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

Hello and welcome to the Orexo Interim Report Q3 2020. [Operator Instructions] Today, I'm pleased to present CEO, Nikolaj Sørensen; and CFO, Joseph DeFeo. Please go ahead with your meeting.

Thank you very much and welcome to this Q3 call for Orexo. Let me start with saying there's no doubt that Q3 has been a challenge for Orexo on several different accounts. But I also find that there's a lot of light in the tunnel. If you look a little beyond the top line news in the report, I think when you look at ZUBSOLV, for example, our main product, while we are reporting a decline compared to Q2, I find that there are some very good signs that there's actually nearly no decline in the open business and where we're non-reimbursed. And even when we look at the big driver of the decline during the last year, the former exclusive contracts, that decline has actually gone down to very low numbers. And if you look at the latter part of the quarter, it was actually flattening out quite dramatically. So while it's been a tough quarter for ZUBSOLV, I think it has been -- there is definitely some light underneath. When we come to Digital Therapeutics, I also find that we're making a lot of good progress. We knew from the beginning that we're coming in, in a completely new business area with a new product that is very disruptive to the existing system. And it's also been clear that all of the efforts we are doing to build up a system to manage the customers, payment processes, insurance claims and so forth is worthwhile, and it will be a major value creator in the future. But it does take time to set all of these processes in place. And when we come to our pipeline, we have made some very good progress on OX124. We got some new guidelines from FDA during the quarter, which is really what I call engineering problems. It's just things we need to fix, but it will have a little impact on the time and a little on resources for that project also. But I'll come back to that in a little more depth as we go into the report. So I'd like to move the attention to Page #4 first and -- which is an overview of our quarterly results. We keep a -- or I have a headline for this quarter, which is Keeping Focus on Maximizing Business Opportunities in the Challenging Environment. And there's no doubt there's been some headwind against us during the quarter both with some legal processes, but also we now start to see a real impact by COVID-19. And when we come to COVID-19, it's -- in particular in the ZUBSOLV section, we know that our stronghold in the market, that's in the commercial segment, that's where people have a private health insurance. And due to COVID-19, we've seen a pretty steep increase in unemployment. And although that is starting to turn the other way around, it's no doubt that, that has had an impact on a number of people without health insurance or moving from a commercial health insurance to a Medicaid plan where ZUBSOLV is less reimbursed. But taking some of the headlines for ZUBSOLV and why we actually believe that we are resilient, which I'm pretty sure some of you will say, so how can you say you're resilient? You reported a decent drop in sales compared to last year. First of all, because a lot of the drop is based on these -- or all of the drop, more or less, in demand can be explained by the decline in these former exclusive contracts, UnitedHealth Group and Humana. And we're known about that for more than a year now. The other part is we're actually doing pretty well in the market access arena. And take the largest single payer in the commercial sector. Express Script and CIGNA have now decided to put ZUBSOLV on as the only branded product on their commercial and Medicare formularies for 2021. The commercial formulary is actually already in effect, and the Medicare one will be from 1st of January. And to do that in a situation where you have heavy generic competition is quite of an accomplishment and actually now makes ZUBSOLV the only branded product that is preferred by all of the 3 biggest PBM: Express Script, Optum and Caremark. That's a total of 59% of the private health insurance market where ZUBSOLV is now the only preferred branded product in the category. When it comes to our overall net revenues, we have seen a decline. A lot of that is explained by Abstral. We knew about that. We've known about that for basically several years now. We have also guided about it, so that's not a surprise. We've seen -- in the quarter, we actually saw a drop in the currency -- of 9.1% in the currency between to Q2 and Q3 of U.S. dollars. That, of course, has a big impact on our top line as we don't hedge our dollars. And then, of course, we have seen some decline in ZUBSOLV demand. On top of that, there were some onetime effect for quite sizable change in inventory for some of the wholesalers during the quarter. But these wholesaler levels normally -- they tend to normalize when you're waiting a few quarters ahead. So in the quarter, we saw a slight decline of 4%. And we think if we combine the COVID-19 and look at the UnitedHealth Group and Humana, that actually explains -- it's a full explanation to that drop. And here, the COVID-19 effect, I actually believe that, that one will disappear when we see employment going back. But of course, it's a very uncertain situation at the moment. Our EBIT in the U.S., and this is something I'm really proud of in this quarter, is when we see that we get pressure from -- on the top line, we also immediately are able to respond on the cost side. And here on the U.S. Pharma side, we have seen a significant -- a good improvement if you look at -- on