Swedish Orphan Biovitrum AB (publ)

STO:SOBI

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to the presentation of the Q3 results for Sobi. I will now hand you over to CEO, Guido Oelkers. Please go ahead.

[Guido Oelkers, CEO & President]

Yes, thanks, and thank you, everybody, for joining us for today's call. I will be joined today by Henrik Stenqvist, our Chief Financial Officer; and Armin Reininger, Head of Medical. And what we want to cover today is give you a little intro, but then also provide you with a business review, talk about our acquisition of emapalumab and then discuss financials and, obviously, provide a summary. So we go to the next slide on Page 2. As per usual, the forward-looking statements, just take note of this and then we go right into the brief of Q3 highlights. So we are -- let's say, obviously, today was a bit of an eventful day, but we are very bullish and very happy actually with all our results, as you can see from Page 3. So when you look at it, total revenues, let's say, have improved to SEK 2.3 billion in Q3 and SEK 6.6 billion for year-to-date. So that represents a 45% top line growth at actual currency and 34% at constant. And when you look at the EBITDA, it increased by 74%, and -- let's say, in Q3, and 85%, let's say, year-to-date. So when you look at those numbers, I mean, we think very impressive numbers and, let's say -- and even though there was a question earlier, let's say, on quarter-on-quarter growth, and what I can tell you is we had fantastic strong growth on the patient acquisition rate in the Haemophilia business, and I will talk about this. So we, let's say, from -- let's say, we believe that the story is really continuing and we are gaining momentum, even though, the summer quarter is always a tough one, particularly, in the southern part of Europe. So net cash position, as a consequence, increased. Revenues for Elocta and Alprolix, let's say, is up considerably, as we can see, to SEK 873 million and to SEK 255 million for Elocta respectively. And what is really gratifying is the increase of Kineret by 28%. And you see now this beautiful acceleration in the third quarter and -- which is very gratifying for us. It shows the investment we put behind the product and the excitement we see in this product is paying dividends. The increase of Orfadin, despite the mixed value of 8% at actual currency minus SEK 202 million meaning flat at constant. So it is also a very nice outcome, in showing the loyalty attached to this product. So overall, we complemented, obviously, our franchise -- information franchise, in particular, with the acquisition of emapalumab, and we dosed the first patient of 003. So summing it up, for us, it was a great quarter. And when you -- then we will go to the next page on Page 5. And we go straight to Haemophilia. So basically, we increased our patient market share considerably and we got reimbursement for Alprolix in Sweden and Slovakia. I just want to make the point because we saw some reports on this and just to hit it off, right away, you have to see, when you look at the quarter-on-quarter results, which we will discuss in a moment, you see really not as much progress as some maybe thought we would have hoped for, let's say. However, you need to realize that there are certain buying patterns and what I'm interested in is, did we increase demand? And I want to make a point that we increased demand by close to 30% incremental growth versus last year patient acquisition, yes? We, let's say -- so what we want to make sure is, that we get, let's say -- we have not slowed down, we are not sailing into the sunset, we are here to extend our market share and, I think, it's an important point to note. And basically, this is not totally reflected in the numbers, but there's always a phasing effect in those numbers, as they are the result of the demand creation, but demand creation significantly increased and there's always a bit of a difficulty to assess what is a true demand when we look at third quarter given the buyers -- due to vacation period in the southern part of Europe, in particular. So when we come to the EMENAR situation, let's look at the second paragraph, we are now becoming increasingly, obviously, standard-of-care in a variety of those markets or becoming the leader in the respective category, but still have substantial room to grow. And the other beauty of our story is really that we have advanced BIVV001. We reported back on the data that we presented at ISTH earlier, but -- and to WFH -- sorry Congress, but we think that is -- this is a fantastic product that has so far already got -- is well-received by numerous opinion leaders. So when we go to the next page, Page 6, I think, it is important to note that there is a lot of noise around new therapies, we just wanted to make sure that you clearly understand, based on real-world evidence, many thousand patients, Elocta and Alprolix have an established safety and efficacy profile allowing personalization of the therapy given patients what they need and basically feeding back to us that they feel better, experience less pain. And this coupled with the individualization and knowing that you can dose higher when you need it, and that you also protect it when you undertake, for instance, surgery in other parts, feel that this is a fantastic portfolio that is not matched anytime soon. So when you then go to the next page on the Haemophilia, it's the slide -- quarter-on-quarter growth, Page 7. And you can see that we had obviously a record quarter influenced to a certain degree by the French claw back, but when you know that -- when you look at also the Q3 development last year, you know that the behavior in Q3 this year is very similar to the behavior the year before and maybe you then know that you have quarter-on-quarter close to 30% increase of your patient numbers, despite the fact that many clinics are not actually converting patients because of the vacation period. Actually, I'm satisfied, yes? And I'm thinking