H. Lundbeck A/S (HLUNB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the H. Lundbeck Q3 2020 Conference Call. [Operator Instructions] Today, I'm pleased to present Deborah Dunsire, President and CEO; Anders Götzsche, Executive Vice President and CFO; and Johan Luthman, Executive Vice President of Research and Development. Speakers, please begin.

Thank you, operator, and thanks to all of you for your interest in Lundbeck. We welcome you to our teleconference covering our financial report for the first 9 months of 2020. As you heard, I'm joined by Anders Götzsche, our CFO; Johan Luthman, our Head of R&D; but also joining is Jacob Tolstrup, Head of Commercial Operations; and joining from Chicago in North America, Peter Anastasiou, our Head of the North American operations. On Slide 2, you see our disclaimer, and I know you've all read it, so we'll move on. Next slide. First, let me start by reiterating that I am very proud of the way Lundbeck employees have responded to the immense challenges of the COVID-19 pandemic. They continued to put patients first while embracing and delivering on our Expand and Invest to Grow strategy. Against the backdrop of constant change, we're very pleased with the development of the business, delivering revenue growth of 6% at reported rate during this first 9 months of the year. Our strategic brands continued to show good growth, both in volume and value across all regions. Several of our mature brands have shown remarkable resiliency, which can be attributed to their well-known effectiveness and very good tolerability profiles. As you know, however, the situation across the world remains fluid, with very few countries fully back to pre-pandemic normal business. And now some are reentering various levels of government-mandated restrictions. As such, the pandemic continues to affect the delivery of health care and our business in many ways. I think we can't underestimate how badly treatment is needed for patients facing mental illness during -- especially during the pandemic, we see increased stress, anxiety and depression rates across the globe. This stress is magnified by the challenges of getting access to appropriate care. One thing that was affected by access challenges was Vyepti, which launched in the U.S. during the first wave of the pandemic. Initial uptake has been slower than originally anticipated, but we are getting great feedback on the product from patients and physicians in the marketplace, and sales in the third quarter have doubled compared to the second quarter of this year. We've developed a robust financial flexibility, both through our business performance, but also the very successful issue of our first Eurobond program a few weeks back. It goes without saying that 2020 is a year with increased levels of uncertainty. But in the first 9 months, the business has delivered solid performance across all markets and costs have come down substantially given our inability to promote our products normally. While the overall trend in Q3 improved, physician-patient interactions are still significantly reduced in many areas. I'm happy to say that most of our field force is now able to make some in-person calls, but overall call volume is still well below pre-pandemic levels. Our teams continue to be creative leveraging virtual platforms to educate patients and health care providers across all aspects of our business, from conferences to product launch events to adapting clinical trial monitoring and continuing patient follow-up, albeit remotely. It's important to stress that we still expect to deliver top line revenue per the guidance we announced in February despite significant headwinds, both from the pandemic and more recently from currency depreciation. Anders will elaborate on the financials in detail, but I simply will state here that we've narrowed the guidance range for the year with just 2 months to go. Next slide, please. Our 5 strategic brands continue to perform well, delivering substantial growth, up 19% in aggregate, adding more than DKK 1 billion in sales compared to the same period last year. These products constitute 59% of Lundbeck's total sales, given healthy volume growth over the first 9 months. A testament to the value these products provide as well as the excellence in execution by our organization around the world. In the third quarter, we have seen impact from exchange rates. And of course, there is impact on the growth of new-to-brand prescriptions, given the limitations the pandemic has placed on patient interaction with health care providers as well as on our ability to conduct normal promotional activities. Next slide, please. In North America, we're very pleased with the strong growth of 19% for our strategic brands in the first 9 months. The growth of the strategic brands more than offset the decline of loss of exclusivity brands, leading to a total revenue growth of 6% for the first 9 months of 2020. We also see sound performance from several of our mature brands. But maybe I should just add that the growth seen was stable in the quarter is not a trend shift but more a sign of quarterly fluctuations. International markets, which includes China and Japan, increased 8%, reaching DKK 3.3 