Orexo AB

Your line is muted. Good afternoon, everyone, and welcome to this second quarter interim report presentation from me, Niklas Arntzen, the CEO of Orexo and Fredrik Jastén, who is the CFO of the company. So those of you who have been following the day, you understand that this quarter, the second quarter of this year, we have continued to clean up the company and going through the transformation after the sale of Subsov in the end of last year. This has had some impact both in terms of operational expenses, where we have resolved disputes and discussions with suppliers, so we're taking a one-time cost on some of these contracts to exit some of those contracts. We have also continued to phase out employees from the US and also reduced the staff in Sweden during the quarter. So all in all, we have in this quarter, we have an inflated both cash flow position and OPEX position, which is driven by this transformation that we're going through. But we feel it's important right now for the company to come through with a clean slate and be as transparent as possible of where we stand at the moment. So where are we right now? I think in parallel with working through all of these different operational items to prepare the company for the new future, we of course continue to work in our R&D programs, which is really where we're building value long term. And if we look at what we have accomplished during the quarter, our 390 project we have gone through in vivo study, which has positive results. ICIPRI, we are well on track to file in Q3 in September with 640. We are on track to start the clinical trial that we are scheduled in for Q4 this year. We are also during the quarter, we started what we can call an early stage scientific collaboration with an external pharmaceutical company to basically work out with the Amorphox application to GLP-1 agonist. That is an early stage, but it's a good access for the company to really understand how we can optimize this program to create interest from pharmaceutical companies. I'll come back to that a little later. We could also strengthen our business development. We have recruited a new head of business development, Raheela Nasati. So this is really to leverage the interest that we've seen growing interest in our Amorphox platform from different companies. We have intensified our discussions with the Department of Justice. This has been something that has been following us more or less to the date. I think it was the 14th of July that we started and six years ago. So it's a little more than six years now. And we really would like to put this behind us. It's a difficult process. It involves more than OREXO. It's also some of the employees in the US. So this is a complex process to coordinate, but we are making progress. We look to be transparent from where we are right now. We have opened the process to look at what are the financing opportunities looking forward. And this is in terms of our strengthening our position in our business development discussions long term to show that we have alternatives and we are well financed to complete the programs. together with the partner, but also of course to ensure that we can continue with high pace even if we should reach a settlement with the Department of Justice. I'll come back to some of the details around that a little later. As you saw in the report, we have a cash position of 233 million. It was relatively significant cash going out this quarter. A lot of that is associated to rebate payments and others from sub-salt sales. That was before we exited the sub-salt business in the US, and Frederik will comment on that a little later. So a little more into the details. So where are we? We have, as you know, we are working with, say, three segments of Explore, Develop and Partnering. And if you look at the programs that we're running right now, all of them are built on the Amorphox platform. So it could look like we are quite differentiated and work with a lot of different programs. Actually, what we do as a company is very focused around the Amorphox technology. and our involvement in the explore space and GLP-1 in infectious disease is limited for us to do the amorphox powder. If it's a natal delivery, we can also support in the next steps, but we really look at partners who should take the heavy lifting of driving the programs forward rather than OREXO, for example, becoming a vaccine company. But we do see that the technology is very valuable or could be very valuable for vaccine companies Where we do have more efforts is in our developed segment, where we're working with anaphylaxis of the two agonist intoxication and opioid overdose. These programs are those who have been running for a while, and as you know, a couple of them are now approaching their final stages. So it's kind of a legacy for working with this. I don't see that Oryx should become a vaccine company moving forward, but there we will rather work with companies who are active in that space. So in a little more detail, in GLP-1 agonist, we are working towards an in vivo study this quarter to start that in oral formulation for GLP-1. we're quite pleased to have established what i would call a scientific collaboration so don't confuse this with a partnership but it gives us access to quite high quality input in terms of methods for study design it's about how to do the analyst analytical methods in the in vivo study it's about access to some excipients that we're working with. So this is an important for OREXO as we have not worked with GLP-1 before to have access to that kind of competence. And of course it gives us a foot if the results are good because the partners of course doing this with an expectation. to look at those scientific results and see if this is applicable to their portfolio. So we are ready to start an in vivo study with an oral formulation in Q3, but we also continue to work with the nasal formulation and also there we would be looking for partners to support the company moving forward in nasal formulations. Infectious diseases, so vaccines. It's quite interesting to see what's happening in the vaccine world. I see more and more recognition of the value of a nasal formulation and this is exactly the sweet spot for Morphox. And here I'm quite pleased with my experience of going to US Bio in San Diego a few