Swedish Orphan Biovitrum AB (publ)

STO:SOBI

Earnings Call Transcript 2017-Q4

[Operator]

Ladies and gentlemen, welcome to the presentation of the Q4 results of Sobi. I will now hand over to CEO, Guido Oelkers; and CFO, Mats-Olof Wallin. Please go ahead.

[Guido Oelkers, President & CEO]

Yes. Hi -- hi, everybody. This is Guido Oelkers, and just to break into -- let's say, who is here on the call, obviously, Mats-Olof Wallin, our CFO; also our Chief Medical Officer, Milan Zdravkovic, and Phil Wood, Head of Haemophilia. So if you have more detailed questions at the end of the presentation, we would be very happy to take this. It's really my pleasure to introduce you the results of 2017. And maybe what we could do is, go really right into the deck, so we go straight into Page 3. When you look at the, let's say, a quick snapshot, what have we achieved during 2017, and for me, this is the great opportunity to present what we think are pretty stellar results. We had a fantastic sales growth, so excluding the onetime credits in 2016, company has grown 45%. And basically, when you look at the Haemophilia business, the product business, we have a sixfold increase. So very strong underpinnings of the business. But we have not only done, I think, a great operational job. We have also complemented our portfolio by the new extended partnership we created with Bioverativ, giving us access to the new Fc fusion XTEN molecules in factor VIII and factor IX. And with this basically creating a long-term pathway for the group to also be at the edge of haemophilia treatment in the years to come.When you look at some of the endpoints, we have shown in a recent trial, let's say that Elocta has very beneficial effects on joint health, the publication by Professor Oldenburg in Bonn, and we are very gratified because these data has not only demonstrated fantastic results in patients from on-demand move to prophylactic treatment, but also some prophylactic treatment with other EHLs to Elocta, giving ways to believe that Elocta with the Fc fusion technology has more to offer than just extended half-life.We have also been able to get a new dosing regimen for Alprolix, let's say, with 2 weeks and longer and allowing us to provide patients more choice in the individualized treatment.And what is also very reassuring is that we now brought into the real-world evidence that we are collecting comprehensively for our molecules in haemophilia. We've got ASURE off the block -- out of the woodwork and basically, are now recruiting patients obviously, and have also for our ReITIrate trial. So for patients with inhibitors and who failed on previous ITI treatment, we have got it off the ground and have now quite a few patients already enrolled in the trial.And Bioverativ has done the same for, let's say, is also now recruiting for their inhibitor trial, [ Bioverativ ] -- in the naive patients to the ITI treatment.When you think about the -- let's say, what is also obviously key is not only having access to the XTEN molecule, but we have also now first patient enter the trials in Phase I now commencing. It's a very important milestone for the company that we were able to move this project from preclinical into clinical. And obviously, now when you think about it, Elocta might not have launched everywhere, has obviously made significant stride to further internationalize -- to being internationalized. On the Specialty Care side, this is something that we have set up, let's say, obviously, in Q2. You remember that we basically -- one of the first decisions was not to sell the partnering business because I think, we thought it was just too good and this has proven to be the right decision. You look at the growth of our more specialized molecule in Specialty Care, the Kineret, the anti-IL-1 and Orfadin. Both products have shown double-digit growth and particularly, the Orfadin performance is very gratifying, considering that we have lost patent in one of the other country. But we have been able to overcompensate this impact with the help of new formulations, but also with the help, obviously, of a very customized patient-oriented commercialization approach.With regard to Orfadin, I mean, we have got the product all approved, and the new formulations approved in a couple of countries, in Saudi Arabia and Canada. And for Kineret, I think it's fair to mention that we also got approval in NOMID in Canada, [ whereas ] we kicked off the studies in gout and Still's for Kineret. Very important indications for the product that will be particularly important in the mid-term, where we commercialize this product and bring it to an additional group of patients.And which has also given [ raise ] to our belief in our R&D strategy is that we were able to move a preclinical project into clinical and this is SOBI003 and MPS IIIA. We can talk more about this later. So basically, when you talk about the events in the reporting period, we talked about SOBI003. I think this is a fantastic achievement for the company, but also, that we have been able to be accepted by the Irish board to be the extended treatment now in haemophilia A and B on an exclusive basis for extended half-life for us, and this is a phenomenal achievement and the -- it gives you an, let's say, an impression of what can be done with these products in the right setting.So on that note, I'll go straight to the financials. I mentioned the 45% on, let's say, so very positive also for Q4. Gross margin obviously substantially increased to 71% coming from 67%. And very strong earning increase, let's say, more than -- let's say, 195% and this coupled with strong cash flow, and I'm sure you will see later in the section that Mats-Olof will present that we were able to pay big debt and increase our cash position. Very positive from a financial standing perspective. And with regard to the financial highlights, I mean, as I mentioned, it was [ 6.50 ] achieved. That's -- clearly, we were beating quite a few forecasts that have been around -- related to our company. 