This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Welcome to Ameren Corporation's conference call to discuss its second quarter 2022 financial results and operational updates. This conference call is being recorded today, August 3, 2022. I would like to turn the conference call over to Lisa DeFrancesco, Senior Vice President, Investor Relations and Corporate Affairs at Ameren.
spk02: Good morning, everyone, and thank you for joining us. Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. We may not achieve our goals, carry out our plans or intentions, or meet the expectations disclosed in our forward-looking statements. Actual results or events could differ materially, so you should not place under-reliance on these statements. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures, or any material agreements that we may enter into, amend, or terminate. For additional information concerning the risk factors that could cause actual results to differ materially, please see the risk factors section of our annual report on Form 10-K for the year ended December 31st, 2021 in our Form 10-Q for the quarter ended June 30, 2022, which have been filed with the SEC and are available through the Investor Relations section of our website at www.amroncorp.com. We encourage everyone to read these documents. This call is intended for investors in Amron and is not intended to promote the use of the SEPA. An archive of this call will be posted on Amron's website in the Investor Relations section. Corrine McHale, Amron's President and Chief Executive Officer, will lead our discussion Dr. Steve Ketchum, President of R&D and Chief Scientific Officer, will provide an update on recent clinical data and publications, and Tom Riley, Airman's new Chief Financial Officer, will provide a more detailed review of our second quarter 2022 financial results. After prepared remarks, we will open the call to your questions. I remind you that multiple audiences typically listen to calls of this nature, including existing investors, potential new investors, employees, current and potential collaborators, and current and potential competitors. As always, in this call, we will attempt to provide constructive information without compromising our competitive and strategic positioning. I will now turn the call over to Karim Mikhael, President and Chief Executive Officer of Ameren.
spk08: Thank you, Lisa. Good morning and thank you all for joining us today. As we enter the second half of this pivotal year for Ameren, we continue to focus on our three-dimensional growth strategy, breadth or geographic expansion, height representing diversification, and depth or core operational evolution. Recently, I surpassed my one-year anniversary as president and CEO of Ameren and have had the chance to reflect on the significant transformation of the company over the past year. In the U.S., we faced continued pressure from additional generic competition. We focused on maintaining profitability, and through our commercial efforts, we were able to retain a level of market share even to this day, that is unprecedented in any generic market. And more importantly, continued to deliver significant positive contribution margin, allowing Ameren to self-fund the expansion to Europe and internationally. During this past year, we made the difficult decision to implement two major restructures. The first was fully focused on the U.S. commercial structure, and the second impacted our company more broadly, in order to manage our costs throughout the period and to address the evolving and challenging U.S. market dynamics. We did this while undertaking a bold strategy for global expansion, which was highlighted by more than 10 market access filings in Europe and multiple regulatory filings in other geographies. With recent achievements, including three country reimbursement wins in Europe and a number of international product approvals for the SIPA, we are beginning to see the bold strategy take shape. In addition, we completely reshaped our leadership team with over 70% of our executive team joining Ameren in the past year, many in the last six months. These accomplishments provide us an even greater confidence that our long-term objectives for Ameren are ambitious but also achievable. Now to touch on the second quarter, beginning with comments on Europe, where we have made considerable progress executing our strategy, and because it is the source of future growth, expansion, and value creation for Ameren shareholders. 2022 has been about laying the foundation for our future across Europe. Midway through the year, we have made considerable progress in key markets, with more to come in the second half of 2022. It's important to note that we have taken a regional approach to growth and expansion in Europe, where our success does not rely on any single market, but rather on building strong, sustainable, diverse revenue streams in individual markets across the continent. And we were delighted to have achieved final positive reimbursement from NICE with reimbursement secured for patients in England and Wales at a strong net price of approximately $176. This was a big milestone as it marks our first positive final reimbursement decision from a large EU5 market. Note that net prices in Europe, especially for chronic treatments, tend to be much lower than U.S. prices. This achievement, and specifically this level of reimbursed net price, acknowledges the value of VASCEPA and our ability to demonstrate this value to payers in Europe. In the UK, we are in the process of establishing formulary access and launch preparations are underway with a formal launch plan for October. We were encouraged by the excitement and enthusiasm in the market regarding the final reimbursement decision by the local