Ipsen S.A. (IPN) Earnings Call Transcript & Summary

Good day, and thank you for you standing by. Welcome to today's Ipsen H1 2021 results. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to speaker today, Ipsen's Chief Executive, David Loew. Please go ahead, sir.

Thank you. Good afternoon, and good morning, everybody. I'm delighted to welcome you to our first half 2021 results call. And it's a real pleasure to be here today to update you on our performance and outlook. Please note that our presentation is available on ipsen.com. Please turn to Slide #2. This is our safe harbor statement, which outlines the routine risks and uncertainties contained within this presentation. I also wanted to mention that the commentary you'll hear today will be on our performance in the first half of the year, unless stated otherwise. Please turn to Slide 3. I'm very happy to be joined today by our CFO, Aymeric Le Chatelier; as well as Howard Mayer, our Head of Research and Development. Howard will be with us for the Q&A session later. Please turn to Slide 4. Here is the agenda for today's call. I will start our presentation with a business overview, after which Aymeric will take you through our financial performance in the first half as well as our improved full year guidance. After concluding remarks, we'll be happy to take your questions. So let's go to Slide #5. So let's begin with the business overview. Let's turn to Slide 6. The headlines from the first half are that we continue to make good progress with a strong performance that were a result of our new strategy for growth. Total sales increased by 11% to EUR 1.35 billion, with Specialty Care at 92% of total sales, also growing by 11%. This was despite the ongoing impact of the pandemic on rates of diagnosis, treatment and patient care, though we do see gradual signs of improvement, particularly in China. Our Consumer Healthcare business, up by 9%, also delivered a very encouraging performance. Cost savings driven by reduced face-to-face activity as a result of the pandemic, and first, efficiency gains, helped to reduce the ratio of SG&A costs to total sales down to 36% while our core operating margin grew to 35.5%. We also generated EUR 291 million of free cash flow in the first half, up by 25%. Through this presentation, you'll get a sense of how these results were driven by our new strategy and why we have the confidence to raise the full year guidance that Aymeric will take you through. I want to thank all of my colleagues at Ipsen, who've made these results possible. They have continued to work so hard in trying circumstances to serve patients, and they are the reason we continue to be a growth business. Please turn to Slide #7. We increased the sales of our oncology brands, delivering 9% growth in the first half and increasing market share, all against the backdrop of the pandemic. Somatuline sales were up by 5% with a good performance supported by further market share gains. We did observe the very recent launch of generic lanreotide in Germany, and we anticipate further launches in Europe this year. Decapeptyl's strong showing was driven by the performance in China, partly reflecting the comparison to last year. We grew Decapeptyl's market share in the period and continue to focus our efforts on the 6-month formulation. CABOMETYX in monotherapy delivered strong volume growth, mainly in second-line renal cell carcinoma across most geographies. We are pleased with the recent launch of the combination with nivolumab in Germany, and we look forward to further launches in due course. ONIVYDE was particularly impacted by the effects of the pandemic in the U.S., but was helped by higher sales to Ipsen's ex-U.S. partner, Servier, leading to overall growth of 1.5%. Please turn to Slide 8. We also increased sales outside of oncology. Neuroscience dominated by Dysport, delivered strong growth of 28% driven by an encouraging recovery from the pandemic in most markets, particularly in the second quarter, reflecting a favorable comparative and a good Dysport performance in the North American and European therapeutics markets. Ipsen and Galderma both did well in their respective aesthetics markets. And we also saw encouraging potential from newer markets, such as Russia and the Middle East. Please turn to Slide #9. Turning to Consumer Healthcare. I was very pleased with the strong growth in the first half. It was a very encouraging performance as we gradually began to exit the pandemic with the recovery of the diarrhea and viral cleansing markets, particularly in China and Russia, and good Smecta OTC sales. Overall, we saw encouraging signs in our consumer business. As stated before, we are conducting a strategic review of our consumer business, which is progressing well. I cannot, however, provide more details at this time. Please turn to Slide #10. Our pipeline is getting stronger. We are excited about the number of potential medicines and indications. And here, I wanted to draw your attention to several opportunities. Please note that the clinical trials breakdown is contained within the appendix of this presentation. In oncology, we were pleased to opt in with Exelixis in differentiated thyroid cancer, a small financial opportunity, but a big potential step for patients. Regarding the RESILIENT Phase III trial for ONIVYDE in second-line small cell lung cancer, as you know, we conducted an interim analysis, and we were pleased to have passed the futility. We cannot provide more details at this stage, however. We also announced an exciting preclinical oncology licensing agreement this month, together with a clinical stage licensing agreement in Parkinson's disease. I take you through these exciting developments in a moment. The first patient also commenced dosing in the first half of the year with the recombinant long-acting toxin in both aesthetics and treatment indications. Lastly, we are making progress in the U.S. and Europe for palovarotene in FOP after we received regulatory submission acceptance in the second quarter. Please turn to Slide 11. As I mentioned a moment ago, we accelerated our external innovation efforts in the period with worldwide licensing agreements in both oncology and neuroscience. Our agreement with BAKX Therapeutics is for a preclinical oncology program, targeting the apoptosis cell pathway where we have obtained the exclusive rights to develop and commercialize investigational treatment, BKX-001, currently being evaluated as a potential treatment for leukemia, lymphoma and solid tumors. We have also obtained the exclusive worldwide rights to develop and commercialize the investigational treatment, mesdopetam, which is based on a novel mechanism of action. This exciting potential medicine has showed promising improvements for people living with Parkinson's disease who experience levodopa-induced dyskinesia. IRLAB will continue to be responsible for the ongoing Phase IIb trial, and we will initiate Phase III preparatory activities. We are very pleased with these agreements, and given the clear strategy and increased focus of a stronger team, we can expect more to come. Please turn to Slide 12. Part of our strategy is to focus on Ipsen's culture and key to our culture is how we can positively impact society. I'm heartened to see how the level of engagement in our CSR agenda has developed across Ipsen. We unveiled the 2024 CSR pillar targets at the Capital Markets Day in December, and I plan to regularly update you on the progress we are making against these targets. I won't take you through everything you see on the slide, but within the employees pillar, we decided to establish a balanced gender target ratio for our global leadership team by 2025. A similar time frame has been established for the executive leadership team at the minimum of 35% of both genders. Turning to communities. You may remember that our revolving credit facility includes a key CSR element. Favorable results by Ipsen versus CSR-based targets are rewarded with charitable donations. And I'm very pleased to say that one of these was recently awarded to International Health Partners, a charity supporting people in some of the world's most challenging places to get the medicines they need. Finally, within the environment pillar, I can confirm that Ipsen is now using 100% green electricity across its site in the U.K., Ireland and France. With that, I'll hand over to Aymeric Le Chatelier, and please turn to Slide 13.

