Orexo AB (publ) (ORX) Earnings Call Transcript & Summary

Hello and welcome to the Orexo press conference. [Operator Instructions] Today, I'm pleased to present Nikolaj Sørensen and Dennis Urbaniak, EVP Digital Therapeutics. Please begin your meeting.

Thank you very much, and thank you for those of you who are dialing in, and those of you who are following online. This is a fantastic day for Orexo and something that we have been working more or less around the clock for -- during the last few months. As we have previously announced, we have acquired the rights to several digital therapies in the [indiscernible], we were suddenly faced by the COVID-19 epidemic, which was both forcing us to change our operating model and preparation model, but it also gave us an opportunity to accelerate the launch of the products compared to the original plans, which were in late Q3 for vorvida and for deprexis and for OXD01, the plan was to launch that product in 2022. Now we have been able to advance all of these somewhat. It's also something that we will do in a way where we would need to take it step-wise. And as you probably read in the press release, we are now starting to reach out to payers, to health providers and to employers in the U.S. with the deprexis and in a few weeks' time also vorvida. And we have launched today the first Orexo-controlled web page for deprexis. When we get into September, we would be ready with the full launch. But because of the situation and the opportunity in the U.S., we have been able to accelerate the time line for when we can actually start selling the product. I'll move in to the presentation and jump faster with the legal disclaimer. I will, however, say we are providing some forecast and prognosis in this presentation. And given the early stages of digital therapies, of course, associated with a decent amount of uncertainty what will happen moving forward. But as you will probably hear during this presentation, we are full of confidence about the opportunity. And that's, of course, also reflected in the quite sizable investment we have decided to make in the launch of these products. Moving to Page #3. So just give a little recap, and that is kind of driven by COVID-19. And when we have had our Capital Markets Day early in March, we started to see countries locking down. There was an increased fear of the COVID-19 virus, basically, leading to a fast increase in different telemedicine, digital, virtual clinic settings where people could get in contact with health care without having to sit in the waiting room together with people who is potentially infected by COVID-19. When we came to April, already at that time, we saw that the fear based on similar situation and crisis before. For a significant rise in psychiatric disorders as a result of the lockdown and fear of the virus was expected, and the FDA decided to issue a new enforcement policy, which allowed products within telemedicine and digital therapies to launch on a much faster route than we would have been able to do otherwise. And that is partly what we are taking advantage of for OXD01 later in the year and also for vorvida. However, vorvida, we have sent in an application. Moving to the next page, Page 4. So what we are now seeing, and we see more and more headlines about this on a daily basis is that we have seen, unfortunately, that the death from opioid overdose increase. We have seen the opioid misuse is increasing. There's a lot of work -- a lot of discussion in the U.S. in the opioid addiction community about how the pandemic -- under the pandemic is right now not getting the full attention. And unfortunately, what we are seeing is that people who before maybe have been able to stop taking opioids are now relapsing maybe because loss of job or general anxiety due to the situation. Alcohol misuse is something that we have seen also in most countries and increasing, and there are several surveys showing how people are using more alcohol. And then we have seen the clinical -- level of the clinical depression going up, of course, as the result of the COVID-19, the lockdown, and I think what you see daily right now is more and more people losing their jobs. The fortunate position for Orexo is that we are in a position where we can help on all of these areas. We do have pharma pipelines to improve the treatment of opioid overdose. We, of course, have Suboxone for treatment of opioid misuse. We have OXD01, which will improve treatment of opioid misuse when we are ready to make the first step in the launch late this year. We have vorvida for alcohol misuse, and we have the deprexis for depression, which we are about to start commercialization of today. Moving to the next page. We -- in our Capital Markets Day, we gave some guidance and also later into deprexis when we signed the deal with deprexis, shortly after, we also gave a guidance for the deprexis. And we believe there is a sizable market for all of the 3 of them. Dennis Urbaniak will come in later talking more about the individual tools. So it [ drummed up ] quite fast. But for those of you who want to get a little more foundation [ and ] how we came up with these numbers, please look at the Capital Markets Day, where you can look more into the prevalence of the different diseases, number of patients, and you would quite easily see that there are not a lot of -- we don't need a lot of patients with these problems before we get up to quite sizable numbers. At the Capital Markets Day, we are also guiding on the price for these different products. And for vorvida and OXD01, which are both a 6-month treatment, the price range we gave was $600 to $1,000. We are -- when we go out and talk to payers and provide us at the moment, we are in the top of that range. However, like pharmaceuticals, we also expect that there will be rebates for different payers, which would put the net price somewhat down in -- within that range. But when we start up, we are in the top of the range. Deprexis is priced slightly higher a month, but deprexis is a 3-months treatment and for that, the price is not half, but it is somewhat lower. So we're talking a