authorities, including NHS, as they look to combat cardiovascular health as a key national health priority. We're focused on educating the market on the benefits of ASCIPA and establishing ASCIPA as a new standard of care to reduce the risk of CV events beyond LDL management. Our objective is to drive this education through medical and scientific engagement, implementing formulary guidelines, and building awareness and adoption through multiple commercial channels. This follows the first national reimbursement decision for Vaskepa in Sweden, where the work to obtain formulary status and launch is well underway. We also achieved individual patient reimbursement in Denmark, are in the process of filing for national reimbursement as a next step in that country. With these achievements, we have truly transitioned to the next phase of our global expansion strategy. And I'm pleased to share that we have also made progress in a second major EU5 market, Spain, where we have begun pricing discussions with Spain Ministry of Health earlier than anticipated. This gives us strong confidence for a possible pricing and reimbursement decision in Spain before year-end. I also want to provide an update on Germany, where we are on the market with temporary reimbursement. Germany continues to be impacted by unprecedented local market conditions. including healthcare austerity measures, which are being implemented as a result of the challenging political and economic situation in Europe, which has impacted our sales during this launch period. At this time, we remain in constant dialogue with the German health authorities and expect the process to complete in November, and we may use our full timeline for these negotiations. Based on the status of the negotiations and current market conditions, we have suspended our contracted primary care field force to avoid having these resources becoming permanent, which was contractually scheduled to occur. We are committed to our presence in Germany pending the outcome of current negotiations with the payer, which remain actively underway. This decision reflects our disciplined financial management and is in keeping with how we have been actively managing our investments to remain prudent and flexible. Across Europe, we continue to advance our reimbursement discussions with national health authorities in Norway, Finland, France, Italy, Israel and the Netherlands. We have also added to the list Portugal, Austria and Switzerland, where we have recently submitted and are now on file for reimbursement discussions. This brings the total number of submitted dossiers to 14 countries in Europe. In addition, partnership discussions in Central and Eastern Europe are advancing well. With our reimbursement and pricing success thus far, we remain on track to receive reimbursement decisions in up to eight countries and to launch VASCEPA in up to six European countries this year. Our achievements in Europe in just under one year give us further confidence that the opportunity in Europe remains a $1 billion plus opportunity. We believe 2023 will be an exciting year where we expect a pivot the revenue generation stage of our bold global expansion strategy now moving to our results in the quarter and the us business in the second quarter of 2022 we recorded 94.4 million dollars in total net revenue including 90.6 million dollars in u.s product sales reflecting the anticipated continued pressure from generic competition in the market The results reflect the full impact of the third generic entrant compared with one generic in the market the previous year's quarter. The pressure was offset by a normalization of some of the trade patterns and inventory destocking we saw in the first quarter, which Tom will discuss in greater detail with you shortly. Overall, While the US market remains challenging, I'm pleased that the revenue this quarter was consistent relative to the first quarter, which speaks to the efforts of the team to retain and support the business. As part of our company-wide focus on operational excellence, we remain committed to maintaining a strong contribution margin for our US business. To that end, we took the difficult but necessary step to announce a comprehensive cost reduction plan to address expenses and market dynamics within the U.S. business, which will result in $100 million in savings through the middle of next year. Tom will talk more about this plan shortly. The goal of our cost-containment initiative is to continue to offset the challenges we are experiencing in the market with a focus on operational excellence that allows us to maintain the U.S. business positive contribution margin. While the cost containment initiative in June was comprehensive and involved cost reduction across the entire organization, the largest portion of the savings was related to a reduction in the U.S. commercial organization, creating a core focus team. The strategy allows for a core sales force to support branded receipt of sales by fully targeting around 14,000 of our most loyal prescribers as we continue to focus on secondary prevention in key CV risk indication, such as prior MI and stroke. Moving forward, our efforts are focused on sustaining and supporting the Vesepa brand and prescriber base we have today in the U.S. Supporting these efforts is the compelling data from REDUCE-IT that shows that CEPA reduced CV events by 35% in prior MI patients. The benefits of CEPA in these patients who have experienced a heart attack and are at risk for another cardiovascular event are particularly important given these patients are at an elevated risk for recurrent CV problems. These results further strengthen the case we are making to the physicians who care for these high-risk patients for pure EPA in the form of prescription icosapent ethyl as a