25% absolute growth, organic growth taking away the onetime credits 45%. Gross margin on a full year basis, 72% and let's say, with over SEK 2 billion EBITA -- SEK 2.053 billion. And that's a 33% increase. On an absolute basis, obviously, substantially more if you take away onetime credit, and we're able to find cash increase.So when you look at the -- as a company, now where do we stand today. I mean, it's obvious that we are primarily present in Europe. That's clearly where we come from, where we end up, where the company is emanating from. This is our stronghold position with our 2 -- where we have the 2 divisions, but North America, obviously for us, quite important. And it's clearly an area that we feel very strong about and that we want to expand as we have previously alluded too. And I think the funds -- our sales in other markets, I mean, in MENAR we start becoming a factor and also, we -- the recent successes in Saudi Arabia in Haemophilia, I think it's right to believe that these positions will expand. But let's say -- [ I would say ] over a year when we build portfolio or maybe there's also an opportunity to further internationalize the company, but at this stage, we are very centric on Europe and North America.When you look at the commercial results, I think for us obviously, I mentioned the kind of growth momentum is, I mean, we are obviously very excited about [ the sales itself ]. Needless to say, but not just by the absolute number, when you look at it on a quarterly basis, you see a substantial increase in the uplift again in Q4, which is very gratifying that basically, we picked up the speed and that our commercial effectiveness efforts and our efforts within the organization that focuses on execution appear to show results. And this coupled with very strong molecules, obviously is propelling growth here. But it's also very positive to see that our colleagues from Bioverativ have done a spectacular job, hence the very significant evolution of royalties, particularly when you take away the onetime credit that we had last year. That's all. That's basically -- they have to take away this and you see obviously, very substantial growth in America, even though they are in the commercialization around 2 years ahead of us, given the reimbursement situation of the product. So when you look at Elocta, which is our flagship, I mean, you'll see, obviously, a very nice uplift of the product and the growth is driven by -- across all countries, but given the patient number and let's say, the commercial success, primarily driven by France and Germany to a certain degree. And very happy to see, now, that we further internationalized products so for us, as we have outlined during previous events, we see a couple of vectors of growth and let's say, for us, and one of them is, obviously, further internationalization and further penetration and let's say, and building then upon some other factors, where -- which we can talk about later. So when you talk about the landmark commercialization of Elocta, you see that we had a fast launch sequence. We were beating benchmarks [indiscernible] for our regulatory, but also, in the -- particularly, in the reimbursement area. That's clearly demonstrating that the company is very proficient when it comes to patient access and payer negotiations. We had very good results with a couple of tenders, for instance, in Ireland, in Saudi Arabia, but also, in the U.K. We have now leading positions, let's say, for instance, in France, in Ireland or in Switzerland. And we have been recognized by a couple of payers that this is a very cost-effective treatment. We think that the effectiveness of the molecule could be leveraged more in the interest of the patient in order to increase further trough levels and protection levels, but there is this opportunity to individualize this and obviously, there has been quite a bit of evidence generation as I pointed out with regard to inhibitors or ITI treatment.So also, for Alprolix, we see a very similar evolution now like Elocta, very strong uplift during Q4. That's very positive because it's a little bit behind the launch sequence given the negotiations with payers. So now launched in 14 countries, but more countries to come, and we'll keep you up to date in this regard. But when you think about, look about -- let's look at this uptake, obviously, very substantial increase in Q4. And the product, we believe, is one of those that actually, when you look at this profile with 2 -- with half-life of obviously, with an application of more than 4 weeks -- more than 2 weeks, excuse me. And with its -- with its profile that we talk later about it, I think it's one of this very strong forward positions for the company.So what we have done? Our strategic imperatives, we have corrected -- collected quite a bit of real-world evidence which clearly demonstrates our safety profile and efficacy profile to provide individual choices. We have shown very favorable bleed rates where the products are individualized in prophylactic treatment, but it can also be used, obviously, in on-demand and when you need it most in surgery or in other serious conditions. We have been able to demonstrate -- to eliminate inhibitors. Let's say, this is in the case, now we have got very encouraging results from case records and 19 of those were published at the latest ISTH meeting. That encouraged us to go now into a clinical trial environment. Hence, the ITI program with Bioverativ. We are driving obviously the joint health agenda because we feel it's important not only to focus on bleeds but also on subclinical bleeds that affect joints and here, we have very strong data, as I've outlined earlier. We feel that this gives us, for the years to come, a very strong position. And on the next slide we wanted to show you why is the market for Alprolix is obviously smaller, given the incidence of haemophilia B versus haemophilia A. This is a very strong proposition with the Fc fusion technology and