Idorsia Ltd (IDIA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the full year financial results 2021 conference call. [Operator Instructions] I must advice you that this conference is being recorded today, Tuesday, the 8th of February 2022. I would now like to hand the conference over to your speaker today, Andrew Weiss. Please go ahead.

Thank you, Heidi. Good morning, good afternoon, everyone. My name is Andrew Weiss, I'm the Head of Investor Relations and Corporate Communications here at Idorsia. With me on the call today to discuss our full year results and our outlook for the future are our CEO, Jean-Paul Clozel; our CFO, André Muller; and our Chief Commercial Officer, Simon Jose. With that, I think we're ready to kick it off with our prepared remarks. Next slide. So on this call, we will be making forward-looking statements. Hence, you have been adequately warned about the risks and benefits of investing in Idorsia shares. Next slide. Jean-Paul, the floor is yours.

Thank you, Andrew, and I'm very happy to really discuss what we have achieved in '21 and how is the outlook for '22 and the years to come. First, the big picture. In Idorsia, we have a common vision. The management and the collaborators want to create a sustainable midsize pharma company, which is based on innovation. Next slide. And from day 1, which means about 4.5 years ago, we had defined 5 key strategic priorities. We wanted to deliver 3 products to the market, build a world-class commercial organization, bring Idorsia to sustainable profitability, fuel our pipeline with new discoveries and utilize state-of-the-art technology to drive innovation. Next slide. 2021, as I mentioned, was a very strong year for what we have achieved and executed. We entered and closed 2021 with a strong balance sheet, thanks to a money raise that we could achieve. And André will discuss this fact. We filed daridorexant in the different -- in the world. And we received -- Johnson & Johnson received approval for ponesimod, an S1P1 drug that was discovered in Actelion and which was developed by our team for the larger part. We filed clazosentan in Japan. That was all at the beginning of the year, started the Phase III of selatogrel. And at the end of the year, we got the results for lucerastat, for cenerimod. And last but not least, this year, and -- beginning of this year, thanks to all this work, we got PIVLAZ approved in Japan, clazosentan approved in Japan and QUVIVIQ approved in the United States. Next slide. So our first goal was to deliver 3 products to the market. So we are on good track. Daridorexant, clazosentan approved. I think that aprocitentan will give results middle of this year. And many other drugs, as you can see, are either in late phase development or in Phase II. So this goal, I think is achievable within a short amount of time. Next slide. So last year, we obtained the results for lucerastat. Of course, we were disappointed by the fact that we could not show an effect on neuropathic pain. But we have seen very interesting other efficacy signal, which really encourage us to continue the open-label phase of this study and to discuss with the authorities in view of the very strong effect, for example, on biochemical markers and on some functions for -- of the patients, like the renal function. For cenerimod, we have, with our Phase IIb, got the information we needed in terms of which is the dose, what is the efficacy, what are the safety and what is the optimal endpoint. So therefore, we are advancing cenerimod in Phase III, and we are discussing the program with the regulatory authorities, especially the FDA. We -- for aprocitentan, patients are all recruited. We are doing -- performing the study. We should have the results in the middle of this year. And I'm really very optimistic for this drug since the safety looks really good, and we have a clear, I think, signal also of efficacy. Then selatogrel, as I mentioned, as under an SPA, started the Phase III. And for our selective orexin receptor antagonist, we have finished recruitment, and we should have the results of binge eating the second quarter of 2022, this year. Next slide. So of course, daridorexant has been the big news beginning of this year, and it's really going to be a global product. It has been approved in the U.S. We have filed our market authorization in Canada. And we are waiting, I would say, any months or weeks, the authorization by the European Medical Agency. And also, we are waiting for the answer of Swissmedic. And the Phase III is ongoing in Japan and, hopefully, will be finished this year. Next slide. So the results of daridorexant, 2 studies, 2 Phase III studies have been published in The Lancet Neurology. That's really the results, as I said, is one of the nicest set of results I have seen in my career. Next slide. Because not only the drug was working to really improve or decrease the time to fall asleep, but also to stay asleep. And the WASO, which is a time that people are waking up after falling asleep during the night, so this is a time that you want to decrease, which is increasing insomniac. And as you can see, you have a very nice dose response effect on WASO. Next slide. But also on time -- or the time to fall asleep, which is called the latency to persistent sleep. So you sleep faster, you sleep longer. Next slide. And if you ask -- which is quite unique, I have to say, if you ask the patients how long they are feeling they have slept, you see also that, subjectively, they have -- they feel that they have slept longer. And this is highly statistically significant, especially with a high dose of -- with, I would say, should not be the high dose, with a dose of 50 milligram, which is the right dose, not the high dose. Next slide. So a very important evaluation we did in this program was to ask with the patient reported outcome questionnaire, we have evaluated what are the consequences of this improvement of sleep on the day performance. First domain, because we are grouped in 3 domains, this functioning was really what we call the sleepiness domain. And you can see the question was how -- the 4 main questions of this domain was asking the patients how they feel energetic, mentally tired, physically tired or sleepy during the day. And as you can see, you have an improvement, which is mean decrease of this domain score. And especially with the 50 milligram, you have a very significant -- the p-value is, as you say, is very low, very significant effect on this sleepiness domain with daridorexant. Next slide. And even more interesting in my mind is the fact that the other domain about mood, about cognition, alertness, how people memorize, how they feel that they can memorize event, this was also improved. This was exploratory endpoints, but very clear results. Next slide. So you could really -- and that was a big question, with such a fantastic effect during the night and during the day, is there a side effect, which prevent -- especially with the 50-milligram, prevent the use of this higher dose? And as you can see, that has been really -- and this is absolutely unique to this product. You see that if you take, for example, the somnolence, the 50 milligrams is less -- there is less somnolence in the morning, as with 25 milligrams of daridorexant and about the same level as placebo. So by giving the dose of 50 milligram, you do not have a price to pay by being groggy in the morning. And that's absolutely fantastic, and that has been recognized in our label or U.S. label by the fact that there is no recommendation of a dose titration. These patients can be treated by 50 and should be treated by 50 milligrams, unless there is a special case, like, for example, a liver problem, then the 25 milligram in this specific patient should be given. So a very, very, very good safety profile. Next slide. So I'm going to give with such -- first of all, I'm going to give to the commercial organization of Idorsia this fantastic drug, and then Simon is going to tell us and to tell you how we are going to commercialize daridorexant, and, of course, also clazosentan, which, as I've mentioned, has been approved in Japan. So please, Simon.