weeks back where we met several vaccine companies and actually gained some good traction and interest of testing our technology to vaccines that could be taken nasally or even for some companies, existing vaccines that could eliminate the need for cold chain. So this is something that we really see as a big opportunity for Amorphox. But again, we don't do this with anticipation that Oryxia should suddenly become a vaccine company. It is basically to add to allow the technology to flourish with other companies and enable their vaccines to be delivered nasally and or avoiding a cold chain and thereby having much longer stability and much easier distribution to the end user. For our anaphylaxis study over at 640, we are well on track to start our nasal allergy channel study in Q4. What's needed for that is to upscale the manufacturing to what we call commercial scale. That means that the testing needs to be done on the final commercial product. Here we're fortunate that we have the entire manufacturing chain set up for ICIPRI so we can basically use the setup with the reliability data with the FDA-inspected process for ICIPRI we can use on OX640 taking away an immense amount of work and risk from the OX640 project. It's a very large market and I see more and more recognitions even scientifically for the need for a more convenient formulation like a nasal formulation. There are some momentum building in the market in the US and even though it's still small it's interesting to see that they have after one year they have surpassed the size in sales than what we had with Softsol when we were at the peak level and continue to show quite good year-over-year growth. Alpha-2 agonist intoxication, that's our Work390 project. I would say a real, the active substance that we're working with, adipamazole, is used daily by veterinary clinics all over the world under the brand name anti-sedan. And the big test here, is it nasally absorbed in a way that is meeting the need for bioavailability to have a nasal formulation? Because this is really what we see as the opportunity here is not to develop a new injectable, but to have a nasal formulation that can be widely distributed to first responders, community workers, and maybe even patients. And here to see that we have successfully gone through this in vivo study and with all of our experience of running in vivo studies on other formulations, we are quite certain that the data we see in vivo studies in animals is applicable to humans as we come further along. Although an ADPAMASOL is available for animals, it is in the eyes of the regulatory agencies, it is an NCE project. That means that we actually have to do a lot of toxicology testing and what we call preclinical testing before we're ready to go into the clinic. As you know, this project is to the vast majority financed by the American Authority, BARDA. Opioid overdose, our ICP, or before weeks one to four, we are well on track to file the product in September. So we expect to have the filing in September, and that would mean the expected review time from FDA is six months. That takes us into the end of Q1, when we should have approval in the US. For both the 640 and the opioid overdose programs, we are starting and intensifying a partnering process where we are looking for OX640 to have a partner who can take the commercialization of partners, because this could very well be different partners for different regions in the world. This is clearly a global product. but we will have partners who can support both the final development and also the commercialization. We expect from OREXA, we have the funds and are expecting to drive the study to the national allergy channel study, but would then look for a partner to take the program over the last regulatory studies and also start the commercial manufacturing. In opioid overdose, we also see a major milestone is the submission to FDA. So when we reach that, it's also a very good trigger of really intensifying the partnering efforts for the US market. So where, and just to give an overview of our future, where we are putting most of our money right now and are expecting to have most of the investments moving forward is the 640 program. And this is a program where you're addressing anaphylaxis. So for those of you who are new to the company, anaphylaxis is when you get an allergic shock. and you need epinephrine to basically reverse the allergic shock. Today, this market is to 99% dominated by autoinjectors on a global scale. There is a nasal formulation that's come into the US and have been started to launch in some markets in Europe also. And it is interesting real-life data that comes out of those, both from Europe and also from the US, where we start to see scientific evidence and value of having a more convenient administration than the auto-injectors. There was a recent study sponsored by the Danish company LKL Velo, who is launching a nasal spray in Europe, where nearly 40% said they didn't carry their anaphylaxis products regularly. which is a big risk because rarely you get the anaphylactic shock when you're at home. You often get it in a place where you can't control how the food has been treated or what is happening around you. So we see here that having smaller and more convenient, more stable formulations would have a major meaning for patients, and we believe this is going to drive continuous growth in this segment. One of the hurdles, we saw that with Naloxone when that was launched back in 2015 in the US, nasal Naloxone products. It took some time before people got convinced that a nasal formulation has the same effect as an injectable. And it took basically, I think, two years before we really saw the market starting to pick up in the US with nasal Naloxone. And today that is completely dominating the market. Should that happen in the epinephrine market, we are looking at a market that is worth more than $3 billion on a global scale today. For Rexo, we have somewhat around 200 million left in external expenses. Then we also have an internal team working with this, of course, and the majority of this is expected from the second half and into the first half of 2028, where we then expect during the summer to have the filing ready. if everything goes according to plan. And we will seek a partner to run this. And why do we think