key intervention beyond statins for meaningful risk reduction. Our efforts to secure exclusive business is working so far. The exclusive business has not experienced any major changes since the end of last quarter as a result of these efforts. The exclusive business is continuing to grow as a percentage of the total Ameren business. That said, we expect volumes will continue to experience some pressure throughout this year. And as we look ahead to the third quarter in particular, we anticipate continued pressure from generics as well as lower revenue due to the seasonality typically seen within the third quarter for this market. We will continue to closely monitor the market dynamics in the U.S. and adjust as necessary, wherever possible. Beyond Europe and the US, we continue to make progress on our bold plan to unlock the potential of the SEPA internationally. First, let me cover our partner three geographies. Our Canadian partner, HLS Therapeutics, continues to make good progress working with all participating provincial jurisdiction to secure coverage from publicly funded drug plans across Canada. They have secured public market access reimbursement for VASIPA in Ontario, Quebec, New Brunswick, Saskatchewan, and with other public payers. We look forward to their continued progress in the coming months. Public market reimbursement for VASIPA in a large single-payer country like Canada is a validation of the CV risk reduction benefits of the product that underscores its pharmacoeconomic value. As a reminder, last year we agreed to HLS partnership with Pfizer, by which HLS will promote to specialists and Pfizer will promote to the large primary care physician groups. We have been closely watching the progress of this strategy, as it may be a model that can be replicated elsewhere internationally. Biologics, our partner in the Middle East and North Africa MENA region, continues to pursue the review and approval for the cardiovascular risk reduction indication in the Kingdom of Saudi Arabia and Kuwait. As a reminder, VSIPA is currently approved in a total of six countries in the MENA region, including KSA and Kuwait for the VHDG indication, and in the United Arab Emirates, Lebanon, Bahrain, and Qatar for both the VHDG and cardiovascular risk indication. Lastly, our partner in China, Edding, received approval for Vaseepa in Hong Kong for the CV reduction indication, and a commercial launch is being planned for Hong Kong later in the year. The new drug application for Vaseepa in mainland China remains under review by the Chinese National Medical Product Administration, and the NDA includes the previously announced successful results of Phase III studies, including reduced According to Edding, they anticipate that a decision can still be expected by the end of this year. Now let me cover our expansion efforts beyond these three mentioned geographies. The plan calls for three waves of regulatory submissions for approval of VSEPA in 20 additional countries in order to ensure that patients in the top 50 cardiometabolic markets worldwide can benefit from VSEPA. Toward that end, we continue to make meaningful progress in the first wave of these efforts. Dossiers remain in full assessment by the respective national regulatory authorities in Australia and New Zealand. In Israel and Switzerland, dossiers are under regulatory review, and along with Austria are in reimbursement discussions. These markets will be managed and discussed within our Europe business. Moving forward, we remain confident in the multi-billion global market opportunity for VASCEPA in Europe and internationally and are pleased with our recent achievements. We are beginning to turn this opportunity into a reality with future launches anticipated later this year and next. In addition, we took steps to ensure our continued investments in our clinical data and pipeline, including maintaining a strong presence at important medical meetings and implementing a stepwise approach to the development of our fixed-dose combination, which ensures our ongoing progress with this important program that combines the CEPA with the statin. To talk more about these efforts, I will now turn the call over to Dr. Steve Ketcham, Amron EVP, President of R&D and Chief Scientific Officer, to discuss recent advancements with our data, plans for presentation at this year's European Society of Cardiology Annual Meeting, later this month and progress with our fixed dose combination. Steve?
spk05: Thank you, Karim. Today, I would like to begin with some remarks in response to the recent media coverage and headlines regarding biomarker analyses of reduced data as published in circulation. It is important that investors, medical professionals, patients, our employees, and other stakeholders understand that we stand firmly behind the science of our product. Recently, there has been considerable discussion and debate around exploratory post-hoc biomarker analyses published in circulation and what those exploratory data might mean in the overall story behind the science of the REDUCE-IT trial. Additional scientific facts are missing from this discussion and provide a more scientifically-based perspective. First, it is important to note that these exploratory biomarker analyses published in circulation were not conducted to provide additional evidence demonstrating effectiveness in reducing cardiovascular risk, but instead to preliminarily explore a subset of potential pathways via which icosapent ethyl might exert some level of effect in this trial. Second, the circulation paper highlights relative percentage increases rather than the absolute increases across the set of biomarkers studied in this analysis. When analyzing these results from an absolute increased perspective, they are small and they do not correlate