Thank you, Jean-Paul, and good morning and good afternoon, everyone. Next slide, please. So obviously, as has been said, our second strategic imperative is to build a world-class commercial organization, and we're focused on 2 priorities to achieve this. The first is to establish a commercial footprint with the right people, infrastructure and processes needed to successfully launch our new products. We've built teams of outstanding people, along with simple and consistent structures and processes, which enables fast decision-making and allows us to remain nimble. And of course, whilst we've been doing this, we've also been developing our ambitious launch plans for QUVIVIQ in the U.S. and for PIVLAZ in Japan, which I'll expand on in the next few minutes. As the metaphor goes, we really have truly been building the plane as we've been flying it. And it's an exciting time for us now as we start to execute our plans. I'm confident that we're very well prepared to deliver successful launches that will exceed expectations. Next slide, please. I turn now to the insomnia market and the launch of QUVIVIQ in the U.S. Now the U.S. insomnia market is huge. There's an estimated 25 million people suffering from insomnia, about half of whom are treated with a prescription medicine. And in a large survey of Americans with trouble sleeping that we sponsored, 70% of respondents said they were desperate to find a solution that addresses the impacts of insomnia on both the night and the day. And simply too many patients are currently cycling through prescription medicines, over-the-counter treatments without finding the solutions that they need. And obviously, in addition to the impact on patients' lives, insomnia has a significant economic burden in the U.S., which is estimated to cost more than $100 billion a year. Next slide, please. If we look at the prescription market, we see in the last decade, there has been a significant shift away from the Z-drugs in favor of trazodone, an antidepressant, which is not licensed for use in insomnia. Now trazodone is now the most widely prescribed medicine for insomnia in the U.S. So physician preference to use an off-target effect of an unlicensed product in favor of licensed medicines is a reflection of the limitations of existing treatments and further highlights the significant unmet need in the market. Next slide, please. And obviously, as you're all well aware, we received FDA approval for QUVIVIQ on January 7. We're planning to launch in early May after the DEA scheduling process is completed. Next slide, please. Now in many calls that we have with investors and analysts, we're often asked how Idorsia, a relatively new start-up, can be successful at launching a primary care product. Now for me, there are 3 critical factors that will drive our success and which make us different: a differentiated product, a handpicked and focused team and the right go-to-market approach. And I'll expand on each of these in turn. Next slide, please. As you've heard from Jean-Paul, we do have an outstanding data set from a robust clinical trial program and a differentiated label for QUVIVIQ. QUVIVIQ helps patients to fall asleep faster and stay asleep longer. But this, of course, is really the entry ticket in this market. So in addition to this, QUVIVIQ 50 milligram, which was evaluated in 1 of the 2 pivotal trials, demonstrated a significant improvement in daytime performance, with the validated IDSIQ patient-reported outcome instrument, as Jean-Paul has just shown you. But perhaps most importantly of all, in this market, QUVIVIQ had a favorable AE profile. There was no evidence of tolerance or dependence. And as Jean-Paul showed you, the rate of somnolence or fatigue is similar between doses and only 1% greater than placebo for the 50 milligram or 2% greater than placebo for the 25 milligram. There is no recommended starting dose or requirement for dose titration, unlike other products in the class. And based on the efficacy and safety profile demonstrated in our pivotal program, we believe that 50 milligram will be the right dose for most patients. Next slide, please. I'm in the U.S. at the moment with our team and continue to be impressed with the caliber of talent we have recruited into the organization. Our U.S. leadership team has been handpicked for their launch experience and their desire to transform a market and build a business. They are all really experienced commercial leaders from different companies and backgrounds who collectively have executed 74 launches. But just as importantly, the team is completely dedicated and focused on the launch of QUVIVIQ. Rarely will you see a team of people with this level of experience and seniority working on one -- just one product. And this makes a huge difference, trust me. Next slide, please. So turning to the commercial approach and our go-to-market strategy. We've developed a highly consumer-centric strategy to launch QUVIVIQ in the U.S. And by that, I mean that we're putting the consumer and consumer activation at the center of what we're doing. Physicians and payers are, of course, critical, but we believe insomnia can be consumer-led, given the nature of the condition and the deep dissatisfaction patients are currently feeling. The U.S. team has already launched 2 educational initiatives to raise awareness of insomnia and the significant impact it has on people's lives. First, the sleep -- The Alliance for Sleep brings together some of the foremost experts in sleep medicine to drive education, awareness and research on the burden of sleep. Second, and you've hopefully all seen our new Seize the Night & Day Campaign. This education and awareness campaign highlights the need for the night and the day impact of insomnia on patients and their families. And we're thrilled to be collaborating with Jennifer Aniston on this unique consumer-focused campaign. Additionally, we have supported the Wake Up America survey, which is the largest U.S. survey of both people with trouble sleeping and of health care professionals. The results will be published in the coming weeks. The U.S. team has also produced a documentary called The Quest For Sleep. And this film highlights real people suffering with insomnia and provides a look at the science of sleep, and this is set to premiere in March. Next slide, please. Now although our strategy is centered on the consumer, as I just mentioned, it is critical we pull through effectively with physicians and payers. The U.S. sales force has now being recruited and is currently being trained. And to support the sales team, we have invested in advanced analytics to enable precise customer targeting and engagement. The best example of this I can give you is the next best action for our sales team. And maybe for those of you that are familiar with using Waze for driving, this is a similar concept, where we're using advanced analytics to define optimal actions in real time and what the right sequence is. And this will be available to support the sales team when they start engaging with customers. Our excellent payer team has been engaging with payers for several months now, introducing the company and discussing insomnia. Following FDA approval, they are now meeting payers to discuss QUVIVIQ and our clinical data. And finally, for the past year, the medical team has been engaging with insomnia experts across the country. So in summary, I'm confident that with our differentiated product, a talented and focused team and our innovative go-to-market approach, we are well positioned to transform the insomnia market and successfully launch QUVIVIQ in the U.S. Next slide, please. So 2 weeks after the approval of QUVIVIQ in the U.S., we, of course, received approval for PIVLAZ in Japan. I believe this launch is also going to be a significant opportunity for Idorsia and I'll touch on the reasons why next. Next slide, please. Now if you could pick one market for the first launch of this product, it would be Japan. The incidence of aneurysmal subarachnoid hemorrhage, or aSAH, in Japan is 3x higher than it is in the rest of the world, with an estimated 30,000 cases per year in Japan. There is a high degree of anticipation amongst neurosurgeons for the launch of PIVLAZ. With no new products to help prevent vasospasm following aSAH in over 25 years, the introduction of an innovative new treatment option is long overdue. And finally, many of you will be familiar with the significant burden and long-term consequences of vasospasm: the physical and cognitive deficits, the social and emotional consequences and, of course, the health care costs. Next slide, please. Our team in Japan is very well prepared now for the launch of PIVLAZ, which we expect in early quarter 2. Whilst this is a very different go-to-market model than QUVIVIQ in the U.S. being a highly specialized product in hospitals, I believe we have the same 3 key ingredients for success: an innovative product, a highly experienced team and the right focused launch plan. Our MSL team was deployed in the middle of last year and has been engaging with the leading medical experts and neurosurgeons since that time. Our specialized sales team was deployed right after approval in January. The team is now talking to physicians and 650 target hospitals about the process for formulary listings so that when we do receive the price in early quarter 2, we can launch very quickly. So in closing, we are absolutely ready for the immense opportunity we have in front of us to launch 2 innovative products in 2 of the world's biggest markets within what could be weeks of each other. We're fully focused on making both these launches successful and fueling the growth of Idorsia for many years to come. With that, I'd like to thank you, and I'll hand over to André.

