Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the financial statements for the first nine months of 2023 of Lundbeck A/S. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Charl van Zyl , President and CEO. Please go ahead.
Welcome, everybody, and thank you for joining us this afternoon to read out the interim report for Lundbeck for the first nine months of 2023. Of course, I'm really delighted to be here. It's my first 60 days, and I look forward to engaging with you to share the progress we are making in the company. So first of all, a few opening remarks before we go to the main content. So, you know, of course, as I said, it's my first 60 days, and I want to express my clear confidence around the underlying revenue performance of the company that demonstrates our ability to execute very well.
The second opening remark I'd like to make is that, you know, obviously, within my 60 days, I've been able to assess our R&D portfolio, and I see clearly a profile that is emerging that gives us some significant opportunities in the future, also to be shared in an investor day later in this quarter. Of course, in my first 60 days, I anticipate that you would have many questions and curiosity around our strategy, but I would like to take some of those questions, of course, later. But I would assure you that we are going through a strategy review in the first 100 days, and we'll be happy to share more with you later. So let's go to the next slide just to disclose our forward-looking statements. So let's go to the next slide, please.
And here I want to highlight the key points, of course, for the first nine months. Again, underpinned by very strong performance, and here what you will see is, firstly, on a constant basis, a 9% revenue growth in the first nine months over 2022 and an adjusted EBITDA growth of 20%. What makes me more confident here is that, you know, when we look at our strategic brands, which essentially make up approximately 70% of our portfolio, where we also invest in significant SG&A, we see a constant growth rate of 16%. And a lot of that is underpinned by Vyepti at 81% and also Rexulti with its new indication.
You will also hear a bit more later about our pipeline highlights, of course, with anti-PACAP being one of important milestones with the proof of concept data that allows us now to advance into the next phase of our development. We'll also share with you headline results on the PTSD studies that I've read out recently. So if we go to the next slide, please. So what I want to, you know, continue to emphasize is really the strong power of our growth related to our strategic brands. What you'll see on the left-hand side is this is, in essence, the growth we see across all our key geographies. It's really important to see here that we are growing high double digit across all the key geographies in our strategic brands, with the U.S. at 19%, Europe at 14%, and the international markets at 13%.
So I'm really pleased at this point with the execution we see that's consistently across all our key geographies. On the right-hand side, you will also see more a breakdown of this growth also by our key assets, and you'll see a nice balance of our positions across U.S. and the rest of the world in a sort of a 50/50 split. But more importantly, in the U.S., you see strong growth, of course, driven by Rexulti and Vyepti. And in Europe and rest of the world, we see very strong growth from Brintellix. If we now go more specifically into the comments on each of the assets, I'd like to move to the next slide to talk more specifically about Vyepti. And here I would leave you with two important comments.
Of course, 81% growth on a constant basis is phenomenal, and we're very pleased with this progress we're making. One of the key areas we see clearly in the U.S. is an inflection in growth that we've experienced, and I'll talk more about that in a second. And then, of course, in the rest of the world, in Europe, we're also see a function of our early launches, where we're rolling out these also across the rest of the world. But more, specific remarks, around the U.S. First of all, of course, I've had a chance to also be with the U.S. team, and, what I see is clearly an organization that is now poised to further maximize this opportunity.
We have a strong customer-facing organization, and we've really built and learned over the last years how to maximize this opportunity in front of our customers. So that's a really strong foundation that I feel is evident also in the results that we see today. The second important point to make here is that we see also an increasing depth of prescribing and also a breadth in terms of new patients that are being prescribed. So this gives us additional confidence that we see a steady uptake also of new patients on Vyepti. What is most important in the third point is really that through this experience, now we see an emerging position that is seen as one of the most efficacious or most efficacious in the class of severe preventative migraine.