to any meaningful changes in outcomes seen in the REDUCE-IT trial. Importantly, all of these biomarkers are exploratory and none has been sufficiently validated or correlated with CVD risk in and across clinical trials to enable them to be relied upon to draw meaningful conclusions. In other words, Any speculation on the potential impact of these biomarkers is purely theoretical, which has largely been ignored in the discussion to date. In addition, the authors submitted a number of additional analyses as part of the iterative manuscript review process, which provide a more balanced perspective on the exploratory biomarker data. However, the journal's reviewers and editors selected not to include those analyses in the final published paper. We believe strongly that had the journal included these analyses and the accompanying data discussions within the published paper, that the conclusions of this subanalysis would be much clearer and this paper, which ended up being more abbreviated than intended, would not be leading to the current level of confusion within the cardiovascular community today. While there can be no guarantee of future acceptance, we will be working with the authors to discuss how best to pursue publication of this data in the future to ensure fair and balanced data in the public domain. While we welcome scientific exploration and debate, it is important that all of the scientifically-based facts are known and considered versus theoretical speculation. Based on the above points, we continue to stand behind the results of REDUCE-IT, the definitive, large, long-term outcome study of icosapent ethyl with gold standard cardiovascular clinical endpoints. Our confidence in vesipa-veskepa comes from the wealth of REDUCE-IT data we have generated, all of which continues to reinforce its CV risk-reducing benefits. We continue to support ongoing research and data analysis of REDUCE-IT as this work further explores the efficacy and safety profile in additional subgroups of patients and further distinguishes vesipa-veskepa as one of the most significant products to reduce CV risk since the introduction of statins. We are very pleased to report that additional data on vasepa vaskepa will be featured at ESC 2022 in Barcelona at the end of this month. These data will focus on specific patient subpopulations at increased risk of a cardiovascular or CV event from the landmark REDUCE-IT cardiovascular outcomes trial. The accepted abstracts include a late-breaking science presentation on the significant reduction of ST elevation myocardial infarction, or STEMI, with FACEFA in the REDUCE-IT trial. These and other new findings will be presented by a variety of international academic collaborators based on researcher analyses supported by AMRIN. We look forward to the presentation of these supportive data at the meeting. Turning now to our ongoing development efforts. The confidence we have from REDUCE-IT and other clinical studies has allowed us to invest further in the future of icosapent ethyl. which is why we are supporting the development of a fixed-dose combination portfolio centered on arcosapent ethyl in combination with a statin. As part of our recent cost savings initiatives, we are taking a more stepwise approach to development in this program, which means that rather than pursue an entire portfolio of potential combinations, we have selected one to move into proof-of-concept manufacturing and testing. Based on the results of those pharmaceutical development activities across the next several quarters, we will evaluate the next steps for the development program. The fixed-dose combination, or FDC, product is in the early stages of development. If successful, the combination therapy would be a game-changer for patients since it will carry the most significant cardiovascular risk outcome benefit label and would hopefully provide additional market exclusivity. With that overview, let me turn the call back to Corinne.
spk08: Thanks, Steve, for that detailed overview. As I mentioned earlier, in addition to revamping our bold strategy across our clinical and commercial organization, we continue to take steps to expand our team globally to better serve Ameren's strategic focus and objectives. One important appointment was the addition of our new CFO, Tom Riley. Tom brings significant financial leadership experience across large global pharma and biotechnology companies as well as a proven track record leading financial planning and analysis within international and commercial operations. He has already become an integral part of our leadership team and is a great asset as we expand around the world. With that brief intro, let me turn the call over to Tom to discuss our second quarter 2022 financial performance in further detail. Tom.
spk09: Thank you, Karim, for the introduction. Good morning, everyone. I'm pleased to be addressing you today for the first time as Ameren CFO and to report on our financial performance for the second quarter of 2022. Let me begin by discussing our results for the quarter. For the second quarter of 2022, we reported total net revenue of $94.4 million, including net product revenue of $93.8 million. a decrease of 39% compared to the second quarter of 2021. U.S. product revenue was $90.6 million, a decline of $2.9 million versus the first quarter of 2022. The results represent continued generic pressure in the U.S., including the first full quarter with three generics on the market. As a reminder, during the three months ended June 30, 2021, there was only one generic in the market, During the second quarter, we saw a normalization in the trade channel. When compared to the prior quarter, we continued to experience pressure on both volume and price. We've continued our focus on retaining exclusive business, and