this is an important project? It's basically because we're just looking at the product profile of OX640 compared to the competitors We see a product that is more stable. We see rapid onset. We see that we have an extensive absorption of the product and even after an extended period. So we don't see a drop in the amount of epinephrine. We basically see that we continue to have an extended absorption even on the nasal allergy challenge from the first started we have. And that is something that is differentiating us from the competitors on the market today. We see an opportunity to have a long shelf life. We have an incredibly stable product. We don't see any degradation, which you actually see on both the nasal liquid in the market today and also in the auto injectors. And then on top of that, we have IP exclusivity to at least 2044. So it's a long runway from where we are today with Wix 640. So even smaller parts of a billion dollar market is highly valuable for Rexel. So what are we trying to do apart from our projects? And I just say with Amorphox, this is really part of what we're trying to build on right now is when we look at the global market for pharmaceuticals, we see some growing issues where we believe amorphox can be a solution. It's around stability of biomolecules. We see a lot of the vaccines and biologics require cold chains to remain stable and even under cold chain they have short shelf lives. Cold chain is a bottleneck and a growing bottleneck in both in the pharmaceutical manufacturing but also when you come out in the distribution of the products of the end user. This is something that we can address. They are limited by molecules, they are by far, the majority are delivered through injection. We think that there could be opportunities for more to be delivered through nasal, and we have seen, as you saw, our first nasal study on the GLP-1 agonist semaglutide through the nose, so much higher bioavailability compared to the reference product. We see an increasing patient interaction model that is changing, in particular in the US, where patients are more and more relying on virtual interactions or virtual interactions with their physician and then home delivery of their product. So you basically, instead of going to the pharmacy, and this, of course, an immense amount of closure of pharmacies in the US the last years, we see that patients are expecting to get the product sent home. And of course, that is an obstacle if you have an injectable and also something that requires a cold chain. Finally, most if you're just doing a normal injectable, you will have little IP associated with the formulation and we have today a long IP and the more APIs we're putting into a MorphX, the longer IP we expect to have. We even have for GLP-1 agronist, Our IP is expected to go into 2047. So that's actually 21 years from where we are right now. So we can with Amorphox offer a significant extension of IP for many products and development. And if you look at vaccines, this is where we really see a big value because we see that most of the vaccines are very, very sensitive and we can provide something with more stability. And one thing I would highlight here is just a very recent Swedish study that was talking about how you need mucosal immunity for or to avoid the the full effect of influenza and others. You can maybe be injected and have a systemic immunity, but if you don't have the local immunity, you will still get sick. Maybe not as serious, but being sick also means that you can spread the virus. And by having something that creates a local immunity, you'll actually have a much bigger opportunity to stop the virus from spreading and avoid disease at all. So this is an area, and it was interesting to see the Swedish study done at the Swedish hospital, the Dandelud Hospital. to see how they came to the conclusion that we need to deliver flu vaccines through the nose to ensure full immunity in a vaccination. So I think we are quite spot on to one of the real hot topics in the vaccine space at the moment. and then our model so again the risk of course by working with so many different molecules is that you are getting too fragmented and and spread your your resources across many different areas what we are basically doing is that we are offering companies with Sorry, I believe I got disconnected here. So I hope that it didn't disturb you too much. And the sound quality is still good. So what we're trying to do is basically with the Amorphix platform is offering a way to create, we do the powder and then our partners will basically have to lead the clinical development and the development and supported data for the API. We can then of course, based on all of our experience from having taken products to the market offer support throughout the entire development process all the way up to manufacturing to do some of the clinical testing. But of course, for clinical trials, we need to rely on the partner to do this. So really, the work that we are offering is focused around creating a powder where we encapsulate the API and make it bioavailable either through the nose or through reconstitution, where you can then avoid cold chain and also increase the stability and shelf life of the product. And we're taking this to customers, to our business development group, where we just recruited Raheela Nassaji, who's a long experience from business development, worked with both large and small pharma companies, most recently as the CEO of a small vaccine company. And with Raheela, we are basically working to leverage the increased interest we're seeing in Amorphox to create new collaborations. So building on the early stage scientific collaboration, looking for other partners in the GLP-1 space. We see high interest from the US authorities in thermostability in vaccines. So again, going with other companies and maybe build on our experience with BARDA to seek financing together with other companies to test these nasal formulations should be feasible. And we have right now several ongoing discussions with Swedish and international vaccine companies where we're discussing how can we best assess the value we can bring to their vaccines. So the focus areas in business development right now is in the Amorphox platform. It is finding a commercial partner for ICIPRI ahead of approval in Q1 next