Orexo AB

STO:ORX

Earnings Call Transcript 2021-Q4

[Operator]

Hello, and welcome to the Orexo Q4 interim report. [Operator Instructions] Today, I am pleased to present CEO, Nikolaj Sørensen; CFO, Joseph DeFeo; and Robert Ronn, Head of R&D. Please go ahead.

[Nikolaj Sørensen, President & CEO]

Thank you very much, and welcome to this fourth quarter interim report presentation. It's clearly been an eventful day on the stock exchange, and I can understand there is some anxiety around Orexo. And having listened to some investors and analysts, I understand some of the concern is around the profitability and our Digital Therapies. So I would put a little extra emphasis on these 2 areas and hopefully create some calm about the situation for the company.So today, and I'm moving to Page #2. We will go through some highlights for the quarter. I will talk about some of the business updates in U.S. Pharma, a little on the pipeline, but I'm joined by Robert Ronn, who will talk a little bit about our new technology platform amorphOX, our new project OX640. Then I will talk to digital therapies before Joe DeFeo will go through the financial numbers for the quarter. Finally, I would take a little discussion on the outlook and our future value drivers. Moving to Page #5. So some of the key achievements for the quarter. We have seen that our U.S. pharma revenues declined very slightly compared to the third quarter and declined somewhat more compared to the quarter -- the fourth quarter of 2020. This decline that we see year-over-year is to the majority explained by the decline we have seen since early 2019 in UnitedHealth Group and Humana. When we looked at our open business, that has been very, very stable. That means that we have been -- where we have been reimbursed, we have seen a stable development. We have worked in [ Sentynl ] to keep up a very strong profit contribution from our pharma business in the U.S. And one of the things that we have seen in the last 1.5 year during the COVID situation is a difficulty to reach out to the physicians and visit the physicians' offices, which is very important for Orexo because we're the only daily treatment where we have active promotion to the physicians. And with that difficulty we have also taken the decision to cost contain on the U.S. pharma site, which is leading to a very strong profitability number of 54% in the fourth quarter. Our biggest highlights during the quarter is back to some of Orexo's core business, and that's around our pipeline and work on new pharmaceutical products where we have developed a new platform, amorphOX, we have launched a new product, OX640 and we had positive data from the pivotal trial of OX124. So all of this is something that is a really strong foundation for us to move forward. On our digital therapies, we have made a change in strategy, a quite severe change, which I think has gone a little unnoticed, even though we have talked about it, is we have moved away from direct-to-consumer promotion, which has been the focus since the summer of 2020 first on VORVIDA and now in 2021 also on DEPREXIS and moved over to a more B2B marketing model where we are focusing much more on partnership models for distribution of the products. And one of the big accomplishments that we worked a lot on during the fourth quarter is that we have been added on at least an agreement with Walgreens to be added on to their online platform called Walgreen's Find Care and now people in Sweden will probably say so what is this? But Walgreens Find Care is one, if not the largest care platform in the U.S. when you're searching for health care professionals to help you with any conditions. So you go in and you can basically use that to get quality reviewed and approved products from Walgreens. They're very selective in which services that they put on to the platform, and they only have a few options within each category. Walgreen's Find Care platform had 135 million visitors in their third quarter -- financial quarter last year. If we look at 2022, this I would say from where we are right now is going to be probably the last a couple of very heavy investment years. So in '20 and '22, we have -- we're reaching one of the most expensive phases in the development of our new pharmaceutical product, and that is just before your filing because you need to get every data point ready for the FDA review. We need to get the manufacturing process. We need to quality control the manufacturing process. We need to file it and pay for the filing fee with the FDA. So all of this is in every pharmaceutical product. This last phase is quite expensive. And we do expect to see an increased investment in R&D during the year. However, we also see that our new model for digital therapies, where we're going through partnerships is going to lower the direct expenses for digital therapies and the expenses we will have in digital therapy will be more associated to MODIA and the launch of MODIA where we have much more synergistic fast pace which we [ subsort ] them what we had when we were direct-to-consumer promotion. So there's a shift in the cost base, but I will also put some emphasis on that. A lot of the investments we have right now are nonrecurring and are associated with specific events leading into OX124 being [ filed ]. It is the Modia trial and then we also have some legal expenses to our patent litigation process that needs to be taken into account. But should I take all of these expenses away, Orexo would actually be a profitable company. So in that way, we have a strong control of financial situation. Moving to Page #7, which is the ZUBSOLV market. So it's not been that eventful quarter, and we do have the situation where our field force have some hurdles to get to the same productivity as we have before COVID. It's gone -- it's very regional. So some regions have restrictions, other have no restrictions. Some clinics are closing for external visitors, moving to telemedicines and others have a business more or less like usual. If we look at the quarter, we have seen a slight decline in the Open segment, but really, some of the decline that we have on the volume base is driven by -- still by United Health Group and Humana. What we have seen is that the second half, if we take both Q3 and Q4 in terms of sales for ZUBSOLV has gone up compared to the first quarter, which I think is good. And we also see that some of the new market access deals we had, for example, Kentucky Medicaid where we added in July or early Q3. But when we look at Q4 over Q3, we had a 45% growth in Kentucky. And we see the same in several other Medicaid plans that we have, good growth even in Q4. But on an overall picture, this is not enough to compensate for the United Health Group and Humana, and some of the non-reimbursed and reimbursed plans. Looking at the overall market, the market growth has slowed down. We were used to see -- or for a couple of years, we saw a double-digit growth. Then we saw a dip here in the first half of 2021, which is still on a year-over-year basis, have a negative impact and some flattening of the curve. And in the fourth quarter, we reached a 5% growth of the market compared to last year. This year has started a little stronger so hopefully, we'll see some better growth numbers for this year. And there is a lot of logic why this market should grow. We have seen the COVID-19 effect on positions and access to physicians have been quite clear. So a lot of physicians have closed down or restricted intake of new patients, which have made it more difficult to find care. We're seeing that the number of patients or people are misusing opioids have gone up through throughout the COVID crisis, exemplified with a number of overdoses have gone through the roof. We know that there are multiple initiatives on both federal and state level to increase resources, increase access to treatment for opioid use disorder. What we do here is similar issue that we have with ZUBSOLV to reach customers and the same for digital therapies is that the focus right now for a lot of the bigger health care providers is on COVID. And that means that the ability to start a big effort in opioid use disorder as long as we have high numbers of COVID infected is limited. But when COVID hopefully soon is gone, I expect this market will see some very good growth numbers. For ZUBSOLV, the market access has always been very important. And I'm very happy to see that we actually start '22 stronger than where we started '21. And that happened with the Kentucky Medicaid where we were added to the formulary. We have seen a very small decrease in the commercial access, where 2 smaller plans have decided to put us on that nonpreferred list, where we before were at the preferred list. We still have some optimism that we can improve the access in the Medicaid segment, and that could be a very important trigger for ZUBSOLV moving forward. And then the big focus right now on, apart from selling ZUBSOLV, is that we are starting this sub launch, you can say, of Modia, where we started in Q4 with some awareness campaign. Now we're moving into more of a trial phase before we will start a more commercial launch of Modia soon. But we know that every time we present Modia, the length of the discussions with the health care providers is much longer than when we talk about ZUBSOLV. In that way, it improves the dialogue with the health care providers, and it becomes more comprehensive, you can say, when we include Modia in the discussions. So moving to our headquarter and pipeline, and I'm moving to Page #10. OX124 really one of the highlights of the quarter was, of course, that we had positive outcome of our pivotal trial for OX124. We saw that we are meeting the requirements from FDA of having a product that is at least as good as the existing products in the market. What is -- The focus from now on is that we need to ensure that the commercial manufacturing process and the product is delivering on the quality requirements from the FDA. We need to show stability, which is -- that means that we need to show for FDA that we can have a shelf life that is meeting their requirements. And we need to file, of course, the new drug applications and that's scheduled now in the second half of this year. If everything goes as planned, we will then have a product that is ready to be launched in the second half of 2023. And right now, we are on good track to meet this time line. Now also under the quarter, we started to talk about our amorphOX drug delivery platform. And to give a little more context about the importance of this platform. I've invited Robert Ronn to join this call. So Robert please take us through the amorphOX product.