a very strong extended half-life, but I think it's also more, let's say, important to say that Alprolix has benefits that go beyond trough levels. And I think this is one of our challenges in the past -- in the weeks and months ahead to make sure that this is more widely recognized and explained, why this product has much [ favorable lease rate ] versus competition.On the next slide, now we come maybe to the Specialty Care positions. I mean, for us, Specialty Care is really built on 3 strengths: we provide what we believe a world-class commercialization platform. These services or this capacity we have not only in Europe, but also in North America. If you look at the track record that we have been able to achieve with the transformation of Kineret in both parts of the Atlantic, with the commercialization buildup for Orfadin and all this in conjunction with our R&D capabilities also to prolong life cycle to do indication expansion, we feel that we have demonstrated here quite a bit. We are very excited also with successes that we have been able to achieving on the partnering side of the business. I talked about the life cycle indication expansion. We gave some examples at a earlier stage with regard to Kineret and Orfadin. And here we have a 2-partnering approach. We feel that this platform in Europe makes us an interesting partner, particularly for U.S. companies who might not want to afford or cannot afford commercialization in Europe. Equally speaking, we also have figured that our platform in U.S. is quite attractive for European biotech companies who are considering on how to unlock their -- in United States and cannot afford to fail for such.So when you basically look at the business in Specialty Care, I think it was a fantastic year as well. I mentioned double-digit growth of the 2 lead compounds, Kineret and Orfadin. But let's say when you look at the total business and you take away the loss of Cometriq, where actually the business has increased by 9% and that shows -- let's say, this business has actually a very strong organic growth profile. And it's clearly an asset of the group. And you want this across the board, and we have very exciting products in the stable like, for instance, [indiscernible] that is very meaningful product [ from endo ] in United States, and we have the rights to our territory in Europe.When we go to Orfadin, here you can see that we have been able to launch new formulations, 30 milligram oral suspension and got approval for once a day, which is a fantastic achievement for our organization and has pretty strong performance across the entire EMENAR region and very substantial growth, obviously, picked up the pace a little bit in Q4, but had a very strong year overall, this 12%.When we go to the next product, Kineret. This is even more stellar growth, given that this product has been repositioned for growth for quite a while and it's now stable. We are excited about the opportunities related to this anti-IL-1 that was far beyond where it is currently utilized. And this understanding and when you look at the literature how many times now Kineret has been quoted or referenced, you can see over the last 5 years, an exponential rise in publications, which gives you an impression why this product is really at the heart of many physicians and why there's so much interest, but also why there's such a strong underlying growth related to the product.So when you go to the next slide, you will see the molecule connecting to IL-1 and basically, just to take away gout and Still's are very substantial indications. We are -- we basically figured that there's a very significant opportunity there. For gout, we have a Phase II. The trial is ongoing. In Still's, we are already in Phase III. We think that this will propel the couple of product further. We need to be obviously recognizing the regulatory timelines because this is not something for this year, at least, not in United States, but it's clearly a very important driver for our mid-term growth. And last but not least, we come to the -- from a commercial perspective to ReFacto business. ReFacto has been an important generator of earnings for the company historically, and it's a very stable business. Doesn't look so stable when you look at this -- the chart, but this has nothing to do with the sellout from Pfizer. Let's say, when you look at the Pfizer report you can see the end markets development. We are not privileged to comment more on this. But what we understand is that this product is in a pretty stable condition. Our revenues are more related to inventory adjustment at the level of Pfizer than to the demand that has been created in the market. Also, basically, we come to a pipeline and basically, here, we just wanted to outline the following that the 2 studies in gout and Still's, SOBI003, one more time, very -- one of those rare diseases that is completely underserved with high unmet medical needs and the preclinical results, let's say, make us believe that this product is significantly different than preceding product in this product group that might not have achieved all endpoints. We are very excited about it. We filed an IND, got approval for it, and during the later part of this year, we go -- we will have first patient in and it's a tangible proof of our ability to bring products soon to clinical development and then eventually to markets.So from an overall standpoint, we are, as a management team, obviously extremely happy with the operational results. But I think that's not a story only of operational results, but it's a story also of moving important strategic endpoint, building the pipeline, securing XTEN growth. Very, very important, now demonstrates that we can probably bring products into clinical development from preclinical, also, an important endpoint. Overall, I feel was a pretty good year that makes us optimistic for the future.On this note, I would like now to hand over to Mats-Olof Wallin, who will bring our financial results more light.