the cost side, which is basically putting us north of 50% in the margin. We have a guidance for the full year of 45% to 50%, and we're now increasing that guidance to exceeding 50%. And if you look at our EBITDA and also on our earnings, then if you exclude the digital therapies, the company is actually still profitable. So Digital therapy (sic) [ Digital Therapeutics ] had an investment with -- when we took the digital therapy investment, we would actually have an EBITDA which is -- of 50.3%, which is a pretty strong profitability if you look at the revenues that were coming in with ZUBSOLV. And then when we come to the earnings side, the big impact on the earnings is -- partly is exchange rate. But even if you know that and just look at the tax changes, you would have seen that the earnings would have been positive also had we adjusted for that. So the negative earnings in this quarter is actually not something that makes me worried at all. That was something that we expected due to the investment we have made in becoming the leader in digital therapies. And as I started now when -- we have been working for now with -- about what is 5 months in the market with the digital therapies, and one thing that is quite clear is we're coming in with a complete new product categories. And that's something that -- where the positive is there's a lot of interest and excitement about these new opportunities, but there's also a lot of hurdles from an administrative perspective. How do you implement these tools into the health care system? How do you get the payment process if you're insured? And all of that is something we have been fully aware of, and that's why we have worked with, I would say, a record speed to finalize the development of our customer support system, and we were ready to go live with our vorvida system in the end of September. And anyone who had worked in a U.S. environment would understand the complexity for building a system that can both manage cash payment and also manage insurance claims and other types of reimbursement and have all of that built into one system and do that in just a few months. So I'm quite proud of what we accomplished there. The other thing that is important is that when we look strategically on digital therapy, we see that this reimbursement process, how to manage the payment process, is really a hurdle that every other company in this sector fights with. And we had a competition where Orexo was co-sponsoring together with a company called Lyfebulb earlier in October, where a lot of companies in the digital health space were presenting a business case and then in the end we decided to [ revolve ] $125,000, but the consistent feedback we got from them was the hurdles that they were seeing when they were working to get reimbursement. So the investments we are doing right now to build a system that's not only applicable to vorvida but basically any other digital health system -- digital health product that we can see is something that I'm sure will pay off not only for the products we have but also the attractiveness of Orexo to identify new products that we can acquire. And then finally to our pipeline. And here, we have done a review together with our Board of Directors where we looked at the different pipeline opportunities, timing, the commercial potential, the likelihood for success, and we decided to put most of our resources into OX124 from a pharmaceutical perspective and, of course, to continue our digital therapies. The 2 other products, OX125 and OX338, we have decided to slow down. That's not a stop. It's a slowdown on these 2 projects. When it comes to OX125, some of the issues that we're working with on OX124 based on the feedback we have from FDA and particularly around some of the reliability data we need to show on the devices is fully applicable on OX125. So all of the investments in OX124 right now would be something that would be needed for OX125 also. So there's really no need to progress with 125 before we have solved these issues with 124. When it comes to OX338, we had very good data on the first small clinical trial we have, but we also saw a need to continue our formulation development, and we are actually doing that right now both internally and together with an external partner. But we are slowing down the investment in the project to be able to fully focus our resources on OX124 and digital therapies. When it comes to OX124, we are moving the time lines a little, and we're right now still aiming at a filing in the end of 2021, but we see an increased risk that, that is moving into early 2022. And the reason for that is basically 2 things. One is that we have some new policies from the FDA where we need to show improved reliability data. That's not only for us, it's for every other product in the category. So if you can solve that, that's actually increasing the hurdles for new competitors. That is something we have to work quite intensively on. And the other area is COVID-19 because some of these policy changes that we're seeing, we would really benefit on working together with our sub-suppliers to solve some of the documentation needs that we have been asked for by the FDA. And right now, due to COVID-19, we can't do that. And I think that is a -- I know that is a hurdle for us. But we still see that the project is making very good progress, and we don't see any showstoppers or risks that the products won't make it to filing. But there's a lot of work ahead of us, and we now see that it will be into -- move -- the pivotal trial that we had scheduled in Q4 this year will now be moved to Q2 next year. The important part of that is that, that was never on