Idorsia Pharmaceuticals Ltd

Good morning, good afternoon, everyone, and welcome to the IDORSIA First Half 2022 webcast. With me on this call are our CEO, Jean-Paul Closel, our CFO, André Muller, and our Chief Commercial Officer, Simon Joes. They're all here to provide additional color to the press release and First Half 2022 financial report published today at 7 a.m. Central European summertime. Next slide, please. We will first be making prepared remarks, and then we will address all of your questions at the bottom half of this call. But before kicking it off, I need to remind everybody about our disclaimer. We will be making forward-looking statements in this call. Hence, you have been adequately warned about the risks associated in investing in Eidosia shares. Next slide. With this said, Jean-Paul, the floor is yours.

So we are on slide three. When we created iDorsia five years ago, we had a clear goal to become a fully-fledged biopharmaceutical company. And just five years after the creation of iDorsia, I am very pleased to report that we are really on a very good track to achieve this goal. Next slide. We are set up from day one, and we have not changed this priority list. We had defined five key priorities. First, deliver three products to the market within a midterm time. Number two was to build a world-class commercial organization to be able to retain the value for our discoveries. Number three, to bring as fast as possible Eidosia to sustainable profitability. To continue to fuel our pipeline with new discoveries. And finally, to utilize state-of-the-art technologies to drive innovation within the company. So slide number five. Let's look at what we have achieved within these five years. First, two products are on the market, QVVIC in the U.S., PIVLAS in Japan. But we have got results of, very good results of Aprocitanzan, which I will describe briefly afterwards. So we are on a good track to get, soon, three products on the market. The US, Japan, and European organizations are now established, and we are starting to have revenues, and I do believe that we are on the path, as we have mentioned, to reach profitability in 2025. We have also continued to discover drugs, And on top of the existing drugs that we had five years ago, we have now a very rich pipeline with some new products moving to phase two or to phase three. And finally, and we don't have time today to go into the details, but I can tell that we're using state-of-the-art technologies in research. but also in marketing, where all the most modern tools, including artificial intelligence, are used in order to optimize our revenues for marketing, but also our ability to discover new drugs. Slide number six. So we want, and that's a very clear goal, we don't want to be one of these biotech companies which are not profitable after 20 years. We want to become profitable as soon as possible. And in order to achieve that, we want to combine not only revenues from our commercial products, and we intend to commercialize QVV, PIVLISE, but also Lucerastat, Cenerimod, and Celatogram. But we want also to have revenues from milestones, and royalty streams. As you know, we get 8% of the sales of Ponesimod, which is Ponvory, marketed by Johnson & Johnson. We will have a significant part of the revenues of Apocytentan. We are awaiting the results of the T-type calcium channel blocker, which has been licensed or partnered with... neurocrime, and we are also expecting that Vamorolon is going to be approved in not a too distant future and bring also milestones and revenues to Eidosia. So now let's start with the first part of this revenue, slide number seven, and I would like to give the word to Simon Jones who has been very efficient to beat the commercial organization all around the world. He was the first person to have this task and to have to do and I have to say that he has done a fantastic work and is going first to discuss the results of his efforts and the efforts of the US team with the launch of QVVIC but of course he will also describe the launch of PIVLAS in Japan.