Thank you, David. Good morning, good afternoon, everyone. I will now run through our financial performance in the first half of the year as well as the detail of the improved full year guidance. Next slide, please. As you see, we delivered a strong growth in the first half across sales, margin and cash. Both parts of our business, Specialty Care and Consumer Healthcare performed very well despite the ongoing effect of the pandemic, while our core operating margin grew by more than 3 points supported by our strategic focus on growth and costs. It was this performance in the first half that gives us the confidence to raise our full year guidance. Our financial focus is also on cash generation with a strong EBITDA growth of 16% in the first half, driving a 25% increase in free cash flow. As a growth business, we are determined to maintain our discipline over cost, working capital and CapEx so that we can further build before we execute our plans for external innovation. Please turn to Slide 15. Looking at our core operating performance, you can see that we were able to improve operating margin by leveraging top line growth, improving our gross margin and managing our cost base. Sales growing at 11% at constant exchange rates were adversely impacted by foreign exchange rates, mainly from the U.S. dollar and the currency from emerging markets. On the gross margin, it grew by 2.2 points, driven by favorable movements in mix and manufacturing variances as well as the growth of other revenue, reflecting increased royalty on one part received from partners mainly for Dysport and some one-off revenue from out-licensed deals. Turning to R&D expenses. We remain focused on long-term growth of the pipeline and the investment in life cycle management, palovarotene and next-generation toxin helped to grow R&D investment to 15.4% of total sales. As David mentioned, we are pleased to see the ratio of SG&A cost to total sales to fall by 1.1 points to 35.8% of total sales. In the next slide, I will take you through the detail of that performance. Please next slide. In the first half, we continued to invest to support the growth of the business. Further investments were made in the launch of CABOMETYX combination in first-line renal cancer and in the preparation of the potential launch of palovarotene in FOP. There was also a progressive recovery of activities impacted by the pandemic and inflation and performance compensation in latter part. We are, however, leveraging top line growth to generate savings. H1 was also impacted by some obvious savings in travel expenses and face-to-face medical meetings given the persistence of the pandemic. We also began to deliver some efficiency gains across procurement, project prioritization, digital and manufacturing initiatives. These savings drove the decrease in SG&A cost to total sales to 35.8% as compared to 37% in the first half of 2020. Also this level is still impacted by the pandemic. We are confident that through our efficiency program, we will further reduce structurally the ratio of SG&A to total sales over the midterm horizon to be more in line with our Specialty Care peers. Please turn to Slide 17. Ipsen continues also to improve the cash flow generation of its business. The growth in core operating income drove a similar increase in EBITDA, while the free cash flow increased by 25% to almost EUR 300 million, thanks to sound management of capital expenditures and working capital. Our strong balance sheet with a net debt reduced by EUR 189 million to EUR 337 million, underpin our ability to build fire power for external innovation opportunities. Today, we have around EUR 1.7 billion of capacity available for pipeline expansion, and we have confidence in our target of delivering around EUR 3 billion by 2024. And as you remember, all of this is based on the conservative ratio of 2x net debt to EBITDA. Next slide. I want now to provide further detail on the upgraded full year 2021 guidance. Given the strong performance in the first half, we now believe that total sales should grow by at least 8% as compared to a previous guidance of sales growth greater than 4%. It is really important to recognize the higher level of comparative in the second half of the year as compared to the first half and also that we need to anticipate further launches of generic lanreotide in Europe in 2021. You know that we do not, however, anticipate any launch of generic SSA, whether it is octreotide or lanreotide in the U.S. for this year. On top of this sales guidance, we still expect an adverse impact from currency on total sales of around 2% based on the level of exchange rate at the end of June 2021. Given the high level of operating margin in the first half and assuming a continued progressive global recovery from the pandemic, we have raised our core operating margin guidance to around 32% of total sales instead of greater than 30% previously. To be clear, and to remember, this guidance excludes any potential impact of incremental investment from external innovation. And now I will hand back to David for the conclusion. So please turn to Slide 19.