Thanks, Simon. Hi, everyone. Greetings from Matterhorn. Not your famous mountain in the Swiss Alps, but a meeting room here in Radnor at our U.S. headquarter. As Simon just said, it's good to meet with our U.S. colleagues face-to-face and getting fully energized by the U.S. team. Next slide, please. Jean-Paul mentioned our key 5 priorities. Let me walk you through the third pillar of our strategic priorities. We have a dual model with, on one side, having net sales from the approved portfolio or hopefully to be approved. The first one, and Simon walked you through is, of course, daridorexant in the U.S., soon coming in Europe. And hopefully, depending on the results of the ongoing Phase III trial in Japan, adding also Japan. We have, of course, clazosentan in Japan. And we may add clazosentan in other territories, depending on the result of the REACT trial. And depending on the interaction with regulatory bodies, we could have also lucerastat. Later on, beyond 2025, with 2 Phase III ongoing, we could add cenerimod and selatogrel. On the other side, we also have milestone and royalty streams. Starting with ponesimod, loans by J&J in the U.S. and European countries and also Canada. Hopefully, as Jean-Paul said, with a positive readout mid-2022, aprocitentan. And here, we'll piggyback on the success of J&J. Most of you may have seen in a business update last year, I think it was in November, that aprocitentan was one of the 14 compounds where J&J see a blockbuster potential. We have also seen a T-type calcium channel blocker outlicensed to Neurocrine. And we could get some positive news -- hopefully, positive news from 2 ongoing Phase II, one in essential tremor and the second one in some rare form of epilepsy with children. And lastly, we have vamorolone, so CDC ReveraGen deal that was assigned to Santhera. Next slide, please. Let me walk you through the full year results of 2021. If we start on the left side, we have revenues of CHF 35 million. This is relating at collaboration entered into in previous years. The non-GAAP operating expenses at CHF 612 million, as expected, are in line or in line with the Q3 guidance, which was slightly below CHF 620 million. leading to a non-GAAP operating result of minus CHF 576 million. Adding the D&A and share-based compensation, we ended up with U.S. GAAP operating loss of CHF 613 million. Below EBIT, the CHF 22 million is mainly relating to the accretion expenses that we had. In connection, we see a convertible loan from Cilag i.e., J&J. As you know, in Q4, Cilag decided to convert the second tranche of CHF 110 million, and this led to a higher accretion expense in Q4 2022. With this, we closed the '21 financial year with a net loss, U.S. GAAP, of CHF 635 million. Next slide, please. If we have a closer look to the non-GAAP operating expenses, you see an increase in development, excluding the inventory build. As you know, before a drug is approved, the inventory build goes directly to the P&L, which will no longer be the case for daridorexant and clazosentan moving forward. But we had increased -- an increase in development. You see here CHF 250 million. Actually, the increase was mainly due to the initiation of the Phase III of selatogrel, not so much on the clinical development side, but also -- with also work relating to a drug substance and drug product. And we also invested more in the early-stage pipeline because this one is also advancing relatively fast. The SG&A, you see here that we had the biggest increase, with CHF 221 million, breaking down in CHF 144 million in marketing and selling compared to CHF 27 million. That's exactly relating to what Simon explained, preparing for the launches mainly in the U.S., also in Japan, and to a lesser extent, in U.K. and in Europe. And we had also a slight increase in G&A, with CHF 77 million compared to CHF 63 million in the previous year. So with all these numbers, we ended up with non-GAAP operating expenses of CHF 612 million. Next slide, please. Cash flow and liquidity, which include the cash and cash equivalents and also is here is short or long-term deposits. As you can see, we ended this year with a strong balance sheet, CHF 1.19 billion -- CHF 1,188 million liquidity. So fundamentally, this year same level, slightly below CHF 12 million below the start of the year 2020. And that's mainly due to the issuance of a convertible bond in July 2021 for a net amount of CHF 595 million, which fundamentally offsets the non-GAAP operating expenses. Next slide, please. Here is the guidance for 2022. Net sales of CHF 120 million, contract revenue of CHF 25 million, and that's only relating to what we know, i.e., some deferred revenue from previous collaboration. And the revenue sharing on PONVORY. So I'm not speculating -- we are not speculating on any other revenue milestone, notably in connection with Neurocrine or with Santhera. SG&A would increase to CHF 520 million, that's the costs to launch a drug in a primary care setting. And R&D would be more or less stable with CHF 400 million. So we would have an operating loss, non-GAAP operating loss around CHF 785 million for the full year 2022. The difference between non-GAAP and U.S. GAAP is mainly relating to D&A and share-based compensation around CHF 55 million, split evenly between SBC and D&A. Next slide, please. Contrary to the previous years, we wanted to also give you what is a clear objective for us, i.e., a profitability target. We strongly believe that we can become profitable by 2025, with annual net sales that would cross the CHF 1 billion mark. And just to give you some context here with this goal. This is only based with the portfolio, which is approved. So daridorexant in the U.S. or on PIVLAZ to be approved in Europe, Canada and Switzerland, where we are highly confident to get market approval. So we will launch in Germany, Italy, U.K., Switzerland in a staggered approach, same for France, Spain and Canada. And we also only had clazosentan in Japan. So we are not speculating on the ongoing Phase III in Japan, which is currently conducted by our local affiliates and Mochida, our partner. We are not speculating on positive results of the REACT trial, hopefully by the end of this year 2022. So we are really counting on the existing scope and anything that would come on top and above. We mentioned, of course, aprocitentan. With the tiered royalty, we would be entitled to in connection with the launch by J&J or any milestone coming from Neurocrine or from Mochida. In connection, we see a positive result of the Phase III in Japan, or even though Santhera is not in scope. With this, I pass the baton to Jean-Paul, who will tell you more about the fourth and fifth pillars of our strategic priorities. Jean-Paul?