starting price of a range of about $300 to $600 per patient in deprexis. Again, this is something that now will be negotiated with different payers. And we will look at what kind of volumes they can provide and different types of business models that will decide the actual net price. And when we look at the competitive landscape, I think this is a fair price that we're asking for in this space. And one of the reasons just you know how the price come up is that we're -- when we're looking at the pricing of this, the benefit for a lot of the payers is you can actually use less therapy sessions. So we're looking at the price of therapy sessions as a benchmark, and this is where we come up with this pricing. Moving to Page 6. This slide were actually included also in our presentation at the Capital Markets Day. And it's a little of a reminder that while we're seeing a fantastic opportunity, every feedback we get from physicians and from payers and from patients in the market research we're doing right now is making us more and more confident that we're sitting on a great potential. But we are in a situation where there are no real established model. There's no established models for reimbursement, the commercialization pathway where you have pharmaceuticals, you have an established model with pharmacies that would pay to the -- would get paid from the insurance companies. We are selling to wholesalers. We have to set that system up here. We think we are quite advanced in that, and Dennis will talk a little more about that when we come to that. This -- but it is a -- we need to build this up from the ground. There are other companies who are a little more advanced than we are both within our disease areas, but also in other disease areas. And we're, of course, looking with great interest in what they have done so to understand what works and what doesn't work. We will, as we proceed, this is an area where I think the agility and speed of Orexo based on also our financial strength, we will continuously look at how the market will receive these products, how fast they will see adoption, we will see and if there are opportunities to accelerate the adoption by investing more, we have the financial sources to do that. If we see that the reimbursement and market adoption goes a little slower than anticipated, we will, of course, slow down the investment also. So it's a lot of having the ear to the ground at the moment that will guide us moving forward. Then finally, before I turn to Dennis, on Page 7, I just summarize the new guidance. So we have in the previous guidance, and for those of you who have looked at our Capital Markets Day, you will have noticed that we didn't include the launch expenses for vorvida. Deprexis came after that. And of course, OXD01, we had original plan to launch in 2022. And now we will start testing with selected customers already in the fourth quarter and be ready for a full launch in the second quarter. So in the new guidance, what we have in here is basically the cost of expanding our digital therapy engine. Most of those costs were already included in the vorvida plans, but now we have to expand it to cover 3 products, where we have to enable to do e-commerce. We need to set up payer support systems, data warehousing, analytical capabilities. And while we have now benefit of pretty large fixed investment in vorvida, there is a marginal cost of adding more products where we have a unique cost for all of them. That's, of course, the launch preparations. So when we come to the launch preparation of these 3 products, we have to develop marketing material. We have to -- OXD01, we have to do all of the branding work that we haven't done before, customer insight generation is something that we find is very critical to ensure we position this right when we come out, field force preparations and so forth. And then, of course, when you have done all the investment in the launch preparations, we come into the launch of the 3 products during 2020, which is including both nonpersonal promotions through social media, other marketing activities, but of course, also field force where we will have some synergies with our existing field force, but we also anticipate we will need to invest in field force reaching out to other customer groups that we're not seeing today. The little red star on the Slide 7 that you see in the middle is actually for OXD01. I'll just say that one, we'll do the final technical development during Q3. And in Q4, we will work with some selected customers to test it to ensure that the program works as is anticipated and there are no bugs and everything. The feedback is positive from the patients and payers before we are ready to do a full launch in Q2 the following year. The increased investment that we're guiding of about SEK 200 million. We're moving from SEK 550 million to SEK 600 million in the previous guidance to SEK 750 million to SEK 800 million in new guidance. That increased investment will hit -- some of it will hit over our Q2, but the majority, of course, will hit Q3 and Q4, an approximately equal amount for the last 2 quarters, but there will be a portion that will hit Q2 also, in particular related to the preparation of deprexis. So investments will be monitored, as I said before, closely during the launch, and we are ready to both accelerate and also to slow down a little if needed. When you look at the announcements we have made, I received a question around deprexis, the money we wrote in the press release for deprexis, I think it was SEK 115 million, is that -- whether that's OpEx or not. These are capitalized investments. They are included in the OpEx guidance in the term that now when we start selling, we will start depreciation of the investment also, but they are not in the OpEx, it's only costs that are on the P&L and not on the balance sheet. So the SEK 200 million is increased OpEx. With that, I will turn over to what I guess most of you are most interested in listening to, and that is Dennis Urbaniak, talking a little about what we're doing in the U.S. and then we'll start on Page #8. So Dennis welcome to take over.