that business has remained stable. Moving forward, we are not investing to grow the molecule in the U.S. market, but we are investing in sustaining and supporting the Viceppa brand and prescriber base we have today in the U.S. We expect volumes in price will continue to experience pressure throughout this year and also anticipate the seasonality typically seen within the third quarter for the market. The results also included international product revenue of $3.1 million, including $2.3 million in commercial supply shipments to HLS in Canada as they began receiving reimbursements in their individual provinces and $0.7 million in European product revenues. Cost of goods sold for the three months ended June 30, 2022 was $50.8 million compared to $32.2 million in the corresponding period of 2021. During the three months ended June 30, 2022, Ameren has taken steps to amend supplier agreements to align supply arrangements with current and future market demand, resulting in a charge of $15 million. Also, Ameren recorded a charge of $9.6 million related to unsellable inventory, which is not related to product dating. Excluding the impact of these two items, gross margin was 72% for the three months ended June 30, 2022. The product has a long lead time in terms of manufacturing, and the market and demand for the SEPA has been difficult to predict related to the volatility of the U.S. generic market. Significant steps were taken to renegotiate future price commitments of inventory in Q2. The renegotiation of these agreements is a very important step forward in lowering future cash burn related to building new inventory. Efforts are ongoing and inventory purchases are expected to be significantly lower in the second half of 2022. Moving to operating expenses. During the second quarter of 2022, we reported expenses of $106.5 million, which includes a $10.2 million restructuring expense. This is a decrease of 6% compared to the second quarter of 2021. The decrease is primarily related to the implementation timing of the initial cost savings that were announced in October of 2021. These savings were partially offset by our investments in growth and expansion in Europe and other markets outside of the U.S. As Karim mentioned earlier, in June, we announced an additional comprehensive cost savings plan that will result in $100 million in savings through the middle of next year. The cost reduction plan included savings related to U.S. workforce reduction, which reduced the total company employee base by over 40% from current level. The plan also included streamlined operational expenditures, including reductions, reallocations, and overall selling, general and administrative expenses, as well as savings related to refining the company R&D strategy to a more focused, stepwise approach for its FDC program. As a result of these cost savings efforts, the company incurred $10.2 million in restructuring charges in the second quarter. We will begin to see the benefit of the cost reduction in the third quarter of 2022, and we will be focused on maintaining our operational efficiencies going forward. The U.S. business continues to be profitable from a contribution margin perspective and provides support for the expansion into Europe and other geographies around the world. Under U.S. GAAP, Admiralty reported net loss of $70 million for the second quarter of 2022, or basic and diluted loss per share of 18 cents. As of June 30th, 2022, Ameren reported aggregate cash and investments of $324.6 million. We have taken significant steps this quarter to reduce our cash burn moving forward. We plan to continue to manage our cash prudently relative to business performance and believe our current available cash and resources, including U.S. profitability, are adequate to support continued operations, including European launch activities, for at least the next 12 months. Now I will turn the call back to Karim for closing remarks.
spk08: Karim? Thank you, Tom, for that financial overview. We have made a great deal of progress despite this year's challenges for both Ameren and for the industry. This progress provides us with a renewed sense of energy and focus on our bold vision to stop cardiovascular disease from being a leading cause of death worldwide. Our continued ability to adapt and evolve with changing dynamics over the last 12 months, as well as the recent important and significant reimbursement achievements in Europe, provide me with even more confidence in our objective to build a multi-billion dollar global franchise and ensure patients globally can benefit from the SIPA, the SCETA. And with that, operator, we are ready to take questions.
spk04: Thank you very much, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone handset at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality.
spk03: Please hold while we poll for questions. Thank you. Your first question is coming from Michael Yee of Jefferies.
spk04: Michael, please ask your question.
spk01: Hi, good morning. This is on the line for Michael Yee. Thanks for taking my question. I guess a couple for me. First, can you comment on the US sales trajectory going forward and how you expect EU sales to pick up? Appreciating that you are getting reimbursement decisions right now in that region for 2022, so maybe comment on how we should think about 2023. And secondly, I might have missed that part, but could you elaborate on the supplier agreement amendments and the unsalable inventory? And also, do you expect this to happen again in the future? And maybe lastly, appreciating your focus on the development of a fixed-dose combination, but in the parallel, could you comment on your BD efforts as well, since I recall that you have plans to align some stuff? enliven some assets in the metabolic area. Thank you.
