have a very low activity level in our field force, which lowered the cost. It also had negative impact on their incentive schemes, which helped us somewhat. And that way, I think it was a little of an outlier in Q4. But I still believe we have a very strong EBIT margin for the US Pharma next year.Just a short summary of some of the value triggers we see for 2021. Q1, fast track designation for OX124. We've talked about that. We believe that, that could come sometime here early in Q1. We also expect to see some agreements with insurance companies, the DTx products. It could be reimbursement, but it can also be pilot projects to test our digital therapies in the real-world setting, and that could cover one or more products. We have agreements with employers. So we are now targeting employers based on the positive outcome we have from Trinity Health and Texas Nurses Association. So we hope to be able to announce some of the employers, a little depending also if they're willing to share that we are working with them. But we are now having a targeted efforts against employers in the U.S.Agreements with health care providers. This is something with this test we're doing in Pennsylvania for medical benefit, we think, will trigger some of these discussions, or we are already in discussions with health care providers who are awaiting the outcome for some of these trials. And then we have our results on the pivotal trial in OX124. We started the trial in Q2, but the results will come in Q3.Second half of the year, and this is my last slide. With COVID 19, hopefully, most of us have been vaccinated. We hope to see that we get the restrictions lifted, which will enable us to go back into the field and work actively with promoting ZUBSOLV; seeing that unemployment rates go down, which we know will have positive impact on the commercial segment. So that should give us an opportunity to grow ZUBSOLV again. ZUBSOLV Europe, launched by Accord Healthcare, if everything goes like planned that will happen in the second half of this year. Actually, the text here needs to be updated. And then we have continued commercial progress of DTx and then the launch of modia in the second half of next -- of 2021. So a lot of exciting stuff coming -- down the line of 2021, that keep me quite optimistic that we have a great year ahead of us. With that, I will open up for questions, and thank you for listening.

[Operator]

[Operator Instructions] Our first question is from Samir Devani from Rx Securities.

[Samir Devani, Research Analyst]

I've just got a couple, maybe 3, actually. Did you take any price increase on ZUBSOLV in Q4, Jan? I guess that's the first question. And then Nikolaj, you mentioned about co-pay and deductibles for DTx. Perhaps you could maybe just give us a sort of example of what sort of level that's going to be at? And then I think Joseph mentioned quite interesting that -- you mentioned that some states were not viable in the current environment. I'm just wondering if you could just explain a little bit more what you meant by that.

[Nikolaj Sørensen, President & CEO]

Okay. I think I can take -- you can maybe take the last one, Joe. And the price increase also, you can comment on that.

[Joseph DeFeo, Executive VP & CFO]

Okay. As I mentioned, we did take another 3% price increase on January 1. I'll take the last question also. In the U.S., with COVID, it's really been a state-by-state response. So some states are much more restrictive in lockdown and some states are much more open. So the more restrictive a state has been, it has been more difficult for a sales rep to get in to see doctors. So in some of those cases, it's just up in viable territories. It's not a significant amount, but it's some. And as they open up, which some of those states are starting to open up now, then they become more viable. And the doctors’ offices as they open more, then that territory becomes more viable. So the territory may come back. Does that make sense?

[Nikolaj Sørensen, President & CEO]

So it's definitely -- it means that we have taken away a sales rep from that district. And then on the co-pay and deductibles in DTx, it's like everything else in the U.S., I think health care system is that every patient has their own health insurance plan. And in that plan, you have your co-pay, then how much you have to pay if you're getting -- even if you go to the hospital and get a normal medical procedure, you have a certain amount that you need to pay. And that is also spilling into the DTx area, and the same is on the high deductibles. And there, you have examples. I saw we had someone who had a high deductible on $2,000. So that would, of course -- then you would have to pay a full amount for digital therapies. But of course, that -- the price for the digital therapy would then be put into the high deductible. So if that person is seeking other health care during the year, they would have a shorter trip into before they can get paid by the insurance companies. And this is what we see that for most of the patients, even through medical benefits, they have to pay some of it also out of pocket. But it is -- when I look at the list, of course, everything is anonymized. So I only have numbers. But if I look at the patients who have gone through, it's a pretty big variation and how much they have to pay out of pocket and how the deductible plan looks like. And that's why, I would just say -- you can say, there is no database where we can get this information. So this is something we need to map out as we are going along. So we have to monitor for UnitedHealth Group, this is the deductibles, this is the co-pay. Humana, this is the deductibles, these are the co-pays. And then what kind of insurance is that the patient has. And as we proceed, we will have better and better insight into what some of those rules will be for the patients with reimbursement.