billion or 25% of our total revenue. This region is still in the early part of the rollout of our strategic brands which showed a growth of 18%. We expect significant long-term growth for these products in the region. Negative currency development in the third quarter impacted the reported revenue growth. Europe shows good momentum with revenue increasing 4%, driven by volume growth, and achieving DKK 2.5 billion. The strategic brands grew an impressive 17%. Next slide, please. Revenue from Brintellix/Trintellix reached DKK 2.3 billion in the first 9 months, a growth of 14% reported and 16% in local currencies. In the third quarter, we see continued flattening or even a slight reduction in total prescriptions for the major depressive disorder market, reflecting an impact of the pandemic on people seeking care or receiving care through telemedicine. In this setting, physicians are more likely to start a new patient on older generic therapies. Patients already on Trintellix/Brintellix continue with therapy and receive more tablets per prescription, which is somewhat offsetting the softness in new patient scripts. Next slide, please. Rexulti is still mainly a U.S. franchise though we've recently launched the product in Brazil and are planning additional launches through 2020 and 2021. Rexulti achieved DKK 2 billion in sales for the period, which represents an impressive growth of 24%. However, it has been slightly impacted by reduced volume growth in the atypical antipsychotic market in the wake of the pandemic. In the third quarter, the reported growth reached 4%. But in local currencies, growth was at 9%. These are strong numbers, given it's -- Rexulti's fifth year on the market. The main driver of growth is increased volume demand in the U.S. major depressive disorder market. Next slide, please. Northera grew 16%, finishing the period just below DKK 1.9 billion, and the product has been quite resilient despite the challenges of the pandemic. Next slide, please. Abilify Maintena grew by 19% to more than DKK 1.7 billion. In many markets, Abilify Maintena is the second most prescribed long-acting injectable treatment for patients with schizophrenia and indeed, in some European markets, it is the market leader. Abilify Maintena continues to hold its 18% market share. Overall, we continue to see solid growth in the long-acting injectables market, although this market has also been slightly impacted by the pandemic. Next slide, please. Vyepti has doubled in sales in the third quarter. We're very encouraged with how this product is delivering for patients. Based on patient testimonials and feedback from health care providers, Vyepti is fully delivering on its powerful, fast and sustained promise. We see a growing number of practices ordering vials. Consistent with our expectations, some 80% of the accounts purchasing Vyepti are among buy-and-bill practices. On the market access side, we have made strong progress in obtaining coverage with both regional and national plans. Over 120 million people now have access to Vyepti through plans which do not require any branded preventive therapy step-through, and we're certainly seeing sales momentum accelerating. It's very clear that the pandemic has significantly limited patient ability to receive infusion products across all categories, but this is gradually improving. Our sales force is also coming back into the field, which is vitally important for this newly launching brand. While the revenue is certainly not what it would have been without the pandemic, we remain very confident in the profile of Vyepti to deliver for patients and become a strong growth driver for Lundbeck in the future. Next slide, please. Lundbeck has a large portfolio of mature brands, some of which have been in the market for decades. You can split the portfolio into our 3 U.S. products: Onfi, Sabril and Xenazine are declining more gradually after the initial steep loss to generics post exclusivity. The larger group of mature brands have high levels of trust and brand recognition in many markets around the world, which makes this portfolio of products remarkably resilient. In fact, Cipralex/Lexapro grew at 7% in local currencies through the first 9 months. I believe this is an underappreciated franchise for Lundbeck as it remains highly profitable and cash generative. Next slide, please. In February of 2019, we announced our Expand and Invest To Grow strategy. We continue to make significant progress along all our strategic imperatives, which sets us up for long-term growth. Our top priority is, of course, to maximize the value of our brands, particularly our strategic brands. And as you've seen, they are performing well. We have expanded our operating space and therapeutic reach through acquisitions last year, and we're now in the process of building a migraine and specialty pain franchise with the launch of Vyepti. We're transforming our R&D organization to build a pipeline around high unmet medical needs in specialist neuroscience indications. We're building a winning culture, leveraging the diversity of our global workforce to drive our progress. I'm now going to hand the microphone over to Johan Luthman to comment further on our progress in R&D.