[Robert Ronn, VP and Head of R&D]

Thank you very much, Nikolaj. So we can start at Page 12. So very briefly, amorphOX is an amorphous powder that is rapidly dissolving. It's stable, and it works with a different type of active ingredients. Next slide, please. The amorphOX platform has been validated in several different human clinical studies that we -- Orexo has performed. This is also the backbone technology that we use in both our Naloxone and also our Nalmefene products. Obviously, these are products that are developed for the treatment of opioid overdoses, provides patients with a needle-free, easy nasal administration. Looking at certain properties and looking at, for example, our OX124 product, one of the properties is that amorphOX dissolves nearly instantly even in very small amounts of liquid. Also, it is remarkably stable, both from a chemical and physical perspective. Obviously, these properties make the amorphOX technology an ideal platform for the development of emergency medications. Page 14, please. When we have compared amorphOX in human studies comparing it to more traditional liquid-based nasal sprays, amorphOX has shown superior pharmacokinetic properties. It has shown a more rapid onset, higher peak and overall exposure as well as lower variability. All these properties are important, especially for rescue type products. Next slide, please. Another very important property of amorphOX is that it is very stable even under accelerated conditions. Also it works for a broad scope of different active ingredients. And we can see that even very unstable active ingredients can be formulated to provide for storage stable products, which could be of a great benefit. Next slide, please. We also see that amorphOX has a wide applicability. And especially, we see significant potential even outside of the substance abuse field with amorphOX. Also, we see that amorphOX has the potential to be used by different dosage forms, can be used for different administration routes, and we also have the possibility to tailor the properties of a certain product to meet certain product needs. Next, Page 17. AmorphOX is a patent-protected platform technology, both 5 ways of already granted U.S. patents, covering both OX124 and OX125 until 2039. During last quarter, we also filed several new patent applications that are directed towards different aspects of the platform. Once granted, these patents will provide protection for a few more years, so extending all the way into 2042. So next slide, please, Page 18. So -- now I would like to spend a few minutes talking about our latest addition to our pharma pipeline, our OX640 product, which is a nasal adrenaline rescue medication. So going to Page 19. So adrenaline is used today for the treatment or I should say, the emergency treatment of allergic reactions and also anaphylaxis. Today, the first-line treatment are different kinds of injectable adrenaline solutions, most particularly or most used are the intramuscular auto-injectors and the most well-known brand name is called EpiPen. These currently commercialized products, they have significant drawbacks, I would say, and these drawbacks are addressed with our OX640 product. To start with, we aim to develop a product that is less bulky than the current auto-injectors. And this is a significant problem because today's auto-injectors are relatively bulky and sometimes difficult to carry with you. And this is obviously critical for these patients that they always carry this drug product Also, OX640 will obviously be a needle-free product, which, again, many patients and also caregivers say, they have a fear of using needles. We aim to develop a product that has a better and more flexible handling and storage. Today's auto-injectors are very restricted in terms of how you can store them for example, you cannot dispose and display them to hot conditions, for example, and you cannot expose them to cold conditions. And this is something that we are addressing in 640. Despite the fact that the auto-injectors require a strict handling, they still have a very short shelf life. And this is one of the major advantages that we see with 640 that our product will have a significantly longer shelf life. Next slide, please. So looking into adrenaline and its stability and why the current products have a very short shelf life, adrenaline is -- and the currently marketed auto-injectors, they are very sensitive to both heat and light. One, they also contain antioxidants. These are chemicals to -- that are in there to prevent chemical degradation. And they are also pH adjusted once again to increase the stability. Regardless of all these measures, they still have a short shelf life. What we see with OX640 is that our formulation is very stable to both heat and light. We do not use any antioxidants or any other preservatives, and we don't need to make any kind of pH adjustments or formulation. And looking at the graph to the right on this Slide 20, it shows a comparative stability study that we have performed between one of our OX640 formulations that we can see in blue in comparison to a commercial auto-injector, which we see in red. And looking at the 6-month time point, after 6-month storage under these conditions, nearly 26% of the adrenaline has disappeared from the commercial auto-injector product. In comparison, if we look at the stable in blue 640 at the same time point, 6 months, only 0.7% of adrenaline has been degraded from 640. And obviously, this is one of the key differentiating properties we see for OX640. Thank you and I hand over to...

[Nikolaj Sørensen, President & CEO]

