Orexo AB

Welcome to the conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.

Thank you very much, and welcome to this third quarter call for Rexo. It has indeed been a transformative quarter in many ways for the company, in particular in our R&D departments where we have made very good progress in two projects, and I will come back to that a little later. Today, I'm Nicolai Sorensen, and I will be joined by Fredrik Gerstein, our CFO, and this time also Ed Kim, our chief medical officer, who I believe will be new to many of you, but Ed Kim will talk a little bit more about our OEC 390 project and why we think this is an important project both for Oryxo, but also for the U.S. We will go through the business update. I will take that, and as I said, it will come in on the products under development, focusing on OECD 390. Frederik will take us through the financials before I will close out with the legal update and some approach for expansion for where we think we have some future value drivers. Starting with a brief overview of the quarter, as I said in the introduction here, we have made some great progress in our pipeline, in particular with our GLP-1 agonist project that we have works 472, where we showed some very promising in vivo data. And also we received a BARDA fund, which initially is worth $8 million, but could be all the way up to $51 million, where BARDA will finance the majority of our Work 390 project. During the quarter, our work with ICPRI, formerly known as OX124, has proceeded well, and we are now starting the reliability and stability testing that was required by FDA more or less on time. With regard to OX640, we have during the quarter, we have manufactured the first batches of the amorphox powder with a pennefrin at commercial scale. We have continued partner discussions, but we've also, as I wrote in the CEO comments, seen some increased uncertainty around the market in the U.S. We believe that is something that will be solved, and I will come back to that a little later. Looking at the revenues, clearly in the Swedish kronor, the dollar Swedish exchange rate has had a strong headwind during the quarter for the company. It impacted with nearly 11 million Swedish kronor, which is kind of close to 10%. But we have also seen during the quarter that the wholesale inventory has declined in the U.S. which explain a lot of the development compared to last year. Then on EBITDA, we have a negative EBITDA, which was not entirely according to our plans, but that is very much associated with the increased value of the share price during the quarter, where we are reserving for provisions for the for taxes, and particularly around the social securities in Sweden, which is impacting negatively in the quarter, but not from a cash flow perspective, but from a P&L perspective. Fredrik will come back to that a little later. Looking at the outlook, we reaffirmed the 2025 outlook, and what's worth noting is that we still believe that it's possible for us to reach our positive EBITDA number for the full year. Moving into our U.S. commercial update, we're seeing the Buknoven and Aleksandr market is picking up a little pace, getting closer to 5% with 4% growth year over year. And also over the last quarter, we saw a slight increase with 1%. this is particular now which is the interesting is behind the scene is that the market has really been been driven by the commercial segment which is now basically on the edge of surpassing medicaid as the largest segment in the us that is important for us because of two reasons first of all the commercial segment has a lower rebate so it's more valuable each patients within the commercial segment is worth much more for us than a patient with medicaid but also we have And we maintain into next year unrestricted access to nearly the entire market with 99% of the volume today sitting with payers where we have no limitations in access for sub-salt. And we have no changes expected for next year. In the public segment, we have seen Medicaid decline. This quarter has actually increased a little, but at a much slower pace than the commercial segment. And we have seen in both Medicaid and Medicare that our access is merely unchanged. There's a small, small plan where we got some restrictions for 2026, but it's not really material for the company. One thing that is interesting in this space is particularly where we see um our largest account is with humana medicare and humana medicare have for a subsoil perspective had a significant impact of two reasons so the one is that we have seen humana medicare medicare declining because they they had new restrictions for certain part of their patients populations but also that the rebate increased for that particular account so we kind of both at lower prices but also we saw negative volumes which have had an impact on the company year over year, which is actually the main explanation behind the year over year negative development. From a quarter over quarter perspective, we actually from a pure demand perspective, we have no major changes. We are quite stable in both Medicaid and open, actually grow a little in some of the segments, but we do still have some negative impact from Humana and to less extent of the United Health Group. For those of you who are new to the companies, These were the formally exclusive contracts where OREXO had nearly the entire volumes within these accounts. But after the introduction of generics in 2019, we have seen a steady decline in the two accounts. One thing that I have shown before is a little around the inventory and this because we have a strong expectations of a build up here in Q4. And to validate that a little, I just want to show some more interesting data here. So one is looking at the sales to pharmacies. That means that the wholesaler sales to the pharmacies is down about 1% compared to last year. Some of that is, of course, pricing. When you compare to our net sales, in these numbers, we also have a 4% price increase in the start of the year. But that's also something we anticipate will happen next year. From a growth sales perspective, we are also stable, despite the volatility you can see here on the dark line. And we're down about 1% year to date. And that is despite the destocking we have seen. And I'm just looking a little closer on the inventory levels at wholesalers. This is a new picture for all of you, I believe. You can see these two peaks that are in the picture. They're both in the end of the year 2023 and also 2024. And if you look at the level of inventory when we enter 2025, It was 60% above the inventory that we have today in the end of Q3. But even just looking into the inventory in the end of Q2, it was actually 30% higher than where we are now in the end of Q3. So there has been an inventory decline and it follows the same pattern that we've seen previous years. So we are now expecting to see the Q4 that there will be some inventory built which help us when we reiterate our guidance for the year that we actually believe we can hit the sales numbers that are in here and also overall the company hit the positive EBITDA number. Coming in on the products and the development, first area I will go a little into depth with is we did show some promising data in semaglutide where we have done a nasal nasal administration. But for most of you should be aware, and I'm sure following the pharmaceutical industry, that this anti-obesity medications, which is kind of a collective name for these GLP-1s, is growing substantially. One is within obesity and diabetes, but also looking forward, there are a lot of expectations in more neurodegenerative diseases such as Alzheimer's and Parkinson's. We also see that there are areas within addiction where these have shown promising data. So it's really in one way a drop with a very wide range of applications and where we see some of these patients segments would have benefit from a new administration form. On top of that, we also see with our dry powder formulation, we can add a lot of stability to the products. So what are some of the reasons why we believe? It's, of course, compared, it's a small needle today that you need to take subcutaneous for most of the GLP-1s. Most of them only have an injectable allosin pipeline. There are a couple who also have an oral formulation, but with very poor performance in terms of bioavailability. But taking it into the nose, it's quite easy to self-administer. It's, of course, needle-free, so it's a non-invasive route of administration. It will bypass the first past metabolism where you would normally, and that's why we see this low bioavailability of GLP-1 medications when they're taken orally in the GI tract. We don't see any need for refrigeration. We have data for six months of semaglutide in our formulation, and during those six months in 40 degrees heat, we're basically not seeing any degradation of the active substance. So we think there are a lot of advantages coming in with the powder formulation, both from a patient perspective, from a stability perspective, and we think that can help also with improved adherence for the patients. With the data that we presented, this is a preclinical in vivo study, so I will say this is very early stage. We think semaglutide is the perfect model substance but this could probably be applied to other peptides used for GLP-1s. Semaglutide is a very difficult peptide in the sense it's a very large peptide, but we're still showing this quite impressive uptake when we compare to the oral formulation of semaglutide with basically up to about seven times higher bioavailability using the nasal route of administration in the studies. We, as I said before, we have continued to do stability studies and we see minimal degradations after six months. And what we're doing now is that based on the learnings from this study, we will continue working on the formulation because the study was in seven milligram. We know that seven milligram of Rebelsus, we know some of the the obesity, obesity data that we've seen from Novo Nordisk is about 25 milligram for obesity. So we probably have to work a little on the formulation to increase the dosing also. The aim is, of course, to take this into a human trial, but we will have to look at the timeline. So it's a little early for us to commit to a timeline, but this is, of course, the ambition that we're working towards is to show that we can replicate the data we've seen in dogs, also in humans, with improved bioavailability over the oral formulation. Then I will invite Ed into the conference, and Ed will talk a little about our ORH 390 project and why we think this is so important for the US. So, Ed, the word is yours.