that this growth is actually making us confident, yes? And when you look at the Elocta increase on Page 8, you see a very nice, obviously, growth curve and it's was 110% growth and 93% at constant exchange rate, I mean, now making also progress in 25 countries, quite gratifying and obviously, the progress now with Alprolix is pretty significant, particular, in the key, let's say, in the EU5 or -- the large EU4 markets. But also now we recently got reimbursement in Sweden, yes? So very pleasing and basically the Q2 versus Q3 is more buying pattern than indicative of demand because -- and demand also for Alprolix in Q3 has substantially increased. So we are actually very positive here. So that basically -- this is my note and what I wanted to make sure you had no misunderstandings when you look at our quarter-on-quarter results. Now we go to the Specialty Care business. Here in Specialty Care, nothing has changed. We're a world-class platform, we're in the launch process of Ravicti, so we are very pleased that when you look at Ravicti and Ammonaps or Amonil in combination, let's say, there is a shift that we're growing this business, very nice. But really the flagship product of Specialty Care is Kineret and, as I alluded to earlier, our investment in the U.S. and our strength -- we still to improvement -- approval in Europe really propelled growth and basically allowed us now to accelerate growth in Q3. And I think what you also shouldn't take away that when you look at the number of publications or citation in peer journals for Kineret, you have seen a significant increase over the last year. So when you look at the average of '16 and '17, it has more than doubled in the years beforehand, and this means that there is a keen interest in the product and we see utility of this product beyond and let's say -- so therefore, we are quite bullish. You have seen the Phase II data of -- that we have launched for Kineret in gout. Here you have to say -- see very clearly, I mean, the product performed in line with what you could have expected from an IL-1 in this setting. The control group was performing better, hence, we didn't show significance, but we -- we're overall very satisfied with the result. So we will let the study play out and then basically see whether we can go straight into Phase III and we'll have discussions with the FDA. Okay, so Specialty Care. And when you basically look at it, solid performance, on Page 11, across all the segments. And yes, also affected in Q3 by the, let's say, by obviously, the holiday period, but also by a slowdown of Orfadin at constant rate, and -- but very pleased with the overall performance, 80% total growth and 8% at constant. When you look at Kineret, I think, I talked about this and I think this gives you a good feel and is offered in, I mean, I think, it's -- we mentioned this earlier, we are quite happy with the way we manage this, even though, we are giving in at constant a little bit, but when you think about we lost the patent, we're defending the product quite nicely. Yes, we will not be able to defy gravity, but we don't see a cliff for Orfadin in the way you would have expected for other products at this point of time. So this is basically our legacy franchise. Now we've come to a very exciting part, which is emapalumab, which we consider as an important strategic deal for us. Basically, this is turning -- we have -- you remember that we made an announcement that there are two parts to this deal, so we're now in the Phase I of this deal, which is, we have acquired the license and, obviously, we are in discussions with the seller to consummate the second part and there will be a couple of steps still necessary. So when you think about it, what it does to us, emapalumab, it basically strengthens our immunology base that we have with Kineret. It clearly, given the buyers of the franchise, covers the U.S., it would bolster our U.S. presence. It will also give us a strong pipeline because there's utility of the product beyond HLH, and we are currently in an explorative stage to agree with the R&D community in our company on what would be the next trials to expand this franchise, and obviously, with Novimmune. And basically, what we expect is an approval during the latter part of this year. PDUFA date is on the 20th of November and basically, MAA filing in Europe around August. So we have paid, let's say, the first payment of the total proceeds for this deal of CHF 50 million and as you know that there is a clause in that both parties can accelerate the remainder of the payments middle of next year. But we think very highly of this and believe that this product has a phenomenal future. And -- but as this deal is a -- as this product is a very substantial opportunity for the company, it also means that we need to prepare it well, so we have initially be guided to market at SEK 200 million to SEK 300 million or SEK 250 million. We think now that we will spend, based on what we understand, around SEK 200 million. And there will be later -- this will be important because when we did the guidance for the year, we did this with all of the emapalumab expenses. So I want to -- we'll come back to this when we talk about the increase of guidance that, in fact, we have done and I think this was potentially misunderstood. So clearly, like-for-like, we are increasing guidance, but now we have to have emapalumab expenses that we've classified in a more precise way. So when we come to emapalumab now, why is this such a fantastic opportunity for Sobi, it will help us to articulate what Specialty Care is about. It will strengthen our immunology franchise, it will give us -- it will strengthen our U.S. presence and with the different indications, it will allow us to build and to bolster our late-stage pipeline. On this note, I think, I would like to hand over now to Armin Reininger, our Head of Medical, who will bring this product closer to you and make you understand why this is such an important addition to our franchise.