Yes. Thank you, André. Thank you very much. And for this clear outlook and -- towards profitability. So of course, profit -- to reach profitability is important. It was also important for us to continue to build the pipeline because, as you know, a company only can survive if it can really launch new products because after 14, 15 years, compounds become generic. And we count on organic chemistry to discover this drug, and this is an a priori we have. And of course, we are not developing, for the time being, antibodies, new technologies or our CAR-T. We are focusing on small molecules. And this is due to the fact that we have top chemists, really, train in Switzerland, where -- which has some of the best school of chemistry. And the advantage of these small molecules is that, of course, you do not have a technical risk that you have for some new technologies like gene therapy, like gene editing, where you still have a significant risk, technological risk. Here, these are methods which are well-known and which are adapted for chronic and also acute diseases. They can be very often given as a pill for oral use or a capsule. And they have a clear patent protection. You are not in a fight like you have in some of the new technologies. And of course, we can really try to optimize the output of this chemistry discovery effort by using not only high-throughput screening, but artificial intelligence, computer modeling, really trying to have all the new technologies adapted to organic chemistry. Next slide. And the pillar #5 was really not to do the same thing as we were doing in Actelion, but really to utilize the state-of-the-art technologies to drive innovation, which means, in our mind, to really continuing to implement this new technology not only for drug discovery. I've mentioned artificial intelligence, computer modeling, but also in clinical development, where we are working with technologies also with artificial intelligence, federal -- federated learning and so on, but also for commercialization. Just Simon has mentioned how we have implemented the technologies to really optimize the use of the time of our medical representatives, how we can really adapt to the market using some new software and new technologies specialized for optimizing commercialization of our products. Next slide. So 2022 will be the year where we are going to become -- Idorsia is going to become a commercial company. We -- after the approval of QUVIVIQ in Japan and U.S., and hopefully soon in Europe, we are going to launch Q2, beginning of Q2 2022, clazosentan in Japan, and in May, QUVIVIQ in U.S. And at the end of this year, we are going to launch QUVIVIQ in Europe. Next slide. But 2022 will not be only the year of commercialization or becoming a commercial company. It's also a year where we are going to get key results. PRECISION with aprocitentan mid of this year, binge eating with our selective orexin receptor antagonist. Cenerimod will start the Phase III in lupus. And we, very hopefully, I think there are good chances that we conclude the Phase III study, REACT, of clazosentan, if there is not another COVID major crisis, which, I think, this seems unlikely. So a very, very busy year. And as we have mentioned, there is a lot of optionalities because we are not including in our guidance for profitability the revenue of aprocitentan or the binge eating or cenerimod or clazosentan. All these products will add to and fuel -- sorry, will increase our growth or rate of growth and are just potential addition to our curve of growth. Next slide. So frankly, if you would have asked me when we started Idorsia that within 5 years, you could launch 2 products in the main countries, becoming fully fledged biopharmaceutical company, including presence in Japan, in Europe, in U.S. And with a clear view of when we can reach profitability, I think I would have told you, I'm ready to sign because that's not that very few precedents in the biotechnology world with such a rapid growth and the establishment of a new company. Thank you very much. And that's -- we can finish on this profitability goal, and I think that, Andrew, I leave the floor to you.