Thank you, Jean-Paul. And as Jean-Paul has said, it's a very exciting time for Eidosia as we launch our first two products. I'm very pleased to be able to share with you today the positive early momentum we're seeing with both Qvivic in the US and with PIVLAS in Japan. Next slide, please. So starting with Qvivic, which, as you know, was launched in May, The feedback we have received from healthcare professionals and patients has been very positive, and we're very encouraged by the steady growth in prescriptions and physician adoption, which I'll share with you in a few minutes. But of course, before any of this can happen, we need to build awareness amongst prescribers. And as you can see here on the right, we are making good progress here, with physician awareness of Qvivic already at 52% in June, just the second month into the launch. Next slide, please. So awareness is building, but what about physician receptivity to the profile of Qvivic? This slide shows the results of some market research we conducted prior to launch with a blinded product profile. It shows physicians were highly attracted to using Qvivic compared to the other medications they used to treat insomnia. And as you can see, 60% of physicians were passionate about using Q-Vivic, that's the green segment, or attracted to using Q-Vivic, the blue segment. And of course, this was significantly greater than all other products in the category, and importantly, nearly twice the level of the other two DORAs in the panel. Next slide, please. And the feedback we have gained from market research about the product profile is translating into positive feedback from doctors about their experience with the product. These quotes are just a few examples of the dozens that we have received with similar themes. And I'll just give you a moment to read them. In fact, I was in the US last week and spent a day with one of our sales representatives in Washington, DC, where I received similar comments and feedback. Interestingly, I had one doctor tell me she had switched 13 patients from Ambien to Qvivik and hadn't heard a thing back from any of them. And when she saw the slightly puzzled expression on my face, she quickly went on to say this was very good news. She was perfectly clear that these patients would have got straight on the phone if it wasn't working out. So in many cases, no news is good news in this category. Next slide, please. So turning now to the numbers, as you've seen in the press release, net sales in the second quarter were 0.4 million Swiss francs. This clearly is not reflective of actual prescriptions dispensed or of product demand, as to enable patient access and generate early demand, we are providing a robust patient support and co-pay program, including a first 30-day prescription free. As you're aware, patient support programs are becoming commonplace now to support new launches during the period where insurance coverage is being built. Furthermore, you should also note that we did not actively stop the channel at launch. Next slide, please. Now, as many of you know, we are partnering with a specialty pharmacy services company, VitaCare, to manage a key component of our patient support program. Now, whilst this makes it easier for patients to get their prescriptions filled, it makes the reporting of Qvivic prescriptions more difficult. IQVIA does not currently include VitaCare in its sample bank, and therefore its syndicated report under-reports prescriptions for Qvivic. We have full transparency of the VitaCare data and combined VitaCare and IQVIA without over- or under-counting. And as we communicated in early May, we will report these data during our quarterly earnings calls. So here you're seeing the first set of them from launch through July 15th, with the VitaCare data being added to the IQVIA numbers in the chart. So you're essentially seeing the IQVIA line at the bottom, then the VPS number, VitaCare, and then the total prescriptions in black. I think as you can see, we have good momentum in the growth of prescriptions dispensed with the most recent data point exceeding 1,100 prescriptions for the week ending July 15th. You'll also notice a few dips during the weeks where there was a national holiday in the US. This is a normal pattern created by vacations, reduced doctor visits, and reduced pharmacy hours during the weeks in question. Next slide, please. Now, taking a closer look at some of the early data, we are particularly pleased with the adoption of the higher 50 milligram dose. You will see on the left that around 75% of prescriptions are for the 50 milligram dose, which is expected to offer the best efficacy for the majority of patients. We believe this, along with the 30-day first prescription-free and a clear nightly dosing message, will help enable a successful trial, something we know is critical in insomnia. Additionally, we are seeing around 60% of prescriptions being written with at least one refill, with over 20% having four or five refills attached. And repeat scripts are starting to be filled. The chart on the right shows the number of writers per week, the number of physicians or nurse practitioners. You can see the strong growth in total writers as we add new writers every week. We now have nearly 2,700 writers after 10 weeks on the market. You'll note the data on writers is only through July 8th. There is a weak lag in obtaining these data versus the total prescription data where we have through July 15th. Next slide, please. This is perhaps the most important slide I'll show you today. It's showing the NBRXs of the three DORA products from our launch in May through July 15th. As you can see, Qvivic went past Davego after only six weeks on the market. Now think about that for a minute. Devigo has been on the market for two years, and after only six weeks, more new patients are being put onto Q-Vivic than are being put onto Devigo. And with the current trajectory, it won't be long before we are through Belsomra 2. Now this matters a lot, not because the existing DORAs are a material source of business for Q-Vivic, they are too small, but because it is the ultimate proof that doctors are responding to the differentiated profile of the drug and that our messaging is resonating. In fact, less than 5% of our source of business is coming from the DORAs, and the majority of Qvivic is coming from new patients at around 40%, or switches from benzos, Zed drugs, or Trazodone around 47%. This is a very encouraging profile. Next slide, please. So we're off to a good start, but what comes next? We have long maintained that consumer awareness and activation will be critical to the long-term success of Qvivic, and our strategy is centered around this, as you've already seen with our pre-launch partnership with Jennifer Aniston. We believe branded DTC and consumer activation will be an important momentum-building catalyst going forward, and we have recently announced our partnership with two celebrities as Qvivic patient ambassadors, actor Taye Diggs and former Olympian and champion skier Lindsey Vonn. Both Tay and Lindsay are taking Qvivic and have positive experiences on the product. They've already participated in a number of media interviews. Last week, Lindsay was on the Today Show sharing her insomnia story, which then got picked up by other outlets, including People magazine. After this interview, web traffic to Qvivic.com tripled from the previous days. Together, Tay and Lindsay have already reached tens of millions of consumers with their messages, many Qvivic-branded. And in the late summer and early fall, DTC television commercials featuring Tay and Lindsey are planned to start airing. We expect this to have a substantial impact on consumer awareness and motivating potential patients to talk to their doctor about Q-Vivic. So overall, we are pleased with the start we have made in the first couple of months in the US and are confident that as we exit the summer months and activate our branded DTC, we will see a further positive shift in momentum. Next slide, please. Looking beyond the US, Qvivik is on track to become a global brand. Following the EU approval in April, launch preparations are underway in the top five European markets, with the first launch in Germany expected before the end of the year. The local teams are actively engaging with medical experts, policymakers, and payers to introduce Eidosia and raise awareness about the significant burden of chronic insomnia. As the first dual-orexin receptor antagonist approved in Europe, there is a high level of interest among medical experts in the differentiated clinical profile of the product. We have also filed Q-Vivic in Switzerland and Canada, where we have recently appointed general managers on our establishing local affiliates. Finally, we have now completed recruitment of the phase three study in Japan and expect the top line results later this year. Next slide, please. So to finish off and just turn briefly to PIV-LAS in Japan, we launched PIV-LAS or clazacentan in Japan in April for the prevention of vasospasm following an aneurysmal subarachnoid hemorrhage, a life-threatening condition which has an incidence in Japan that is two to three times higher than in the rest of the world. Next slide, please. There has been no new innovation in this field for over 20 years, so the availability of a new product with high quality evidence is creating a good deal of excitement within the neurosurgeon community in Japan. Neurosurgeons have responded very favorably to the robust Japanese phase three data demonstrating the safety and efficacy of TIVLAS, which was published in the Journal of Neurosurgery in April this year. Next slide, please. I'm very pleased with the positive early results of TIVLAS since the launch in April. Net sales in the second quarter reached 11.4 million Swiss francs, and of this, nearly 70% has already been purchased by hospitals from wholesalers, and we have been receiving reorders since the beginning of May. Approximately 60% of our target hospitals have placed at least one order for Clair de Saint Anne, and as we estimate that, based on the incidence of ASAH in Japan, Approximately 10% of patients were treated with PIV-LAS in June of 2022. We expect this positive trajectory to continue as PIV-LAS is included in more hospital formularies and treatment protocols, and neurosurgeons gain more experience with the product. So in summary, our commercial organization is fully focused on executing against our ambitious launch plans for both QVIVIC and PIV-LAS. We're hearing positive feedback from our customers about both of these innovative products, and we are seeing the number of prescribers and prescriptions dispensed increase steadily week over week. I'm confident that the positive momentum will continue to build after the summer months as we ramp up our consumer activation in the US and continue to gain patient share for PIVLAS in Japan. And with that, I'll now hand over to Andre.