[Armin Reininger, Head of Medical & Scientific Affairs]

Thank you very much, Guido. Hello, everyone. It's my pleasure to really talk a little bit about the emapalumab, which is a fully human monoclonal antibody that targets interferon gamma, which is a central mediator of inflammation. In order to assess and really appreciate more of what this interferon gamma product can do, you need to also clearly have an understanding of what HLH is, which is the second bullet point. HLH is hemophagocytic lymphohistiocytosis, you will see it also spelled out on the next slide, which is a life-threatening syndrome of extreme immune activation. Interferon gamma is one of the key players of the immune system, of the innate immune system and what is happening in this kind of disease is that the inflammation really goes completely overboard. It is such an excessive inflammation and tissue disruption due to abnormal immune activation that there is a lack of normal down-regulation activated immune cells, mainly the macrophages and lymphocytes go overboard and that literally has a pretty high death rate. You will see on the next slide that HLH is a rare and life-threatening syndrome that has 2 patient segments: there is a primary HLH, which is genetically determined and then there is a secondary. The secondary has, as a trigger, infections, autoimmune diseases or malignancies and infections could also trigger the primary HLH, although, there is not then a clear cure once the underlying disease is treated, but that is only cured by, in most cases, by bone marrow transplant, stem cell transplantation. So indeed, we have very high unmet medical needs. There is a fatality with a median survival of less than 2 months without treatment, overall treatment, and there are no approved drugs -- no approved drug treatments up-to-date. So we are pursuing the first approval for that kind of disease with emapalumab, and there's currently a widely accepted treatment protocol that apply a combination of different treatments like dexamethasone and chemo-immunotherapy, but what we want to also show is that this kind of treatment will be more beneficial to the patients and will have literally also a higher survival rate. Overall, we are targeting both patient groups combined, roughly 5,000 patients in the U.S., Europe and Japan of both primary and secondary HLH, but what we also hear back from the opinion leaders and from the field is that there is quite a number of even undiagnosed patients. So there is clearly a huge unmet need that we try to target with this kind of product. And with that, I hand back to Guido.

[Guido Oelkers, CEO & President]

Yes. Thanks, Armin. And -- so when you look at Page 19, it gives you a bit of flavor why we are so really excited. We are creating a product which peaks at, on what we know today conservatively, around USD 300 million.It's a late-stage product that's utility beyond. It will help us, obviously, in the U.S. to expand our position. We have already recruited quite a few people. We have expensed quite a fair amount. That's -- and frankly, this is what we feel our team has to spend to make sure that we take advantage of this very significant opportunity for the group. And obviously, we are in the process to plan studies, and we are working with the external help on this to give the product justice. So when you think it through, emapalumab essentially is an important catalyst for us to build out a more immunology franchise under the heading of Specialty Care. So essentially enabling us to build another leg for the company, and we felt very strong about it so that we are building on strengths and going into an area where, with our business systems, we can add a lot of -- a ton of value in a relatively de-risked environment, meaning late stage. And I hope you can share our level of excitement.So when we come to page 21, our pipeline. I think I don't want to go through the entire pipeline. I think I just want to make reference to a couple. I think the key here in this context is that XTEN/BIVV001, was successor to Elocta, is making very good progress. An update will be made at ASH in November, very excited about this. And you have seen the data from the WFH meeting, so that's clearly one of the probably most exciting compounds in the Haemophilia environment.Then last thing important to note is now PDUFA date for emapalumab on the 20th of November. And we have acquired the rights to this, and done already, for emapalumab, secondary HLH product progressed. And I think in our own stabilizing, important to note is that we are nicely in the recruitment phase, now in clinical phase with 003 and are also thinking about different ways on how to accelerate the product, and obviously, very -- and also again, it's an environment with high unmet medical needs. And for anakinra, we are now already in commercialization in sales -- in Europe, sorry. So when you think about it, actually we touched quite a few key points of the company and what does it mean in terms of numbers, and instead I would like to ask Henrik, our CFO, to talk about the financial results.

[Henrik Stenqvist, Chief Financial Officer]