Okay, thank you very much, Nikolai, and good morning, good afternoon to everybody. For those of you who may not recall, it was in April of 2023 that the White House declared fentanyl-xylosine mixtures as an emerging public health threat. So that was about two and a half years ago. And in the latest DEA National Drug Threat Assessment, which goes back over the past three years, the prevalence of xylosine in illicit opioid samples that are confiscated by the DEA has increased over four times. And it's no longer a problem just in the Northeast, but it's spreading. And certainly, if you look at this heat map, has already reached significant numbers on the West Coast. And it's been identified in all 50 states. Now, it's not just how common it is now. But what we see here is that the deaths due to xylosine fentanyl overdoses continue to rise. This is a paper that analyzed CDC data, which currently only goes to 2023. Now, if you recall, 2023 was the first year where the total number of overdose deaths started decreasing. What you see here, though, is that in 2023, the number of xylosine fentanyl overdose deaths continued to increase. So we're hearing this from market research as well as informal discussions that we have with colleagues and customers in the substance use disorder space that this really is a problem. In the last two to three years, there's been emerging animal data suggesting that while xylosine is an FDA-approved veterinary product that is safe and effective when used appropriately in animals, when xylosine and fentanyl is given to these animals, in this case usually mice or rats, it actually increases and sometimes multiplies the lethality and the opioid-induced respiratory depression. There is a paper published in 2023, it's the title on the left, which identified, it didn't measure respiration, but identified that a moderate dose of xylosine increased the lethality of fentanyl by over 100 times. So it took one 100th the dose to kill 50% of the animals. So we believe that this is truly a public health threat and it is growing over time. Now, the BARDA partnership that we recently announced is a true partnership with this agency that is part of the Department of Health and Human Services. They're not only contributing a substantial amount of financial support, but BARDA has technical experts in all phases of drug development and public health who are at our disposal to continue to consult with us, advise us, and advocate for the continued development of OX390. You heard Nikolai mention that the total value is $51 million. The current base period is going to be dedicated to the IND-enabling toxicity studies, formulation development, and in-house manufacturing capabilities. And that total is $8.5 million. Based on achieving certain regulatory, manufacturing, clinical milestones, there are four option periods to continue the development. And these are negotiated with BARDA at each stage so that this is a staged approach to manage the risk of this program. Because as you know, drug development always carries some degree of technical risk. The goal is to develop an intranasal rescue medication for use by laypersons or first responders in the community where these overdoses are happening. It'll be developed on Orexo's own Amorphox platform that you know so much about, and it will continue to leverage the existing manufacturing supply chain that we've already developed for OX124 and OX640. Back to you.