[Mats-Olof Wallin]

Thank you, Guido. As you have heard from Guido Oelkers, the revenues in Q4 came in at an all-time high of SEK 1,875,000,000, which is 45% higher than the same period last year and for the full year 2017, the revenues came in north of SEK 6.5 billion and number to number, we have a 25% increase. But also, we have to consider that 2016 full year was impacted by 2 onetime credits of SEK 708 million. And there were a noncash flow impact. And this regarding those 2 revenues for the full year increased 45%, 2016 to 2017. Gross margin for the quarter came in at 71% versus 67% last year same period. And that is due to the improved product mix that we have had -- seen continuously throughout the year. And for the full year, gross margin came in at 72%.EBITA for the quarter came in at SEK 619 million, which is also an all-time high for the quarter for Sobi. And EBITA for the full year came in at SEK 2,053,000,000 versus SEK 1,543,000,000 last year. However, that should also be taken into consideration that SEK 708 million in onetime credit. And that goes also on the EBITA line. So in reality, EBITA increased by SEK 335 million to SEK 2,053,000,000, an increase of 146%.Also, the EBITA of SEK 2,053,000,000 and also the top line of SEK 6.5 billion is higher than the latest outlook that was given after the Q3 report. After the Q3 report, the outlook was SEK 6.3 billion to SEK 6.4 billion and the revenues came in at SEK 6.5 billion. Guidance on the gross margin was around 70% and the year-end numbers came in at 72% and EBITA guidance was SEK 1.9 billion to SEK 2 billion. And the actual result was SEK 2,053,000,000. Net profit for the period was SEK 357 million and net profit for the full year was SEK 1,149,000,000 versus SEK 802 million last year. Last year, you should also consider the SEK 708 million in onetime credit. In reality, net profit has increased from SEK 94 billion to SEK 1,149,000,000. Turning now over to the balance sheet. The balance sheet has been strengthened during the year. There is a positive operating cash flow of more than SEK 1.3 billion during the year.This means also that the long-term debt has been paid back. So the company is now debt-free and has a cash and cash equivalents of close to SEK 1.5 billion at the end of December 2017. Inventories and accounts receivable have increased due to the businesses growing and intangible assets have been reduced to [ bear ] the amortization.Equity has also increased from SEK 5 billion -- close to SEK 5.4 billion end of December 2016 to SEK 6.7 billion end of December 2017. By that, I hand over to our CEO, Guido Oelkers.

[Guido Oelkers, President & CEO]

Thank you. Thank you, Mats -- Mats-Olof. So now we come to the outlook. So what do we expect for 2018? And as you know, we are traditionally a company that is more focusing on delivery than [ go big ] on aspirational projections. So what we basically see is a strong uplift of sales between -- to SEK 7.5 billion to SEK 7.7 billion. The half year range reflecting that there are one of the other uncertainties related to the business, we feel very strong about our Haemophilia performance. But obviously, we have to recognize, let's say, the situation with Orfadin and maybe the one or the other uncertainty regarding, also, manufacturing royalties income. So gross margin clearly should be at least 70%. And on the earnings side, we feel very strong about achieving between SEK 2.5 billion to SEK 2.7 billion, which would be up to more than 31% of increase. And that's -- let's say, we feel very strong about this. And this is a reflection of top line growth and our effective programs. When you think about our strategic positioning, I mean, don't want to dwell too much into this, we have -- I think we have made very substantial inroads into Haemophilia. Something that is not very trivial to achieve, considering that we were a rather small player not a long time ago. So I think we earned our respect. As recent surveys also show, we are driving obviously enough commercial effectiveness. We have built a pretty formidable Specialty Care business that we want to expand further. And we are going to make great strides in terms of late-stage pipeline. We have not yet made a substantial move with regard to our North American presence. And basically, when you look at this, I'll say, from a future direction perspective, we want to further internationalize our business, and this will basically be a function primarily of our launches of Haemophilia in more countries, particular, of Alprolix, but also there's still some room to capture and obviously, we got Elocta. We want to build further our Specialty Care position, and be eligible as a preferred partner, particularly for U.S. biotech companies; strengthen our commercial position in both part of the Atlantic as you know and build obviously our pipeline. So really emerging from becoming a pioneer in rare diseases to somebody who is aspirationally becoming a leader. I think, on this note, I want to now hand over the floor for questions. If there are any, would love to provide more color.

[Operator]

[Operator Instructions] And our first question comes from Eun Yang from Jefferies.

[Kyung Yang, MD & Senior Equity Research Analyst]

So I understand the guidance, that you want to provide a conservative guidance so that you can meet or exceed. But based on your revenue guidance, it's like no growth or like a low single-digit growth from fourth quarter run rate. So aside from Haemophilia, is there any area that you think that could provide difference in performance from 2017 to 2018? And the second question is on the U.S. business. What percent of 2000 -- I would say, 4Q revenue, was it from the U.S.? And given the growth in Kineret and Orfadin in North America, what do you expect the U.S. growth would be in 2018?