So this is clearly a strong position, which gives us confidence that we can continue to see strong growth in the U.S. also for Vyepti. It is a global asset for us, so it is really emerging also in other positions in migraine, and we see it as an important vector for long-term growth. Also, when we think about anti-PACAP in our pipeline, that could fuel additional opportunity in the long term. So Vyepti, I would position for you clearly as an invest for long-term growth inside Lundbeck. If we go to the next slide, then some remarks specifically on Rexulti, and again, also here, phenomenal growth, high double digits at a constant basis at 19%.
This is predominantly from the US, and we would see here, of course, an indication expansion with agitation associated with dementia in Alzheimer's disease, where we see a clear early signals of a successful rollout of the launch. When we look at this specifically, of course, we have a number of indicators that we will share in the future more in detail, but what we see is a very strong uptake in our target population of 65+ . And you will also see, as we now go into the fourth quarter, additional awareness that we will generate through our DTC campaign to further fuel that growth we expect for the long term, also for Rexulti. And of course, together with our partner, Otsuka, we are investing here to maximize this opportunity for the expansion of the indication.
Then if we go to the next slide, a few comments specifically on Brintellix/ Trintellix. So of course, we have a well-established asset here, with a lot of years of experience. But despite that, we see very strong growth across the European and international markets, specifically in Europe, to call out here 16% on a constant basis, and of course, also very strong growth we see in the international markets, in particular, also Japan, where we see very strong performance. And in this essence, we are very targeted, we're very focused with our resource here, and we see clear response in terms of growth rates for Brintellix/Trintellix. A few words specifically on the U.S.
Of course, the market is phenomenal in terms of its change as well, that we've seen post-COVID, with a greater shift towards primary care and also nurse practitioners. And together with our partner, Takeda here, which, in this case, 80% of the resource is driven by Takeda in the US, we are jointly assessing how we best deploy our resources with this new dynamic. And so our resources essentially is to maintain Trintellix in the US, while investing more specifically on Vyepti and Rexulti for the long term. Then if we go to the next slide, and before we go to Johan, I want to make a few comments on Abilify Maintena. Of course, here also very good to see the underlying growth of 11% on a constant basis.
This is driven by very strong underlying demand in the long-acting injectable segment. And of course, we come from a very strong position here with a strong foundation and strong market position. So it's still really phenomenal to see the growth also in this long-acting segment. So before I hand over to Johan, I just again want to express my confidence around the underlying revenue performance, the strong contribution we see from the strategic assets that make up essentially 70% of our portfolio today. And therefore, we are very confident as we go into the remainder of the year and into next year, that we can drive this growth with the strategic assets that we have. And so with that, I'd like to hand over to Johan.
Thanks a lot, Charl. Yeah, thank you, Charl. It's good to see you off as a strong start as our new CEO. So R&D continues to have a very strong year. As we already covered in the Q2 call, we had an extraordinary second quarter with a rich flow of very important positive R&D events, including two approvals with FDA, both of those together with our partner, Otsuka. But even Q3 comes with several interesting R&D activities. One big event this year was obviously the sNDA approval of Rexulti for agitation associated with dementia due to Alzheimer's disease. We have thereafter spent the summer and fall to support the launch of the product in this indication.
We have been participating in conferences, for example, the AAIC conference in July, with a special session on agitation, and we also had many interactions with leading KOLs in the field. What we keep hearing is that the approval is really welcome, given that it came after a 20-year period of no full approval of any NME by FDA for the treatment of Alzheimer's disease. More importantly, the interactions with various leading experts in the field have reinforced how critical it is to have an approved therapy for the devastating agitation symptoms of Alzheimer's disease. Agitation is part of the behavioral psychological symptoms of dementia spectrum, a range of major clinical issues for which there has never been any FDA-approved treatment. Specifically, agitation is one, together with aggression, one of the most bothersome clinical issues.