a critical time line. So the pivotal trial has always been something that we could move without impact on the overall time line because the real critical time line is on the manufacturing -- the commercial manufacturing of the product. And that's the one that's impacted a little bit these reliability data we need to generate to the FDA. So just to summarize what we are working on. And I see no need for us to reconsider our strategy. We are working with ZUBSOLV as our main profit contributor and as a very strong foundation. We're working to broadening our commercial footprint, and we've done that through entering digital therapies. We've done that by now setting full focus on one of the pipeline projects to be sure that we can get that all the way to filing. And we're working actively with business development to find new opportunities right now predominantly in the digital health space, where we believe that we have a good opportunity to build from this infrastructure that we have invested in, in the U.S., but we're, of course, also looking at pharma opportunities should such an opportunity emerge. Then moving into the digital health on Page 6 and now to 7, again a summary. For some of you, some of these slides will be a repetition of what we presented earlier in October. So our strategy right now is basically building based on the 3 products we have: deprexis, vorvida and modia. We want to establish a platform that enables distribution, payment processes, customer support. And on that scalable platform, we're looking to expand our presence and add new products. One of the activities we have done is that we're working through the Lyfebulb initiative, where we basically had a beauty contest of -- I think in the beginning, there were more than 20 different companies applying. And in the end, I believe it's -- was it 8 companies that -- 8 or 7 companies that presented to a panel, and one of them were then decided as the winner. But that gave us a very strong insight into new projects, new exciting companies who are really in the early stages to see, are there any of these where we could do either partnership or probably also acquisition opportunities. And this is really part of the strategy right now, is to build a core digital therapy engine where we can add on more products on top of those we already have. Moving to Page #8, so a short summary of the products we do have. And for those of you who are new, we have deprexis, vorvida and modia. Deprexis is a digital therapy for depression, vorvida for alcohol misuse and modia is for opioid use disorder. We see all of these have a substantial potential. We're talking north of 10 million patients, potential, in both deprexis and vorvida, patients who would need -- would benefit from these tools. And when we come to modia, we have a smaller group of patients in treatment right now, but we also have north of 10 million patients who are suffering from opioid dependence. So these 3 disease areas are definitely very exciting and an area where you have a lot of unmet patient need where we think we can play a role, which could lead into quite substantial sales numbers when we evolve the company. Moving to Page #9. So what have we done during the last quarter? The focus has really been for us to identify the right payer models. And those of you who listen to us, that has been the consistent story. We are basically looking -- at work during Q3 to understand what kind of model would work in this space. We have identified several different opportunities right now which we have then integrated into the system that we launched in late September, and we're now basically rolling that out. But rather than doing a big, broad rollout, we are targeting certain patient groups, certain regions in the U.S., to test that this is really working in a smooth way. So rather than coming out with a very broad big bang and then find out that the system is not fully operational or there's flaws in the system, we're now doing a very targeted approach. But we are starting to see some good tractions with several physicians who want to work with us, and we also have some first purchases of the product. So one of the things that has been available since 25th of September is vorvida, an out-of-pocket solution which today allows patients to buy for credit using debit cards or credit cards. And we'll also launch an opportunity to pay in installments quite soon. So there will be a lot of options for the patients to work everything, from your employer paying to your insurance company paying, all the way down to paying installments of the price of vorvida. Moving to Page #10. So the system that we launched on the 25th of December is basically a system where you go in and you get your access key. And you can then ask us to manage and support during the insurance claim process. We will even soon offer a solution where we can guide you to a health care professional. So you don't only have your digital therapy, but we'll also put you in contact with a health care provider who would help you throughout the treatment. And then, of course, a customer support system to help customers who have different issues with logging on with systems and so forth. All of that has been built to 25th of September. What we see is that, that is evolving. I think the next add-on is the installment. The people can basically pay in installments on a monthly basis rather than one fee. And then we are also looking to add on this opportunity to work with health care providers relatively soon. Moving to Page #11. So where we are right now is we're making some pretty good progress. We have found a -- basically confirmed that there is a big need