[Guido Oelkers, President & CEO]

Yes. So I mean, thanks, Eun, for -- obviously, as you alluded to, we are in the business of delivering. So hence, we provide a forecast that we can attach a high probability of success to. I mean, you want anything else, I think would not be reasonable that the tradition of the company, we have no interest to change this. So when you look at the different vectors for growth, let's say, why we are where we are, I mean, there is -- you have seen the acceleration of growth in Haemophilia in Q4, very encouraging. And we think that we -- let's say, that we have a strong role here to play also in 2018, no doubt. With regard to other part of the business, I think where you see an effect, you could, let's -- we don't know there's uncertainty when you are in a, let's say, in a patent expiry situation is offered in, you don't know how this effectively will impact your business. We are able -- as you've seen in Q4, to have a good shot at this and have been able to drive growth and this shows our connection, and we're clearly committed to the product as we go along. But it's very -- to predict that this continues growing double digit is more difficult. And let's say, when you then look at the manufacturing business, where we are really in the hands of our partner, which we cannot influence, and basically, we don't have material insight that make us now believe this is -- the world is coming to an end. But we have to be -- we have to recognize that we're dealing here with uncertainty. And this uncertainty is reflected in our, let's say, in our forecast, while as we continue strong growth for Kineret, but also -- and obviously, with our Haemophilia business. Now, let's say, when you look at the growth of the U.S. business, well, also, in one of your questions, there -- this, we typically don't comment on. We don't show, let's say, revenue by product, by company. But it is, let's say, in our scenarios, we see that the Kineret growth is, let's say, is contributed across the 2 regions of the Atlantic, meaning the U.S. and Europe, obviously.

[Operator]

Our next question comes from Peter Östling from Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

I acknowledge that you have a history of providing very cautious guidance. But I think that this year, you're probably taking it to a higher level. So I'm just wondering what is the logic and reasoning behind the current guidance if you don't clearly see the market differently than for instance, your partner, Bioverativ? And then, second question just if you could talk a little bit about how many of the patients on Orfadin have actually been switched to [indiscernible] with 20 milligrams and the oral solution formulations?

[Guido Oelkers, President & CEO]

Yes, I mean, we can talk about the -- let's -- why don't we talk about Haemophilia. When you basically see the data point Q4, you basically look at it, we feel very encouraged. I mean, for Haemophilia, let's say, when you're -- and I'm sure you have done this, you modeled the growth uptake, take away the, let's say, adjust for positive price difference. You basically will find us, that we don't have to hide behind the Bioverativ forecast. [indiscernible] Bioverativ performance just adjusting for the later time that we came into the market. So we have no data point that would make us now, based on what we know and what we -- or how we perform, that makes us believe that we should be, let's say, we should be more conservative. I mean, we have to recognize, obviously, that there will be new competitors entering the market. The thing is everybody knows, but we're also convinced that we have a very strong proposition with our products based on, let's say, the data, based on the indication we got, indicated for across all age groups, on our very clean safety profile. And then on the additional effect that we have just alluded to, that's in joint health, but also, the neurological effects that's manifesting itself in the case records in ITI patients. So overall, [ we feel ] good. But it's also good to recognize that other companies are also -- have something to offer. I mean the -- and these are pretty formidable companies. So therefore, we don't go ahead of ourselves. And with regard to Orfadin, let's say, we have the give and take now, let's say, depending on the countries between 30% to 40% of our business, let's say, on the new formulations.

[Operator]

Our next question comes from Erik Hultgård from Carnegie.

[Erik Hultgård, Research Analyst]

A couple of questions, if I may. First, on market share, if you can provide the market share update on your top 5 countries for Elocta? And secondly, could you remind us of the price gap per unit on average between the U.S. and Europe? And finally, how close are you to deliver on your strategy or strategic priorities to expand into North America and establishing a late-stage pipeline?

[Guido Oelkers, President & CEO]

Yes. Maybe -- I mean, Erik, maybe, I'll just start and then I hand over to Phil. But normally, I think, we have not provided if I'm not mistaken market shares by market, let's say, and maybe I can -- because we have talked about it that, let's say, more ranges. Let's say, that and there's a broad range of that probably rank from -- let's say, 20 -- from 20 -- above 25 to lower than 10. That basically gives you a little bit of a range, and -- but it also gives you an indication that we are -- we feel quite strong that we can still grow taking away now obviously, Ireland, where it's actually simply 100 here. Let's say, but -- so we are -- we think that substantial growth still, let's say, the price difference, Phil, you want to comment on this between the U.S. because it's been difficult given the nominal price and the effective net price, and that in the U.S. you have different reimbursement system. So we probably cannot ascertain to really have, let's say, I mean, and this is our privileged information that Bioverativ do not share with us. So at most we can provide, maybe a dimensional perspective, as EBITA mentioned.