Thank you, Simon. Let's move to slide 21. Let's start with net revenues. Simon alluded to the 11.4 million sales of PIVLAS and the 0.4 million of QVIVC. As you know, we report net sales and not gross sales, so it does not really reflect the demand and the volumes, notably for QVIVC. We had also roughly 11 million contract revenues. A little more than 10 million were deferred from a previous outlicensing deal, so a milestone. and slightly less than 1 million relating to Onvoray. We'll come back to the 407 million non-GAAP operating expenses in a minute. So this led us to a non-GAAP operating result of minus 384 with the usual EMA and stock-based compensation. the US GAAP operating results reported were minus 405. Below EBIT, the 15 million is mainly relating to financial expense, 8 million in connection with convertible bond interest, and 4 million on the unrealized loss, notably on the Santera shares. in connection with the tax expense. So this led to a U.S. GAAP net loss of minus 499 million. Next slide, 22, please. Coming back to these non-GAAP operating expenses, you see we had a small increase in R&D, totaling 180 million, of which you had a fixed cost base, mainly in research, more than 70 million, 72 million, actually, study expenses, of which 60 million were really on five compounds. Celatogrel, we see ongoing phase three, SOS AMI, where we see a nice increase in the recruitment pace and the development of the cardiopan. We have Darvidoxant, we see a Japanese trial that will be finished before year-end and also the initiation of the pediatric one. We had Senamod with the appropriation of the phase three. Lucerastat also mainly with drug substance and clazosanthan finishing the Western trial that reacts that should also read out by the end of this year. Then, of course, the big jump is in SG&A with 226 million. Slightly higher in G&A, reflecting also more global footprint in the US, in Japan, and now starting also with the launch preparation, having now six affiliates in Europe and Canada. Plus, of course, the marketing and selling mainly driven in the U.S. with QVVIC and to a lesser extent with the launch of Piblast. So $407 million, a huge increase compared to last year, $248 million. Next slide please 23 you see here the cash flow so liquidity cash flow reconciled with liquidity was minus 455 So here 407 non gap OPEX we just discussed CAPEX of 18 you have usual stuff in CAPEX with 12 million and you had also a 6 million milestone in connection with the Japanese approval early 2022. Working capital changes, 42 million. Many built up of inventories to supply both U.S. and Japan with QVVIC and PIVLAS. 22 million increase in receivables as one can expect with sales which are out, 10 million and the rest is other receivables or payable. And the last year you have 12 million with others that's mainly relating, you have a lot of movement here but the main one is the deferred revenue of 11 million. So we ended the second quarter with a liquidity of 733 million. Next slide, 24, shows liquidity between cash and cash equivalent, 230 deposits of less than 12 months, 500 million. And you also see how this liquidity is held mainly in Swiss francs, 572, and also in the U.S. dollar, 146 million. So relating to operating loss, 840 million US GAAP excluding DNA and SBC and mainly non-GAAP operating loss should be as we indicated with the full year results and as mentioned in the press release to one 785 million for non-GAAP We need more visibility to guide on net sales a little more than two months after the launch in Japan and less than two months because the drug was not available in the retail channel before mid-May for QVVIC. But we are committed to spend around 785 million net between moving and profitability target. No change here, but I'm more confident than when we initially published this guidance, which was based on . U.S. products that are approved, but I know strong results of aprosecantin in resistant hypertension. We have no doubt the drug will be approved. in the U.S. and in Europe.

And before we get to it, we get a nice, right, annual net rate of prospect price.

Jean-Paul, the floor is yours.

Thank you. Sorry, you were cut, André, but we can answer the question to clarify a few points that you made. As you said, our expectation of becoming profitable in 2025 did not include a procedental income, and I think that the good results of a procedental shows us the importance of building and continuing to build a pipeline. So how is moving our pipeline? Slide number 28. So on top of the redirects and the which is now basically we are waiting for the Japanese results in end of this year. But for Clazos and Tan, all patients within REACT have been included and we are now analyzing and we need to have a six month follow up so the results should be available end of this year or beginning of next year. mostly mainly beginning of next year. At Procidentan we got the results, I will describe them later on, but also all the other projects are moving, except the selective, the SORA in beach heating, which was not positive, and we absolutely have decided to stop this program, and we eventually evaluate. What should we do with this compound? We have other drugs which are finished. We have finished phase one, such as the CXCR7 antagonist for multiple sclerosis, a very interesting product. And other products which are nearly ready to initiate phase two. And of course, for all of these programs, we are evaluating how to optimize the value for this product. Is it by keeping the development for us or partnering? And of course, in very competitive areas, we are choosing a partnering solution. Next slide, slide 29. So I mentioned the result of apocytentan. This was, for me, a very important result because we have been working on these drugs within Actelio and then Idorsia. It's a result, basically, of 30 years of research of endothelin. It's really an optimized, mixed, dual endothelin receptor antagonist. And what we saw is, I think, very clear. Aprocitantin reduced blood pressure compared to placebo, and all the methods which have been used to measure blood pressure, being at the doctor's office or ambulatory at home or after withdrawal and with using these two methods. all results are consistent and show a very significant effect of aprositentin on blood pressure. As mentioned, the effect, and this is maybe the first time that in so severe patients, such a long evaluation has been done, but the effect is maintained and very well confirmed after a period of 48 weeks. And very interestingly, the effect has been observed in a group of patients which are known to be resistant to usual anti-hypertensive drugs. And very important to remember that this study was done on top of a triple therapy for 40% of the patients, quadruple therapy, meaning a calcium antagonist and a diuretic and an angiotensin II receptor blocker and a beta blocker in 60% of the patients. And also, you will see one receptor blocker and a beta blocker in 60% of the patients. And also you will see when the results will be available that this was a very severe patient, patients combining heart failure, renal failure, obesity, diabetes for nearly 50% of these patients. And this is why the very good tolerability and safety that we have observed is so important. So I am very confident that this drug is going to satisfy a highly unmet medical need in this patient. So what are the next steps with aposetantin? Slide number 30. We want to file the NDA before the end of the year. And we also, and of course it depends of the acceptance of abstracts and so on, but we want to show the results in the scientific presentation as soon as possible and we want of course to submit these results for peer review publications. And clearly we have increased our interaction with Johnson & Johnson, with Janssen, who is in charge of the commercial launch, because we of course want to have the best label, and the label which also corresponds to the need for a successful marketing. Next slide. So, already if we are half year in 2022. And when we think of what we have able to achieve in this first year, it's quite impressive. So if we summarize what has happened during the first six months of 2022, we had QVVIC approved in the US, Klazozentan approved in Japan, the commercial launch of Klazozentan initiated in Japan, the commercial launch of QVVIC initiated in the U.S. QVVIC approved in Europe and we obtained the result of apracitantin in phase three, final results. Now, the rest of the year is going to be also very important because QVVIC is going to be launched in Europe and I do believe that Europe is a fantastic ground for commercial success of Qvivic because no innovation in the sleep domain has been happening for drugs within the last 20 or 30 years. This year, in the second half of 2022, we intend to launch the phase three with Scenery Mode. and we have discussed with the FDA, and we are integrating all their requests and all our also learnings from the phase two within our phase three, which should start before the end of this year. And we, as mentioned, will get the results of daridorexant phase three in Japan, which will be the base of an NDA in Japan. And we want to finish the phase three of Klazozentan for European and the US. And this phase three is called React. As you see, a lot of things will happen. And I'm not discussing all the brand new products that we are discovering. And I can tell you we have made some breakthrough in several areas, so be prepared for more. Thank you.