for the product in the market. We have very good discussions with both national and regional payers, health care providers and other distributors that we've been looking at. We have launched the vorvida page, and we're soon going to add on deprexis and now modia, which is the opioid use disorder, in digital therapy. It has been finalized from a technical perspective, and now we're moving into a technical testing before we'll start testing it with a select group of patients probably late this year. However, we also need to recognize this is early stage. We have no -- there's no established reimbursement distribution process for digital therapy like the one we have in -- for pharmaceuticals. So we need to find a way to navigate around in this reimbursement landscape. I think we made very good progress with this customer support system I just presented, but I think this is an area which would need to evolve not only for Orexo but for all other companies in this sector. We have started in October to promote directly to physicians. Our field forces, all of them, were in a big meeting -- virtual meeting in the beginning of October to be educated in the tools, and they have now started to promote vorvida to the physicians. Deprexis website is coming a little later in Q4. That would be very similar to the vorvida website, and we're looking forward to launch that soon. And as I said, modia, we are now starting the technical testing, moving to patients late or -- late this year, maybe early next year, but definite targeting a broader launch in second half of next year. Moving to Page 12. So we already announced 2 partnerships. One is with GoGoMeds. GoGoMeds is a distribution partnership where they have a relationship with a lot of court systems in the U.S. with the prosecutors and district attorneys. And they are basically offering vorvida as an option for patients who had -- who have been stuck with a driving under influence offense, and this become an option for them to show that they take care of their problem. But GoGoMeds have very good relationship with a lot of employers in the U.S., and they also have a right to distribute our other products. But we start up with the vorvida model. GoGoMeds wants that to go through some of their own systems to be able to manage the payment process, and I believe that they are now planning to go live a little later in November. Trinity Health is a large health care provider in North Dakota, where we -- as a first step, we have provided the employees of Trinity Health who are -- North Dakota is right now the epicenter of COVID-19, and so we've offered them, the employees of Trinity Health care, an opportunity to access deprexis and vorvida. And we have seen a pretty good uptake for that, but I will also highlight that Orexo could decide to sponsor that to be able to do it fast rather than finding a payment model. So during the COVID-19 peak, we will sponsor that process. But we're also working with Trinity Health to identify other groups where we will have a more commercial partnership with them in distributing our solutions. Then moving to ZUBSOLV on Page #14. And as I started the call with, we have seen a quite strong growth in the market. However, when we come to the commercial market, which is where we have a very strong reimbursement of 98% of the patients have access to ZUBSOLV, that market has actually declined both in Q2 and Q3. We find one of the explanations to that is definitely related to the COVID-19 and all of the restrictions put on people in the U.S., which have led to a lot of unemployment. The positive is, of course, that the unemployment numbers are now improving in the U.S. But at the same time, we also see that the COVID-19 is continuing to create new restrictions, and we create an uncertainty around what market conditions we have. But if we look beyond the COVID-19 effect, as I said in the beginning, we actually see that we are standing against this negative decline in commercial pretty well as we actually see no change in our open market. That's where nearly all of that volume is. And we think that there's a good opportunity to grow again when the commercial segment will rebound, which is will -- sooner or later on people get back to work. When we come to other effects, we start with our field force in the field from July 1. All of them were back in the field meeting the physicians. But we have seen that there have been restrictions in the access to clinics and also to prescribers. So we have a lower number of meetings than we had before. About half of the meetings we have are with the physician and the other half is with office staff. And actually, 20% of the calls are done virtually rather than in face-to-face meetings. And this is very fluctuating depending on the COVID-19 situation in the individual states in the U.S. So this is an area where we are still struggling. And while we're seeing it gradually improving, it's still not where we were before the COVID-19 pandemic started. And then to the ZUBSOLV situation. Right now, we have Express Script and, CIGNA who have listed us on their preferred branded product formularies both in commercial and Medicare. We remain the -- we are now the only branded product on -- preferred branded product on the 3 -- top 3 U.S. PBMs covering nearly 60% of the market. We have not lost anything in our reimbursement coverage for 2021, and there have been some small changes in Medicaid, but that's not affecting the overall coverage rates. We see that ZUBSOLV is dropping 4% in demand, but basically, nearly all of that is explained by a drop in UnitedHealth Group. The fastest part is in UnitedHealth Group and Humana. We have seen that