[Philip Wood, Head of Haemophilia]

Yes. Erik, I'm Phil Wood here from the Haemophilia business. So we -- as I'm sure you're aware that the pricing rate environment in Europe is much more restrictive than it is in the U.S. And as such, we -- what we aim to do is to offer competitive pricing that often reflects the premium that we believe that the product value brings to the people in the communities and people with haemophilia. So we have a very competitive approach to pricing, but it is where we see value that we can drive into the business.

[Erik Hultgård, Research Analyst]

Yes. Is it possible to be a little bit more specific on the price cap without providing any exact numbers?

[Guido Oelkers, President & CEO]

No. I think it's probably not up to us to speculate here and I see, Phil, because these are privileged information from Bioverativ, and they -- and we cannot even watch for the accuracy of the data. So I think it's not accepted, is not good. But in terms of -- when you just adjust for volume, yes? Volume is basically where we have a pretty good idea that we are following their performance.

[Erik Hultgård, Research Analyst]

Okay. And on the expansion into North American [indiscernible] late-stage pipe?

[Guido Oelkers, President & CEO]

Yes. I mean, we have, let's say, we have screened, let's say, the market very substantially. So we have -- and we are currently pursuing a couple of projects. It's early days because, as you know, it's still binary. You either get it or you don't. So cannot really speculate about the future, but we are working on a couple of projects now to address this and hopefully can inform you when we have first [ scored ], let's say, but until then it's purely speculative here.

[Operator]

[Operator Instructions] And our next question comes from the line of Peter Sehested from Handelsbanken.

[Peter Sehested, Research Analyst]

It's Peter from Handelsbanken. I would like to follow-up. To start with -- on Erik's question regarding the strategic. I mean, when you talk about the strategic things, the conversation always gets a bit high level and very, very muddy, but -- so to get to the [ nitty gritty stuff ], in the U.S. what exactly is it that you want to achieve in terms of, I mean, sales force present, it's -- so let's say what is your medium-term view? You could just check the type of current base that you have in the U.S. right now. Could you elaborate a little bit on what kind of presence you have there in terms of sales reps, in terms of whether what you want to do there? Is adding something that would expand your overall presence, your commercial presence in terms of the market or whether it's something you just add a pipeline product or a [ database-based product ] or product on the market that you could leverage with your current infrastructure to get some more feelings for your thoughts on this issue. And then I have a couple follow-ups when you finish with that.

[Guido Oelkers, President & CEO]

Yes. Thanks, Peter. I mean, unfortunately, I mean, you know we probably cannot provide, let's say, with a detailed overview of our commercialization structure at this juncture. I mean, what I can tell you is that we have an adequate representation, let's say, in the U.S., which is in line with our -- with the needs of rare diseases. And then you have an anti-IL-1 with indication that you have, let's say, the good news is you don't need hundreds of reps, let's say, to cover this and hence, our structure is accordingly, it's competitive in these areas where we are in. But it is not with the -- it doesn't extend beyond. Let's say, now, what are we looking for? We will look for both, let's say, obviously to -- let's say, late stage, but also bolt-ons. Let's say, and we'll see what we can in the end get. I mean, it's a marketplace, you might get something or you don't. I mean, you will find out. But ideally, obviously, we find something where we can leverage the people that we have because that would allow us to be more competitive and build on the strength. So I'm afraid that, let's say, at this stage, I cannot be more specific, but once we have got something going, we're happy to provide you with more details on this end.

[Peter Sehested, Research Analyst]

Okay. And my follow-up question would be, I think, regarding your exclusive contract in Ireland. Here you will not talk about the price, but could you provide some flavor on the potential to penetrate further similar deals like that in the Ireland? Or is this just a special case given the size of the country? And my second question relates to, I guess, it's all -- [ it is why ] with your strategic potential question. I mean, it's sort of -- the potential for returning cash to shareholders, I guess, with your strategic thoughts we should forget all about cash distribution to shareholders in the near term. Is that correct?

[Guido Oelkers, President & CEO]

Yes. Excellent, I appreciate it. Thanks, Peter. So with regard to the Irish situation, let's say, this is -- we cannot and obviously won't comment on any prices, let's say. I think one of these very unique scenarios, where you have payers, patients, associations and also physicians collaborating extremely well and assessing products on their own merits. And then making choices, which are in the interest of patients. Let's say, we don't -- I mean, we don't expect that this becomes now the prevailing model in all countries, but clearly, we see obviously, a merit to make sure that the patient has a voice and we can only comment the Irish patient organization how they have been able to assert themselves and making sure that the patient voice is heard. Phil, you want to comment on this?