Thank you, Jean-Paul. So this concludes our prepared remarks, and we are now happy to move on to the Q&A session of this call. On logistics, may I quickly ask you that when you formulate your questions, that you limit them to one question only and drop back into the queue. Furthermore, you have the opportunity to write your questions on the webcast and we'll be able to then take them up in this forum. Operator, please prepare the lines.

Thank you. As a reminder to ask a question over the telephone, you need to press star one one on your keypad and wait for your name to be announced. Please stand by while we compile the Q&A roster. We'll now take our first question. This is from the line of Peter Verdelt at Citi. Please go ahead. Your line is open.

Okay. Well, I have three, but I will play by the rules and ask one and drop back in the queue. When we speak to patients and docs, the message points that you give in QV do resonate. Payer access is always going to be the issue, so You previously talked about balancing the need to drive access with not giving away too much on rebates so early in the life cycle of the product. Do you think you've got that balance right at the moment? And can I push you on when we could expect one of the big three PBMs to provide access? Could something happen before year end? Thanks.

So, yes, I think we're where we want to be. We're in discussions with every single large plan. And we're in that cat and mouse game, Peter, as we've talked about, where we're, you know, trying to trade off driving demand to make sure that we can have the right conversation about when and how much versus the long-term potential of the product, which has a patent life of 15 years. So after two months, I wouldn't expect to have been presenting a contract. And to be honest, if I had one here now with you, I can promise you I would have paid too much. So I can't tell you when it will be, because that's a lot going to depend on, A, it's confidential, B, it obviously depends on how we go with the demand and where we net out. But I'm completely comfortable with where we're at at the moment. But it really is about driving demand so that the payers can respond.

So Peter, it's Jean-Paul. I just wanted to insist. This is, and I am very convinced, when I see the data, when I see the feedback on the markets, This is going to be a big success. We are already going to be, I really think, before the end of the year, above Bessamra, we are going to be the new product in sleep area, the real breakthrough that people are waiting for a long time. And it would be crazy for us to give up by accepting too high rebates, to give up too early. This is a long-term... decision of course it's always very tempting to give up but we are not going to give that and we want a decent discount and this is going to to happen and this is why we need to be a little bit patient because the time is working for us you know you see the the steady increase of the demand and And at one point, I'm pretty sure we will find a very good negotiation solution with this PBM.

Thank you. Thank you. Thank you, Pete. Operator, next question, please.

Thank you. We'll now take our next question. Please stand by. Question is from the line of James Gordon from J.P. Morgan. Please go ahead.

Hello, James Gordon, JP Morgan. Thanks for taking the question. So I'll go for QVQ, please. So you previously did issue 22 revenue guidance and then you now have withdrawn it. So is that because of challenges with coverage and more couponing going on longer or the two are interlinked? So is that the reason? And if so, how much better could the couponing situation be in Q3? Should we assume a lot less couponing or might it be a similar amount of couponing? And if we try and extrapolate your chart, I think it says on slide 13 that 60% of coupon patients have gone on to become refill patients. So does that mean, is that how we should think of it? That's like your conversion into payment, paying patients for Q3. And if I could squeeze in just a clarification point, I think I saw a comment in the release about non-equity dilutive instruments. So does that basically mean debt issuance in H2?

I mean, I think the first thing I would say is that We probably have hit a tougher environment that we're launching into with COVID. I was in the U.S. last week, and as I said, and you go into the doctor's offices and there's still some of them aren't putting patients face to face. They're still dealing with backlog and catch up. And in that context, sort of pulling patients in on insomnia isn't sort of top of their list. So I think we have a challenging environment that we're launching into. We had a couple of operational things that we've since squared away around electronic health systems. It's taken us a while to get them all up and running because some doctors' offices are on three-month contracts, and therefore when you have to write prescriptions electronically, a number of those doctors couldn't do that in the first month or two. So we've had a few sort of headwinds that we've been battling with, which I think is what perhaps has slowed the demand slightly. But as I say, I think if you look at the charts now, we are breaking through that and I think we're very pleased with what we've got. It's perhaps a little bit delayed compared to where we thought we would be. I don't think at this point contracting is part of it. I don't think we would expect to have big contracts and open access at this early stage of the launch. I think it's about driving demand to make sure that we can subsequently open those contracts up. Regarding your second point on the 60%, just to be clear, In the slide I showed, it's 60% of prescriptions written include a refill or more than one refill. But we are seeing those refills being filled. And just to give you a sense of what's happening at the moment, we've looked at the first few cohorts in May. And the majority of prescriptions where they had a refill, that refill's been filled. And the majority of the time, it's in 32 days or less.

Thank you, Simon. Andrei, are you still on the line? Of course.

I missed the question of Peter.

James Gordon asked the question about what potentially could be a non-equity financing.

Well, I'm afraid, James, you will need to be a little more patient a couple of months before we can announce such deals. But, you know, I indicated sale and lease back. I indicated royalty-related deals. We are working on it. And as you can imagine, getting these strong results for Aposite and Tan will dramatically help. So it will be around these two types of instruments in order to, again, start 2023 with a stronger balance sheet and more than a 12-month cash runway.