Thanks, Deborah. Please turn to Slide 13. While we continue to maximize our brands that already have, we have simultaneously focused on filling our pipeline with treatments for brain diseases for which there are few, if any, treatment options. The focus on niche diseases affecting more defined subpopulations or people that is a high unmet medical need. We're making good progress on neurology and psychiatry and specialist pain indications while we are investing to maximize Brintellix/Trintellix, Rexulti, Abilify Maintena and our new brand, Vyepti. With regards to Vyepti, we have continued with filings in Brazil and the Philippines. So the number of submissions now stands at 9, with more to come. We will also submit the European marketing authorization application before the end of the year. The clinical trials that slowed due to COVID-19 are starting to pick up pace. Enrollment rates are increasing. However, we are still not at levels we saw pre-pandemic. Overall, we have a strong sustainable Phase I set of assets. We are continuing the investigation of our early development portfolio, including the PACAP and MAGLipase programs. As an example, we have started a Phase Ib study with MAGLi 66 in PTSD. And we plan to start 3 additional Phase Ib studies to fully explore the therapeutic potential of this biology. Next slide, please. Our Phase III clinical study evaluating Rexulti in Alzheimer's agitation has, as previously announced, been seriously impacted by the COVID-19 pandemic. To address this, together with our partner, Otsuka, in dialogue with FDA, we took the opportunity to increase the power of the trial and to adjust the sample size to maximum of 330 subjects. We have also decided to conduct an interim analysis, when a targeted sample of 255 subjects have completed the trial. The interim analysis decision will be in accordance with prespecified criteria and conducted by an independent data monitoring committee and expected to take place during the second quarter of 2021. These decisions increase the power of the study overall, in addition, gives us the possibility for an early stop with a successful interim readout. Next slide, please. For Vyepti, episodic cluster headache has been selected for indication expansion based on evidence supporting the role of CGRP in this disorder. Episodic cluster headache is a terrible, very painful condition, characterized by episodic attacks of intense unilateral headache. Most patients experiencing cluster headache attacks rate their pain intensity as near to or the worse possible. The condition is also termed suicide headache as patients with this condition also have a higher-than-usual suicide rate. The social impact of cluster headache is considerable, and it's associated with substantial direct and indirect economic consequences. Cluster headache has a prevalence of 0.1% with a 2 to 6x higher average incidence rate for males compared to females. There are significant unmet need for just every clinical aspect of cluster headache. The currently available preventive pharmacological treatments are mostly nonspecific, insufficient and hampered by side effects. We anticipate initiating the ALLEVIATE study soon, and the study will recruit around 300 individuals. The primary efficacy endpoint is changed from baseline in number of weekly attacks. Next slide, please. Together with Otsuka, we have been conducting a pivotal Phase I study investigating a new innovative and patented protective formulation aripiprazole, allowing for dosing every second month. Dosing every second month can add important benefits in terms of convenience for the patients and has the potential to increase treatment adherence. The need for medication monitoring by health care professionals, family and caregivers is also likely reduced. This study has now concluded with a positive outcome. In addition to assessment of safety and tolerability, the objective was to establish the similarity of aripiprazole concentrations when given every second month with a new 2-month formulation versus administering Abilify Maintena monthly, given over 2 months. This was shown by observing the exposure in the last dosing interval. The study show that the new 2-month formulation, while being safe and tolerable, provided effective plasma concentrations of aripiprazole for 2 months. This means that the new formulation can be dosed every second month compared to monthly Abilify Maintena. Based on the data obtained, no further clinical studies are expected to be required. Scale up of manufacturing capacity is underway at Otsuka Pharmaceuticals, and regulatory submission is planned in the U.S. and Europe for the first half of 2022. Next slide, please. As I touched on before, we are substantially transforming our approach in R&D to be able to more effectively expand our pipeline with the balance of first-in-class and best-in-class drug candidates to enable a steady progression of breakthrough and differentiated medicines across all development phases. We have refocused our internal discovery research on 4 biological clusters, which are shown at the left side of this slide. These biological clusters represent areas of important emerging advances in neuroscience with rich opportunities to establish drug discovery programs with strong impact and potential to address areas of highest unmet medical need. Drawing on the buildup, our experimental medicine expertise, we are also strengthening our abilities to early establish the technical and scientific qualities of our clinical candidates, enabling us to gain more objective evidence of drug action and test efficacy early in development, thereby derisking the path to the market. We will continue to enhance our science and development capabilities, including the digital technologies in pursuit of delivering medicines with better outcomes for patients. With that, I'd like to conclude the R&D update and pass over to my colleague, Anders, for financial updates.