Thank you, Guido, and good afternoon, everyone. So let's look at some financial highlights for the quarter.Revenues for Q3 amounted to SEK 2.3 billion, corresponding to an increase of 45% and 34% at constant exchange rate. This Q3 number was positively impacted by SEK 56 million related to the adjustment of the provision for pharmaceutical taxes in France on the year 2017. And if you remember, we gave a heads up of this coming adjustment in Q2.Gross margin came out strongly at 75%. And in addition to the ongoing positive product mix effects that we have, the gross margin was, obviously, positively impacted by this French adjustment and also favorable FX effects.EBITDA reached SEK 933 million, corresponding to a margin of 40%, which is equal to the margin year-to-date. We also had a very solid cash flow during the quarter with operating cash flow amounting to more than SEK 700 million, which translates to a conversion over EBITA of 76%. Thus, we managed to increase our cash balance by close to SEK 200 million, despite the acquisition of the emapalumab license of almost SEK 500 million.Go to next slide. This slide is the full P&L, where you can see that below the solid gross profit for Q3, we have OpEx of SEK 808 million, representing an increase over Q2 of just about 10%. And this increase reflects, in addition to the continued market investments and ongoing R&D programs, also development and prelaunch costs for emapalumab, amounting to some SEK 50 million for Q3.Furthermore, with a tax rate for Q3 of just below 23%. We are back to normal after the one-off adjustments in Q2, and that resulted in a net profit of SEK 623 million for the quarter and a growth in EPS of 92%.Go to next slide. And finally, a quick look at the balance sheet, where the only major movement this Q2 is the capitalization of the emapalumab license of about SEK 4.1 billion in intangibles. The remaining license fees for the product, some CHF 400 million or some SEK 3.6 billion, have been classified as current liabilities because these payments can be accelerated unconditionally by either party after July 1, 2019.Then I hand over to Guido again.

[Guido Oelkers, CEO & President]

Yes. Thank you, Henrik. So when you summarize it on the -- regarding the strategic direction, Page 27. So we said, we obviously need to maximize the opportunity in Haemophilia. That's what we are doing. So we have made significant progress in Haemophilia. We have 2.3x more patients end of Q3 than we had last year at the same time, 2.3x. We have increased the patient acquisition Q3 2018 versus Q3 2017, the incremental rate by 30%.Yes, in the Q3 environment, you have not as many switches as you would have in other quarters granted and as a phasing of the buying pattern, but we actually are confirmed -- we see a confirmation in our strategy that we are acquiring patients, we are expanding our market share, and actually, we are very satisfied with the progress that we made in the environment that we are dealing with.We are developing the Specialty Care business. We are very satisfied with the progress that we have made with Kineret, particularly in Q3. We are very satisfied with the patient -- with the patent defense of Orfadin. We are expanding now our presence in the U.S. We see this as a great opportunity for our group. And with emapalumab, we will strengthen our pipeline and significant progress was made with 001.So overall, actually, when you look at the next page, actually we are very positive about our outlook. We have strong profitable growth. It was over 70% in the quarter EBITA growth. We have strong cash kind of generation. The company is in an excellent shape to explore external growth opportunities from a position of strength, which we believe is particularly important in today's volatile environment, and we have increased financial flexibility.So when we come to the outlook and also to make sure that there is no misunderstanding, we increased guidance on the top line to SEK 8.9 billion and SEK 9 billion. We have a favorable gross margin, increased guidance on the gross margin. We have increased our guidance on a like-for-like basis for EBITA. To -- just to make it very clear that -- to avoid misunderstandings, we originally guided SEK 3.4 billion to SEK 3.6 billion. If you account on a like-for-like basis, this would have meant without the emapalumab expenses, a guidance from SEK 3.6 billion to SEK 3.7 billion. Now we are spending -- we are investing into the launch activities of emapalumab and into the clinical development activities for emapalumab, and as a consequence, our guidance is SEK 3.4 billion to SEK 3.5 billion. So we are, by no means, reducing our guidance on a like-for-like basis. We are preparing the future and essentially stick to what we'd originally told you. And we're making significant strategic progress by diversifying our company. So I think this gives you a little bit of a flavor where we are today.And we might now open the floor for questions.

[Operator]

[Operator Instructions] The first question comes from the line of Eun Yang from Jefferies.

[Kyung Yang, MD & Senior Equity Research Analyst]

So on Haemophilia, Guido, you mentioned that there continues to be increased demand. It's more of the buying patterns there affecting seasonality. But when I looked at third quarter this year, I fully -- particularly exclude the adjustment in French pharmaceutical tax. Quarter-over-quarter growth is kind of flattish. So what I'm trying to understand, given the buying patterns, do you expect in the fourth quarter, there would be a nice uptake in Haemophilia sales?

[Guido Oelkers, CEO & President]

Yes. I mean, the -- you would, obviously, hope that your patient number eventually translates into, obviously, growth, also in the -- economic growth. I mean, just magnitudinally, just to give you a sense, we have increased our total number of patients despite the fact that there was a vacation period in Q3 and centers are not so hot on switching patients by more than 10%. So we have made significant progress in this more tougher period of time, and clearly, much more progress than last year at the same time. And when -- and patient switch doesn't mean you get your money right away. Patient switch means that you get a prescription, but sometimes the product is used that he has or if it is still available. So the economic result will come differed. So you will see some of these effects also having a deferred effect. But frankly, I'm much happier having a strong demand uplift than showing you a sales line, which is a result of the demand.

[Kyung Yang, MD & Senior Equity Research Analyst]

So when I look at your upper guidance -- the upper end of total revenue guidance for this year, that kind of implies that fourth quarter total revenue would grow at a kind of a middle-single digit. So I'm trying to figure out whether the middle-single-digit growth expected in the fourth quarter based on your guidance. From there, you still expect uptick -- nice uptick in Haemophilia franchise's sales in the fourth quarter?