[Philip Wood, Head of Haemophilia]

Well, thank you. Just to say I think that's exactly the point here because whilst we don't expect to see this procurement process replicated, let's say, in many places as intended, what we do see increasingly is patients having their voice heard in reimbursement decisions. And I think you'll see many situations going forward particularly in Haemophilia as the patient organizations gather pace and momentum. I think it's interesting to see that in France, we recently had Alprolix pricing approved and it's currently the only approved extended half-life factor IX treatment even though we've been reviewing others as well.

[Guido Oelkers, President & CEO]

Yes. So then basically -- Peter, and I think there was another question, let's say, which was regarding -- sorry, the...

[Peter Sehested, Research Analyst]

Yes. It was regarding use of cash distribution to shareholders. A view of your...

[Guido Oelkers, President & CEO]

Yes. No, I mean, when you -- when you give a forecast of up to more than 30% EBITA growth, we think, let's say that this actually suggest that there is a still a great future in this company, and we hope that shareholders agree with us and that we can make efficient use of their funds, let's say, in the interest of the business and continuing investing into this business because when you look at the vectors of growth for haemophilia, we still have a lot of ground to cover from a penetration, let's say, but also, from a internationalization perspective, recognizing obviously that -- obviously, the competitive landscape is going to change. We are fully aware of this, and let's say, you don't and that -- this will have one or the other impact, but we are convinced that we have a strong offering.

[Operator]

We have a follow-up question from the line of Peter Östling from Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. Two quick ones. On your comments on the potential price gap between Europe and U.S.A., acknowledged your replies there. But I think that you sometime in the past have said that the commercial value for your market are similar to the ones that by relative control, mainly due to -- even if there's a pricing difference, there is, for instance, I guess, the use of prophylactic is more common in Europe. So it maybe even sounds a little bit. That's my first question, if you could just reiterate if that's the case still? And then also, if you could comment a little bit around the extended half-life more related to haemophilia B because some of your competitors in that space or several ones have said that they are market leaders. So if you could put some flavor to the dynamics into the haemophilia B market?

[Guido Oelkers, President & CEO]

Yes, absolutely. So maybe with regard to the U.S., I mean, clearly, as long as I'm here, I've never commented on the U.S. versus Europe, let's say, and the equal potential. The only thing I said is that there have been analyst reports out there when I started suggesting that -- and they have recognized the price difference, let's say, as I saw at the time that suggested a higher safe line for the U.S., versus -- let's say, versus Europe. But we are also recognizing now, we are at the beginning of our penetration. So I mean, I cannot say more. I don't think -- I mean, I don't think we have really commented on price differences, at least not since I'm there, and therefore, I would want to refrain from this. With regard to the second part, it's a bit like this phenomenon when you ask 10 country managers, are you going to grow above market? 8 will tell you, yes, which is mathematically obviously difficult, yes? So -- and, let's say -- and you know what obviously, many people want to feel like leaders. I think, we can safely say that we have more room to cover because I think we have to explain, let's say, still I think, the stronger into the community that you have actually superior protection with Alprolix. And then I hope -- and it's obviously difficult to ascertain some of these comments, we have got X percent of switches because there's no real database that in an [ object profession ] can support either of those and then you have to basically try to extrapolate from data that our -- they were in a certain, let's say, confined space. I mean, we don't make a secret out of this that we are not yet satisfied with our performance. But I think it's also good, sometimes you have an area that you can improve. And clearly, given the product profile, given what the product has achieved in United States, we are encouraged to improve.

[Peter Östling, Life Science Analyst of Equity Research]

And just a follow-up on the market. It was not the price difference I was after, but could you verify my notion or comment on my notion that prophylactic use of factor-based products is more common in Europe than in the U.S.?

[Guido Oelkers, President & CEO]

Phil.

[Philip Wood, Head of Haemophilia]

Yes. Yes, that is the case, and that's prophylaxis tends to be more widely used across the European regions because of the way that the products are reimbursed. So in U.S. there is a higher degree of on-demand therapy due to the insurance system.

[Operator]

We have a follow-up question from the line of Eun Yang from Jefferies.

[Kyung Yang, MD & Senior Equity Research Analyst]

So obviously Elocta and Alprolix have been in the [ EU ] market more than a year. Are you seeing some price adjustment in certain countries, including Germany?

[Guido Oelkers, President & CEO]

No. No, we don't. We basically, we have obviously, when you have the customer renegotiations with accounts, that's an ongoing process. But -- and sometimes, this can go different ways. But you have not seen, let's say, an adjustment as an enforced measure, let's say, to our price situation. And let's say, at this stage, we are still encouraged by the fact that people recognize the superior profile of Elocta and Alprolix and what it can do to patients.

[Kyung Yang, MD & Senior Equity Research Analyst]

Okay. And then a quick follow on the pipeline. So you have provided some color on MPS IIIA enzyme replacement therapy. But how about 005, the Fc body for C5? As well as [ IL-1 Fc body ] programs?