Thank you, Johan. Please turn to Slide 18. Lundbeck's strategic brands have shown very robust double-digit growth for several years now, and that has continued in the 9-month period, although the global pandemic is having a negative impact on the demand growth in the third quarter. The aggregate -- in aggregate, we have seen a 6% growth in the net sales in the first 9 months, driven by the resilient Lundbeck product portfolio and even in light of the currency headwinds in the third quarter. Cost of sales increased by 20%, partly reflecting amortization of Vyepti and partly due to valuation adjustment on Vyepti inventory following reduced production cost which will benefit the gross margin going forward. Looking at core cost, the increase was only 2%. The core gross margin, therefore, increased from 85.8% to 86.3%. SG&A costs for the period were DKK 5 billion compared to DKK 4.6 billion in 2019. The SG&A ratio for the period was, therefore, 37.2% compared to 34.6% for the same period last year. The increase is mainly due to investments in the commercial organization in the U.S., China and Japan related to the support, the continued growth of Brintellix, Trintellix and Vyepti. The SG&A costs have benefited from the COVID-19 related cost avoidance due to lower activity level as well as positive currency effect in the latter part of the period. Research and development costs increased to DKK 3.7 billion for the period. R&D costs are impacted by increased clinical activity for Vyepti, costs related to the impairment of foliglurax of approximately DKK 800 million announced in March 2020 and R&D restructuring costs related to the changes in the R&D organization announced in June 2020. Adjusted for the impairment and the restructuring cost, the R&D ratio for the period was 20.6%. Core EBIT reached DKK 3.7 billion, and the core EBIT margin faced a modest decline from 31.8% to 27.7%. The effective tax rate for the period was heavily impacted by the foliglurax impairment, focusing on the core tax, it actually declined to 19%. Core earnings per share reached DKK 14.87 per share. Please turn to Slide 19. As you can see from the slide, free cash flow was solid and grew versus last year. On the right part of the chart, you can see that the acquisition we made last year increased the debt, which was DKK 5 billion at the end of September, but the net debt-to-EBITDA ratio is still at a healthy level of 1.1x. We expect the net debt to be around DKK 5 billion at the end of 2020. I'm pleased that Lundbeck has, for the first time in history, issued a corporate bond a couple of weeks ago, thereby improving our financial flexibility. The bonds provide a very attractive long-term financing and are strong supplement to our existing funding sources. Our ability to raise capital in the bond market at these attractive interest rates is a testament to the financial strength and quality of Lundbeck as a company. The 7-year bond was priced at a coupon of 0.875%, which we are extremely pleased with. The corporate bond issuance raised EUR 500 million in cash, which will be used to repay the bank debt we obtained when acquiring all the biopharmaceutical. Please turn to the next place -- next slide. We have narrowed the guidance corridor for the year and now expect growth in revenue in the range of 3% to 4%, corresponding to a revenue raise of DKK 17.5 billion to DKK 17.8 billion. We are, therefore, still in a range we provided in February despite negative headwind from U.S. dollar. I think it's relevant to stress again that currencies will provide headwind in the fourth quarter, which only partially will be mitigated by hedging. In the fourth quarter, we will likely see continued negative impact on demand from the pandemic on several markets and products. In China, we will see a negative impact from volume-based procurement, or VBP, on Ebixa, which is our second largest product there. Please also note that especially international market can show significantly quarterly fluctuations as a consequence of timing of shipments. Q4 will likely suffer from that, but it is important for me to stress that we do not -- or we do expect continued growth for our strategic brands in the coming years. The financial guidance for EBITDA, core EBIT and reported EBIT for the year has also been narrowed and with a slight upgrade of core EBIT. Core EBIT is expected to reach a range of DKK 4.3 billion to DKK 4.5 billion, which is a margin of at least 24%. On that note, please remember that we in February guided core EBIT to be in a range of DKK 3.5 billion to DKK 4 billion, so a material upward revision and, by the way, leaving a higher base to perform from next year. Reported EBIT is expected to reach between DKK 2 billion and DKK 2.2 billion for 2020. For the full year, you should expect financial items to be a net expense of DKK 100 million to DKK 200 million depending on the currency development. To conclude, let me provide some of the pushes and pulls that will impact 2021. We expect continued growth of the strategic brands, including an acceleration of the Vyepti sales. Northera loss of exclusivity by February 2021 is expected to impact sales of that product by around 50%, as we do expect multiple generics to come onto the market at that time. Regarding cost, we expect to have a higher clinical and commercial activity level, including for Vyepti. Based on current exchange rate, top line will have some headwinds, whereas there will be some benefit at the cost level. Based on these pushes and pulls, it is obvious a risk that revenue and EBIT for '21 may well be lower than the expected level for 2020. Next slide, please. Lundbeck has shown over the past 20 years it has been able to overcome fluctuations in the pipeline, including loss of exclusivity and still grow the company. Over the 20 years period, Lundbeck has been able to show an average growth rate in sales of more than 7%. From the graph, you can also see that we have had periods with significant impact from generic erosion, but also that the company has emerged stronger after these periods. I'm comfortable that Lundbeck after Northera's LoE will still be able to grow and continue to deliver value in the future. Now I will hand over for -- to Deborah for the final remarks.