Thank you, Aymeric. So let me sum up today's key messages and let's turn to Slide 20. We remain focused together for patients and societies. This is why we are making excellent early progress. And I'm pleased that our strong results were seen in double-digit sales growth, cost efficiencies and improving operating margin and excellent cash generation. We're delivering against the strategy, maximizing our brands and strengthening our pipeline to provide a platform for sustainable long-term growth. We're in the initial phase of our efficiencies program designed, as Aymeric said, to ensure our ratio of SG&A costs to total sales is more in line with our peers. The CSR progress we are making is because our positive impact in society is central to our culture. And finally, our full year guidance has been raised across both the top line and operating margin, illustrating our positive outlook for the business. So Slide 21. Thank you so much for listening to our presentation. Aymeric, Howard and I will be happy to take your questions. Operator, over to you.

[Operator Instructions] Your first one comes from the line of Elizabeth Walton from Crédit Suisse.

Elizabeth Walton from Credit Suisse. I have 2. Firstly, on Somatuline, we see that the U.S. sales are starting to plateau. Can you help us here on what are the key drivers of return to growth in this region? And secondly, on Dysport, we saw nice sales there this quarter. Historically, there's been lumpiness of the aesthetics sales to Galderma. Is Galderma currently saturated with supply? Or should we think about it as real-time inventory and that's sort of sustainable growth?