[Guido Oelkers, CEO & President]

Yes. I mean, we are -- obviously, we're now not to tell you the stories. If everything works out, life is going to be beautiful. I mean -- but we will see -- I mean, if you follow the guidance, you obviously expect a significant, again, quarter-on-quarter growth. And you will see an uplift, obviously, very likely on the Haemophilia side as a consequence of this. You have momentum with Kineret. The unknown is offered in as it was. We have -- the last quarter was also affected by relatively poor sell into the Pfizer chain on the refractory manufacturing that clearly affected the quarter. There is likely going to be a bounce back. So overall, I think we are very confident about the guidance that we have given for the full year.

[Kyung Yang, MD & Senior Equity Research Analyst]

And can you give us what's the current market share of allocating Alprolix in your territories?

[Guido Oelkers, CEO & President]

Yes. I think with these market shares, we don't provide here guidance, but we have now -- we are now in various markets. We have standard of care, that means we are market leader, and -- but the good news is that we are still -- because we are looking at this in the funnel of penetrations, we'll be tracking, obviously, the patient number by account. And there, we still see substantial growth opportunities for us. And basically, as we just highlighted, saw an acceleration of the growth. And I think we are a little bit careful now providing guidance on market share and -- but we obviously give you the -- and you have the total market numbers that are published, so you can adjust the -- just use this equation here. But we are now becoming quite substantial here. And -- but the good news is, we haven't petered. So that's clear. And the teams are extremely excited and motivated now to drive growth.

[Operator]

The next question comes from the line of Peter Sehested from Handelsbanken.

[Peter Sehested, Research Analyst]

Regarding your EBITA guidance, I mean, you are increasing your top line guidance by SEK 300 million and then you are adding another SEK 200 million on costs. So that should give you plus SEK 100 million, but you actually guided the midpoint down by SEK 50 million. So what sort of the discrepancy between the plus SEK 100 million and the minus SEK 100 million that you are sort of adjusting your guidance by? And secondly, you're saying the way that you're guiding for the years was that -- we discussed previously. I mean, are you sort of -- you say Orfadin is an unknown. Are there other, let's say, factors where you are cautious? I mean, a couple of months -- for the past many quarters when the trend was, let's say, ordered, the share price affected a more positive trend. I mean, everyone was sort of implicitly assuming that you were being bullish. And I think you also previously stated that you wanted to be cautious or let's say rather surprised positively than negatively. So I wondered if you give the kind of a flavor, again, when it comes to the guidance for -- or the guidance that you're providing now. Are you also giving a guidance that you want -- that you believe you can beat? Or do you believe that you are actually realistic at this point in time? Those were 2 to start with, and I'll jump back in the queue.

[Guido Oelkers, CEO & President]

Thank you, Peter. I mean, just to may -- be quite explicit, I mean, the -- what actually affected our guidance are the expenses that we didn't have initially in our guidance for emapalumab, that's it. But if you look at this guidance like-for-like, we would have increased it to the higher point of SEK 3.7 billion. And we have not done this because we are taking the SEK 200 million expense line on emapalumab. And as a consequence, we have guided for a narrower range, SEK 3.4 billion to SEK 3.5 billion. But the earning machine is doing extremely well and producing more than what we guided for. So what basically is a top line comes in, flows through when you deduct essentially the emapalumab expense line. So that's to this point. So we are -- and we wouldn't represent those numbers if we would not be very confident at this rather late point of time that we can make those numbers. I think we have confidence. And Peter, you had -- was there another angle to your question that we could maybe take or did I answer this?

[Peter Sehested, Research Analyst]

No, it was just respect to the top line component of the guidance, but I guess -- yes, I think you probably embedded it in your final question. That's okay.

[Guido Oelkers, CEO & President]

And I think as we've always said, we don't want to underperform, clearly.

[Operator]

The next question comes from line of Hans Mähler from Nordea Markets.

[Hans Mähler, Director of Healthcare]

I have a few on emapalumab. Firstly, when it comes to your somewhat lower initial costs for the launch process. Has this also changed the timing for breakeven or when it will be accretive to your earnings? And then also, I wonder if you can specify how much of the sort of one-off costs you took in the third quarter? And maybe how you see the split between the R&D line and the sales and marketing line?

[Guido Oelkers, CEO & President]

Yes. Maybe Henrik can talk about this?

[Henrik Stenqvist, Chief Financial Officer]

No, there is no change to timing. We still expect the product to be accretive in 2021. When it comes to the SEK 200 million that we think we will spend in 2018, about SEK 50 million of them were spent already in Q3. So that would mean about SEK 150 million left for Q4. For the remaining costs in Q4, it is more or less an equal split between R&D and sales and marketing, slightly more on R&D.