Thank you, Robert. I'll just comment as a non-chemists here. So what's the importance of antioxidants and preservatives is actually these products can also cause allergic reactions. So while you're treating your allergic reaction by adding antioxidants and preservatives, it actually can cause a second allergic reaction for people. And if you are a person who is forced to carry one of these epinephrine products, then you are -- a lot of people are multi allergic. So you have -- you're allergic to a lot of different products. So that's important. And I would challenge everyone of you, either if you are carrying an EpiPen or similar today, or your kids are doing that and consider whether you would be more comfortable of having a small nasal spray, which we know would work even if the nasal spray has been placed in a backpack in the sun on the beach or been in a backpack when you're out doing cross conscious in the cold. I would, for sure, use a product that I know works under these temperature variations, and we don't need to be cautious about storing it in a certain way, not at least to talk about the convenience of using a nasal spray compared to an auto-injector. So we are very optimistic about the opportunities for OX640. The next major milestone will be the first clinical exploratory study, which we're performing during the second half of this year. And with positive results from that, we will be able to guide more about the development plan. And I also see this is an excellent opportunity for Orexo to work with other companies to take a part of the development as we wouldn't -- this is a truly global product where, in particular, these properties can be important for countries where you have more severe temperature variations than what we have in Europe.Moving to Page #22, the digital therapies. So I get a lot of questions. So are you happy with the development of Digital Therapies and the sales of Digital Therapies. And of course, I'm not. There's no doubt about that our expectations when we launched Vorvida during the summer of 2020. And later, Deprexis direct-to-consumers would be met by a higher demand and also that we will see more agility and flexibility for insurance companies and large caregivers to find ways to help us reaching patients, who during COVID-19 had issues getting to their physicians. That has not happened. The-direct-to-consumers, which have always been a secondary objective for us, but we saw now when people couldn't find access to therapists, which we have seen a lot of headlines about how difficult it is to find psychotherapist when you have depression that we saw that Deprexis could be a good alternative. I would say that had we seen the consumer market as the main market, then the price point we have is way too high because we have put the price into a value that we have created by doing a lot of the clinical research that GAIA have been doing on Vorvida and the Deprexis and also what we're doing on Modia. We see this as a tool for health care, which should be reimbursed by insurance companies. And that process is something we knew from the beginning, we have no infrastructure in place. But we have been overly optimistic about how fast it would take to get all of the stuff in place. Therefore, I would also say it's quite unfair to judge the DTx sales right now and say, okay, this is -- there's no demand for these products clearly because there's no sales development between the quarters. That's not really true because it's still like we have a train, but there are no train racks. And can you adjust the train's ability to come in time when there are no train racks to drive on. And this is where we are with our Digital Therapies, we have decided to move away from the direct-to-consumer promotion, which was the focus for about a year, relatively costly because you're addressing a big market in the U.S. So the direct expenses that we have for, in particular, Vorvida and Deprexis have been for this direct-to-consumer advertisement. A lot of those expenses are something that we can reuse as we progress. We have a lot of commentaries from influencers and others, and we have a lot of media also that have been written about the product, but it has not really generated the demand that we would expect. And we do know that the price is a concern for many consumers. So what are we doing right now? We have -- during -- we mentioned that in the third quarter call that we're moving away for direct-to-consumers, that means that there's a shift in the cost base. We're moving away from these direct expenses where there were some costs left in Q4 of earlier committed expenses in the direct-to-consumer cost. But now when that is over, we see that our cost base for DTx is moved more into synergistic cost with ZUBSOLV that means that the Modia field force that will take a cost on DTx, but it will also be cost that is shared with our ZUBSOLV field force. Our direct expenses to consumer marketing will go down. And that means also when we look at the overall cost base for 2022 that we expect our overall selling expenses will go down, and that is primarily driven by less direct expenses to DTx, which are not synergistic with ZUBSOLV. So what are we doing now? We continue to focus a lot on partnerships. But what we've also decided is to work much more focused with fewer committed partners to ensure that we get a pull-through that we solve some of the issues that we have seen during the year when we have been in contact with quite a few partners and we have signed up different clinics and hospitals. But if their commitment has not been there to solve some of the reimbursement hurdles that have come up, it has been difficult to really get traction all the way to the end patient. Fortunately, we have a couple of partners who have really been willing to work with us Trinity Health in North Dakota being the front runner but we have worked intensively with everyone in their leadership team to solve the solution, how can they work directly out to their network of clinics in North Dakota to integrate our products into their treatment programs and get it reimbursed through the existing treatment programs that exist for people with alcohol issues or with depression. We are -- I have been also hoping that one to move faster than what it has done, but I also realize that the devil is in the details. And we have a situation where if everyone reads about North Dakota and the impact of COVID-19, you would understand that they have been under severe pressure from Trinity Health on a different issue. But last week, we had a big meeting in Trinity Health with a full team from Orexo, their full leadership team for the clinicians at Trinity Health