Agitation is not only a burden to patients themselves, but even more so to caregivers, and it's a critical challenge in their care. Early this week, we were therefore very pleased to see the full publication coming out in JAMA Neurology on this last year's concluded pivotal trial in the program. The full publication is a nice follow-up to our late-breaking news presentation at ASE in 2022, and a more complete presentation at the CTAD meeting end last year. The publication, together with the prior publication by Grossberg et al from 2020, is providing us a very comprehensive view on the drug's performance in this indication. In addition to the U.S., we have ongoing regulatory reviews of brexpiprazole for treatment of agitation and Alzheimer's in Canada, with expected completion by Q1 2024. Regulatory review for the indication is also ongoing in Singapore, Australia, and Switzerland.
Approval in those three countries through the so-called Access Consortium process is anticipated during mid-2024. On September 7, Lundbeck and Otsuka also announced results from the phase III clinical trials of brexpiprazole, studying the potential of the drug in the treatment of post-traumatic stress disorder. This has been, to us, a much awaited readout, given the long and arduous road it has been to complete the two trials. The trials were hard to recruit, and in particular, they were heavily influenced by the COVID pandemic. One of the trials was a two-arm design, studying 2 mg-3 mg flexible dosing of brexpiprazole in combination with sertraline. That trial met its primary endpoints on Clinician-Administered PTSD Scale (CAPS-5), by brexpiprazole separating against the treatment arm receiving sertraline only. The second trial, a three-arm design, missed its primary CAPS-5 endpoint.
Overall, the safety and tolerability results across these two trials were consistent with the profile of brexpiprazole we observed in other indications. We are currently in the process of further analyzing these results, as well as the previous phase II data for the program in PTSD. The data from these trials constitute one of the largest datasets ever generated in the indication of PTSD. Also, more importantly, PTSD is a very serious mental health disorder with a wide range of symptoms, with no new treatment options seen in more than 20 years. It's therefore important we discuss our findings with the FDA to determine next steps. We also had another FDA approval during the spring for our aripiprazole two-month ready-to-use long-acting injectable suspension for intramuscular administration. In that program, the EMA review progresses well after resubmission in the summer through the line extension pathway.
Our estimate is still for an early H1 2024 finalization of the review. The product is also undergoing regulatory review in Australia and Korea. In April, we announced a very encouraging positive readout from the first-in-class anti-PACAP monoclonal antibody Lu AG09222 in the HOPE trial. The antibody was given as an IV infusion to patients with frequent migraines that had not responded well to two to four prior preventive treatments. Since this is an emerging full development program for Lundbeck, I'd like to provide some additional context in the next slide. The data from the proof-of-concept HOPE trial, together with some phase I experimental medicine data, were revealed at the International Headache Conference in Seoul in September this year. The presentation was very well received by the scientific community.
It's not often in R&D that you get the chance to be part of a clinical proof of concept. And in migraine, this is indeed the first clinical evidence of a new mechanism of action being effective since the CGRP target was shown to work back in 2004. So this is big news for the field. The excitement is exemplified here by a statement by the 2021 Brain Prize winner, Peter Goadsby, one of the most eminent scientific leaders on migraine research. A broader phase IIb program has been designed and will start early 2024. Key aims of the upcoming trial is to establish subcutaneous efficacy and build a comprehensive understanding of the optimal dose range. Next slide, please. So we have several important events during the year so far.
We have also progressed nicely across the R&D pipeline, both with brand support and not least with our early innovation pipeline. This is facilitated by our transformed R&D organization, including a very strong preclinical research organization. Since the pipeline is, in the coming years, set up to deliver some interesting programs leading to full development, we think this is timely to reveal a bit more what is happening in Lundbeck R&D. We will therefore hold an R&D event in London on the thirtieth, as Charles just mentioned, followed by a shorter version in on December the sixth in New York City. In that event, you will hear about how neuroscience is the right place to be and how Lundbeck is built to profit from this exciting field and deliver leadership.
We are already well on our way to build a very interesting, innovative pipeline and thereby an even stronger, sustainable future for the company. About this, we'd like to share more at the R&D event. With this, I'd like to hand over to Joerg.