[Hans Mähler, Director of Healthcare]

Okay, good. And also, could you specify on the intangible assets on the -- how long period will you amortize the amount? And maybe if you can comment a little bit on what kind of volumes you need to get to breakeven on the product?

[Henrik Stenqvist, Chief Financial Officer]

Well, we will start to amortize it when we launch it. And it will be amortized over 15 years. Your second question was regarding...

[Hans Mähler, Director of Healthcare]

When you have an assumption on the breakeven timing of the emapalumab, what kind of underlying assumptions in terms of volumes have you included there?

[Henrik Stenqvist, Chief Financial Officer]

We haven't guided on that yet.

[Guido Oelkers, CEO & President]

But when you look at it, as a top line peak sales, that gives you an indication that, obviously, we are -- we have significant hopes for this product, but we wouldn't provide such indication if we would not be absolutely certain that we can beat those. So we think it's a very significant product, and that's the reason why we are investing into this, why we are looking at new indications because once you buy a product and you don't do anything with it, I mean, it will be a fallacy.

[Operator]

The next question comes from the line of Richard Parkes from Deutsche Bank.

[Richard J. Parkes, Director]

First one, just a little bit more sort of clarification on the 3Q, a lot quarter-on-quarter performance when you adjust for the French tax adjustment. So obviously, there has been that slowdown. I just wanted to clarify the point that you made. I think you were saying that you've seen a 10% increase in patients on therapy throughout the quarter. I just wanted to check whether that was correct? And then, I'm trying to understand why that's not yet been reflected in sales? Is there any negative impacts in the quarter either from pricing adjustments or sort of buying pattern stocking that's dragged on that Q-o-Q performance? That's the first question.

[Guido Oelkers, CEO & President]

Yes. I mean, the way this works with these prescriptions is, you get a prescription. You have product. You use the product then you convert to a new product. Now depending on the patient, this can take -- this can be instant, but this can take a couple of months. That's the reason why it is not instant. But in the case of Elocta, just to possibly there quite clear -- just to give you a little bit of a data point, it's basically we have for Elocta made very substantial progress also beyond 10% incremental increase of patients in the Q3 2018, and we have significantly more than -- close to actually -- more than 25% growth Q3 2018 to Q3 2017 in terms of absolute patient acquisition rate -- switches. So what it means is also Elocta is actually doing extremely well in our funnel. So the team, the machine that we have out there, which is not incentivized now to smooth over basically and manage the sales, they are there to create demand. And then the sales is what basically the channels and the clinics and others are ordering. And then obviously, it's basically -- then also driven by those things. There is a time delay. Over time, that obviously is going to equalize itself and -- but what you can see is, that we have -- that we still on the way up in augmenting relatively our share in this market and that's the reason why we are actually quite bullish.

[Richard J. Parkes, Director]

Okay. So there were no specific negative impacts in terms of pricing or also buying patterns. It's just a case of sort of delay between the prescriptions when ready [ and so ]?

[Guido Oelkers, CEO & President]

I mean, obviously, there are price effects. There are some net price adjustments in Sweden, for instance, but in terms of materiality, it is primarily -- it's a phasing effect. But there's obviously a price effect as well, but this was not driving now the quarter-on-quarter development.

[Richard J. Parkes, Director]

Okay. Perfect. And then second question. I understand there's a factor VIII tender in the U.K. that's coming up. And I just wondered how much of your sales are currently coming from the U.K.? And what your confidence is in taking part in that tender going forward?

[Guido Oelkers, CEO & President]

Yes. I mean, we don't comment on singular countries. The U.K. is -- for us, is an important part of the business, but it's not the important part of the business. And I don't want to comment on what basically our tactics for the next tender are.

[Richard J. Parkes, Director]

Okay. And then third question just on emapalumab. I just wondered when -- because I think the clinical data hasn't been presented since 2015, so when would you expect to present data from the updated clinical study, which, I think, has been submitted to the FDA for review. I'm just wondering whether it might be something ASH. Or would you time something for next year during the launch phase?

[Guido Oelkers, CEO & President]

Armin, you want to comment on...

[Armin Reininger, Head of Medical & Scientific Affairs]

So as you can imagine, right now we are pursuing heavily discussions with the FDA to really get that on track and get approval for that product. That product now is the primary objective. Once that is accomplished, we want to go into publishing more. What is already in the books and you can also find it on the ASH website, there is a next-stage CVA accredited symposium that we'll talk about HLH and other -- and new therapies. So clearly, that is a hands off from our side, but there's clearly the top opinion leaders talking about the decision and therapies on the horizon. So this is for us more getting the approval and then doing the next steps. And the next congresses are clearly in our publication plans.