Thank you, Elizabeth. On your first question on Somatuline U.S. sales, well, plateau is perhaps saying a little bit too much. We are in the Q2 growing quite nicely. We have seen, however, somewhat a little bit of slower growth triggered by the pandemic impact, as we have seen in many oncology indications. And since the new patients are constituting 10% of the total patients, you see that effect relatively slow on Somatuline, much lower than, for example, on ONIVYDE. And so what we are observing right now is that we have seen that since the pandemic started, less new patients were diagnosed, and we have also seen some patients skipping doses because they were afraid to go to the center to get the injection. We also see some patients when they are progressing, for example, on Sandostatin, that the physicians say, you can wait a little bit until the pandemic has slowed down and then you come to our centers. So we have a bit of, if you want, a jam in terms of -- patients now starting to turn up again to the centers and being put on the drug correctly. So our assumption is it's going to start to recover with more people getting their vaccinations and with more people starting to show up in the hospitals again. On Dysport, yes, our production is having enough supply. So aesthetics, for sure, will continue to grow. We see it in the Galderma territories and also in our territories performing very well. But we also see that the market on therapeutics has also started to recover well.

Next question comes from the line of Sachin (sic) [ Sachin Jain ] from Jain (sic) [ Bank of America ].

Sorry, Sachin Jain, Bank of America. Two please. One, Aymeric on margins. I don't know, no specific guidance for next year, but wondering if you just discuss high-level progression into next year. The background for the question is obviously, very strong margins this year to the highest you've reported for guidance at 32%. Just trying to understand how the balance of reinvestment versus sort of COVID costs coming back versus however Somatuline generics impact next year where the margins can be flat, up or down '22 versus '21. The second question is just on palovarotene. David, wonder if you can provide any color on ongoing FDA debate. I think there's been some commentary on road show conferences that you're confident the product is approved and you're expecting that [indiscernible] really to be around age cutoff. So any updates there?

Very good. Thank you. Aymeric, do you want to take the first one?

Yes. So thank you, Sachin, for the question. So I'm not going to comment on the margin to be expected in 2022. And as you know, we're going to provide early next year guidance and visibility. I will maybe further comment on the performance H1, and how we see the performance in H2 and the profitability. So clearly, the outstanding performance 35% margin in H1 this year is not representative of where we want to bring the business. There is a clear level of savings that is generated by COVID. At the same time, we are progressing very well on our efficiency program, and we expect that once we're going to start to be impacted, especially at the gross margin level because you remember on that part of what is driving also the lower profitability expected in our guidance for H2 as compared to the 35% delivered in H1, we will be able to implement this efficiency to maintain our profitability and to be able to lower our SG&A more structurally to the level that we have achieved in H1.

And then on your second question, Sachin. Perhaps I can actually ask Howard Mayer to comment on this.

Okay. Great. So regarding palovarotene, just to recap, as you know, the NDA was accepted for priority review by FDA at the end of May and the action date as at the end of November. The review is progressing as expected, and we're cautiously optimistic with FDA asking questions and requests for additional information in areas where we expected them to ask. Based on discussions with FDA, we believe it is likely that there will be an advisory committee meeting later in the cycle, and the team is actively and intensively preparing for one. We think the most likely questions to the advisory committee members will be around the comparison of the Phase III MOVE study to a natural history cohort, and that comparison and the statistics there. And also as, expected, the lower limit of age acceptability in terms of benefit risk and the inclusion of skeletally immature patients in the label.

Aymeric, can I just take a follow-on, perhaps just to clarify the margin question. Maybe asking in a different way. So full year guidance was 32%. Consensus doesn't model margins beyond '21 being higher than 30%. I'm just trying to understand how much of the 32% for this year is one-off? Or would you just frame this as a sustainable uplift? And maybe I ask it that way.

Yes. So maybe to add a little bit. I'm not going to provide you a midterm guidance. I think we provided at the Capital Markets Day, the direction where we want to go. And as you know, R&D investment is going to be also one of the big components. So again, as I said, gross margin, which we see structurally be impacted by potentially entry of generic on the Somatuline market, I think SG&A where we are progressing what you see some of that is conservative. There's going to be ongoing efficiency to be generated, which will offset the part of this reinvestment. And then R&D, as you know, we still have a pretty significant level of Phase III. And now external innovation is going to play a significant role to the long-term profitability beyond -- 2022 and beyond that we see.

Comes from the line of Arsene Guekam from Kepler Cheuvreux.