Okay. I think James was explicitly asking whether debt could be part of that financing tool.

It could be one of the avenues.

Thank you, Andre. Operator, next question, please.

Thank you. We'll now take our next question. And this is from the line of Dominic Lunn from Credit Suisse. Please go ahead.

Thank you. It's Jo Walton here from Credit Suisse. I'm afraid I'm sorry to be like a stuck record and still on Qvivic and access and payments. We see that you have a $0 copay to start with, and then you have a renewal of $25 a month. If I was a payer and I could see that my patients could get free product initially, and then they could get refills paid for by Adorsia, at $25 a month, which is probably roughly what I'd be charging them for Tier 2, what is the incentive that brings the payer to come to a dossier and say, I want to get involved? So I guess my question is, how long is this couponing going to be going on? And specifically, if I were to look for a coupon today, how long could I look to be getting effectively free product before I have to suffer any material financial pain. Thank you.

Hey, Jo, it's Simon. It actually works the other way around, I think, in that we right now estimate we've got 20% access, and we're obviously looking to drive business through that 20%. We are also, every single patient that goes through VitaCare additionally is going through the process which can ultimately lead to a prior authorization application, a good number of which, by the way, are being approved. So everything in that 20% plus prior auths, the payers are paying for full price with no rebate. They also do respond to patient need, patient volume, and as we start to generate demand and we go through Deviga, we go through Belsomra, and they see true demand in the marketplace and they start paying full price with no rebate for the business that's going through, then there is an opportunity for us to have that conversation. And that's traditionally the way that the market works. Right now, I don't blame them. Right now, they say, hey, guess what? I've got Bell's Pharma. I've got Dave Ego. Why the hell should I give you a contract for Qvivic? It could well go the same way as the other two. And it isn't. We're already demonstrating that the volume is on a very different trajectory than the other two. And once that picks up, and once they start seeing what they're paying for the covered lives, then I think we'll be in a very different place to have that conversation. With regard to the timing of couponing, that will depend on where we get to with the payer contract. But essentially, once we start to see commercial coverage come up, then that will obviously come down.

And I sneakily just checked then, a 20% access rate is a good enough rate to trade off against the cost of a national direct-to-consumer campaign in September when you haven't got that much access to pay it back?

Yeah, I mean, over several years, yes, because it's a primary care drug. We don't expect to break even in year one. usually you're looking at a profitability for a primary care drug in year three. We're targeting, as you know, as a company, we put out guidance to be profitable in 2025. Thank you.

Thank you, Joe. Operator, next question, please.

Thank you. And we'll now take our next question. Please stand by. This is from the line of Manos Mastourakis from Deutsche Bank. Please go ahead.

Yes, hello, everyone. Just wanted to get a better sense of PIVLA's revenues phasing for the next few quarters, if you can make a comment on that, please. Thank you.

I'm not going to comment on future revenue projections. The thing I think I know is on a lot of people's minds is how much of this is real and how much of it is stocking in terms of what we've reported out already, which I obviously can tell you retrospectively. But in June, for example, wholesalers reordered 90% of what they sold out. So I think we're already at a point where we're at steady state in terms of what's in the market. In May, it was 70%, and in June, it was 90%. So the volume that they sold to hospitals, they essentially reordered 90% of that volume from Adorcia.

I think that, Jean-Paul, I think these people have always been underestimated, the potential, because people underestimate, first, how big is the problem of these patients, especially in Japan. And we, the Japanese, have... done, you know, are basing their prescription on results obtained in Japan. You know, it's two studies, the whole NDA is not only based in terms of safety on all what we have done in Europe, in the U.S., but mainly on two pivotal studies in Japan. So most of the best centers have been involved, and this explains why the pickup is fantastic at the beginning of this launch. And I am stunned to see that already, as mentioned, we are treating 10% of the patients after two months. Imagine what is going to be at the end of this year. So you can expect, and I'm good, I would say good surprise for PIVLAS compared to the expectation of the market this year.

Operator, next question, please.

Thank you. We'll now take our next question. Please stand by. And the question is from the line of Raghuram Selvaraju from HC Wainwright. Please go ahead.

Thanks very much for taking my question. This is just with respect to the long-term view on QVIVC. Can you comment on potential additional sleep disorders that you want to explore with the drug given its profile in treatment of insomnia, particularly with respect to conditions like jet lag and shift work disorder?

You know, we have, especially in the U.S., I have to say, we have a label which doesn't exclude jet lag, exclude any sleep disorder. We have chosen as a strategy to go with the big indication that says the largest label and we discuss it with the FDA so we have no restriction and frankly, our marketing goal is certainly not the jet lag one or two drug. The real, what we have observed is that The benefits increase with time and I think the chronic insomnia is really our target and there are millions and millions of patients and tens of millions of patients with chronic insomnia. What we want during the first years is to focus on marketing effort to explain that this is a chronic disease like hypertension, diabetes, where you need to be treated every night And I think that if we would start to discuss jet lag, it would be a little bit against this message. I think it is a fantastic drug for chronic insomnia. I think it could be good, and we didn't do the study. But people, if they want to take it for jet lag, they can. But frankly, when you take this drug every day, this is why you have seen the benefit that we have described in our Lancet paper on daytime performance. And this comes with time, and this is really a drug for chronic use.

Thank you, Jean-Paul. Thank you, Rob. Operator, next question, please.

Thank you. We'll now take the next question. Please stand by. This is from the line of Thibault Bouteran from Morgan Stanley. Please go ahead.

Hello, can you hear me?

Yeah, we can.

Thank you for taking my question. It's just about the agreement with Sinus Health. I just wanted to know if you could give us some color on how this partnership has been going, if you had to make any adjustment to the agreement, incentive structure or anything. and basically what you learned since the launch in relationship with this agreement compared to your initial expectation. And also still on the same topic, if for some reason you want to take back control of marketing for any reason, how binding is this agreement and how much freedom you have here in terms of doing that? Thank you.