where basically both have educational processes, we were sitting down, having workshops for how we're going to implement this. And that gives me some optimism that we will, in the near term, [ with Trinity Health ] come with some new patients. We have the situation with Modia, and here to set expectations right. We also had some experience with Vorvida that we tried to promote to some of our customers that the reimbursement process was difficult. And here, you need to understand that there's no way that a physician in the U.S. is going to buy services that they are not sure that they can get financed through the insurance companies or sell directly to the patients. And of course, selling direct to the patients, the price again become a topic. So this is really about getting insurance companies to cover this. We know that for Modia, we can get coverage under existing treatment programs, but we need to be sure that we can answer all of the questions we get from physicians. Therefore, we're moving in a process where we have during the late autumn, we have done what we call an awareness campaign where we have informed position about this. We have identified those who are most interested and we will now move into a trial phase where they can try it on a certain number of patients. And then we will work with them to test the reimbursement process. So when we're starting a broader commercial rollout during the summer, we will know that we have viable reimbursement pathways and that we will not have issues that doctors, experience issues when they're trying to put patients on these products that would stop them to test it once more. So I'm very optimistic about how Modia has been very well received in the awareness campaign. And I think it's a fantastic fit with ZUBSOLV. So we feel comfortable about this. But Deprexis and Vorvida is really about getting this Trinity Health model up and running, and we can then copy paste it into other large health care providers in the U.S., where we fortunately already have agreement with a couple of more health care providers who could -- are ready to take on these products. Moving to Page #23. So where are we with our different channels. And we are working really with 3 different channels, we're calling consumers, health care providers and employers. On the consumer side, as I said, we have stopped our direct promotion to consumers and are now relying on other partners. We have Sober Grid, the world's largest online community for people with addiction problem, who have been a partner they have started to roll out Deprexis and Vorvida through the peer coaches, and are now moving into a phase where they would promote it to the full community. Together with Sober Grid, we have approached several different customers in the U.S., both employers, but also we have approached Walgreens and their find care model. And as I said before, Walgreen's Find Care is probably the largest and if not the largest, it's definitely one of the largest online platforms for people who are looking to find care of from quality stamped providers that have been assessed by the clinical team of Walgreen's Find Care. They had under Q3 2029 (sic) [ 2021 ] in according to their earnings call that 135 million visitors. Of course, some of that is driven by COVID. People are seeking help on COVID to seek help to get test, to get the vaccines. But it is an amazing increase. In 2020, had 30 million on the full year basis. So Walgreens is actually a fantastic step forward for our direct-to-consumer promotion and will be a significant quality stamp in any other discussion as this is known to be someone who have high requirements on the providers they include into their network. We're then working with health care providers. And here, as I said, Trinity Health is really where we have a lot of focus right now because we want to make this a success so, we know when we're approaching other health care providers that we have a model that works. And then we have employers, we did start with our own direct to employers efforts, which also took some investments during the first half of last year, but I have realized that our offer is too narrow for the employers to take. So we have signed up with a company called E-HBS, who are basically focusing in employer benefits, so health care benefits for employers. So they have added our products to their services, also Just Miine who is both a health care provider, but they are also focusing on selling health care services to employers in the Michigan area. Finally, we have something about moving to Page 24, market access and reimbursement. They are the tracks that we need to have in place to get this one flying. And it's not only Orexo, it's the entire digital therapy and digital health space. We know there are no established reimbursement programs. But during the fourth quarter, there was a CPT code approved by the American Medical Association and CPT code is what is used by the insurance companies in the U.S. to manage reimbursement. That was improved -- approved during Q4 and is ready for implementation on January 1, 2023. We also know that CMS, which is the next step after CPT code, you go to CMS, which is Center for Medical Services. It's a government agency, and they will then decide on reimbursement for Medicaid and Medicare. And they have decided first reimbursement range for these services, which will also be implemented in January in 2023. Then when it comes to our -- so this will be an opportunity to get reimbursement on our products on a stand-alone basis when the CPT codes are ready. But what we're working on right now is integrating our codes into medical benefits pathways, and that's where the Trinity Health is coming in, how we can set up a treatment program that get approval from the insurance companies, and we can then get -- the treatment provider will get paid for the entire treatment program but that would be enough also to cover the cost of Vorvida and Deprexis. And this is exactly what we're doing with Trinity Health is developing that treatment program, get it anchored with the insurance companies and set up the administrative processes to manage this. So that will be an important next step. And for Modia, we actually know that we already exist in bundle, and we have some -- we have confirmed that, that can be included in this bundle of services, which is covered for opioid use disorder. So when we get it up and running, we're quite certain that there is a program where we can get reimbursed for Modia through this medical benefit route. With that, I will move into the financial section and allow Joe DeFeo to take us through the financial section, and I'm now on Page 25. Joe, please?