we're actually starting to get to some of the lowest level of decline that we've seen since they made the change. Moving to Page 15. As you can see, the market growth has -- continues to be very strong. This is total market growth of 18 -- or of 13%. However, the fastest-growing part is where we say it's non-reimbursed, and that's basically in the Medicaid space. And as I said, the commercial part of the open segment actually declined during Q2 and Q3, which made it more difficult for us to grow. Moving to Page 16. This is more of a breakdown. And I will just highlight that the top line here, we have decided not to include any institutional sales. Some of our open market, you would see, is including institutional sales. But as we don't have that on a month -- a weekly basis, we have excluded it here. So when we look at the open market, we basically see nearly a flat development throughout the year. And this is where we are reimbursed and ZUBSOLV has access to the market. So while we're not growing, we're not declining anything significant in the open market despite the decline in the overall commercial open market. When we come to Humana and the UnitedHealth Group, as you can see on the green line on Page 16, you will see that the drop during the quarter is now 5.2%, which is much slower than the drop that we saw in the previous quarter, which was 10%. And if you look at the drop more granular, you will see that most of that drop was actually during July, whereas it, during September, has more or less been flat in United and Humana. And breaking those 2 down, we will see that basically all of the drop in September, the minimal drop, was in United and not in Humana. When we come to the non-reimbursed, we also see that it's basically been flattening throughout the latter part of the year. So moving to Page 17. And this is a new slide we bring in this section, but that's to illustrate how the effect we have on sales in this quarter is actually explained fully by United and Humana. So if you look at from the left, that is our Q2 sales. Our open segment, nearly no change. Non-reimbursed, nearly no change. UnitedHealth Group and Humana, there we saw a drop, which is explaining the 4% drop in demand. Then during the quarter, we actually saw a quite sizable decrease in the inventory levels compared to Q2, which had a quite big negative impact. We did have a smaller adjustment for returns. So every month, we are reserving money for returns. And then we are looking back and see, did we get the returns of products that we had to reserve for? And if we don't, we're adjusting that. And that is something we have done in this quarter and actually the previous quarters also. And then when we come to our payer mix, we actually saw a small -- a very small impact, nearly nothing between the quarters. What we have seen is that the Medicaid plans we have in open have grown, whereas the commercial have declined a little. So while the open is nearly flat, it's driven by a little more Medicaid than commercial. And then maybe one of the largest impact during this quarter is in the currency effect, where the Swedish krona has strengthened towards the dollars with nearly 9.1% if we look on average between the 2 quarters, which is quite a significant effect. But what I wanted to highlight is really we don't -- we have a flat sales. I would love to see it growing, but if you look at what's driving that flat sales, we're actually growing in Medicaid, but we are then losing a little in commercial. But that -- what we're losing in commercial is very much explained by the COVID-19 and the overall decline of the commercial segment. And then we have these 2 plans where we before were exclusive, which is still spilling over to a slight decline, but it's really fading during the quarter. So summarizing, for ZUBSOLV. If you look beyond 2020, we actually now see we have a -- where we have been strong before, we have now an even stronger market access position in particular in the commercial sector but also now in Medicare, where Express Script is not as strong as in commercial, but they're still a significant player. And we are looking into -- even in the Medicaid and public space. We had Louisiana Medicaid, which were announced early in the quarter as effective from July 1. And what's really positive when we look into 2021 is that there has been no changes in our overall reimbursement coverage for ZUBSOLV into 2021, where Express Script, I would say that's a very good improvement, but that's more because of our competitor has been taken off the list, then we've been added because we are also preferred on Express Script before. But the main branded competitor, Suboxone Film, has now been removed. When it comes to our field force, they are now back in the field trying to sell in the office space selling. But as I said in the beginning, we are not back at the same efficiency and reach that we have pre-COVID, and the pandemic is still creating some uncertainty, and there's a lot of fluctuations in the outbreak of COVID-19, which can have effect on our field force ability to reach their customers. But of course, me together with, I guess, everyone else in the world are really hoping to see some of our colleagues in the industry coming up with a vaccine soon so we can get beyond this pandemic situation. With that, I will leave the word to Joe DeFeo, who will take us through the financials. Joe, please.