Thank you, Jean-Paul. Next slide, please. So with that, we've come to the end of our concluding -- to the end of our prepared remarks and are ready to take your questions at this point in time. We've got 2 formats, oral as well as written format. So I'll let the operator open up to the question rosters now.

[Operator Instructions] And your first question comes from the line of Peter Verdult from Citi.

Pete Verdult, Citi. Three quick questions, please. Firstly, for Jean-Paul or André, share price reactions today seems to signal expectations Idorsia will tap the market again this year. Just wanted to hear your thoughts there versus monetizing the PONVORY or potential apro royalty streams. Secondly, on aprocitentan, Jean-Paul, just wanted to kick the tires. Again, we've got Phase III data in middle of the year. We know what the FDA wants to see in terms of efficacy. The KOL feedback, generally positive. We're going to see edema, but as long as it's tolerable, the drug is of great interest. So with respect to this edema angle, which seems to be the potential banana skin, how comfortable are you that the edema profile for apro is tolerable? And then lastly, Simon, on QUVIVIQ. You probably don't want to go here, but I'll try anyway. Any ballpark quantification of the U.S. price point that you'll be seeking? How aggressive or not you intend to be with couponing and the size of your commercial team with respect to the sales force at launch?

Thank you, Peter. So yes, you've addressed the questions directly. I would suggest the capital markets question to André, what are your thoughts right now on how our abilities of liquidity. On the edema, I would give this directly to Jean-Paul. And pricing or more, where are we right now with our negotiation strategies with the different payer accounts to Simon.

Yes, Peter, I can start. Yes, I can start with your first question. You mentioned equity raise. I would say without any cash raise, we see a guidance we would end 2022 with approximately CHF 400 million. So this could be acceptable. But of course, if we have any opportunity at the right price to raise cash, not necessarily through equity, but cash, we would do so. I mentioned in the past that we have different avenues to do it. Right now, we see a current stock price. I don't think that equity would be the favorite route by far. Convertible as well, even if you would mitigate this lower stock price, we see a conversion premium. So we are much more inclined to explore potential avenues with royalty monetization deals. You mentioned PONVORY. We could also add aprocitentan, yes, best to monetize aprocitentan is to get the results. And as Jean-Paul said, for different reasons, efficacy and safety, we believe it could be positive. And we have also -- we see a rich pipeline potential outlicensing deals. And so we're -- just to be very clear, we are much more working now on these last 2 avenues, royalty monetization and outlicensing deals.

Thank you, André. Jean-Paul, on edema and your thoughts around -- for apro.

Yes. So I think that you have to know that daridorexant -- and I'm sorry to start with daridorexant. Daridorexant was the ultimate orexin receptor mixed antagonist. It took us 25 years to really discover this drug, and it was a very, very big effort. Aprocitentan is the same. It's the ultimate mixed endothelin-receptor antagonist. . It is the work -- now it's more 30 years that Martin started to work on this endothelin project. And really, we came with a product, which is, by nature, mixed blocking both receptor. And we believe that because also of the fact that it has a very specific pharmacokinetics, not being influenced by renal function too much, it is really the ideal drug for resistant hypertension. And it should be having much less than -- edema than the other selective -- blocking only ETA receptor antagonist, which, most of the time, have been tested in clinical trials. So first, there is a rationale why we should have an edema. Now we have treated more than 800 patients for nearly a year or 9 or 8 months for most of them. We have got 7 DSMB, which have not mentioned any issue. We have not seen very clinically, I would say, significant edema problem. And this has not been mentioned -- because we are still blinded, it has not been mentioned to us by the DSMB. And what is very important is that what we see on the opposite is really a signal. And for 8 months during the trial, the patients are in the open phase. So we know they are treated by 25 milligrams, the highest dose of aprocitentan. And we see a very, very significant and marked blood pressure decrease. And I just cannot wait to see the results of this study because I think people are going to be surprised by the efficacy in resistant patients. This is very, very severe patients. You are going to see not only a very good safety but a fantastic efficacy.

That was clear, Jean-Paul. Simon, do you want to take the question on dari and where we are with QUVIVIQ and negotiations?

Yes, sure. And I'll take the three questions in turn. So in terms of price, I mean the payers, we know will start with the Belsomra price as their starting point. But given the profile of our product, we're looking at a premium to that. Obviously, I won't be disclosing anything more specific than that, but we believe that we have a superior product, and we will price for that value off the back of the current price of Belsomra, which is just over $400 WACC a month at the moment. We will be couponing, yes. I mean, obviously, while we build commercial access, we'll want to have patients try the product. And actually, we do see quite a benefit there because we know that successful trial use is going to be critical with this product. And I think for people to be able to use it and use it for an extended period through a coupon in the script will be very beneficial to them and to continued use. And in terms of sales force, we're going to be in the sort of 400 to 500 range, just to give you sort of guidance on that.