Thank you very much, Nikolaj. As you can hear. It's a very exciting day. The market is certainly set, and we're ready and confident going forward that we can help answer a lot of that significant unmet need. And as I go through the business, I just wanted to highlight a few themes that you'll see in terms of how we're building out both our competitive capability and how we think we can best quickly serve the market. First, from an advanced data and analytics point of view, certainly, you'll see when I highlight the products. These products are quite unique in their ability not only to deliver a positive experience. But in the extensive study, you look at deprexis, it is certainly the foundation in terms of evidence. So we're going to take that evidence in terms of the outcomes and apply that to the business. And that will drive our investments as we go forward and really focus on analyzing not only the results of the products but the experience. And in the middle, we spent a lot of time on patient customer market insights and while we believe we have some of the best technology out there, we also know it's critically important to surround our customers and our patients, in particular, with a positive experience that makes it easy for them to not only acquire the products but to use them to get the full benefit. So that's been a major focus of our marketing efforts. And finally, as you heard Nicolaj talk about, we're starting by creating access and moving forward. And we're very excited because we have both the flexibility and the capability to align business models that align with our payers' business and enable broad access in a very partnered fashion. And so we'll explore different ways that we can create access for those products, and I'll share some more specifics as we go forward. So those themes are powering our business. And if we could move to Slide 9. We've been doing a lot of work on clarifying our insights on getting very precise targeting. And now we're in creating the access phase, and this is critical. We're going to take a very targeted approach against those markets with the highest need. And then as we create that access, we'll accelerate our investments around driving that customer engagement, demonstrating that value to the payers, the providers and the patients. And then certainly scaling to meet the full market potential. So it's a very disciplined approach that we have as we bring to the business. And if you can move to Slide 10, I wanted to just start with a quick overview of the products. Obviously, it's critically important that we bring gold standard products to market. You saw the announcement earlier in Q2 around the deal with deprexis with GAIA. And this is certainly a milestone type of product. It is grounded on cognitive-based therapy, cognitive behavioral therapy, but this is digitized counseling. And what's really unique about our products is you get the opportunity to have an interactive experience, having literally a counselor in your phone in your desktop, in your tablet that gets to know you, who can tailor the therapy to you individually. And this is where our products really stand out. Deprexis covers 10 different modules of exercises, but again, highly customized to that individual. Just like the best therapists would deliver a tailored plan to deliver the best outcomes. And what's most exciting is the consistent benefit that deprexis has shown and studied through peer-reviewed published evidence in multiple different clinical settings and consistently shows benefit across the board. So we know this is a product that's going to meet that unmet need in a very difficult area, and we're very excited to bring that forward. On the next slide, on Slide 11 is an overview of vorvida. And this is also a very exciting product, very unique in that here, we're helping people manage problematic drinking. There's really nothing else quite like this on the market today. There are options for abstinence, of course, for individuals that are really having a dependence issue. But there's a very sizable market in the U.S. that's growing now as a result of our current situation, where people are having negative impact on their lives based on their drinking behaviors. They may not be ready to move to a full abstinence, but they need help changing that behavior. And again, using the best standards of cognitive behavioral therapy in a personalized, highly interactive fashion, vorvida actually allows users to move at their own pace, and again, the evidence behind vorvida that was also peer-reviewed and published shows a significant benefit in terms of reduction in alcohol consumption. And so these are examples of taking a very powerful, personalized engine, applying it in an individual fashion to deliver the best results and with the benefit of doing it in your own home at the pace that you like. So really highly unique and very exciting. So it's terrific to see the strength of what will become these gold standard products in the market. Moving to Slide 12. One of the things we know is, while having those gold standard products is critical, you must have that, you also need to surround them with a positive experience and the right types of support tools so that individuals, whether that be doctors, patients or payers cannot only be properly educated about your products but can have a positive experience in terms of how they learn about them, how they actually acquire them and get started and then how they use them along the way. And this is very exciting to see that we are bringing forward equally compelling support programs. You see on the left is just a quick snapshot of our site that's gone live today, meetdeprexis.com, where you can start to begin some initial information about deprexis. And on the right side of the slide, I'm giving you a little bit of a sneak preview of some very, very compelling creative work that will be coming forward on vorvida in terms of presenting creative, as you would expect to see a normal type of an ad for perhaps an alcohol product, but giving the contrast of what an individual with problematic drinking might be thinking about, I would really love to have some different approach. And of course, now you have that with vorvida. So we'll have user-driven experiences around learning and acquiring the products, but also really compelling user-driven, creative and communication messaging in the marketplace to help accelerate the learning and really understand the benefits that the products can provide. Moving to Slide 13. Those core communication materials are terrific, but we're also putting forward what I believe will be an industry-leading patient experience platform for each of the products. So we are bringing forward services that will include things like hub services. Think of this as a patient concierge