Good afternoon. If you go to Slide 20, this slide shows our drop in sales. We'll get to ZUBSOLV on the next slide. As you -- as we've made you aware from the end of last year, we lost our agreement with -- or our agreement expired on Abstral, so we have lower Abstral sales of about SEK 40 million. And so -- and then the rest is ZUBSOLV. So if you go to Slide 21. So with ZUBSOLV, you could see our -- from this standpoint, the predominant loss is in, as Nikolaj mentioned, the United Healthcare and Humana. That's where we see the steepest decline. But as Nikolaj mentioned, that's been starting to slow down and flatten out lately. The open, although it's down 3%, that's due to institutional sales. If you look at -- you take out the institutional sales, the rest of open is actually slightly up. And then the non-reimbursed, that's been flattening out. It's really flat right now. But versus last year, it's a 3.5% decline. And then wholesale inventories, we did have the -- our wholesaler inventories were slightly up, and then we have the return adjustment, which is slightly negative to last year. And then our price increase plus our payer mix has been positive. And as Nikolaj mentioned, we have the exchange impact, which has been negative in Q3, a much stronger SEK than last year. If you go to Slide 22, this really show -- this shows you our U.S. Pharma business, which is ZUBSOLV. On the left, you could see as our sales declined in ZUBSOLV, there's been less of an impact on gross profit. As you know, we've improved our cost of sales for ZUBSOLV and really taken full advantage of that this year. So the sales declines have been somewhat mitigated by the improved cost of sales, which makes our gross profit less of a decline than the sales. And then on the EBIT side, we still have a very strong EBIT. And our profit margin, our EBIT margin, is over 50%. So it's been holding up very well. We do a good job of making sure if we see we're losing business, we adjust our OpEx appropriately to mitigate that loss on the bottom line. If you go to Slide 23, here's our P&L. We just talked about our revenue reduction, but it's less of a reduction when you get to gross profit due to our cost of sales. When you look at our operating expenses, selling expense is obviously up because we're investing in our digital business. But we also -- as I mentioned, with the decline in revenue in ZUBSOLV, we've had a lowering of our selling expense. So there's been some savings there. The administration expense is up, and that can really be explained by this FDA subpoena in the U.S. Our R&D expense is higher due to the clinical trial on OX125 and the final development of OX124 towards registration in 2021. And some of our internal costs are slightly lower. The -- when you look at other operating income/expense and then also look down at net financial items, those are negative, and that's really all based on exchange, as I mentioned, the stronger SEK. The net financial items is due to the cash we have in U.S. dollars, and the stronger SEK level give us a loss in the quarter. But you can see year-to-date we still have a positive, and that really is explained -- we took some very good opportunity, as you may recall, in the first quarter with a strong dollar to transfer a bunch of our dollars, a large portion, close to 1/3 of our cash, a little more than that, into SEK from U.S. dollars. So we still maintain a gain year-to-date. The tax loss, this is a reversal of our deferred tax asset. And the reason for this is, as we're investing in our digital, as we're showing some EBIT losses, based on IFRS, taking a conservative approach, and we're releasing some of that -- we're releasing the deferred tax asset. But it's important to note that, that tax loss carryforward asset is still there. And so when we turn profitable again, we'll be able to regenerate this deferred tax asset and reverse these amounts. So it's more of a timing issue, being conservative with where we are, investing in our business right now. And that leads to where we are from a net profit standpoint. But as you can see, our EBITDA is a small loss. We're still positive for the full year -- for the year-to-date. Slide 24. These are our segments which we've been reporting. We -- I've already talked about U.S. Pharma. If we go down to digital, you can see the operating expense investment in digital. And as Nikolaj mentioned, we just completed the payment and reimbursement processing system late September. So therefore, that's the reason we don't have any revenues in Q3. And then on headquarters and pipeline talked about the loss of the Abstral agreement last year. So that's the reason for the reduction in revenues. And then the operating expenses are up due to our investment in OX124 and a little bit from OX125. So that's our segment. If you go to Slide 25, this shows our cash position. You could see our net cash position, almost SEK 370 million, and our liquid funds, almost SEK 600 million. The important thing to note here is when you look at cash flow from operating activity, despite our loss, our cash flow is -- the negative cash flow is very small. And with the amount of cash we have, we have plenty of cash to invest in our business. The investment activity are mostly related to our digital business. And basically, we put almost all of that behind us now with those investments. And then the financing activities are small, but you can see that we did some of those, as I mentioned, opportunistic things in the first quarter related to the strong dollar. That was the financing activity we did year-to-date. But they're very small now going forward. So really, when you look at this, our cash flow from operating activities is small. We do a good job of managing our cash. We do a good job of managing our expense base as revenues materialize. So we're sitting on a very strong financial position. And with that, I'll turn it back to Nikolaj for the outlook.