Your next question comes from the line of Sachin Jain from Bank of America.

It's Sachin Jain here. Just I'll take a couple on darido and then a couple on financials, if I may. So firstly, on daridorexant, just a couple of commercial questions. How does being a scheduled drug impact your consumer-driven focus of your marketing strategy and focus on PCPs versus specialists? Just wondered if that's creating any specific hurdles that you're navigating. And then on positioning, you clearly referenced trazodone and Z-drugs in a large market. I'm just wondering, on your positioning versus CBT, which, in time, has become, I think, a preferred first-line therapy. And then on financials, the '25 guide of being profitable versus growth and CHF 1 billion in sales, I guess, implies a flattish cost base from the '22 levels onto '22 costs are essentially double what they were 2 years ago. So I just wanted to make sure I interpreted that correctly. And then last question on financing. I just wanted to clarify comments. You noted the lack of equity was really a function of the share price. If the share price responds to a successful darido launch, would equity be back on the table? Or are you totally ruling that out? And just as you think about royalty or outlicensing, what timing are we thinking to? It sounds like 2H?

Thank you, Sachin. So I'll probably give the first question to Simon. Second question, André. Third question, Jean-Paul.

Yes. Sure. I'll take the first couple. Sachin, I don't think we see scheduling as being a particular issue or barrier to our DTC activities. We obviously have to be clear in all of our promotion, whether it's to health care professionals or to patients that it is Schedule IV, which is what we expect. But that's the same with every other sleep drug. So we don't see that as being a barrier. And there's nothing specific in the regulations that mean you have to do DTC in a different way if you're a scheduled drug, other than the fact that we need to be clear that we are scheduled. So that is fine, I think. Regarding CBT, honestly, I don't think we really see that as a competition. I think we're competing in the full prescription market and which is, in the U.S. alone, is 75 million prescriptions. CBT is variably effective and certainly is not widely accessible. So even though there obviously is a bit of momentum at the moment with CBT and apps and digital and so on and so forth, and it may grow some, I don't think we see it necessarily as anything that we would compete with. We'll take the prescription competition that comes after that, which is still a very significant opportunity, particularly when you start pulling in a lot of the OTC medicines that people are cycling through. So although we can look at a 75 million script market, I think when you start putting the OTC medicines in, it gets larger than that. So we're not intending to really reference or go after CBT. It's all in the post-CBT prescription market. And for many people that don't get to go through CBT anyway because it's just not accessible or, in some cases, not recommended.

Great. Thank you, Simon. André?

Yes. Sachin, regarding your -- maybe your second question regarding funding, you know, and I never say never. So I would not rule it out, to tap equity capital markets, but that's, I would say, unlikely for the time being. And again, we are not against the wall. So we'll still closely monitor the equity or equity-linked capital markets. But we have a clear preference for nonequity-dilutive deals, royalty monetization or outlicensing deals. To your question regarding the outlook for 2025, well, one thing is to set expectation. We see -- crossing the CHF 1 billion mark, it's even better to beat these expectations. We need a little more time to see the uptake here in the U.S., get also the pricing in Japan for clazosentan, get also the pricing in the European countries. As you know, it's a [ hurdle ] race to launch a drug in Europe following EMA approval. So -- but we are confident that we'll be above CHF 1 billion, i.e., beat this expectation. Coming to the OpEx, it's -- we are first committed to profitability. So if the sales are not at the level that we expect, we will adjust the OpEx. So it's really a commitment of the whole team, and we discussed it yesterday with the U.S. team. They know we grant them all the financial means in order to meet their objectives. And they know that there is only one way, i.e., succeed, as Simon said. So it will be really an exercise depending on the ability to grow our sales and to adjust accordingly, but having a better profitability as the OpEx.

Thank you, André.

Your next question comes from the line of Jo Walton from Credit Suisse.

I'm afraid I'm going back to QUVIVIQ and the U.S. and a little bit on Europe. Can you tell us how important the elderly market is to the overall demand? And when your latest thoughts are is when you might be able to get Medicare coverage? If we look at the script as simple analysts, we tend to look back at the initial scripts of Belsomra, for example. Is there anything that we should look out for that is going to be different with your QUVIVIQ launch? Is there going to be higher levels of couponing, which will mean that there's a shorter period of time, there's a more depressed initial ramp despite good penetration? And I wonder if you can tell us a little bit about the EU negotiations that you must presumably be starting. And how we should think about Europe as an opportunity on top of the U.S.?

Simon Jose.