[Joseph DeFeo, Executive VP & CFO]

So if you go to Page 26, picture of our revenue position. Our revenue for ZUBSOLV did decline year-over-year, 6.7%, primarily due to the United and Humana programs that were previously exclusive. However, when you look in the middle of the first box, you can see that our second half sales beat our first half sales. So we've had higher sales in the second half of the year. And then when you look at the bottom slide, you could see that our decline in Q4 was only 2%, 2.1%, below Q3. So we're definitely seeing, if you look on the demand side, which are the first 3 boxes on that waterfall that the demand declines are dropped off significantly. So it's much flatter volume of sales. And also, it's a negative in Q3 and also versus last year the wholesaler stocking was less, but this is actually a positive for the company because in Q1, there's less inventory sitting out at the wholesalers than previous years, and we take a price increase on -- we did take a price increase on January 1 of 3%. So that will be more of the sales in Q1 will be at the higher price. The other positive that's actually going along right now as we get close to closing the month of January is that the U.S. dollar is up about 5% from where it was in Q4, and with our revenue being in U.S. dollars, this is going to be a beneficial outcome in Q1 for ZUBSOLV sales having a positive dollar where it is as of now.Next slide, 27 is our P&L. You could see from a P&L perspective that we're definitely investing in our future growth drivers. Yes, we do have a negative EBIT versus last year, but this is due to investing in our future growth drivers. Our gross profit is a bit negative. This is mostly due to exchange rates, but also some variances. And that fluctuates a lot with when we produce product. We don't always produce at consistent levels every quarter. And with the Q4, that also affected our COGS and should be beneficial now with us sitting with a better inventory position going into Q1. From an operating cost standpoint, yes, we do have higher legal costs due to the subpoena in the U.S. and also the patent challenge in for ZUBSOLV. But the other parts are our OX124 development expenses, which affects R&D. Also, our Modia trial is another item in our R&D expenses and our DTx associated expenses in both selling expenses and obviously, the Modia, I just mentioned into R&D. As we look and go into 2022, yes, we are guiding to similar operating costs. However, as Nikolaj mentioned, a lot of those are onetime costs. The expense of trials at the end of the cycle for filing OX124 and also the Modia trial, which we started in Q4 and will happen through the -- at least the first half of 2022. The good news, when you look at those 2 items, OX124 and Modia as we're getting rid of the file and we're finishing studies, as we go into future years, these are 2 products that are heavily synergistic with our U.S. infrastructure. So when you look at products, normal products that take a couple of years to get to profitability, we anticipate OX124 and Modia as they go into launch mode that will be quicker to profitability because we have a very strong infrastructure in the U.S. So that will be a very positive sign as we launch those products. And Nikolaj also mentioned that our cost for Vorvida and Deprexis are coming down because we're more into a partnership mode and less into the consumer -- expensive consumer promotion. And you could see, as I mentioned at the bottom of the right, our EBIT in the U.S. is still a very strong 53%, and we anticipate that to continue this year. And as I mentioned a little earlier, with the U.S. dollar about 5% stronger as much as that continues, that will make our U.S. business even more profitable and drive that profitability for positive results in 2022. Next Slide 28, is our cash position. You could see that we did have a negative SEK 80 million cash flow from operating activities. However, part of this -- over half of this has to do with some accounts receivables, which one of our major partners or wholesalers in the U.S., we did a negotiation with them instead of having a higher increased cost for that wholesaler we decided to go with giving them extended terms. So it's more of a timing issue. You could see SEK 43 million, roughly around $4 million is really delayed collections. So when you look at that, that would normally have meant about over SEK 40 million of higher cash position. So our liquid funds are still in a good position over [ SEK 500 ] million. Our net cash position is positive. And as I mentioned, we are -- there's a timing of accounts receivables that will basically come in a month later than normal. But when you look into 2022, we are very conscious of our cash position and our cash flow. we mentioned a couple of things myself and Nikolaj about how we're looking at our expenses -- and we will continue to do that and make sure we keep the company in a good position to be able to take advantage of launching our exciting new opportunities as they materialize. With that, I'll turn it back to Nikolaj for legal update.