Thanks, T. But let me start with your second question or part of question first. So just to be clear, we are in full control, as Eidosia, of the marketing, the pricing, medical, and everything to do with the strategy of the product. Cineos essentially are providing Salesforce services to us, and we're pleased with the way that's all going. We've had to make no adjustments to the contract. I know I've said this before, but we need to be very clear that Eidosia is in full control and has built the capabilities for all of what I would describe as the strategic capabilities that the organization requires for the asset. And Cineos is providing Salesforce services in partnership with us. They're doing a very good job. We're pleased with the quality of the Salesforce that they've stood up, and we've had no cause to change anything to do with the contract. Thank you.

Thank you.

I'll take our next question. Please stand by. This is from the line of Rosie Turner from Jefferies. Please go ahead.

Hello, good afternoon. Thank you very much for taking my question. So I will start with one also. How are you thinking about the launch plans in Europe? And I suppose it will vary in terms of country access, I think. before we've spoken about Italy, but I just wondered if there was an update there. Thank you.

Yeah, I mean, we're expecting actually to be launching Germany first. As Jean-Paul said, we look at Europe very, we're bullish about Europe because the unmet need is huge, just as big as it is in the U.S. In fact, the number of patients on prescription medicines in Europe per capita is higher than the U.S., I think that's probably because there's more OTC use of sleep meds in the States. And many of the European regulators and even some of the payers are really quite concerned about the long-term use of zeds and benzos and put restrictions around their use. So being the first DORA to come into the European market against that backdrop gives us a lot of confidence in the opportunity ahead of us. As I say, we'll launch in Germany later in the year. And then, as you rightly say, we'll roll other markets out through the course of, across the break of the year and into 2023, dependent on market access. You're right that Italy is a self-pay market, which means we won't have to wait all the way through a long, protracted reimbursement process in Italy. And there is potentially an opportunity for us to think about a similar approach in Spain. But otherwise, it will be linked to reimbursement, particularly in the UK and France.

And just, you know, I wanted to add that there is something very special for Europe, is that the label of QVV in Europe is quite extraordinary, I have to say. It's really for insisting on chronic use. Here it's, and you know that in Europe, most of the drug, every drug, most of the drugs, I have to say, especially benzo, Z drugs, are limited to a few weeks of treatment. Here, it's the first chronic insomnia drug, which is approved for chronic use, and which is also approved for patients who have really daily consequences. There is, in the label, very clear mention on the fact that It should be really, it's going to work, especially in patients with chronic daily impairment of their daytime performance, and that there is a benefit of a QVV in this patient on daytime performance with the 50 milligram. So we have a very, very unique label. which is unique as an insomnia drug because it's the only drug, and this is very important for reimbursement because nobody can compare to a drug which is not approved for more than a few weeks. So I think it's very helpful, the reimbursement. It is really a drug for chronic use and for patients with daily impairment of their activity. So this is what we try to really integrate into our launches, and we are working on that in every country.

And in addition to having chronic labeling, just to add, the intrinsic data on daytime performance are also in the European label, which is very beneficial for us in Europe.

Perfect, thank you.

Thank you. Next question, please.

Thank you. We'll now take our next question. please stand by. From the line of Kia Parekh at Goldman Sachs, please go ahead.

Hi, thank you for taking my questions, please. The first one is, if I look at consensus for 2022, we've got cubic sales of about 70 million and then 23 at about 250, 260 million. How comfortable are you with consensus numbers? Do you think they are broadly in the right kind of ballpark? Or do you think given some of the decisions you're making from a commercial perspective, we should be thinking about a different curve to the ramp? Thank you.

Okay, you're on the line. Do you want to take that? Or do you want me to take that?

No. Well, I can take it. You've seen that we maintain our net operating loss guidance, but we no longer break it between sales, other revenue, and OPEX because we need a few more weeks to get more visibility on the uptake, mainly for QVB in the U.S. So I will... I will not comment on the consensus for 2022 and even less comment for 2023 and after. But as we said and Simon agreed to it, We have almost 13 or 14 years of IP protection, so we will not sacrifice short-term profitability or sales by contracting with payers. We really want to extract the most value of QVV, notably in QS. So we'll give for the full year certainly more color with the Q3 results, but right now it's premature.

Thank you, André. Thank you, Keyur. So we got one or two questions coming in through to the webcast. One of them is for you, André, on the back of the non-equity financing possibilities throughout the remainder of this year. Do you want to give some more granularity as to what those could be and when they could be actually happening?

Well, we are definitely actively working on it. So I'm confident that, again, we'll ink a few deals. Will it be in Q3 or early Q4? I don't know, but for sure our objective is to raise cash with either, as I said, sale and leaseback and or right here related monetization or right here related deals or even structured debt. So between this combination plus Jean-Paul also mentioned it, but our out-licensing takes time, but I hope also that we link a few out-licensing deals. So I'm really confident that we'll raise a significant amount of cash, putting us in a very strong position starting 2023. Thank you, André.

We've got another question on do we have an update on the development of Lucerestat, Jean-Paul?

I think that we are basically continuing the open label phase and we are preparing a discussion with the authorities. We want to, we have seen as mentioned many times, we have seen very, very interesting data on the I would say end organ protection with this drug. We want to confirm this data with as much information as we can. We are using, we were mentioning, we are using basically all the new technologies and the new techniques to evaluate these effects. For example, you are using artificial intelligence techniques to really compare with a sort of placebo untreated group. And we will discuss at the end of this year with authorities the results. But since the protection of this drug, of Lusterastat, is going to be through orphan protection, we prefer to take our time to accumulate data and to go to the authorities with very convincing data. That's the situation. I can tell you that the data that we have are very impressive, and this is why we do not want to give up on this drug, because I do believe it's a very efficient drug in February.

Thank you, Jean-Paul. Operator, do we still have questions in the roster? We do.

Would you like to take the next one?

Yes, please.

Thank you. The next is from the line of Peter Verdelt at Citi. Please go ahead.

Sorry. Peter Verdelt, just a second question to Andre on the APRA royalties. Could you characterize the level of interest that's been there from parties, how many are in the data room, and your level of confidence that a deal can be done before year end And maybe Jean-Paul can just reassure us that the edema signal imprecision is going to be considered as manageable from a DOCSIS perspective.