Thanks, Anders, and please turn to Slide 22. As we forge ahead for the remainder of 2020, we will work to navigate the effects of COVID-19 while driving our strategic brands forward. The outstanding operating results over the past years gives us the strong financial foundation to continue to drive our Expand and Invest to Grow strategy forward and deliver a sustainably profitably growing company in the coming decades as we were focused on restoring brain health so every person can be their best. With that, I'd like to thank you for your interest and open the Q&A session.

[Operator Instructions] Our first question is from Wimal Kapadia from Bernstein.

Wimal Kapadia from Bernstein. So just firstly, on the interim readout for Rexulti in Alzheimer's agitation, clearly, a positive what we hear or seen. But I wanted to get a sense just on Lundbeck's confidence in the trial. Given that the data from the previous Phase III trials and some of the nuances that drove complications in certain sites, how do you feel about the potential to actually show a positive outcome in this third study? And how much of an effect is the higher dosing of 3 milligram? And just tied to that, how confident are you in the recruitment given further lockdowns could be quite problematic? How much flex have you included in your time lines for the interim readout? And then my second question is just to actually get a sense of Vyepti expectations heading into 2021. Consensus is close to DKK 700 million. So I wanted to get a sense if you believe that number is actually achievable, or do you expect a continued slow and steady ramp, at least in the first half of 2021.

Thanks, Wimal. I'll start and then hand over to Johan. With respect to the interim in AAD and how do we feel about this program, I think we had a trial that demonstrated significance looking at a 2-milligram dose in fixed dosing trial. We had a trial that demonstrated significance at -- for patients at the 2-milligram level in a flexible dose trial, and now we have a trial that tests 2 and 3 milligrams of a drug that we know has significant benefits in schizophrenia and major depressive disorder. So it's -- we're very encouraged, and we look forward to seeing the results in this group of patients who need good therapy for agitation. Rexulti has a profile that we believe can deliver. I'll pass it over to you for further comment, Johan.

Yes, just a few comments on the overall confidence. So obviously, the trial was ongoing in the midst of the pandemic. So what we're doing here is basically to assure that we deliver upon that promise that Deborah talked about. The data from the previous 2 studies were very robust at the higher doses. And here, we also have a 3-milligram dose, and we have a pooling of the data. So we'll look at this data overall. We need to establish a little bit more safety data at the highest 3-milligram dose. So I would say, from an efficacy point of view, it shouldn't be a big issue, particularly after the changes we made now when we increased the power and allow us also to have an early look at the data. So I think it's 2 smart moves to change the study. Recruitment confidence. Well, that's a little bit why we have the interim analysis also because we are very confident to reach the interim analysis time point. As you well know, we cannot predict the future of the pandemic. We have actually learned to live a little bit with the new normal in this trial. The trial was actually halted, as you may know, early in the spring. We got restarted, and we have actually more or less all the trial sites open. Obviously, they have problems in enrolling on and off. But in terms of getting the interim, we are very close to be there in terms of enrollment, in terms of the overall 330. This is the best fair estimate we can have right now based on the current enrollment rates.