year, and also to work to find one or more partners for the ORX640 project, where we see this project could be purely a global, have global opportunities where ICIPRI is more US. We think ORX640 is something that deserves to have a global market. So to round off, why do we think that we are at an interesting time right now? I think OREXA, we have several products that are right now approaching approval or very close in their final stages. We have ICPRID that we are expecting to buy just within a few months. we have 640 which we could file also in 2028 with approval either late that year or first of all late that year or early the year after we have an work 390 project which is maybe a little longer ahead but the risk in the project both from a development perspective but in particular also from from a finance perspective is relatively low because Oregsu is only covering a fraction of the expenses So we're doing this based on our differentiated Amorphix platform. I think we again and again, we see that we can do stuff with APIs that no other company can do. We have our high value, late stage pipeline. We have experience. We've taken four products to the markets. We know what it takes to get a product approved. And we see that we have multiple quite interesting inflection points coming up relatively soon in the company. such as the IC pre-submission, OX640 commercial scale manufacturing, NAG study results, new partnerships and collaborations around the InvolveFox platform. And with that, I will open up for Fredrik to take us through some of the financial numbers. Fred, please.

Thank you Nikolaj. So starting with the P&L for continued operations which we as you know after the divestment of Subsol US no longer follow up on a segment basis. Now this vested Subsol US business is presented as discontinued operations in note 10 in the report and will be presented that way for the remaining part of 2026. So on net revenues of three and a half million for the quarter, abstract royalties were low, reflecting ongoing trend of individual country royalty agreements expiring. In addition, royalties were also negatively affected by the turmoil in the Middle East. Error royalties were also lower following launch of generic products in Canada. Sub-salt ex-US royalties, on the other hand, were higher, explained by positive true-up of Q1 royalties, where we hope to start seeing the effect of course increased market efforts when finalizing their sub-salt manufacturing setup in Europe. OPEX, so that amounted to 107 million for the quarter, which is up from Q1 last year. But the absolute majority of that difference comes from the settlement with GAIA, as Nikolaj talked about, terminating the collaboration in relation to digital mental health products. That increased admin expenses by approximately 20 million. Seven expenses were lower than last year, mainly due to lower marketing related costs for SIPRI and lower digital mental health product activities. ADMIN were high mainly as I mentioned from the settlement with GAIA, but also from increased legal fees seeking a settlement in the DOJ investigation. R&D costs were also higher, following higher costs for the development of OATS 640 and OATS 390, which on the other hand also meant higher BARDA reimbursement of OATS 390 related costs of in total 4.5 million. That being the main reason for a total positive contribution from other operating income and expenses of 5 million. Another comment on OPEX and the total this quarter of 107 million and we look at what that would be without non-recurring items such as the settlement with GAIA and normalized with no transition related expenses or legal costs in relation to the DOJ investigation. We would for the quarter instead look at OPEX of some approximately 60 million excluding depreciation or annualized about 240 million SEK. We are also continuously looking at how to become more and more cost efficient going forward. We have, for instance, reduced the Swedish workforce with approximately 10% after this intersection. Net finance items nowadays, after the redemption of the bond, give a positive contribution. It was one million for this quarter, mainly explained by higher interest income from bank accounts. Net prop is then for continued operations minus 102.5 million SEK and for discontinued operations plus 2.1 million. And there the restructuring cost post transaction is starting to phase out, although will remain in some degree until the transition period has ended, likely end September. And next page. cash flow we reported total negative cash flow in Q2 for continued operations of minus 98 million where we had a negative contribution from operating activities of 93 million, primarily impacted by negative operating earnings, a negative adjustment for non-cash items, where the major part was payment of provisions for outstanding rebates related to sub-sold sales in 2024. That is before the transaction with Dexel. These rebates will decrease significantly going forward, expecting to be fully phased out by year end. We have like 3 million left to be paid of our provisions for rebates the last two quarters this year. Furthermore, we had positive changes in working capital, mostly related to an increase in accounts payable from our own operations. And then under the Transition Services Agreement, following the divestment to Dexel, OREX also continues to collect software revenues on behalf of Dexel during the first nine months of the year, which also had an effect on working capital through both accounts receivables and accounts payables. Now, this setup with Dexa, though, is just a pass-through exercise with a net zero effect on cash flow over time. But 44 million of our cash in the balance sheet end of this quarter is payable to Dexa. So cash flow from continued operations was a negative 98 million, as I said. Cash flow from discontinued operation was a negative 14 million. And this is mainly from payment of severance and other post-transaction related restructuring costs. So the total negative cash flow for the quarter is then 112 million. After adjusting for a positive FX effect of 2.6 million, that meant a decrease of a cash from end of Q1 of 109 million to 277 million, after which then 44 million belongs to Dexel. So our own cash is $233 million in the future. And with that, back to you, Nikolaj.