Thanks, Jo and Andrew. Yes. So the elderly is a very significant population for us on several counts. One is the prevalence of insomnia in the elderly is high. And actually, the plus 65s account for a significant part of the market. And actually, they are the ones that are most underserved because the Zs and the benzos are really not used well in that population in the U.S. They're on the Beers list. So they recommended that those products are not used. So you've got a population that is not sleeping well, is at risk and is almost more underserved than the rest of the population. So we see a big opportunity. And actually, if you look at our clinical data, the clinical data that we've generated are very impressive in the elderly. I mean you look at the somnolence rate in the over 65s and you can see it in The Lancet supplement, our somnolence rate in the over 65s on the 50-milligram dose is 0.8%. So we've got a very differentiated profile within the elderly population. So we see a big opportunity in the over 65s. In terms of access to Medicare, if you look at the straight line timing, we would be looking at January '24 for access because, obviously, that's just a straight process that we have to go through, given the timing that we are launching. That said, we are going to be talking to CMS and to some of the plans to see whether we are able to accelerate based on the need this population has and based on the profile of the product that we have in our hands. We don't know how that will work out. So we would hope that we can get a product added off-cycle and earlier than Jan '24, but that's yet to be confirmed or determined, obviously. In terms of Belsomra and ramp, first of all, Belsomra didn't have a bad start. So actually, if you look at the ramp of Belsomra for the first 4 to 6 months, it was actually quite good. The problem is it then essentially went flat because the product didn't deliver on efficacy. So I think we will see, I think, a ramp that should match, exceed Belsomra. But I think it's the really important thing is what you see after 6 months. Does it continue to grow? And are we getting repeat business? Because ultimately, that's what's going to drive the long-term value if we actually get patients on the product. They like it. They respond well, they want to stay on it. And then that's really, as I say, what will drive the long term. And Europe, so I think Europe is a big opportunity, actually. And I think people are probably underestimating it. I think the regulators and even the payers are almost more concerned about the use of Zs and benzos than we see in the U.S. And you see in Germany, for example, they restrict access to 4 weeks only. In the U.K., it's 2 to 4 weeks. So patients who basically have symptoms for more than 2 to 4 weeks have no options at all available to them. And we're going to come in with an indication, of course, that is chronic use based on our 3-month data and our 12-month extension. And we're the only DORA that will enter the European market. So we're going to stand alone in a market where there's no other product that can be used for long-term use. And we're seeing great interest and great receptivity amongst the opinion leaders, in particular, and in our early conversations with payers. And we're talking to Germany and the U.K. at the moment. There is significant interest in the product because of their natural concerns about the use of Zs and benzos.

Thank you very much, Simon. Very clear. On that note, I did get a question through the webcast that was very dari-focused, so I thought I would slip this one in, and it concerns the couponing. And André, if you could provide some clarity as to how couponing is going to be accounted for in terms of revenues. How does that function? A very detailed question, but I think it fits in nicely here.

Yes. No, the couponing cost is in the deduction between gross to net sales. So the CHF 120 million net sales that we guided for 2022 includes the couponing.

Okay. Very clear. So the CHF 120 million basically already takes that into account because that is already deducted for. Okay.

Your next question comes from the line of James Gordon from JPMorgan.

James Gordon, JPMorgan. Two questions, please. One was about revenues and the guidance for this year. So the CHF 120 million of sales, is that including a double-digit revenue contribution from PIVLAZ? Or is the vast majority of the CHF 120 million going to be QUVIVIQ? And QUVIVIQ or daridorexant, [ those stay ] more easily, so not launching until May. Are you expecting to have much stocking? Or otherwise, might it be very back-end weighted? So to manage our expectations, 2/3 or 3/4 of the CHF 120 million ends up being in Q4 this year? Or are you expecting more even spreads? And then just one other question on the '25 top line target. So I saw that you don't include clazo in the West or apro, how much of that is because you still see significant risk around it versus the chances of them being divested? How confident are you in the 2 things on a relative basis?

Thank you, James. I think, André, on both accounts, you probably know best how those numbers came about.

Yes. James, we don't want to disclose the breakdown between QUVIVIQ, mainly U.S. Because it will be really launched in late Q4 in Germany and Italy so almost no sales in Europe. So it's mainly U.S., but it also includes a significant amount for clazosentan in Japan. Of course, the amount will also depend on the speed of uptake for clazo, but also, of course, we see a price. We are currently negotiating with relevant bodies in Japan. If you look at the phasing, as you understand the speed of uptake, you want the, especially with the co-pay and couponing, you will -- in order to -- against this early adoption that Simon had mentioned, you won't see much sales reported in Q2 but increasing over time, Q3 and, of course, Q4. And of course, moving forward, we expect this exponential curve in '23 and beyond. So back to 2025, yes, as I said, you're right, not speculate on any additional approval. The CHF 1 billion, and again, as I said, we hope that we'll be able to meet these expectations. We'll be mainly daridorexant -- mainly U.S., but Europe, depending also on the price that we'll be able to negotiate, could be quite significant by 2025. And here, again, we only include the [ CEU ] for U.K., Canada and Switzerland, not adding any other countries in this staggered approach. And for clazosentan, I think that we will -- it's under -- it's like QUVIVIQ in Europe. In my view, it's significantly underestimated by all the analysts. And I hope we will be able to positively surprise with the sales of clazosentan in Japan.

Okay. Thank you, André. Can I just very quickly follow up? The CHF 145 million, does that include any kind of stocking?

The CHF 145 million, you mean the CHF 120 million for net sales, plus the CHF 25 million from deferred revenue?

Exactly.

Yes, it includes the normal stocking, obviously. But it's a low proportion, especially for Japan and, of course, slightly higher for daridorexant in the U.S.

Okay. And Jean-Paul, do you want to give another outlook on how bullish you believe apro is going to come through as James put out the question whether that was one of the reasons why it's not included in the numbers?

I think you can never be 100% sure. But this program has been based on the FDA recommendation. It's really the FDA who designed with us, and they told us we won this program for resistant hypertension. So I don't think there is, if the study is positive, regulatory risk. And the results, as I said, looks outstanding. So I think there is a very low chance of failure at the stage we are now with this program.

Okay. Thank you, Jean-Paul. I'm aware that we are already 10 minutes after the hour. We're going to let this continue to run. Operator, are there more questions?

There is. Your next question comes from the line of Lucy Codrington from Jefferies.

Just a few left for me. Just, if you could, what would be a kind of reasonable price per patient for us to consider for clazo in Japan? And then finally, just on your marketing strategy for daridorexant, how the roles are kind of split between yourselves and Syneos? And what proportion of patients are seen outside of the primary care setting?

Thank you, Lucy. Simon, do you care to take both of those?