[Operator]

[Operator Instructions] Our next question is from Klas Pyk from Nordea.

[Klas Pyk, Research Analyst]

I also have 2. First, if you could please elaborate a bit on the opportunities for a DTx portfolio outside the reimbursement system. Does the launch stand and fall with you getting reimbursement in place? Or are there any meaningful opportunities outside of that? And also, just a brief on the pilot projects, you mentioned, with the insurance companies. Maybe you said it, but can you please clarify how long these projects are?

[Nikolaj Sørensen, President & CEO]

So with the opportunity outside the reimbursement system, one opportunity is because patients paying out of pocket. I think one of the things we have seen is that for vorvida, $750 onetime out of pocket was a hurdle for quite a few people, even though they are people who have done it. But we saw when we started the installment plan that more people were using the installment plan than out-of-pocket pays. So that is clearly -- patients basically paying cash is one opportunity. Another large opportunity is employers. And there, you can, of course, say that's part of getting reimbursement. But you could also say it's the way that we go to an employer who say, I'm making this available for my employee, and I will pay for it. I think that opportunity is something that seemed quite attractive. And again, based on this feedback, very small sample, but still from Trinity Health, if you look at prevalence of alcohol and depression issues and see how many patients have actually accessed our products, we have a quite large share of those, the people who are using our products at the moment. Then I think from a -- if you take what other opportunities you have? It's -- some health care providers have their own -- basically replace existing expenses, for example, to counsel us and they take on the cost on their own books. So it's not paid by the insurance companies, but basically paid by the health care providers. We do have some interest from some of the private clinics in the U.S. to do that because this is an opportunity for them to get to their patients. We see other health care providers who see this an opportunity to integrate into basic treatment programs where they have, for example, for depression, but this will be an integrated part of that. How their reimbursement looks like in the back end? I'm not sure. But it wouldn't be us who have to do it. And then I do think the medical benefit plans that we are running with, does not require individual approval by the insurance companies because it's already there in the system. So in that way, you don't need individual reimbursement. Each insurance companies, it's already covered if the patient have an insurance plan that cover that kind of mental illness treatment. When it comes to the pilot program project that really depends. I think some of the projects that I can see coming is testing, for example, modia, testing in a real-world evidence population. The modia treatment is for 6 months. So I would guess that the pilot would go on to 6 months. But as we get feedback as we proceed, I hope that, that will also lead to a constructive dialogue with the insurance companies of making it available to a broader group of patients. I could see some of the -- some pilot programs with some insurance companies could also be around the reimbursement pathways. It could be around our payment models, where we have quite a lot of flexibility in how we can do this. We could have value-based programs, meaning that we can take when patients meet certain indicators in terms of improving their condition. So I think this is on an individual basis. Because you say pilot programs success and get real-world evidence would probably exceed the lifetime of the project, which means that some of them could probably run for a year. So -- but that doesn't exclude that we could use that as an entry point to get more and broader reimbursement plans.The pilot project that we're doing right now for medical benefit, that we're running in Pennsylvania, that one is aimed at finishing now during Q1. So -- and there we don't wait for the full amount of treatment because we do know that the medical benefit plans will have the majority of the payments early on in the treatment journey. And that's really the important part for us is to ensure that we get paid for our products and also that the physicians get paid for his or her time. And that's what we're testing at the moment. And you could say how difficult can this be? And I can tell everyone who have worked in a U.S. insurance environment, it is difficult, in particular, if you're building a system that should be able to do it on a large scale.

[Operator]

And our next question is from Ross Blair from Rx Securities.

[Ross Cameron Blair, Healthcare Analyst]

Just the one today is on OX124. So in the U.S., it's obviously quite a big opportunity for OX124, $70 million to $110 million per year. I was hoping you could just provide some color on what the opportunity might be in Europe as well?

[Nikolaj Sørensen, President & CEO]

Yes. So OX124 is a very powerful naloxone medication, and there is a difference in the approach to treatment in Europe and the U.S. In the U.S., the sentiment is that you have to have an naloxone dose that you can distribute to individuals, which will get the person alive. The way in Europe is that the regulatory authorities, we need to have a dose of rescue medication that keep people alive in the time enough for the ambulance to come and being able to provide naloxone through an injection. So so far, Europe has not been open for these high dose naloxone rescue medications. And the reason for that is that they are afraid that the patients will have severe respiratory -- severe withdrawal symptoms. So when you get naloxone, it's kind of immediately blocks all of the receptors and patients will immediately go into withdrawal. That will probably save their life, but they will have severe control symptoms. And here in Europe, we believe that you should have more -- the health care and emergency rooms should be able to adjust that for the individual patients, so they don't get into too much withdrawal symptoms. And the reason for the difference in approach is that fentanyl overdose is much more prevalent in the U.S. than in Europe as a whole. If fentanyl get more traction in Europe, then Europe would need to take a rethinking because the normal doses that just you see in nasal sprays in Europe is generally much lower than what it is in the U.S.