Thank you. Jean-Paul, do you want to take also to your first question?

I think I have to say that the edema signal is not is really, I would say, I would not discuss the word manageable. I think it's a very, it's part of the treatment of these patients, and it's really not causing people to stop the treatment. I think we have a few. I think we can count on the, basically, on one hand, the patient who had to stop because of that. So I think that in this very severe patient, this is not going to be an issue. And even more, I think that what we have observed and what is more important that despite the very severe renal problems that these patients do have, we have not seen what I was really worried and what everybody should be worried when you treat this patient is the occurrence of acute renal failure because when you give anti-hypertensive drug in these very severe patients, this is a big risk, and we didn't see that. So I think the safety is going to be not an issue. Of course, every doctor will look always at these patients, but frankly, it is not to the point that it should produce stopping the treatment, and that's the situation. So I'm very confident. And these are very severe patients. I said on four therapies, and what we have observed also is some, and we will give results later on, some very interesting indication on some renal function or renal damages We have measured proteinuria. We have measured global filtration. So we have some very interesting data that will be shown later on, and we should reassure everybody using this drug. And the other question, sorry, I forgot the other.

Just characterize the level of interest.

And by Johnson?

No, by other parties in the royalty deal.

In the royalty deal. I think, as we said, we have many interests. But, you know, a deal is a deal. And until it's signed, it's not signed. So I do not want to comment before we have the signature on this contract. And, of course, we are working, and Andre especially is working very hard. But the data here... I think that what you have also to remember is that this protocol, this protocol of the studies, has been really suggested to us by the FDA. This is what they wanted to see in a drug in resistant hypertension. And the fact that all the primary, secondary endpoints are positive, the fact that this is a protocol really agreed with the FDA, and the basically suggested by them, and it was a very good idea, very good suggestion. I think we know that this drug really should be approved. I know that you always have to be very careful while working on the quality aspects and so on, but we know that this drug should be approved on the merit of the clinical results. And this is really making much easier our discussion with the potential YLT for YLT deals. Now we have the results and we have been able to start the discussions.

Thank you, Jean-Paul. Thank you, Pete. Operator, do we have any questions left?

We do. Please stand by. The next question is from the line of Dominic Lund from Credit Suisse. Please go ahead.

Thank you, Joe Walton, again. I'm sorry to go back to QVivic, but this is a question about Europe. So I understand you have the Cineos sales forces you have in the U.S. You have VitaCare as a distributor in the U.S. Is there any equivalent in any of the markets that you would use in Europe? And given that there hasn't been a DORA approved in Europe, how confident are you that you've got all of the data that you need to maximize the local reimbursement for those countries that will give reimbursement and that you won't have to do additional clinical studies. It's a question really of the degree of confidence in your knowledge about the 15 plus markets in Europe versus the one market that you have in the US. Thank you.

Yeah. OK, Joe. So just to be clear, VitaCare is not third-party logistics providers. So all the distribution of drug, they do do some of that themselves where products come in directly to VitaCare and they can distribute directly themselves. But we also have a 3PL in the US which does the traditional distribution and we have a 3PL in Europe that will do the same distribution throughout Europe. The actual patient service and co-pay model is not applicable to Europe just because of the difference in the nature of the of the markets, but obviously we have all of the traditional distributions set up in Europe already. With regard to payer, yeah, no, we're confident we've got what we need. And a large part of that, as Jean-Paul said earlier, is because payers are starting to separate out chronic versus acute. And actually, I'll give you an example that in our NICE submission and in our conversations with NICE in the UK, we have agreed that Qvivic will not be compared to the zeds and the benzos because the zeds and the benzos are restricted to two to four weeks of treatment, and this is a chronic medication. And by separating out as a chronic medication, you actually avoid the need to do these sort of head-to-heads. I'm not saying that's going to be the case in every single market, but we're in a very good position to be able to use the difference in the labeling to separate out the comparisons that is required. And honestly, I think we're very focused on the top five markets. I mean, there are 15, and we can get to 40-something, but really the concentration of the opportunity sits with the big five markets and the addition probably of the Nordics.

Thank you. Thank you, Simon. Thank you, Joe. Operator, next question.

Thank you. Please stand by. And the next question is from James Gordon from JP Morgan. Please go ahead.

Hello, James Gordon. Thanks for taking the follow-up question. It was just following up on the financing point, because my understanding before had been that Plan A was the divestment of APRA royalties, and we've heard that it's not to do with the DEMA or any approvability concerns. Is the challenge just that at this point J&J hasn't said that much about their aspirations for the product? and that maybe a potential purchaser of the royalty would like to see not just the approval, but even how the launch is starting to go before they really want to commit to it. And the other part of the question was just, I heard sale and leasebacks mentioned. On the balance sheet, I think PP&E is something like 150 million. Is that the part of the company that could be for sale, or does that understate it? Is there more to sell than that?

On the latter part of your question, James, yes, that's the bold part. And these are the buildings that we received from the merger process from Actelion back in 2017. On the first part, yes, J&J has not indicated much so far, except that back in October or November, fed an R&D a day mentioning five drugs with a potential of more than 5.9 billion including prositantan with a potential between 1 and 5 billion. Now they've seen the data of the precision trial and you know in these large companies they wait for the result before really putting all the resources behind the potential launch. And that's what we see now. So, of course, you've not seen the full set of data. It will be reserved for publication, certainly in one of the scientific conferences later in the year. But I don't want to preempt Janssen's excitement around the around the Procidentin. But as Jean-Paul said, we see a data of the precision trial. We are confident that J&J is the ideal partner to make Procidentin a big success. I recall that most of the analysts see sales at peak north of 2 billion. At 2 billion, we would get 550 million rises. So it's not tomorrow, that's for sure, with the drugs that would be launched in 2024 in the U.S. and in other territories after. And each additional $1 billion on top of the $2 billion would be an additional $350 million. So, yes, a proceedent ad for us and for right here related deals was a key milestone to achieve. I'm not saying that the regulatory risk is off the table, but as Jean-Paul said, with Phase 3, which was designed with the FDA and with all primary and secondary endpoints met with statistical significance, we are highly confident that the drug will be approved. J&J will launch it, and we have no doubt that we have an ideal partner here with Youngstown.