[Nikolaj Sørensen, President & CEO]

Thank you, Joe. So our legal update can be done very short. There's actually no update since the last quarter. I will say the patent dispute we have with Sun Pharmaceutical or Sun Therapeutics is ongoing. And if it's following the normal time lines, we would be off a trial during the first half of next year. With the subpoena, nothing has really happened during the last several months. Our financial outlook. So we have been a little cautious of what we're saying here. There's a lot of uncertainty around COVID-19, both for ZUBSOLV sales, but also our digital therapies is something we have seen every time we can meet in person it's much more productive than when we have virtual meetings. When we look at the key market development, we do expect that the market for us for buprenorphine-naloxone products is a little better than in Q4. So we say 5% to 8% growth during 2022. ZUBSOLV, we are expecting the normal seasonality we have is slightly lower sales in the beginning of the year, partly due to the reimbursement structure in the U.S., than the second half. But we are -- so we're expecting a slight decline on ZUBSOLV in the start of the year and then to have an improvement in the second half of this year. Overall, the development really depends on how COVID-19 will evolve during the year? Is it like my home country, Denmark, where they just removed all restrictions. Then I think there's a good opportunity for the market to show good growth numbers, and that also impacts ZUBSOLV, but we see a continued roller coasting of restrictions and others, then it can have a negative impact. On the OpEx side, just as Joe said, we -- we do see a shift now into the OX124 and Modia trial, and we are reducing expenses for DTx. And that fortunate part of that is that for the OpEx side, we see an opportunity to -- this is nonrecurring expenses. So when we come into 2023, it's really a question for us, where do we want to place the money in our development pipeline and also in the U.S. And you say, right now, our U.S. Pharma and DTx are full U.S. operations, they are profitable. And what we are investing in is right now quite heavily into our development pipeline. Into 2023, I think we have a new decision for where should we prioritize? What is the timing of the project? And of course, for our digital therapies, there is a need for them to start to show traction. Otherwise, we will, of course, either shut down or severely restrict the expenses. And we won't increase our investments in digital therapies before we see that we do get traction, that we do solve some of the reimbursement issues. If we get all of that solved and we get a good response, then we should, of course, invest into the market to grow the business. But if we don't solve this and we don't get movement in Trinity Health and Walgreens and others, we will, of course, reduce the spend on Digital Therapies quite significantly. So -- on an overall basis, we have a very good control of our financial situations, even though that we have invested a lot of money in the last 2 years and we'll invest some money this year. But when we come to 2023, we are in a situation where we buy simple priorities of not starting anything new and expensive, then we could keep a quite strong financial situation in 2023. When we come to OX640, then we have an expensive project right now, but in 2023, we are likely to work much more internally on the development, so that will have a different cost profile in that year. So moving to Page #32 and I'm soon finished. So what is to expect? I think OX124 is a very exciting market opportunity. The market right now has seen entrance of 2 generic alternatives just as I expected, the price point of these generics is more or less in line with the branded product because Narcan, which is the brand leader is not an expensive product and to produce this product is very expensive because of the quality requirements from FDA and cannot be done in a normal generic model of using existing supply chains. You simply have to build up a dedicated supply chain to be able to meet the requirements for these products. So we have seen the 2 generics. One came in at a 5% discount and the other one at a 6% discount. We've seen that the market opportunities when some of the legislative discussions that are in the U.S. right now is to make a mandatory co-prescription of overdose rescue medications together with opioids. And if that is implemented, we think this market could be beyond $1 billion market. And if that happens, and we take about 10% of that, that will be a very significant opportunity for us. The adrenaline auto-injector market is a $2 billion market. It's a global market today. It's, of course, something that is needed everywhere. There's a very strong increase. We see -- of some regions, we see more and more people having severe allergies. And we think coming in with a nasal spray is something that will definitely add a lot of convenience. And I would also say certainty to people that the product works when it needs to work. Moving to Page 34. So what are to expected for the next year here? First half of '22, we will have ZUBSOLV launch in Europe. So our partner in Europe is expecting to launch it here in the first half. We will have some first revenues coming in here in the first quarter, not of significance, but it will be [ revenues ] coming into our -- to Orexo. We have our Digital Therapies partnering progression seeing that we can solve the reimbursement issues with Trinity Health will be extremely important for this business venture in the future. We, of course, expect to see some sales progression in DTx. My expectations to Q1 is not that high, but I do believe that in Q2, we should start to see something on our Digital Therapies. In the second half of the year, we'll have OX124 file. We'll have OX640 human trial. We will have Modia commercial launch, DTx partnering again, ZUBSOLV market access development. I think both getting certainty about the situation for 2023, but also see if there are new opportunities to grow market access for ZUBSOLV. And we will have ZUBSOLV launch in Europe, which the 29 countries that our court is sitting with, and we expect to see that being stepwise rolled out as they see opportunities in different markets. The year after we will have our Modia trial results, we're expecting them to come in the first half. We have the patent litigation, which has not been scheduled, but with normal circumstances happen in the first half, approval of OX124. And as Joe said, that one is very, very synergistic with both Modia and ZUBSOLV in the market. And then, of course, we expect to see some new product ideas coming out of the amorphOX platform either directly with Orexo or in collaboration with other pharma companies. With that, I will leave it open for questions. So thank you for your attention.