with a partner who can help understand what their options are for acquiring the product. What type of insurance coverage they have and the best way to get it, we'll have customer service covering all aspects of product, technical, medical and clinical support with both Level 1 and Level 2 support to ensure that all questions are answered quickly in a patient and customer-friendly fashion and storefronts for that portion of our business that goes down the e-commerce route where individuals with vorvida, for example, because of privacy reasons, may want to just purchase the product directly in the privacy of their own home. And ongoing customer relationship management and support all architected with a common experience that's focused on making things clear, simple and easy for our customers to get these products because we know when they do, they're going to get the significant benefits that they've been proven to deliver. So it's quite exciting to see the full-service platform that's coming forward. On Slide 14, we're very excited about the early feedback that we're seeing as we've been out in the marketplace, both formally and informally speaking to patients, providers, caregivers and certainly a lot of discussions with payers that are accelerating even further with today's launch. And you can see some of the specific quotes here. But for me, there's a couple of themes that we see consistently coming forward that give us great excitement about our ability to meet this important unmet need. The first is this opportunity to engage with the therapy at my own pace and the privacy of my own home or setting, really stands out. And today, because of the COVID situation, individuals have much more limited options against areas that were already big problem areas before this hit. And so now we can actually offer the strength again. You have the therapist in your pocket that you can engage with that gets to know you and can help you deliver a program that's actually going to help you drive that behavior change. The other thing that we're seeing is a very, very strong response to the products in terms of the experience that they drive. They're really well-crafted and designed, not only is the engineering perfected in a way to deliver the outcomes but the design aspects of that user experience are really market-leading, and we're seeing individuals just warm to them in a way that we know is going to drive use and ultimate delivery of those outcomes. So very strong initial feedback. And of course, we'll keep everyone posted as we go forward in terms of how we turn that into tangible access and then ultimately, experience and use across the board. Moving to Slide 15, that's that key next step. And Nicolaj alluded to the fact that this is quite an emerging market, certainly in the U.S. in terms of pathways for digital therapeutics. And one of the things we're excited about here is the fact that it is an emerging market, and we believe at Orexo that we have both the mindset and the capabilities to understand the different payer needs and payer businesses in terms of our partners that are going to reimburse and pay for these products and quickly align models that deliver value for them and create access to the marketplace. So we're not coming in saying you can only get our products in this one particular way. We're going to work across different alternatives that are aligned to the payer in the market we're looking to serve, and we're going to have a lot of focus on what we're calling these framework agreement models. These are models that are really focused on capturing, delivering and paying for value. And we know with the types of products we have in the marketplace, we're confident we're going to be able to do that, and we can also work together with our payers and providers to ensure that the appropriate target audience receive the products. So we're going to be working through right now establishing those alternate payer models, as you see. And then in September, with the full platform launch with our e-commerce, we'll also have options for those individuals where a direct purchase is the preferred option for their personal situation. So at that time, we'll have really a standard flexible model that allows us to move quickly to align to the market needs and again, to create access, which is such a critical aspect right now. And as we look to close, moving on Slide 16. Just a quick summary. Hopefully, you've seen from this short overview, back to those themes of advanced data and analytics, significant user driven experience, particularly patient experience, but also provider and payer and novel approaches. And when you look at that approach that we're taking to market with a very disciplined targeted investment and lay that against the market need today more than ever, these problems were significant when we started down this venture, just at the beginning of the year, now with COVID-19 and with all of the situations associated with that in terms of isolation, the unmet need is even greater than before. And the unmet need is different because people have to access the therapies in different settings. And these are settings that we work in and we can deliver on. So that value to patients is significant we can quantify that value, we can also quantify that for the providers and the payers that are involved, so we can see the common benefits around helping people improve their ability to recover, improve their ability to change problematic drinking and also improve their ability to manage through depression. So our focus is to become that leading provider, that patient-oriented leading provider with world-class tools, you can see that in the products, put a world-class experience around it and a nimble customer-focused approach to creating value and delivering partnered value. And finally, we're going to capture this across the board. The other thing we're very excited about is while we're bringing what we believe are the industry-leading standards in terms of evidence behind our products, we're going to continue to translate that evidence to demonstrate the benefit they're delivering. Again, back to that enforcement policy, that's a critical need in demonstrating how these new approaches are actually helping benefit those increases and issues that we're seeing as a result of COVID-19, and we're committed to help capture and communicate that evidence going forward. So across the board, the timing here is perfect. We have a very unique opportunity to help and serve a lot of people on the front lines of recovery and mental health. And hopefully, you can hear how excited we are and how much we look forward to sharing our results as we go forward. So with that, my portion is finished, and I'll turn it back over to Nikolaj for any closing comments or start of the Q&A.