[Guido Oelkers, President & CEO]

Maybe Milan can give you some color, Eun.

[Milan Zdravkovic, Head of R&D and Chief Medical Officer]

Eun, it's Milan Zdravkovic, Head of R&D. So regarding 005, this is our C5-blocking agent, and we've got -- we are currently conducting preclinical experiments to figure out how we could potentially differentiate this in this space. So this is an early preclinical project, with adding 006 which essentially has the same pharmacological profile as anakinra source and IL-1 alpha and beta blocker, this is currently in the CMC development.

[Operator]

We have a follow-up question from Peter Sehested from Handelsbanken.

[Peter Sehested, Research Analyst]

So starting off with a couple of highly exciting housekeeping questions, such as tax rates and CapEx for 2018, and then I have a follow-up question.

[Guido Oelkers, President & CEO]

Excellent. Thanks, Peter. Maybe Mats-Olof can provide.

[Mats-Olof Wallin]

Tax rate, it is currently 25% for the year 2017. The actual tax rate is about 22% due to the [indiscernible] Can you hear me? Peter?

[Peter Sehested, Research Analyst]

Background noise. Yes. There is some background noise where I am here. So just go ahead.

[Mats-Olof Wallin]

The actual tax rate is around 22%. However, due to the newer tax reform in U.S., we had to take a hit of around 3 percentages also on the tax rate for 2017, of a onetime nature. But around 22% is the actual tax rate. Regarding CapEx, what was your real question. Need for CapEx in 2018, was that your question? Sorry?

[Peter Sehested, Research Analyst]

That is correct. Yes.

[Mats-Olof Wallin]

We don't see any extraordinary need for CapEx to run the normal business in 2018 compared to 2017. No, the answer is no. No additional beyond 2017. Same rate.

[Peter Sehested, Research Analyst]

Okay. And so perhaps just a final question on tendering in Europe, [ it hurts ]. There are some reviews out there in the public domain, you can see there are subs in so many countries, particularly, in southern Europe where you only have access to the market if you were engaged in tendering. Could you just elaborate a bit on perspectives in terms of access for your products in countries with and countries without tendering and what is your strategy in that respect?

[Guido Oelkers, President & CEO]

Yes. I think we obviously have to adopt to the system that is prevailing, yes? And we try to provide in these tender situations [indiscernible] we tried to provide attractive prices, but we will -- we are not obviously going to levels that sometimes maybe more commoditized competitors are willing to accept. So we want to get [ some -- still some ] recognitions for superior products at the -- obviously, at the [indiscernible] with the patients because we feel that more patients should be able to benefit from Elocta. Hence, we are doing this extensive donation program. So that's really at the heart or the philosophy of the company, but we don't go down to this level. And basically, yes, quite a number of tender countries out there. We just got a price approved in the -- in Poland as well. We're thinking of how we can deal with this, but normally, our philosophy is make the product available also in our private markets on the strengths of science and on the strengths of superior product profile, and we have got a very positive recognition and [ there's a -- less ] in a nontender market what we do is we try to provide medical, the interesting propositions to physicians as everybody else tries, but we think that we have a little bit of an edge. As you've seen in our clinical trial program, we tried to generate more evidence to even more cement our safety profile and our superior features of the product. Hope it will give some flavor. Thank you, Peter.

[Operator]

Our final question comes from the line of Peter Östling from Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

I promise this is my final one. Maybe for Mats-Olof, could you comment a little bit about the operational costs in the quarter? That was a little bit high, are there any onetime items included in that goal? Should we use that run rate into 2018 also?

[Mats-Olof Wallin]

I think that's a run rate that you probably can use for 2018 as well, without give any guidance on the cost development for sale. But you have seen our guidance, so top line on gross margin, on EBITA and sort of -- and doing the math you can see its where we will land given that if you believe in our outlook for the 3.

[Peter Östling, Life Science Analyst of Equity Research]

But will that -- if you look at 2017 and the selling has been extensive, rates fluctuated quite significantly between the quarter, would we see the same kind of captain in 2018?

[Mats-Olof Wallin]

Yes. Our guess that Q3 is always a very low quarter, or the lowest quarter in terms of costs, yes. And of course, Q4 has been a high quarter in terms of cost. But also, our EBITA is also very, very high in Q4.

[Guido Oelkers, President & CEO]

I think on this note, we probably can close the conference, given the timing that everybody had. And really like to thank you for your attention and for pretty interesting dialogue. Obviously, you know how to reach out. We have Jorgen and Linda, if you have further questions. But we are happy to be at your disposal. Thank you so much. Wish everybody a great weekend. Thank you.

[Operator]

Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect your lines.