spk08: Well, thank you. We'll try to take them one by one. Let's just start with the U.S. trajectory. First of all, we're pleased that this quarter we've seen our revenues to be in line with what we've had in Q1. If you really analyze this performance, you'll see that from a volume perspective, we are declining in the 7%, 8% prescription versus the Q1 of 2022, which is what is expected. So this is really in line with expectations. At the same time, we also continue to have a price impact because we're losing volume in the non-exclusive segment where we have lower rebates. But this is more or less getting to a stabilization because now most of our business is really coming from the exclusive business. So over time, yes, we anticipate obviously a Q3 decline because it's seasonal and because we have a volume, but we see the price erosion over time, over the next two to three quarters, stabilizing in a certain way. So we're pleased with this quarter. We continue to monitor the situation very closely. and we'll see how things are going to evolve. In terms of, you know, Europe, I'm going to try to address like two, three questions in one. You know, for the moment, 2022 is the year for reimbursement in Europe. That's not our revenue generation year. The focus today is to get as many countries, but more importantly, at the right price. And you've seen, you know, the team delivering very strongly on that promise with a final net price in the UK of around $176. It's significantly higher than our net price in the US, even prior to any price erosion, right? Totally in line with what we committed to at the beginning of our European journey. The UK is known to be a challenging market from a pricing reimbursement perspective. So the fact that they came out and they came out as our second country gives us confidence that that's really, that's the trend, that that's, you know, what we're going to be delivering over time. It takes a little bit more time, obviously, to get to that level of net price, but we're engaged with all of the payers and negotiations continue. 2023 is going to be the revenue generation year. This is the year where we're going to have, you know, at least six markets launching by year end 2022. So the remaining will launch. in 2023. So, you know, this is when we switch from pricing reimbursement to true revenue generation in probably, you know, 10 of the markets at that point in time. You know, on questions regarding, you know, supplier contract amendments, I'll start, but also let Tom, you know, share more detail. You know, we had a choice between you know, after we've seen the q1 results and the significant shift in the US business, either to take, you know, a year to 18 months to adjust inventory level, because this is a very long lead manufacturing process. And if we took down that route, we would burn a lot of cash by the time we fix it. So we decided to, you know, renegotiate with our suppliers so that we can find, you know, arrangements. So Tom,
spk09: Yeah, Kareem, just to follow up, so it's multiple, we have multiple arrangements, long lead time on the product. We see this as a good first step to stabilizing our working capital related to inventory, and we'll continue to work with our suppliers moving forward to make sure that we stabilize the supply purchases to reflect existing demand. Okay, and I think the second question was related to the inventory charge of approximately $10 million, which we had incurred this quarter. So just to give a little background, this charge was a result of inventory that was damaged by one of our third party suppliers and caused the inventory not to be up to our quality standards. So we have worked, we've worked diligently with this supplier to ensure that the proper procedures are in place to mitigate this in the future. So that's the situation.
spk07: Thank you, Tom.
spk08: On the fixed dose combination, you know, we continue As you've seen, despite the fact that we streamlined investments in terms of development to ensure that we keep the project active and ongoing, because we believe there is significant opportunity of having a fixed dose combination on the market. But we decided to focus only on one statin. We made progress. We're in the phase of prototype manufacturing and getting ready for next steps. And, you know, our BD position remains as such. We continue, you know, looking for, you know, assets that will provide, you know, U.S. revenue and a U.S. asset for us and for the great team we have in the U.S. to focus on, on top of the SIPA. But we're also open to other opportunities, so we'll see how that is going to evolve over time. But thank you for the question.
spk01: Thank you. Very helpful. Thank you.
spk04: Thank you so much. The next question is coming from Louise Chen of Kantor. Louise, please ask your question.
spk12: Hi. Good morning. Congratulations on all the progress this quarter, and thanks for taking my questions. So I wanted to ask you about your SG&A in the third and fourth quarter, given your cost reduction program. How should we think about it relative to second quarter if you can't give exact numbers? And then secondly, just on the sales, the nuance in the third and fourth quarter, because I guess during – the first half of the year, we got a lot of questions on how to think about sales and if they're going to be up or down quarter over quarter. So any color you could give or any thoughts in the cadence or nuances would be very helpful. And the last question I had was just Tom is the new CFO. Um, you know, what do you want to bring to Ameren and how will you do things differently at the organization going forward? Thank you.
spk08: Thank you, Louise. Um, So we can start with the SG&A, and then basically from there, I can give it to Tom to continue. So if you remember, we implemented our restructuring really in June. So most of the benefits in terms of cost reductions are really going to start to be seen from Q3, Q4, and the first half of next year. And the split may be in the range of $50 million this year, $50 million next year. But that's really at a high level. Tom, you want to add to that?
spk09: Related to the savings? Yeah. Yeah. So as we mentioned earlier in the quarter, none of the results or the savings were reflected in the Q2 results. So we expect overall that we'll have over $100 million of savings related to these cost reductions over the next 12 months, and they'll be spread over the next 12 months. Okay. Okay. And then Louise, I think you had a question related to the, me being the new CFO overall, very excited to be at Ameren. Um, like every other CFO looking for to drive the function, um, to be best in class. So that's the number one focus or a focus. I think overall, what we see is to stabilize us, continue contribution margin in the U S um, so that we can support overall the U European investments and really grow the company. through a European and an international base. That gets me very excited and I'm glad to join Ameren to deliver on that.
spk07: Thank you, Tom.
spk08: Just to go back, because I think there was also a question on the cadence on the U.S. revenue and what to expect over the next quarter. So as we said, we've seen within the exclusive segment, which is now the large majority of our business, a stabilization in volume, if not a sort of single-digit growth in volume. So we feel fairly confident that we are keeping track on that one. We continue to see price erosion and the non-exclusive. We continue to lose volume, obviously, there. But this impact is slowing over time. Obviously, Q3, there is a seasonality. So Overall, we continue to focus on contribution margin. This is the number one driver of our efforts in the U.S. The U.S. is delivering a very significant contribution margin that is supporting the organization drive, European business, and, you know, our investments in the regulatory approvals globally. So for the moment, you know, from a contribution margin, we continue to deliver on target and we'll keep the effort. Thank you, Luis.