[Operator]

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

[Samir Devani, Research Analyst]

I've got just a couple, I guess. Just on the Modia trial that's ongoing. Can you confirm whether you've recruited any patients into that study yet? And if so, how many? So I guess that's the first question. And then also, Nikolaj, you talked about the reimbursement code. And I was somewhat confused as to whether that code was approved or was being created because I think you talked about being approved in the statement. So maybe you can just clarify that for me.

[Nikolaj Sørensen, President & CEO]

So on the first one, Modia trial, that one is ongoing. We have at least 1.5 week ago, we had 125, I believe, -- the -- like everything else, the recruitment is impacted by COVID-19, and we do have several of the centers who temporarily have been forced to shut down because -- to taking new patients because of the situation with COVID-19. So -- it's a little slower than we expected, but not a lot. So we are aiming at 400 patients, but the recruitment has really up here after the Christmas period, so more than 125 a few weeks back.The reimbursement code is approved by American Medical Association. So that one is confirmed, and also CMS has confirmed a reimbursement range for that code. So that is ready, but it will be implemented for 2023.

[Samir Devani, Research Analyst]

So just can you maybe just clarify what -- if it's been approved, what has to happen before it gets implemented? Why does it take a year for implementation?

[Nikolaj Sørensen, President & CEO]

So it's -- that's, of course, the question I also had when I saw the notice about the decision. The -- I know if it's fortunately, it's not only us. It's every code that we're -- decided on at that time was implemented first in 2023. I simply think it's because these codes needs to be implemented into the insurance company systems and that takes time because you need to update all the IT systems with all the insurance companies in the U.S. and that's simply the implementation time of these codes because it's not uniquely for this one. It's something that was for all the decisions that we're taking at the same meeting. So I think that is the reason that ensures all insurance companies need to have time to implement and also decide on reimbursement levels. So CMS, they decide on a range that is a guidance for Medicaid and Medicare, which, of course, normally is below the range that is used in private health insurance companies. So I think that is the reason. And most of the -- we know from pharmaceuticals, for example, that the decision by insurance companies are often taken on a half yearly. They have a -- for either annual or every half year, they make decision on reimbursement of new products. And I also think that could be one of the reasons that it simply takes time.

[Operator]

Our next question comes from [indiscernible] with [ Direct News ].

[Unknown Analyst]

Yes. I was wondering about the Digital Therapies. I guess no one expected very much for sales numbers this quarter. But as you said I guess many people have higher thoughts about this area as you have. But for 2022, what are your ambitions within this field?

[Nikolaj Sørensen, President & CEO]

[indiscernible], we have not communicated any numbers for 2022. That's of course, been a debate internally what guidance we should come out with. One of the things we would like to get some comfort on is the reimbursement routes and pathways that we have found that they actually work, and we want to see that the patients coming through because it's relatively binary. If they don't work, it will be difficult to get out in a larger scale. If they do work, we have seen with other therapies who have been integrated into treatment programs of similar nature that the pickup is going quite rapidly. And to take one example, if Trinity Health actually put this in front line of people who come in and seek help for depression, that everyone should get Deprexis that even in North Dakota means quite a lot of patients would come in and use Deprexis. So we add this crossroad, which make it binary in terms of volumes. But -- what I can say is that our expectations is, of course, to see some good development in particular, starting in Q2 and into the second half, but we have not communicated any number.

[Unknown Analyst]

Very good. Fair enough. Let's see what you can deliver later on.

[Operator]

Our next question comes from Gergana Almquist with Redeye.

[Gergana Almquist, Equity Analyst]

I have a question about the [ amo ] platform. So you're right that it will be the platform for future project development. So could you -- could you elaborate more on the visibility of these platforms? So what kind of diseases, what -- how big markets are we talking about? Because it's a very big statement to make. It will be the backbone of our future. So what applications do you see apart from the adrenaline and...