Yes. So to your question on Vyepti. First, we're not going to give guidance on 2021. But a lot -- it depends -- this brand is dependent on the resolution of the pandemic. So its ability to inflect the growth is going to be largely dependent on the ability of patients to come in to see physicians. So right now, what we're looking at is further closings in different areas of the world and in different areas of the U.S. So we'll have to see how that pans out. Anders, you had a comment and then Peter.

Then I can also add that consensus numbers has been pretty stable during the year. And I would assume that, that number is not reflecting also the decline or depreciation in U.S. dollars. So that also needs to be taken into account. So when you look at the number, you need to take in what Deborah just alluded to, the uptake from the pandemic and then the depreciation in dollar.

Our next question is from Trung Huynh from Crédit Suisse.

I have 3, if I can. Just in the presentation, you highlighted that Trintellix and Rexulti, the patient load remains disproportionately affected by COVID. So should we expect a dampening of growth of these products during the period of when the pandemic lasts and then perhaps then return back to normal levels we saw pre-COVID? Or is the expectation we should see a faster recovery to normal trends in the 4Q? And then similarly on Onfi and Sabril, the level of growth was significantly higher. Is this a new quarterly base during the pandemic? Or again, should they return back to the usual levels very quickly in 4Q? And then just on Alzheimer's agitation, will we have a press release about the interim analysis if it doesn't hit at interim and the trial continues towards the expected completion dates in the first half of 2022?

Okay. I'll start on Trintellix and Rexulti and then hand over to Peter. I think what we're saying with these major depressive disorder, the category has had a dip in terms of access to care, both branded and generic. And we're seeing some recovery of that now. But the generic is returning a little bit faster than the brand, which is not surprising, given that any new patient is started on an SSRI or SNRI. And then later, after many of them have tried those and not necessarily got the results that they need will be moved to a branded therapy. So we will see that continuing. I'll also say that with our drug, Lexapro or Cipralex, we've seen the resiliency of patients being put on escitalopram or Lexapro because the profile of that drug is so strong, not only for major depressive disorder but also for that condition together with anxiety which has been quite prevalent in the pandemic given the circumstances. So I think we will see recovery to growth. I think that the profile of Trintellix is extremely strong for patients who need to function well. So I have no lack of confidence in Trintellix's ability to really deliver for patients in the future. Peter, would you like to comment?

Yes. I'll just add a few comments on top of that. First of all, I echo what Deborah said that I see nothing structurally underlying or anything that would stand in the way from recovery of growth other than pandemic-related things. And just to give you some perspective, as you've probably tracked other categories, new-to-brand prescriptions across the entire pharmaceutical industry is down post-pandemic versus pre-pandemic. And then you ask yourself, why is that? Clearly, there's some promotional component to that because a lot of these prescriptions are branded prescriptions that are very sensitive to promotion. And obviously, promotion has been impacted. But also, as Deborah mentioned, patient volumes, physician practice hours or openings, some being better at telehealth than others, all affect that. And I believe that's exactly what we're seeing with these 2 specific brands and nothing else beyond that. And so I fully expect as those dynamics return back to normal that we will see the kind of growth that we've seen in the past for Rexulti and Trintellix.

Yes. And I think as to the -- well, the first -- fourth quarter return to normal, again, it's going to be the ability of patients to get to their physicians and get therapy. We know that in telehealth, physicians are most likely to either keep a patient on a current therapy or start a new patient on something -- a drug that they know particularly well, which means that in telehealth we'll see a slower recovery of the brands. But it's pandemic related at which point they'll recover. On Onfi and Sabril, we expect that those are not new trends. There's quarterly fluctuations. And Peter, perhaps you can comment.