Yes. I'll take those. Yes. We're not in a position to disclose price on clazo in Japan at the moment. We're in the negotiations with the authorities. We should -- you should see that in April when we conclude. So hopefully, your question will be answered in a few months from now. But we're not in a position to disclose that at this point. In regard to Syneos, essentially, Idorsia is fully in control of the strategy and all of the core commercial capabilities in the U.S. So we have obviously the marketing, the medical market access price and the strategic control of the brand. Syneos is essentially a sales force partner, and they are providing our sales force support. We have done that in a creative way with a revenue option for them, where they can gain some upside if they perform well. But essentially, the costs all run through the OpEx. It's a contract sales force, but we've done it in a way that we allow them to have a performance benefit if we overachieve. But essentially, they are the sales force that we're in control and drive all of the strategy and the strategic elements of the product.

Thank you, Simon. So I've got another question coming in through the webcast asking -- this is one for Jean-Paul. We've got so many milestones coming through. The share price doesn't seem to want to always react to them. What is -- what are your thoughts on how the share price decoupling is from all of our milestones?

I think -- thank you, Andrew, because this is a very often question asked. And I think that we have -- at Idorsia, with the Board and with the management, we have decided, and this was very clearly explained by André. We are guiding on basically the base case, which we have described, which is dari in U.S., Europe -- in U.S., Europe and Canada and clazosentan in Japan. That's it. . All the rest is upside. And this is unusual. This is unusual into the biotechnology field, where most of the company are valued and their stock price depend on sometime dreams and hope and expectation. And there is no limit to dreams and expectation and hope. It's quite unlimited. It's very different when we make a base case like we do. And that has a disadvantage of maybe people who are not really thinking in this way to value us. Just the value on this base case, and they don't give much value for the upside. But that's our strategy. And that means, for us, that if we deliver on aprocitentan, if we deliver on the clazo in U.S. and Europe, if we deliver in many of the other projects, lucerastat, maybe we are going to turn around the situation. If we succeed, we can really markedly change our stock valuation. So I think it's much nicer and, I have to say, not to be in a situation to disappoint the market but too surprising on the positive side. That's our strategy.

Excellent. Jean-Paul. Operator, do we still have questions in the queue?

Yes. Your final question from the audio comes from the line of [ Miriam Kaplar ] from [indiscernible].

I have two questions. Can you tell me something about your expectations regarding the peak sales of daridorexant? And my other question is that the equity ratio dropped from 41% to 7%. Does that concern you?

Okay. So I think on expectations, Jean-Paul, I think best is if you give us some outlook on what you believe. And on the equity metrics, André, maybe you want to take or tackle that?

I think that the drug, daridorexant, has 14 years of patent life, or at least. And so I think what is going to be the sales in 14 years, I cannot predict. I think like I can predict, it will grow for the next 14 years because we don't have much competition. And frankly, that drug, Ambien, or what is -- I just forgot the generic name, but setting -- it was setting for CHF 4 billion in 15 years ago when it was not before becoming generic. And so I think that under these numbers, I would be very disappointed in the future. And then that is -- the other question, sorry, I forgot.

The other one is for André on the equity ratio dropping from 41% to 7% as we -- basically, we have a reflection of the convertible bond portion on our balance sheet. Does that concern you, André?

Not at all, just to give a straight answer. Our -- and also taking the metrics from U.S. GAAP accounts, where the -- for instance, we know the convertible bond of J&J will ultimately convert into new shares. But according to U.S. GAAP that says a conversion feature leading to this accounting treatment. Again, we're not funded to breakeven. We have various ways to a fancier company. And this should, at one stage, be reflected in the equity.

Excellent. André, thank you. We did get two more questions on housekeeping and pipeline on the web from -- in written format. So on both selatogrel and lucerastat, Jean-Paul, where are we right now with those 2 compounds?

So selatogrel, Phase III, fully ongoing, starting -- we are really starting to include patients. We are opening centers by hundreds. It's several hundreds of centers. And we are going to really get the pressure rising now this year in terms of getting more and more patients recruited. So that's going well. And we are quite in good situation for the auto injectors to the production, everything is ongoing. So that's for selatogrel. And I think the other question for lucerastat, we -- as I said, we got fantastic biochemistry data. We got a very strong signal on renal function. And I would say, also on the cardiac, we see some very interesting observations on the echography -- cardiac echography. Now we are continuing to observe these patients in order to get a large number of patients treated for 2 years with lucerastat. And we are starting -- we will discuss with the regulatory authorities if we can use this data by comparing them with an artificial or historical, if you will, control group, like it was done with Fabrazyme from Genzyme. This was the way they got full approval. So we are going to discuss with the FDA, but some other countries have very different request in terms of what is needed to approve such a drug in an orphan disease. And we are discussing with other regulatory authorities also. So I think, at the end, I'm very hopeful that this drug can be approved in as many country as we can.

Thank you, Jean-Paul. And then one more for André regarding flexibility of the commercial costs in 2022. How much wiggle room is in that cost block that we are guiding for 2022 if the commercial ramp up were to be slower?

Well, for 2022, not much because we need to really properly launch the drug here in the U.S. You launch only once so you need to succeed. So it's really more stop and go, depending on the uptake moving forward '23,'24 and beyond.

Excellent, André. So we've exhausted all the questions. We've come to the end of this call. We've passed over the hour significantly. So thank you very much all for your ongoing interest in Idorsia and wanting to know how the story is going to evolve over the next few years. It is very exciting. So stay tuned. Operators, please close up, close down the lines.

That does conclude our conference for today. Thank you for participating. You may all disconnect.