[Richard J. Parkes, Director]

Okay, perfect. And then, I might just take one last one, if that's okay. Since the Hemlibra approval, have you seen quite a lot negative pressure on your share price, despite the fact that was really a surprise that was coming? So I'm just wondering based on the label of Hemlibra or that approval, has anything changed in your view of the competitive threat from Hemlibra?

[Guido Oelkers, CEO & President]

Yes. I mean, we were, to be honest, a little bit also surprised that actually news in a way that were no news, let's say, had such an impact, but that's not for us to comment on. That's really in the eyes of the beholder. But basically, Hemlibra was becoming effect. But as we have pointed out, we believe in the profile of our products, strong safety profile, product based on real-world evidence, not on patient selection and in clinical trial setting, and basically allowing you to personalize the product. I think that equation, honestly, hasn't changed. And we're obviously in a permanent dialogue with those people who really matter for making such decisions. Because no matter what we believe, it's essentially in this context really of relevant. It is what the physicians believe and what patients feel. And we haven't sensed that this equation has changed. Armin, you want to comment?

[Armin Reininger, Head of Medical & Scientific Affairs]

Yes, I want to comment of quite a number of context. We have via advisory board, personal and face-to-face interactions. And in essence what we hear without exception is there are certain dimensions that you need to look at when you are assessing such a product, a new product or existing product. And just to list them down to you, those are the dimensions that were given to us by the physicians as those are their most important ones they look at: protection, safety, personalization, reduce treatment burden, the capability to treat on-demand bleeds and surgery where there is a much higher need for high factor levels, the possibility that it is a factor replacement and not a substitute for the factor VIII replacement and the ability to measure that factor. If you take all those dimensions together, then you get a score number or an index or whatever you want to do with it to assess a certain of product. If we look at Elocta and also at BIVV001 to come, we are, I would say, literally the standard of care with Elocta right now and even want to beat that with BIVV001 coming. So this is our view on any new technologies entering.

[Operator]

The next question comes from line of Christopher Uhde from ABG.

[Christopher Winston Uhde, Biotechnology Analyst]

So I guess, the first question is on Alprolix. Obviously, you've said a lot about the seasonality and the phasing. I'm just wondering is there anything more you can add on the switch rate. I'm wondering if given that the number was lower than Q2, was competition from IDELVION and/or Refixia a factor?

[Guido Oelkers, CEO & President]

No. We had record high switches in Q3 versus previous year. And frankly, no for Alprolix, the switch was even higher than the relative contribution to the overall than for Elocta. So it was more than 15% of new patients coming in Q3. So we can't -- even though when you look at it quarter-on-quarter sales performance, it is not reflected in what we have seen in the acquisition of new patients.

[Christopher Winston Uhde, Biotechnology Analyst]

Okay. And then on Kineret, what's driving growth? And I mean, is it -- it sounds like from the presentation that it was still became significant now? And then I guess, do you see a chance of approval in acute gout on the anaGO data?

[Guido Oelkers, CEO & President]

I think this is Phase II data. So I think there needs to be a Phase III program. And we now hold our horses and basically wait for the meeting that we will have with the FDA. But we think that the product has utility, obviously, in the indication. Otherwise, we wouldn't have done what we have done. But what basically drives the Kineret growth is this growing scientific interest. It is still the indication and it is our investment into the marketing and sales organization and the medical organization in the United States that has accelerated growth. And then we think that there is utility of the product and new indications as well. And when we have basically made the decision to enter into new programs then we'll let you know, obviously.

[Christopher Winston Uhde, Biotechnology Analyst]

Okay. And then -- so do you have any data yet on whether therapeutically relevant levels of SOBI003 cross the blood-brain barrier?

[Guido Oelkers, CEO & President]

No. We have -- I mean, we know that -- we have now 3 patients randomized, and we know that the product for the patient that has been randomized -- that has been enrolled into the program first was well tolerated, but more than this we cannot say. It's a blinded trial and so we have to wait.

[Christopher Winston Uhde, Biotechnology Analyst]

Okay. So -- all right, tax though. That was nearly 23% this quarter and perhaps I'm recollecting correctly. But my sense was, last quarter, you were indicating that it might be more like 21-point something. What's the reason for the difference at any rate Q-o-Q? And then should we expect a higher rate going forward?

[Guido Oelkers, CEO & President]

Henrik?

[Henrik Stenqvist, Chief Financial Officer]

You put me in a difficult situation because I wasn't here in Q2. But we've normalized now, I would say, in Q3 because Q2 was, obviously, impacted by the onetime effect. So if you mean 2018, we are heavily dependent on the Swedish tax rate. So it's more likely to be between 22% and 23%. And then as you know from 2019 onwards, we will have a reduction in the Swedish tax rate.

[Operator]

Our last question comes from the line of Peter Sehested from Handelsbanken.