Yes. Definitely echo that. I don't think anybody should anticipate that this is the new trajectory of the products. There's a number of factors that, I think, led to the strength of both of those brands in the quarter. In some instances, we've heard of cases of some generics having some supply issues. You also have some gross to net favorability. Those -- we do these kind of gross to net adjustments periodically as we compare our actuals versus what we had accrued for. And then also a small component of it, but nonetheless, a component is that you see this phenomenon really across the world, but certainly in the United States that some of the more older, tried and true established products have a touch more resiliency than some of the newer products that are still establishing themselves and subject to promotion and all the things we just talked about. And so I think Onfi and Sabril has tried and true products also are having some small benefit from that. But it's a variety of factors, and you should not expect that to continue.

And then regarding the AAD interim, we would anticipate that there will be a release at that time. And remember, it's designed -- an interim design to -- for an early stop for efficacy or futility or the trial will simply continue to the predetermined number of patients.

Our next question is from Sachin Jain of Bank of America.

Sachin Jain, Bank of America. 3 topics, if I may. Firstly, back on the Rexulti interim, apologies. If the effect size, say, in your prior Phase III studies at 2 milligrams is repeated in this study, would the study stop at interim? Or have you set a higher bar for stopping at interim? I'm just trying to get a feel of how we think about study stop at interim versus final analysis on your statistical setup? Second question, just to dig a little bit more into '21 trends. Any additional color you can give us on SG&A and R&D growth into next year, particularly related to Vyepti? And then thirdly, another question around consensus and mid-term margin outlook to the extent you're willing to comment. Consensus has core EBIT margins expanding from 23%, 24% at present to low 30s by 2023. Any perspective you can provide on that 700 basis points of margin expansion? And what sort of Vyepti sales is required to support it or any other factors that could aid?

Okay. Johan, will you take the first question? And Anders will probably...

Yes, the first one is very straightforward. We look at the clinical significance as same as the statistical significance. So there is no basic assumption change in this trial in terms of the effect size.

SG&A wise, you can see that we have said that this year we have improved our -- our SG&A will be improved with around DKK 600 million due to the pandemic. I assume that these DKK 600 million will travel back next year, assuming that we will be preparing for the U.S. launch or the European launch of Vyepti. We will have more activities behind the Vyepti in the U.S., hopefully. So you should see an increase. But of course, that also come on top of that SG&A, and SG&A level has been more muted this year. And from a margin expansion, it goes without saying what we have said is that '20 and '21 and to some degree '22 will be impacted by heavy investments in R&D with all the different activities with Vyepti and that will, of course, impact the margin. But to come -- to be more specific on the margin expansion, it goes without saying that when we come to '23, '24, then we assume that we'll get more back to a more normal EBIT margin levels.

Our next question is from Emily Field of Barclays.

Just a question on the Vyepti and cluster headache. I believe that that's an indication where some of the other CGRPs have struggled. So I was just wondering if you could go into your confidence that Vyepti could be successful in that indication. And then you kind of touched on this in your answer to Trung's question. But coming out of the pandemic, we've talked about in the past a Tsunami of mental health. But obviously, for that to impact you guys will require a return of new patients, new patients to then fail on a generic to get to some of your key brands. So when would be a realistic expectation where we could actually see if this is a phenomenon that would actually come to fruition and potentially impact Lundbeck's business?

Great. Johan, on the cluster headache?

Yes. Thanks for the question. I assume you alluded to that Emgality made it basically into that indication and Ajovy did not. There are a lot of learnings from those trials in terms of the time of the attacks, the period after initial attack. And we have learned how to navigate those kind of trials much from those trials. They really set the stage for us. So in terms of the 1-, 2-week readout we have, that is a little early than the other trials because that's really when the intensity is more -- aggregated number of attacks is more intense. There's also another thing I'd like to highlight. We have an IV infusion here, which gives a much -- presumably a much faster onset. So that's another thing that is advantage with Vyepti, particularly against the others that have been tested there. This will be an episodic cluster headache, which is the indication that Emgality also was successfully.