Thank you, Johan. Let's turn our attention to the financials. The +10% of reported revenue growth is driven by growth of 9% in constant exchange rates, attributed to the robust performance of all of our strategic brands. The negative FX effect is driven predominantly by the decrease of our main currencies, which is more than offset by the positive hedging effect year-over-year. The adjusted gross margin, which is removing the DKK 312 million impact of the provision for Vyepti inventory obsolescence and the amortization and depreciation linked to sales, is higher compared to 2022 by 1.3 percentage points, reflecting the positive sales development. Sales and distribution costs grew 15% at constant exchange rates, primarily due to expenses for the launch of Rexulti AADAD in the U.S. in june of this year, as well as the continuing global rollout of Vyepti.
Increased administrative expenses in 2023 are attributed to digital investments, the CEO transition, and an increase in legal provisions of DKK 69 million related to ongoing litigations, which we are factoring in as an adjustment. R&D costs decreased by 12% at constant exchange rates, which is not entirely aligned with the guidance we provided in the previous quarter. The main reason for this is that we are seeing lower than expected costs related to completed life cycle management and phase IV activities. Additionally, the transition from early stage to mid stage for several of our projects takes slightly longer than anticipated. All of these effects contributed to an EBITDA growth of 9% at constant exchange rates.
Adjusted EBITDA, net of effects of the provision for Vyepti and other legal provisions, grew by +20% at constant exchange rates, improving the margin by 5.2 percentage points to 32.5%. Please bear in mind that approximately 2.4 percentage point of the margin improvement in the nine months relate to the lower R&D costs compared to last year. Next slide, please. Our EBIT grew by +21% in reported rates. Also, it carries exception costs of DKK 396 million. The increase is reflecting the high revenue growth and strong operating leverage. Please also keep in mind that our EBIT of this year includes a higher depreciation and amortization of roughly DKK 200 million compared to last year. Our net financial expenses decreased for the first nine months to DKK 146 million.
The lower expenses are mainly driven by the non-recurring fair value adjustment of the CVR in Q1 last year, triggered by the Vyepti EMA approval, as well as lower debt levels and higher interest rates. The effective tax rate has increased to 23.5%, compared to last year's 22%, in line with the full year expectations, reflecting the reduced deduction of the Danish R&D incentive. Net profit increased by +34% to DKK 2.2 billion, and adjusted net profit increased by +27% to DKK 3.6 billion. The adjusted EPS growth of 27% is in line with underlying performance after adjustments related primarily to amortization of product rights, Vyepti provision for inventory obsolescence, other legal provisions related to the ongoing litigation, and the fair value adjustment of CVR to former shareholders in Q1 2022. Next slide, please.
The cash flows from operating activities landed at an inflow of DKK +3.1 billion in the first nine months of 2023, compared to an inflow of DKK +2.2 billion last year. The operating cash flow is, of course, a reflection of the strong EBIT performance, further benefited by higher adjustments for non-cash items of DKK 1.9 billion, which are mainly driven by higher amortizations in 2023 and the provision for Vyepti inventory obsolescence. This is negatively impacted by higher change in working capital of around DKK 1.3 billion, driven by a decrease in short-term liabilities from payment of sales milestones in 2023, partially offset by lower inventory development, primarily due to the final part of Vyepti inventory buildup that concluded in September 2023.
The cash flows from investing activities were an outflow of DKK 362 million, driven by paid out sales milestones. Just for your reference, the 2022 number in comparison included an outflow of DKK 1.1 billion for the CVR payment to all the shareholders. The cash flows from financing activities were an outflow of DKK 2 billion in the nine months of 2023, compared to an inflow of plus DKK 169 million in the same period last year. This is primarily driven by the now fully repaid revolving credit facility, under which DKK 1.2 billion were drawn last year, and the higher dividend payment in 2023 connected to the improved net result in 2022.