Arsene Guekam from Kepler Cheuvreux. A follow-up question to the previous one. What part of the cost savings do you think you will be able to keep in the future in a world post-COVID with more travels and face-to-face meeting? The second one is on Dysport. I would like to understand what led to the significant growth during the quarter? Sorry? Okay. For my second question, I just would like to know, do you think these sales are only catch up sales? Or do you think this is very sustainable in the future?

Yes. Thank you, Arsene. On the cost savings, I think, Aymeric, you can comment a bit further.

Yes. So on the cost savings, you're right to say that there are both. I mean, part of the cost savings are clearly structural savings that we expect to retain. There will be some reinvestments. And clearly, we know travel expenses are going to progressively restart as we recover from the pandemic. And I think that there is also new way of working, and we know that face-to-face interactions are going to be reduced. Attendance to congresses are going to be different, and there is a lot of initiative within the group where we expect to be able to drive efficiency through more digital, to be more efficient and also to adapt to this new environment. A lot of that will have to be compared to the cost base 2019 because, as you know, the level of travel increases and activity was very, very limited in 2020. So when you compare our results in 2021, this is more additional costs that we expect to be able to spend as we progressively recover from the pandemic.

And then on Dysport, so the growth during the quarter is, of course, having a significant component of low base comparison versus last year because we have seen in Q2 patients coming back to treatment centers, whereas in Q2 last year, they were all confined and the market was significantly depressed. Now we have to keep in mind, so the growth is going to start normalizing again over the coming quarters because we are starting to come back to more normal levels. We're not fully back yet. So there will be still a bit of a catch-up. But the underlying growth is also there. In aesthetics -- aesthetics is a strong growing market, and the treatment space is also growing very nicely. So you, probably not going to say the exact same growth rates that you have had in the Q2 because of the very low base comparison, but we will see further growth on this also in the future.

Comes from the line of Delphine Le Louet from Societe Generale.

Delphine Le Louet speaking here. Aymeric, sorry for that, but just quicker clarification regarding the gross margin scenario. Back in 2013, we were close to 80% gross margin. And we had revenue of Somatuline in the range of the EUR 280 million. We are close to, I mean, 86.2% right now in H1, and you already know the number for Somatuline. Most of the margin was driven -- the gross margin was driven not only by Somatuline, but also by very good increase in Decapeptyl and in Dysport sales. These 2 drugs are at least not changing anything regarding the scenario. So out of the 7% increase in terms of gross margin, how secure you are regarding the loss of revenue of Somatuline? Do you think about a 50%, 60%, 70%? And so I found very, very hard in reconciliating the gross margin -- not the gross margin, but the operating margin landing scenario you're talking about for this year, even if not talking about '22. So first question on that. Second question regarding China. And can we get, and especially any more comment regarding the capital? Excellent performance over there. Just trying to understand, have you done anything new regarding the targeting in terms of hospital, any change in marketing approach or anything we should know, any phasing, any stock issue or any inventory building up. Can you let us know about that?

Thank you, Delphine. So maybe if I understand correctly your question, I mean there's a lot of element in your question. So clearly, any entry of generic on the Somatuline market will have an impact on the overall gross margin of the business. And it is true to say that as we anticipate impact of generic in Europe for the European Somatuline, there will be a negative impact, both by the fact that there will be volume loss and there will be pricing impact. So we anticipate in our guidance for H2, which is embedded in our 32% that the gross margin of the group will clearly not stay at the same level as it is today. And this is combined with additional SG&A that we plan to spend given both as we've seen in H1, but to another magnitude, the recovery from COVID where there are going to be more, as I said, travel and expenses. There will be more activity that we expect to be able to do, and not to be back to the same level pre-COVID, but also to support some of the launch of prelaunch activity like preparing for the potential launch of palovarotene or also supporting the launch of CABOMETYX in the CheckMate-9ER first-line combo study -- combo indication. So all of that will clearly impact the level of profitability in H2, which explains the underlying guidance around 32% of corporate income.