Thank you, Dennis. So I -- we have received a decent number of questions ahead of time through e-mails, but I would actually like to open up for questions here first, and then if there are any questions we received on e-mail, we have not addressed from the Q&A, then we will take them in the end. So operator, if you'll open up for questions.

[Operator Instructions] Our first question comes from Samir Devani, Rx Securities.

Congratulations on the acceleration of the launch. I've got a couple of questions. Just in -- on the basis of the insurers, I know that Express Scripts has got a digital formulary. But perhaps you can just outline how many of the insurers that you're speaking to have a dedicated digital formulary? Just maybe map out the sort of work that you need to do with them to get these products added to those formularies. So that's the first question. And then I guess the second question is, will the patients that are insured, will they have to pay a co-pay? And then the final question is, are you considering any sort of direct-to-consumer marketing?

Dennis, I think they were all yours.

Yes absolutely. So thank you for the question. I'll kind of start with the last and go back. So our marketing mix will be quite comprehensive. We will be communicating with physicians, with payers and with patients directly where appropriate. Similar to our whole investment approach, it will be very targeted, specific, a lot of digital communications. So you're not going to see for example, ads on television, but we will have a number of different direct-to-communication vehicles and channels that will leverage appropriately for the products as it fits the market need. Your second question was around co-pay. And a lot of that is going to depend on the individual insurance plan and benefit structure that a patient has. So for example, if we make an arrangement with an employer for coverage. Some of the products may be offered directly through the employer without a co-pay or if it -- depending upon the level of benefit that, that individual has with their current insurance, it's possible that there could be a co-pay, and that's going to be really plan by plan specific depending on the nature of the agreement that we put together. So there could be some scenarios where that exists. There could be others where they actually can acquire the product directly without a co-pay. And that's actually related to your first question, where you mentioned, yes, ESI has publicly stated that they have a digital therapeutics formulary. Caremark has also communicated that they are developing one as well. And so you have, on the pharmacy benefit manager side, 2, if not be, 2 of the largest PBMs looking at putting this formulary together. And I think that's a positive sign to recognize the presence of digital therapeutics. What excites me most about our approach and our products is we are not limited to only look at these as a pharmaceutical or only look at these as being managed in the same way as a drug from a formulary perspective. Because I can bring a counselor in your pocket, a digitized counseling option, we have the opportunity to look at medical services and medical benefits as well. And there's a number of existing pathways for both reimbursement and billing today around counseling that we'll look to leverage. And so while we'll keep an eye on the ESIs and Caremark in the development, we'll also be working to look at what are the existing appropriate pathways that can be put into place and leveraged now to create access. And we believe that a significant portion will follow on that medical side as well.

That's great. And maybe if I can just sneak in one more. Just with the investment that you're announcing today, how many more personnel are you planning to bring on board?

That's -- I can start asking -- answering that. So it's clear that for Dennis is building a team from a marketing perspective. And I'm -- I would -- so Dennis, correct me if I'm wrong, but I think we are approaching 10 more people that I have added to the company right now. It's some in medical also. We have some medical advisers. We have some marketing people, project management. When we get to field force, we will initially work with our existing field force. But as we see reimbursement being built out, we would -- probably we would expand the field force, but I can't guide exactly on where that is. But there's a little expansion planned in what we have right now. But it's primarily the cost that we have at the moment is associated with all of the external costs. One thing we have been forced to do to do the acceleration is that we have -- we're using quite a lot of consultants at the moment to ensure we can meet the time line and things like customer support and the patient hub for services around reimbursement, all of that is outsourced. So on top of our own employees, there are quite a lot of external service providers involved. Even the e-commerce platform is not Orexo proprietary, but we would work with a vendor to say -- we are working with the vendors to set that up. Okay. Operator with more questions on the line.

The next question comes from Klas Pyk, Nordea.

So my -- my question relates to costs. So you talked a bit about your cost and investments in 2020. Most seem to be rather fixed, but can you say anything or quantify your expectation for 2021 and forward? And how the cost base will develop during launch?