In the nine months of 2023, we have continued to deleverage the company, landing at a net debt position of DKK -46 million, compared to DKK -3 billion at the same period last year. Next slide, please. As we are coming closer to the end of the year, we see the strong momentum of our strategic brands to continue and more than offset the erosion of mature brands. Lundbeck therefore narrows its full year guidance range on revenue to DKK 19.8 billion-DKK 20.1 billion, which is the upper end of the previous range. Connected to the narrowing of the revenue guidance, allow me to elaborate the following: The strong performance of our strategic brands is complemented by the continued global rollout of Vyepti, as well as the launch of Rexulti AADAD and Abilify/ Asimtufii in the U.S. in June of this year.
While Brintellix/Trintellix is facing lower growth in the U.S. and China, generic pressure in Brazil. Our mature brands, and especially Cipralex/ Lexapro in Japan, Deanxit in China, and Sabril in the U.S., are facing strong generic erosion. The remaining part of the year is expected to show lower performance compared to the first nine months of the year, which were benefited by timing of shipments as well. Additionally, the full year is expected to benefit from a positive hedging effect of approximately DKK 66 million due to more favorable hedging rates. At the same time, Lundbeck is raising and narrowing its full year guidance on Adjusted EBITDA to the range of DKK 5.6 billion-DKK 5.8 billion. The raise of the adjusted EBITDA guidance is driven by the lower than previously anticipated R&D costs, as we see lower closeout costs connected to completed lifecycle management activities.
In addition, the transition from early- to mid- stage of several of our projects is moved to 2024. With that, I hand over to Charl.
Thank you, Joerg, and also thank you, Johan. So let me leave you with a few, closing remarks before we go to the Q&A. So again, what you would have seen here is a very strong underlying growth performance in the midterm. You see also here, very strong confidence around our evolution of our strategic brands with double-digit growth, and, of course, a very strong translation of that also into profit and Adjusted EBITDA. And what you will hear more, of course, also during our R&D day, is, an advancing and emerging pipeline that is also very exciting for us. So from that perspective, of course, with my first 60 days here, I'm very optimistic around where we're going and how we're seeing the progress inside Lundbeck, and of course, we're happy to take your questions now going forward.
Before we go to the Q&A, I would also just like to say that I'm joined today also by Tom Gibbs, our head of the U.S. Commercial Operations, and Jacob Tolstrup, our head of Commercial Operations for our business outside of the U.S., and we'll be happy to take your questions now.
Ladies and gentlemen, at this time, we will begin the qestion-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. Our first question comes from Michael Novod with Nordea. Please go ahead.
Thank you very much. It's Michael from Nordea, Copenhagen. So a couple of questions. First, to sort of marketing dynamics in the U.S. and also scripts dynamics. So maybe this is for Tom in terms of Rexulti in AADAD. So you see this very significant growth trend in 65+ years , but we haven't really seen the full inflation in the total script. So maybe you can talk a bit about prescription dynamics and how you see this panning out over the next couple of quarters. Secondly, on commercialization too, you're talking about perhaps considering Trintellix more of a very mature brand now in the U.S. Could it be justified to add more marketing resources outside the US, or will it just be for other products in the U.S.? Yeah, I'll start with that. Thank you very much.
So, Tom, would you like to answer the question on the U.S., and then, Jacob, I would ask you to answer the question of Michael on the ex-U.S. opportunity. Thank you.
Hi, Michael, and thanks for the question. I would start out by saying it's still early in the launch for Rexulti AADAD, and as we've just debuted our direct-to-consumer campaign on October 9th, but I would say the launch is progressing as we expected. From a qualitative perspective, our experience to date does confirm that the AADAD market is a large opportunity for Rexulti, with significant unmet need in the marketplace. We've discussed this earlier, we do see the AADAD market as a nascent market that does need to be developed, and Lundbeck, along with our partner, Otsuka, will make the necessary investments to make sure that we maximize this opportunity, both to ensure patients and caregivers can realize the benefit of Rexulti treatment for this highly debilitating disease.