Just if I understand, James, you wanted to ask why does it take time? Was it one of your questions, sorry?

Yeah, why time? Also, I think the initial, at least what I'd understood before, it sounded like it was very much that the plan A was that it would be sold by the end of the year, But it now sounded like there were quite a few different options being entertained. And so my question was, if it's not the approvability and it's not the profile, which sounds like it's very good, why was it lesser?

No, not at all. I think it takes time and we want to have a good deal. We don't make a reality deal for several hundred millions. And of course, it's going to be a big deal. We want to go through a real good process and we want to find the best offer and we want to work on every single detail of this offer. It takes time, but I think that there is nothing which is in front of us which would prevent us to do such a deal. Now we have the results and everybody is quite confident that this drug is going to get approved. There is no issue on this side. I repeat, we do not want to get through dilutions and we will use many, many approaches in order to avoid diluting the shareholders. We are working very hard and every day we are making progress and before the end of the year we'll be there. I'm quite confident. We do not want to give up value too early, and this is a topic of Andre to try the best deals of all what we do.

Makes sense. Thank you.

Thank you, James. Thank you, Jean-Paul. Operator, do we have any questions left? The time has advanced.

We do. Please stand by while we take the next one.

This is from Rosie Turner from Jefferies. Please go ahead. Hey, thank you for taking my follow-up question. So it just cracked up a bit earlier, Andre, when you spoke about what you needed to be able to see to give us some kind of guidance on QVIVC, I guess, for the remainder of this year. And I just wondered what that was. Are we kind of waiting to see that DTC have an impact, I guess, at the beginning of September so we can expect maybe a bit more guidance in Q4 or... Is it something else that we just missed? Thank you.

No, it's really to see demand. Simon, I'm sure you can add to what we need to be more confident in the uptake beyond the preliminary weeks.

Yeah, I mean, Rosie, it really is for us to have some more time and see some more data points. Momentum is good. You've seen the MBRX data, which is a critical lead indicator. And then we've got the DTC, as you mentioned, kicking in in sort of late August, September. And I think once we start to see what the trajectory looks like thereafter, we'll be in a better position to have a view as to what that looks like.

Just, you know, I would like to say, as a CEO, and it's not auto-congratulations, please believe me that we are all... very focused on our task and on the challenges. But, you know, which company has built within five years a GP sales force in the U.S. and now in Europe? I don't think that has happened. And frankly, we have had at the first weeks, you know, it was not easy for us to go through the distribution channel. We were not a very big company compared to the big Merck or Pfizer of the world. And of course, we had to get the organizations, the distribution system in place, the electronic systems in place, which is now in place. So that's the first point. The second point was really to inform the doctors. And this is really what we have done. You have seen more than 50% of the doctors know about QVVIC. They are testing it. Let's be clear. Even if they believe us, I think they still believe more in the things they will see by themselves. So they are testing, most of them testing in a few of the patients, sometimes in a lot of their patients, but sometimes in one or two patients. And what we have heard that they're very happy. But this is a phase where the doctor are testing it. But the real clear thing is that This market will take off only with DTC because today doctors, as we say, have some other clear priorities. They have the COVID situation, which was not anticipated. I frankly believe at the beginning of the year that this is with vaccination going behind us. There is, as you have seen, quite a big number of patients who have COVID patients. And then when the patients will be able to really know about this drug and ask, this is going to make the difference. And already we are going to be the number one DORA very soon. Frankly, before being the number one, I would not hardly discuss with these payers. I want to be the number one to discuss. That's always a much better situation. And we are going to see the real impact of DTC during Q3, but even more Q4, I would say. It's Q4. It's a Q4 issue. Then we will really be able to describe with you when are we going to plan for the payers to cover us, how much is the demand, and what are our expectations, and the This is really going to happen late this year.

Thank you, Jean-Paul. If I may, Jean-Paul, I would add to your comments that sleep is a perfect world for drugs that work, and we believe that QVB has these key attributes. I say it in parallel, but look at the launch of Tesla back in 2014, you know, you need free sampling to build experience with the patient, the word of mouth, but also with the physicians, because if you get your strong feedback from a patient, this is what will drive a commitment. Now, Simon has shown that less than two months after the launch, we have already 52% awareness, which is already a significant percentage. And the second part will be, yes, PBMs, as Jean-Paul said and Simon said before. Yeah, well, there are some barriers, and with stronger demand, we will get these PBMs on board, but not at all costs. I hope we'll have the same profile in COS. So Tesla with Celgene and now PMS north of $3 billion. But look at the first quarters. It was really a slow uptake. Hope we'll do better.

And also, just to add, sorry, because I think we forgot to mention it during this, or we didn't mention it as much as I think, is the importance of the 50 milligram. 50 milligram dose. which is really basically recommended in Europe and which is approved. And it was so important for us to have 50 milligrams. 50 milligrams gives a subjective improvement in the patient. We know it. Basically, one hour total sleep time, subjective total sleep type improvement. You know, one hour of sleep per day means a whole night of sleep at the end of the week. This is major and this is really fed with the 50 milligram more than the 25 milligram and this is why we are so happy and we have to fight. And we are fighting that really people, patients take the 50 milligram dose which is certainly the dose giving the best subjective effect without the price to pay on the side effects. And this is the indicator of personally which I look the most because if we would be having 75% of the patients 25 milligrams, I think we would be in trouble because it would mean that the patients will not make the difference and will not tell the doctors what they do today. They tell the doctors, God, I have not slept for such a long time And this is because the fillet, this is a subjective, and this is a 50 milligram. And we are working very hard on that. And I think this launch is a success, will be a success, because also we are spending a lot of energy on this dosing recommendation.

Thank you, Jean-Paul. Okay. We've overdrawn more than a half an hour. We need to conclude the call for today. So on this, we're going to thank everybody for their ongoing interest in IDORSIA. Our next scheduled news flow will be the nine-month results on the 25th of October, but I'm sure before then we'll be talking again. So stay safe, everybody.