Thank you, Fred. Again, as you can understand, this is a relatively complex exercise, particularly given the U.S. setup where you have returns, you have rebate payments, and some of those returns and rebate payments are coming in. QUITE LATE AND CAN BE ASSOCIATED WITH THE OREXO SALE OF SUBSAL PRIOR TO THE TRANSITION TO DIXEL SO THIS IS A HAS BEEN A PERIOD OF TRANSFORMATION AND ALSO TO where we have to work with parallel both continued and discontinued operations, which of course is clouding the picture a little about the financial performance. But I can promise you we are working intensively to bring down our spend and to really focus our resources where we see most value and to avoid future expenses associated with the US legacy operations, that means the commercial operation. So to the legal update, and we did mention that we've intensified the discussions with the DOJ. When we look at the structure that we expect, it would be a settlement where the payment will be over several years. So there will not be one big payment coming when you have reached the settlement. It's something where I think there's a very constructive dialogue with the DOJ for what is feasible for OREXO to ensure that we can continue our operations looking into the financial situation. which is some of the stuff we have done during the spring, is basically to show forecasts and also give the DUJ a full insight into our ability to pay in such a settlement, which of course is relatively limited given where we are at the moment. We also expect that parts of this will be covered by insurance and as I said before the settlement will cover not only OREX but also some individuals who have been working in leading positions in the US and for those individuals that we have a D&O insurance which should cover their exposure which should take a decent amount of the total settlement and the amount should be covered then by insurance. However, the discussions are ongoing. It's not been closed. It's a slow moving process. So it's something that we have been spending, as Fredrik said before, a decent amount of legal fees during the quarter and historically quite a lot of legal fees. But I do see that we have made some progress during the quarter, which give us some confidence that we can be approached a final resolution, even though I'm also fully aware that the details in the settlement agreement is still to be worked out. Our position remains that we have been compliant. We have used external legal advisors, regulatory advisors to review our commercial material and training material and others. And we get the word from our lawyers that we've been compliant However, given where we are, this has been going on for six years, we would really like to put this behind us and also to avoid the cost of a potential legal proceeding in court in the US and also the continuous expenses that we have right now to manage this process. So, final slide. We have shown this before. Subsol EU, we haven't seen an effect of the EU sales yet. I will say right now, what we have in our account is actually based on projections and not the final sales report. But we do know that the Subsol EU material was released in the end of the quarter, so we expect relatively soon that the material from Accord will reach the market and be the basis for the future commercialization in Europe, which should give them a much more competitive cost of goods in the European market, which in its turn should also have a positive impact on the orexo royalties. 390 in vivo study, as you understand, is important and we will relatively soon, in just a few months, we will hopefully put another buck next to the Q3 filing of ICPRI. And then trial start of week 640 will come shortly thereafter, plus the in vivo study in GLP-1 agronist, which is scheduled for this quarter also. So we're looking quite well to basically put a tick in the box between each of these milestones in the short term. And we are working now with a much stronger business development set up have joined us to increase the number of partnerships and get more companies to test and work with our Amofix platform. With that, I'll just remind you about our financial calendar. Next report is coming in October 22nd. And we are participating in the numerous, and this is just a small subsection of some of the activities where we are with business development. And again, with Ahila joining us, this is an area where we expect to increase activity levels quite substantially during the next half year. So with that, I will open up for Q&A.