[Operator]

[Operator Instructions] Our next question is from Gergana Almquist from Redeye.

[Gergana Almquist, Equity Analyst]

I have a question about deprexis and, specifically, the marketing strategy and reimbursement strategy?

[Nikolaj Sørensen, President & CEO]

For marketing -- for deprexis?

[Gergana Almquist, Equity Analyst]

For deprexis? Yes.

[Nikolaj Sørensen, President & CEO]

Okay. Yes. So the commercial strategy, we -- in December, we opened up the system for deprexis to -- for direct sale. And you can also apply for reimbursement through the system. So if you go in, in us.deprexis.com, you can basically acquire deprexis. And this was the first step. We are now basically a little kind of how much forward should we wait for the vorvida results? Or should we also start testing deprexis? So we are going to test deprexis in the same system as we're doing for vorvida. That means integrating deprexis into an existing treatment plan. And that is something that we will start now during Q1. When -- apart from that, we have deprexis just like vorvida. We're talking to insurance companies, to employers and others to get reimbursement of the products. So there's no difference in approach between those 2. Deprexis has taken a little -- sorry. Yes, please.

[Gergana Almquist, Equity Analyst]

Nikolaj, I was just wondering because depression, just like opioid addiction and overdoses, are rising, skyrocketing now during and after the lockdown. So I was wondering if there -- if you're seeing some movement or more openness to treat depression.

[Nikolaj Sørensen, President & CEO]

I think it's -- so as you all know, that vorvida, we have vorvida long before we have deprexis. So deprexis came in during the summer and it has taken a little time for us to get all material ready. Deprexis already were certified by the FDA, and it's that marketing also in fact, with GAIA. So we have worked with GAIA also to ensure that we have the right claims that we can use during the autumn before we've been able to move out. But now we are there. So now we can start to promote deprexis more broadly. And I do think deprexis is an easier product than vorvida because vorvida, alcohol treatment is something that is like smoking cessation. Until we had Champix from 5 similar products, it is something you care, you were responsible for on your -- privately, you went to the pharmacies or you bought different programs privately from different counselors and other for you, which are alcoholic, you go to AA meetings. Deprexis -- and depression is something that is treated in the health care sector. So in that way, I think it's an easier product to come in with. But at the same time, it's also a little more crowded space. There are more internal therapies for depression than there is for alcohol abuse. But I see in my daily data here and how many people who are accessing the program that we have seen quite dramatic increase in people losing deprexis within the agreements we have in Trinity Health and also the Texas Nurses' Association now after Christmas. So it's clear that there is a pretty large demand for deprexis. And I think given the situation right now, deprexis should be a -- you would believe it should be a pretty easy sell.

[Gergana Almquist, Equity Analyst]

Okay. And another question I have is about modia, the opioid treatment. Why is it so difficult to sell it in the framework of MAT, together with ZUBSOLV? What would it take to speed up the efforts there?

[Nikolaj Sørensen, President & CEO]

I think we -- for modia it's one -- right now, we are we are discussing with partners to -- where we can collaborate, test it with a specific group of patients. And that one is simply to be sure that the program works as intended. It has been tested technically. It's been developed. But I think before we can be sure that it is something that is -- there's no hiccup somewhere. And then we want to test it with a larger group of patients. And we're expecting to do that now during the first half year. But we are looking at commercial opportunities to combine it with ZUBSOLV in different shapes and bonds. And we do see that there are some significant synergies commercially between the 2 products, which could help both ZUBSOLV and, of course, also modia. So if you follow us in the autumn, you would probably see concepts where those 2 are combined in different ways.

[Operator]

And as there are no further audio questions, I will hand the word back to the speakers.

[Nikolaj Sørensen, President & CEO]

Okay. Thank you very. I said to the operator here before we started that, I hope that we will be able to take questions after 35 minutes, and I apologize that I speak too much and then the presentation so long. So thank you so much for taking the time to listen to us throughout the hour here today. And I hope that a lot of you will continue to follow Orexo and the progress we are making during 2021. Thank you. Good bye.