Thank you, Joe. So I think it's Page #27. We have made a few changes to our outlook based on this result. So the first guidance we have is the market will continue to show a double-digit growth. There's no doubt that, that will happen on the full year. When it comes to ZUBSOLV net sales, we before said that we expect it to be in line with 2019. That one has changed, and we actually now expect it will decline compared to 2019. But we do expect that our Q4 will be stronger than our Q3 result. Here, I will note that in the first version of the report, there was a typo, so the change was not fully implemented into the last version of the report. So you should use the one we have here in the press release that came later during today. We also -- in our OpEx guidance, we have lowered our OpEx guidance from SEK 750 million to SEK 800 million to now at SEK 675 million to SEK 725 million. Part of that is explained also by the dollar exchange rate because a lot of investments in particular in digital health is dollar denominated. So that helps us to save some money during the second half of this year. But also, what we're -- when we're looking at the business right now, as we saw, that ZUBSOLV was not taking off. And of course, all of the COVID restrictions, the activity level in the field force is immediately spilling over into less expenses of running the field force. So all in all, we have decided to lower our OpEx guidance for the full year. And then finally, we have the Abstral royalties. I think that's more or less a given. And when we come to the U.S. Pharma EBIT, we actually increased that to now exceeding 50% for the full year, and that's basically based on some of the reallocation of resources we're doing into digital therapies, where we're moving people from the ZUBSOLV business into DTx. But yes, I will say that there's a lot of synergies between our digital therapies and our ZUBSOLV business, so there will be a benefit for both sides. But there is definitely an increased focus on DTx, and we have moved some resources from one area to the other. Then to Page #28. Unfortunately, during the quarter, we had 2 new legal processes. One is that we received a subpoena on July 14. We have, of course, engaged a U.S. counsel to help us with this process. But there really hasn't happened anything since July 14, so we have not received any further information or request than the ones that we were presented on July 14. So that one has right now stalled the process, and we haven't heard back from the prosecutors and the FDA. When it comes to the patent infringement litigation against Sun Pharmaceuticals, we -- on September 13, we have filed an infringement action in New Jersey. That triggers a 30-month stay in the process from the FDA to review Sun's ANDA. And that would normally also be the guideline how long time this process will be from a court perspective. I would say in these COVID times, we know that the court systems have been heavily under pressure in the U.S., so I think there's quite a lot of uncertainties to the time line. And I think it's safe to say it's not going to be accelerated, but there could be some delays. What I feel with the Sun Pharmaceutical process is we have a very strong patent protection on ZUBSOLV, so I feel quite comfortable that we will be able to defend ourselves effectively also against this patent infringement. So just to sum up, while it's pretty clear that the quarter here was a disappointment for our stock market, I sincerely believe that there is quite a lot of good signs in our business. We are in a space where there is a large and growing market need, and I don't think anyone of us need to open a lot of newspapers before we understand how the mental illness is increasing rapidly in the aftermath of the COVID-19 pandemic. Even Swedish television last week had a larger piece in one of the newscasts about the opioid epidemic in the shadows of the COVID-19 pandemic. So they stood out, all of the 3 areas, alcohol misuse, depression, opioid misuse, as an area which is growing with an increased need for treatment, and that's right where we are. And even when the pandemic is gone, a lot of these mental illness issues will still be there. We are coming into digital therapies. It's a completely new business area for -- in the entire health care sector, but it's growing very rapidly. If you just look at some of the most -- largest M&A deals that have been announced during -- in the health care sector the last half year, some of them have been in the digital health space. I know even in Sweden we see a lot of the digital health companies are really thriving in this environment. And we believe that this is going to be a massive trigger for digital health to take place in the health care sector, and we are there right now with our portfolio. We have a very strong cash position. We did take a little beating because we still have quite a few dollars sitting in the bank accounts. So -- but at the same time, most of our expenses are in dollars as well. So that's -- in that way, we have a natural hedge. And we have the money. We have -- and even if you ignore the bond, our net cash position is more than enough to drive OX124 and digital health all the way to profitability. We have an existing infrastructure in the U.S., and it's more and more apparent in some of the works after the field force have started to promote vorvida. It's really a lot of the new leads that we have with customers is coming from our field force networks in their respective regions. So for me, that's a really strong evidence that there is a strong synergy between our field force and our -- our digital therapies venture or new business area. And then we have a pharma pipeline, and we have a digital pipeline, which is clearly in the right space from some of the needs that we see in the market right now where the opioid use disorder is increasing in the U.S., unfortunately, so is the overdose. And I'm pretty sure when the overdose statistics come for 2020, we will, unfortunately, have seen a new record in number of people who are overdosing, and the overdoses are predominantly from fentanyl. And that's exactly where we need OX124, a new, stronger, faster and longer-acting overdose treatment for patients who are at risk or suffer from overdose. And with that, I will open up for questions. So thank you for listening for the last 45 minutes.

[Operator Instructions] Our first question comes from the line of Samir Devani from Rx Securities.

I've just got a couple of questions on the numbers and then perhaps one on vorvida for -- maybe for Joseph. Just on the wholesaler levels. There's a bit of stocking this quarter, but the report talks also about it being lower -- wholesaler levels being lower than this time last year. So perhaps if you can just comment as to whether -- how -- are we at normal level -- wholesaler stocking levels for ZUBSOLV right now? That's question one. And then just good to see the U.S. margin improving on the commercial business. I'm just wondering, how much more room do you think you have in terms of getting that margin up? Or are we sort of plateauing at this point? And then just on vorvida. I'm just wondering, you -- Nikolaj, you mentioned that you -- that the sales force has started promoting vorvida to physicians. I was just wondering how -- what sort of feedback they're getting. And in particular, are you getting questions about reimbursement or challenges for them in terms of reimbursement?