[Peter Sehested, Research Analyst]

It's Peter from Handelsbanken. I have a couple of follow-up questions. The first relates to emapalumab, and the primary versus secondary. Could you give an estimate of the -- of your -- of how the 5,000 patients are distributed between primary and secondary? And secondly, with regards to Orfadin, Alkaptonuria. You have it in your pipeline slide, but it's not really something that you talk about in your full year reports. Given how this has developed and the particular structure there, could you just update us a bit on what your, let's say, go-to-market strategy for this particular indication is? Or is it used so much off-label already that we really shouldn't expect anything from Orfadin in this indication? And secondly -- or thirdly, just an update on Kineret's exclusivities, how the current formulation and what you're selling relates? How much of that is associated with the 2032 patent, et cetera, just to give us a flavor for how should we think about any, let's say, threats from similar products?

[Guido Oelkers, CEO & President]

Yes. Maybe we start with the question on primary and secondary HLH. Obviously, the -- there's a majority of patients which is secondary. And I don't think we are providing guidance on the disease. I mean, you -- I mean, please feel free, but there will be -- I mean, there will be, obviously, utility of the product based on the patients that have been recruited in the current trials in both parts of HLH, and we don't want also to have any comments on the later discussion on anything. But we think that the product has utility for both, but you know this trial -- it is now developed for primary and then we will find out. I think there, we might take a step back. But in total, there -- it's 5,000 patients that can benefit from the product. So it's quite a significant, actually, number of patients. And yes, granted the effect of secondary HLH will come later at this stage. To be honest, this is -- we will provide guidance on this at a later point of time. And I hope you understand that particular as we are currently in the midst of various discussions and I don't want to speculate. And then the second part of your question -- sorry, Peter, can you just remind me what the second part was?

[Peter Sehested, Research Analyst]

Yes, it was regarding the Alkaptonuria indication for Orfadin...

[Guido Oelkers, CEO & President]

To be honest, this is something that we did to justify basically utilization of the product in this indication because we felt it's important. It was a request that was made to us. And we did this in the interest of patients and physicians. It is not materially affecting by any stretch our P&L, unfortunately. So it is a service indication that we did because we were -- we were asked by the medical community and by patients to get this on label. Sorry, and there was a third question -- or maybe I missed this?

[Peter Sehested, Research Analyst]

No, it was actually relating to Kineret exclusivity. How much is actually protected, not protected right now by existing patents? And yes, just to get a flavor for how that product is sort of protected for -- against biosimilars, generics, et cetera?

[Guido Oelkers, CEO & President]

I mean, from what we understand, there is -- we are developing the product and we are not aware of competition for now.

[Peter Sehested, Research Analyst]

Okay. Just one -- I might like to throw in a final question on the question that I've got a lot this morning and that's sort of relating to how costs might develop going forward. And it appears to be quite a large uncertainty questions, how will the Sobi cost base grow from here. Could you give us some flavor on that? And what we see -- we hear, the SEK 200 million, are they one-off for the quarter or sort of for the year? Will they be replaced by something else? How much more cost will there be for emapalumab, et cetera, et cetera? And also, the commercial infrastructure and what might the additional acquisitions of the emapalumab assets implied for the cost base? So sort of a flavor on the cost base and so forth.

[Guido Oelkers, CEO & President]

Yes. I mean, we have -- I mean, obviously the opportunity for emapalumab is very significant. Now there is a onetime cost element in the cost right now included, but there is -- it's possible a significant part is ongoing cost. Because now we bought the product, and that now means it's our duty to develop it and make it a big success in the market in the interest of our shareholders. But clearly, in the interest of patients, given this very high unmet medical need in both parts of HLH. So we will provide guidance on 2019 and in line with our per usual schedule, and then we will give you a detailed guidance on what we want to spend and what our forecasts for the year is for 2019. We would not necessarily, at this point of time, endeavor to do this because the -- first of all, we think we want to conclude on how many indications we can develop and we want to get a sense for -- obviously, for the earnings of the company. But we feel quite bullish about this product and it is a beautiful opportunity for Sobi, and it ticks so many boxes of our strategic fit. It's late stage. And you get to launch now in the U.S. soon here. So I think -- I hope that analysts and investors would want us to spend money on emapalumab because it's a -- it will be a very good investment to the future.

[Operator]

Thank you very much. I'll hand the conference back to the speakers for closing comments.

[Guido Oelkers, CEO & President]

Yes. Thank you so much. I hope we could clarify the accounting of our guidance for the year. I hope we could also clarify that we actually have made substantial progress also in Q3 in Haemophilia. And I hope we could share with you, at least, a little bit that we made quite substantial progress. And when I look at my colleagues here and what we felt this 45% top line growth and over 70% earnings growth, actually, we didn't feel so bad. And with all due respect, so I hope -- and thank you for your interest and for the very good questions and please stay tuned. Appreciate it. Thank you so much, and have a great day.