And Delphine, to your second question regarding China, Decapeptyl. Most of it is driven by the recovery of the market. And of course, we are present in many territories. So we haven't really changed the targeting of the hospitals. We're focusing on getting the 3-month version listed and also to start to prepare the 6 months indication that we should get soon next year to come. Ex China, we had market share increases in several markets. So that was also helping the Decapeptyl sales.

Next one comes from the line of Emily Field from Barclays.

Sorry, this is Rosie Turner from Barclays. I'm not sure why that's coming up as Emily. But anyway, just a couple of questions from me about this lovely pipeline chart we've got on Page 10 and then the kind of, I guess, external innovation. So I'm just wondering if you could give us a little bit more color around those long-acting neurotoxins? What the plan is kind of moving forward between the two? And kind of how quickly we can expect them to progress kind of through to something in Phase III and potentially registrational? And then on mesdopetam. Would that come into kind of Phase IIb and then you're obviously working on the Phase III preparation. Is that -- do you mean that now kind of fills your later-stage pipeline? Or are there going to be kind of further near-term plans to continue to bolster the pipeline?

Yes. So on the [ LANs ], just to set the expectation, we are not providing the launch dates yet. We are in Phase I in both, in aesthetics and in treatment with -- we have 2 candidates. And perhaps I ask Howard to elaborate a little bit more on the science because it can be quite interesting.

Yes. So we have 2 [ LAN ] programs. One is [ LAN A ], which is recombinant [ LAN A ] and one is recombinant [ LAN AB ] that contains -- it's a chimer of the heavy chain of [ LAN ] -- of recombinant toxin -- or botulinum toxin B and the light chain of A. And both of those preclinically showed evidence of an extended duration of activity. Right now, as David said, we have 3 ongoing Phase I studies, 2 with A and AB in aesthetics and 1 with AB in treatment in spasticity. And so those are progressing quite well, and we hope to have some data by the end of this year or early next year to be able to select A or AB to move forward with in aesthetics.

And on your question on the recent deal that we just did, we have said that we are hunting in oncology/hematology rare diseases and neurology. So these 2 deals were actually spot on, on what we have announced. And we are going to be looking really for great opportunities, which are exciting from a scientific point of view, but which are also reasonable in terms of deal terms. So we will stay very disciplined on the deal terms and go for the right opportunities in 1 of those 3 areas that we have determined as being strategic.

Comes from the line of Zain Ebrahim from JPMorgan.

Zain Ebrahim, JPMorgan. Just two questions for me, please. First question is CABOMETYX. Just following the disappointing HCC data, just wondering how you see the path to your peak sales of EUR 700 million. And if you can give us an update on expectations for non-small cell lung cancer and prostate cancer in terms of your confidence in those indications and the timing of any data readout? And my second question was on the BKX-001. Just if you could talk us through the thought process behind in-licensing that asset in terms of what you've seen in the profile that differentiates it from VENCLEXTA.

Thanks a lot, Zain. Great questions. Hepatocellular is not going to influence the guidance that we have given with the above EUR 700 million peak sales. Reason is, you remember that we stated before that we don't have a patent on cover in China that we were looking in, okay, what is achievable there. Of course, hepatocellular has a very high incidence in China. And so therefore, in our forecast model, HCC was actually not having a very large weight. In addition, it's quite an ironic effect. Of course, if you do not bring a new indication, your price is going to stay where it is with the renal cell indication. So short term, it will be actually slightly accretive. Of course, longer term, we will lose a little bit of sales, but it was not so meaningful that we have to change the guidance. So we're going to stick to our guidance there. In terms of non-small cell lung cancer and castrate-resistant prostate cancer, you remember that we have had good Phase Ib results. And so we are believing that this is a good combination, and we expect the filing till 2023. On BKX-001, perhaps I can ask Howard to elaborate on the differentiation question.

Sure. Thanks, David. So BAKX is actually a member of the BCL-2 gene family, which is an activator of apoptosis. So it's the downstream effector of BCL-2, which, as you know, is a pathway that has been validated by venetoclax. But this has been a relatively difficult target to drug until the BAKX team. And what we've seen is very good single-agent activity in vitro and in vivo in resistant refractory hematology models and actually synergy with venetoclax. So the hope and the differentiation is actually to get a drug candidate that we can move forward to actually address resistance to BCL-2 inhibitors.