[Robert Ronn, VP and Head of R&D]

So thank you for the question. This is Robert Here. So I mean, we don't see any particular limitation when it comes to certain indications. Obviously, an amorphous powder with these kind of properties, you can see a lot of different use, not only for nasal emergency products that we are working with. You could also consider using it, as I mentioned, also for different other administration routes and other dosage forms. So I don't see any particular limitation on the type of indication. Obviously, the platform has properties that makes it very good for emergency type of product that requires a rapid onset, for example. That's one particular aspect. the other one is obviously the stability advantages that we see. For example, working with a very sensitive active ingredient like adrenaline. And there are obviously other unstable active ingredients that could benefit from this technology.

[Nikolaj Sørensen, President & CEO]

And I think, Gergana, if we go back to 1999, that was when Orexo had our sublingual technology platform, which since then has led to the development of both Abstral, [indiscernible] and also ZUBSOLV. Each of them with their own merits with some unique properties, which have generated new patents in particular, ZUBSOLV. But it was -- that 1999 invention was also the backbone for these 3 products in as diverse areas as treatment for opioid use disorder to sleeping disorder in [indiscernible]. And that's a little what we see right now. And I think the -- it just takes some dialogues we had the last few weeks. We have had a few companies that we haven't been in touch with on other routes, and where they stand here and some of them are very early stage. NCE-like products will need to find a every method that works and have thought about doing an injection products and suddenly, we maybe have a solution for them, which could make this either as a nasal spray or a sublingual tablet or similar. We have products that we know are used across the world in very sensitive areas at high humidity, large temperature variations, and we've shown that we can make it stable. So right now, it's -- I think we are in a very fortunate situation from Orexo is that we have a lot of ideas. The big challenge for us is, of course, looking at our financial situation and also people situation that we need to prioritize, which idea to progress with first. And we will communicate the projects as we progress. But right now, the big focus is on OX124 to get that finalized. That's our priority #1. OX640, we want to show that it works. We think that has such broad application that we have decided to put it ahead of OX125. Because if we can show that, that works, we think that's an opportunity for us to be more creative in our business development discussions with other partners, for example. So that's where we are right now. But -- but if we should have endless amount of resources, I think we would have another couple of projects that we would start right now, but we need to prioritize.

[Gergana Almquist, Equity Analyst]

And should I see it as a back to the root kind of story for Orexo that you are turning to the pharma R&D. and run this in parallel digital and pharma? Or What are your priorities for the future?

[Nikolaj Sørensen, President & CEO]

I do think that it's -- in one way, it's back to the routes. Of course, we have been done doing pharma development for all the time. For a period of time, it was very focused around ZUBSOLV. But now we -- since the last 3 years, we have been focusing on developing new -- 4 years, focusing on developing of new products. And the back to the route is that we develop a product designed for a specific need, and that is OX124 for fentanyl synthetic over dose -- in that process, we also developed a new technology that we see have much broader applications and that is back to where Orexo has been before. But there's no doubt that we are a commercial company. And the #1 thing for us is right now to get over this investment period and then turn this company profitable again, we're using a luxury situation compared to many other Swedish pharma companies that we had a lot of money that we could spend. We have a continuous cash flow coming from ZUBSOLV that we can invest but we, of course, don't have an endless amount of resources. So now we do a lot of investment have done that the last 2 years. We'll do that in 2022. But then we're in a new situation, and I think that profitability is going to become a much bigger focus of the company and also in the decision to start new projects.

[Operator]

[Operator Instructions] We have no further questions. So I hand back over to our speakers.

[Nikolaj Sørensen, President & CEO]

Okay. Thank you. So we received 2 questions on our -- to our Investor Relations mailbox, and one was around the guidance about profitability for 2022 and if possible, coming years. And we've talked about that. I think the -- we do see 2022 as an investment year, but we are seeing that we're moving into more -- some final R&D investments, on which OX124 was a lot of the expenses past year has been on DTx, and we see DTx going to see reduced spend in the year and the spend that we do have with a much higher degree be synergistic with ZUBSOLV. Then we have another question. DTx sales reached [ SEK 2.3 ] million. Are you satisfied with that level? And how do you think the revenues will proceed. Of course, I'm not satisfied with DTx in 2021. There's no doubt about that. We have invested a lot of money in what we thought could be and opportunities due to COVID-19, and that has not materialized. And we have learned a lot. We have produced a lot of material that we can leverage in the future. But -- there's no doubt that when we enter 2021, that is not what we expected when we started the year. But when we're looking ahead, I do think we have taken a step back. We have a more partner-focused strategy. We made a big breakthrough with Walgreens. And I think we are now really getting ready with Trinity Health. And with these 2, I think we have a good foundation for expanding the partnership model into new companies, and we do have several others who are waiting. But again, Trinity Health is going to be the model for other big health care providers in the U.S.So that was the last comment. And I would thank all of you for taking an hour out of your busy schedule and wish you a great day. Goodbye.