spk12: Thank you.
spk04: Your next question is coming from Rowana Ruiz of SVB Securities. Rowana, please ask your question.
spk11: Great, thanks. Good morning, everyone. So I'm focusing on the Europe front. Two questions from me. I noticed you mentioned suspending the primary care field force in Germany, and I'm curious, how might that impact or benefit your overall spend, and how long do you plan to keep the suspension in place? and also what's focused focusing on Sweden and the UK as newer countries coming online. I was curious, you know, what additional investments do you plan there and how do you see the outlook and spend for those countries as well?
spk08: Sure. So, so, you know, in Germany we chose very early on because we came very, very early to the German market, uh, to basically have a contractual agreement with a third party, To have our primary care field force hired through them by them because labor laws in Europe are complex. And if you have to, you know, change course or make any changes can be very, very difficult from a process, but also with cost implications so Based on that agreement, you know, that field force contract would end now. So we just decided, since we're still in negotiation, not to extend and not to continue, but to suspend at this point in time, because it will get us to save a good six months of, you know, investments in that field force looking at the German situation. Now we'll have to see how the negotiations are going to evolve. Are we going to be successful and come back to the primary care field force and that allows us to do whatever we want with flexibility? Or the situation would remain very, very difficult and then we would consider everything from exiting to the market or having minimal presence depending on what agreements we reach with the Germans. So we took advantage of the moment. As a reminder, at the same time, we hired every, you know, our full team in the UK, I would say a bit ahead of time. So in a way that balances our, you know, investments. So we knew we could save in Germany and we knew that we could invest earlier in the UK by taking those two actions together. we are in a way normalizing this so that it doesn't have, you know, the additional U.K. investments don't hit us that hard since we're saving in Germany. Having said that, investing more in Europe is good news because this means we have more reimbursements, so we look forward to invest more. But for the moment, that is the wisest thing to do in the time being until we see how the German negotiations will take place. Finishing up on Sweden and the UK, Sweden and the UK are in launch mode. You know, in those two countries, once you have national reimbursement, you basically have a phase where you have to get formulary inclusion. So you have to make sure that on the regional and local formularies, the product is listed. So NHS, because they were very excited about the product, committed to have the product listed on NHS formularies within three months. which puts the official launch date for the UK for October. So we're very pleased with this, and we're making every effort to ensure that the product will be on the formulary, but also there is budget allocated to it, which is the third most important step. As a reminder, when a product gets approved mid-year or toward year end, it's not that fast that they can allocate budget because of financing cycles. So you tend to have a bit of a slow uptake during the first few months in one year. But in the new year, then there is a budget allocated for you so that physicians know that they can freely prescribe. We're very excited about the launch in the UK and Sweden. We now have a full team in the UK, incredibly talented with very significant cardiometabolic experiences. at every level. So we're very encouraged and we look forward to share more progress on the launch over the next few quarters. Thank you, Rowana.
spk04: Great. Thanks. Your next question is coming from Daniel Wool of JP Morgan. Daniel, over to you.
spk10: Good morning, everyone. Thanks for taking our question. A couple of questions here. First, in the U.S., can you quantify for us the benefit for this quarter that potentially derived from the normalization and trade stocking seen in 1Q. And I can follow up with the rest.
spk08: Sure. Thank you and welcome. So, you know, we cannot really articulate it in the second quarter as a benefit. In reality, there was a destocking in Q1 and a hit, which was normalized this quarter, right? So, This is really how it is analyzed. It's not like there is an artificial benefit this quarter. In fact, this is the first quarter where we see prescriptions and bottles really aligned so we feel confident that we're balanced where we are today and the hit that we've seen in the q1 has been basically normalized where we stand moving forward we hope that we're not going to see any of these disturbances in the trade you can never speculate i think the market overreacted to a third genetic and and we're not surprised right um usually in a genetic market you have all the genetics coming in together on the first month. So you rarely see situations where you have six months with one genetic, then another six months with a second genetic, then a third genetic coming in literally after a year and three months. So yes, the wholesalers reacted. We understand that. But I think now they see that the erosion or the volume progression of the genetics in general is linear no matter how many, you know, they are on the market. And we continue as a reminder to retain 60% of, you know, the market despite a year and a half of genetic presence, which I believe, you know, the U.S. team is very proud of.