Thank you. Joe, will you take the first one -- or the first 2?

Sure. I'll take the first 2. So on the first one, yes, we are at normal wholesaler level. You could see that they're down versus prior year. But as demand comes down, you also have your wholesaler inventory levels come down because they keep a certain weeks of supply. But they've been pretty tight and efficient there, and that's also been why we've been able to keep our return rate lower and take some positive benefits from that. So their inventory levels are at normal levels, and we continue to monitor them that they'll -- they stay in those type of levels. Can you -- question 2 was related to the margin on U.S. Pharma. I believe the margin can actually -- will actually get better. As we've mentioned for a while, we have the infrastructure in the U.S. to support new products. And now we have the digital product. And really in Q3, what you see right now is mostly all of that infrastructure is sitting on U.S. Pharma. Now the -- as Nikolaj talked about, the sales force is now starting to get involved in promoting vorvida. And then next year, they'll get involved in modia. Now we're going to start seeing some of that infrastructure move on to the digital business, and that will actually improve the EBIT margin. Most likely, in Q4, we might be -- will be in the mid, maybe even high, 50s.

Okay. And then the last question was on vorvida. So what's the feedback? So I -- it's still early in the days with the field force, but we have some excellent examples of some of our sales reps who have been our health care liaisons have been very active of building networks for people suffering from addiction. And one of the big issues with addiction -- opioid-addicted patients, we actually heard that from one very large clinic who said that when people come in and get treatment for opioid addiction, they actually feel they have a pretty good control of them. But the most difficult patients to treat are those who also suffer from alcohol addiction and have depression. So combining the opioid addiction treatment with ZUBSOLV with a treatment for the alcohol addiction where he really had no offering to the patients today, there's no tools available for alcohol addiction treatment, was a big opportunity. And that was clearly field force driven and that we have a large clinic where we're now discussing a way for how he can add vorvida into the space. We have other examples where some of the physicians we have worked with in some of the northern regions have good networks into large employers, and some of these large employers have now led us into discussion with some employers about how these products could be added to the benefit plan for these employers. So all of these small opportunities, and some of them actually are pretty large opportunities, are driven by field force who is now coming out with vorvida. And I'm pretty sure that, that will just build. But we will also see that some of those health care liaisons are probably more pharma reps, and a little more complex selling of these digital therapies will require either that some people will be replaced with other people or we are moving some people to work more with pharma and some other people will then come in to work more with digital therapy, and that is an evolution process we are going through right now. Then clearly, you're putting your finger right on the spot with the reimbursement. This is one of the #1 questions we're receiving from all of the physicians, is how can we make this reimbursed, what are the opportunities to get it reimbursed either as a pharmaceutical benefit that we see a prescription DTx or as a medical benefit. And this is really one of the areas where we are working tightly right now both with dialogue with insurance companies, also with the prescribers to see how we can create programs where this one will become part of their reimbursed business that they're providing. So this is an area that is still evolving, but it's pretty clear that reimbursement is a very important topic, not only for the prescribers but also for the end customers, the patients.

And can I just ask one follow-up, Nikolaj, just on the sales team? How are they -- how has their reception been to promoting a DTx? So like, obviously, that's something quite new for them.

So in normal years, I would have been with them on -- we have this what we call a POA meeting, so plan of action meeting, and that was done in the second week of October. I would have been there with them. I would have been sitting with the sales team to get the feedback. This year, that was virtual. So I was, of course, part -- included in part of the program, but it's not possible to enjoy -- or to join the full feedback and get that. I think the feedback you'll hear around the coffee machines is often much more honest and transparent than the one you hear in the rooms. And I'm pretty sure that you will have a broad range from those who are very comfortable and see this as a fantastic opportunity to those who are more nervous about it. But what I do see is that there are really some of the sales reps who in a record speed have started to generate leads with the digital therapies and actually to the extent that one of the sales reps I was sending an appreciation email to just last week, copying in my full Board of Directors, explaining what she has done in her region to promote digital therapy products because she's just generating lead after lead for these products, and that's an evidence of how the digital therapies -- the sales team can work with this. But then again, that was one sales rep. So we have more than 50 of those. So I'm pretty sure you have -- like anything else, you have a normal distribution of those who really enjoy and find this as very exciting to those who are finding a little more challenging to start promoting these products. And -- but again, this is something we need to learn and see who are successful and then how can we learn from their success and educate the rest of the team to do the same.