Next question comes from the line of Sarita Kapila from Morgan Stanley.

Sarita Kapila from Morgan Stanley. Two, please. So the first is on Somatuline generic competition in Europe. Could you help us understand what pegged in your guidance in terms of the number of countries you're expecting the generic to launch in, in the second half of the year? And what volume share you're expecting in some of the key markets? And then secondly, on CABOMETYX, the Q2 is flat versus Q1. Perhaps you could help us understand how the launch in first line is progressing? And if you're seeing any patient flow here? And any feedback you're receiving from the physicians?

Yes. Thank you, Sarita. On Somatuline generics, I mean, we are not giving such detailed guidance on a number of countries and the volume share by key markets. What we are hearing is that [indiscernible] seems not to have had their logistics optimized to the degree that we were expecting. We were expecting their entrance earlier, in fact. So it's certainly positive for us. They have also not been able to translate their centralized approval into all the markets because they had 20 countries in the decentralized process. They only got 14 countries so far registered. And there is only 1 country so far where it actually has basically launched. So far, we see no impact of that launch, but it has also to be fair extremely recently. It was like 1.5 weeks ago. So in that sense, I think we have to see what's going to happen in the coming months. And if they are actually able to get more registrations and actually also able to deliver enough drug into the markets. We do know that they have pitched in the Norway tender. Then for CABOMETYX, in terms of patient flow and market shares and volumes, so you have seen that our sales kept on increasing. And we see good gains in volume, second line. And we see also the first-line launch in Germany starting to pick up. It's a bit early in terms of market research data. We have very recently launched. So we need a little bit more distance, but the feedback from the key opinion leaders is very positive. They see that cabo/nivo is bringing a very good balance of a very high efficacy and good safety combined with an excellent quality of life. So I think it's a very competitive regimen. Thank you, Sarita.

Comes from the line of Sachin Jain.

Thanks for additional question. I just had a follow-on palovarotene post the FDA comment. I wonder if you can just talk to any commercial sort of work you're doing ahead of potential approval year end and into next year around patient numbers and pricing. If you could update us on any of those metrics from a commercial perspective as we think about how to forecast sales for next year and peak, noting that consensus for next year is around, I think, 50 million and peak is around 150 million at the moment. So any comments you can make?

Yes. In terms of patient numbers, so as you know, the incidence figure -- the best incidence figures which exist are from [indiscernible] a from which have a very good registry of patients in France. And they estimate that it's 1.34 patients per million inhabitants. So if you run the math, that gives you roughly 1,000 patients in theory for the U.S. and Europe for the key countries. So therefore, what we are doing now is to really focus on trying to identify those patients because by far, not all patients are being diagnosed. In the U.S., we are doing deep analytics on the databases with certain markers where we believe that can be predictive for FOP. Our experience shows that we are able to identify patients based on that and working with the physicians and also with patient groups. We are starting to identify more and more patients. So that's certainly in all the countries now one of the key activities that we are entertaining. Because as you know, in ultra-orphan diseases, identifying the patients is a bit a search for the needle in the haystack. And it's a very important activity to bring patients on drug. So -- but these preparations are going fairly well, I have to say. Regarding pricing, of course, we can't really say the price. It depends what's going to happen in terms of the label that we're going to get, be it in the U.S. or also ex U.S. It's going to depend then on payer discussions. So you can expect that we're going to price it in the vicinity of other ultra-orphan disease drugs, which, of course, mathematically speaking since it's such a rare disease, it's going to be relatively high per patient, but the total budget impact is not going to be so significant for society. So I think it's price which is going to be sustainable for society and it's going to also have patients really benefiting from the drug. Regarding peak sales, so we are not giving any guidance as I have said in the past, and we are not changing that at the moment. As I said, we need to first know what the label is going to look like and also what the payer discussions are going to give us a feedback.

No further questions. Please continue.

Thank you very much, operator. We see no more questions. So I would like to thank you, everybody. Thank you for attending. Looking forward to seeing you at our Q3 results, and have a nice vacation if you haven't taken them yet. Wishing you all the best. Thank you.

This concludes today's conference call. Thank you for participating. You may all disconnect.