spk10: Got it. Thank you. And then focusing on the Europe side, on Germany, can you provide us with a bit more color on the ongoing discussion with the health authorities there what the process entails, and what exactly are the possible outcomes that are expected when the process comes to completion in November? And then switching to UK, while there might be a slow uptake in 2022, as you have discussed, due to budgeting not being allocated, how should we expect the launch to look like in 2023, and what are some of the dynamics at play that would shape the launch trajectory?
spk08: Sure. So on Germany, we are now in I would say the final stages of the negotiation with GKV, with the payer. If those negotiations come, we come to an agreement, then that would end maybe in a month or so. And if that doesn't, then there is an additional opportunity for an arbitration that would take you until end of November. That's why we decided since things are still ongoing, And we clearly see based on the market dynamics, the situation in Germany, not for us, but for everybody is incredibly challenging in terms of healthcare. I mean, there are unprecedented decisions on controlling healthcare budgets and so on. So we thought that the wisest thing is to just save money. Save money. This is conserved cash. Make sure we save this money waiting for a final decision. Now, if by November or by end of this month we see a positive decision, then we will very easily rebuild because we have the contacts of our teams and we can reinitiate that. But if not, then we would have, in a way, restructured and saved the money with very, very minimal cost slash labor law impact. So all the scenarios on the table, we can't speculate at this point in time. I have disclosed before that in the UK, which was a very successful negotiation at the end, we went through you know, a third round of negotiation, which is very, very uncommon in the UK. And it, you know, has given a positive result. We can speculate or say that that's going to be the same in Germany. But, you know, the message is we continue fighting and we continue negotiating until the last minute we have in the process for for the UK. If you remember, we decided not to invest in any country ahead of reimbursement to ensure we don't burn cash too prematurely. Now in the UK, we have a final decision. We have a full team on board. This team is on the field where we are today and working very hard for us to have a strong launch. 2023 is going to be a full year for them. We have huge efforts in scientific engagement to build the awareness and the adoption. We believe, you know, the UK launch will be a good proxy of what we can deliver, you know, at a European level because there is significant adoption. We've actually seen tweets by NHS, by the Minister of Health, by others saying they're excited to reimburse the product for their patients in the UK, which is, you know, unheard of. So we feel encouraged, and we're doing everything possible to drive that moving forward.
spk10: Got it. Helpful. Thank you very much.
spk04: Thank you. Our final question is coming from Kate Cruz of Goldman Sachs. Kate, over to you.
spk06: Hi, thank you for taking our questions. This is Cade on for Paul. We have two. We wanted to know how you were thinking about planning for a potentially recessionary environment both in the U.S. and the U. in addition to the restructuring, if there's any steps you're going to take. And then number two was how do you think about the margins for the U.S. business going forward post-restructuring? Thank you so much.
spk08: Thank you. So, you know, I think... The environment is very challenging now overall. It was tough for us as a company for the last year in any case. And again, as a reminder, we did implement two restructuring already. So we had one in October of 2021. Then we had the second one in June of 2022. So we've been very proactive so far to be on top of our cost structure. And I can tell you we're going quarter by quarter looking at our contribution margin because that's for us the most important KPI we look at. The key actions we've taken, we're proactive to ensure we will be able to deliver future contribution margin that is needed for us to sell fund. At the same time, we keep our finger on the pulse if we see that the market conditions, you've seen us taking action in Germany, right, we are ready to take further actions if need be. For the moment, we don't see that happening because I believe we've done a pretty significant effort in the last restructuring with almost 40% of headcount impacted in the company, right, ahead of all those headwinds. But you never know how the market is going to shape, so we continue to be vigilant and we will react if need be. The last question was on margins. In the U.S., I mean, look, we've had a one-time impact on our margins this quarter. We don't see this being repeated. We'll have to see how things evolve, but if there are any additional one-time impacts, It is possible, but we don't see that as a trend. Tom, you want to add anything?
spk09: Yeah, I would just say with that, we were contribution margin positive again in the quarter, and we continue to do so in order to invest into the European and the rest of the world market.
spk07: Great.
spk09: Thanks.
spk07: Thanks, Tom. Awesome.
spk08: Any further questions? Okay.
spk04: Okay, we don't have any further questions in the queue. I'll now hand back over to Karim if he has any final comments.
spk08: Well, I just wanted to thank everyone for the call today. We believe we've had a strong quarter with significant success in the UK and Sweden. Our US performance is on track and is delivering the contribution margin that we expect. So we continue to move forward and we look forward to share more progress and update with you in the next quarter. Thank you all for being on the call. Thank you.
spk04: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone line at this time and have a wonderful day. Thank you for your participation.
Disclaimer