Now, from a quantitative perspective, we're now starting to track weekly TRX data, as you've seen in the 65+ cohort, as well as patient claims data. Now, the patient claims data does lag by about two months. Both of these data, as we've discussed and as you've seen, suggest there has been a meaningful uptick in this segment, which is having a positive impact on the overall brand. The claims data even suggests a greater impact from the AADAD launch than what we're projecting with the 65+ TRX data. I think importantly, and as we outlined in the presentation, the contribution within the long-term care segment has actually been very robust, and through my lens, it's the AADAD launch that is really propelling the growth of the brand.
If we look at the October data, which I'm sure you've seen, we've seen all-time weekly highs for TRXs, NRXs, NBRXs, TRX share, as well as NRX share. Now, as we think about moving forward, we are anticipating to begin to start seeing the impact of our branded DTC campaign. Normally, you see that about 8-10 weeks post-introduction, so we should start seeing that in the December timeframe, and we're also looking at implementing a more focused effort in long-term care to maximize the opportunity in this channel, which will begin in early 2024.
Great.
And on Brintellix/T rintellix outside of the US, Michael, to try to answer your question. So we talked about it also on, in previous quarters. It's been a journey for us, starting with an optimized, brand positioning, and then over the past five, six years, have a smaller investment into growth here and there in different parts of the world. And that work continues, and that is also the benefits that you see coming out now with the growth rates that we see, I would say, especially from southern parts of Europe, but certainly also other markets, including Canada. And the latest sort of smaller investment we did there was, recently done, in Canada.
So, I would say from my part, it's not about what we cannot do, meaning we don't need to go down in promotional spend in the US to find these additional growth opportunities for Brintellix outside. So it's not an either/or, but we will continue to look for those opportunities outside. And I think we're seeing very good growth rates for Brintellix around the world due to these investments that was done in the past.
Great, thanks. If I just may add one short follow-up for Johan. In terms of PTSD, so when do you expect to have a meeting scheduled with the FDA and thereby be able to take the decision whether to try to approach the regulators with the data you have for potential label expansion or not?
Yeah, we are gathering the data, as I said, and analyzing. I tried to remind you that we also had a phase II trial that's part of this program. So we have data from three trials that we have to look at, and we do all this combined analysis and separate analysis. It's a very strong, convincing data from the flexible dose study. So that drives our desire really to have that conversation with the FDA. We are already on track having those discussions. I don't like to give any dates, and of course, the outcome of those discussions will determine our next steps. But we are confident we have a strong position to discuss, and then we see if they really see the big medical need.
As I mentioned, it's 20 years since last the drug was approved in this field, and it's only two SSRIs on the U.S. market. So we're looking forward to those conversations, but, obviously, we would have liked to see two positive trials smashing success. Now, it was smashing success in one of them, which makes it a little more complicated in terms of discussions.
Okay, great. Thank you so much.
Our next question comes from Charles Pitman with Barclays. Please go ahead.
Hi, Charles Pitman from Barclays. Thank you so much for taking my questions. I have just two to start off. Thank you. First, to Joerg, on R&D costs. I was wondering if you could just expand on the kind of the lowered R&D cost expectations for FY 2023, maybe particularly focusing on kind of what the key delays have been around moving 222 and 462 forward, that were originally expected to kind of keep R&D flat year-over-year. Maybe just what the sensitivity around is around next year's R&D expense is gonna be, and directionally, kind of how should we think about this increase year-over-year moving forward?
And then just secondly, I know, Charles, you mentioned you don't really want to talk too much about strategy, but I was just wondering if you could just give us maybe a bit of a background on, you know, following your experience at UCB and, previous, M&A experience within kind of neurology section. What specific learnings do you believe that you have from UCB that you would like to apply to Lundbeck here? And kind of how are you considering M&A options and use of cash? And is that something we could hear more about at the conclusion of your 100-day review? Thank you.
Maybe I'll start off on your financial questions. I think we have to look at a couple of parameters. I think we're this year we're not spending less on R&D, we're spending less on life cycle related projects. And that's something we've seen as a development over the past couple of years, that pretty much every year we're halving the spend. And especially when these trials close out, you usually finalize your reconciliation, and that basically is what drives the favorability in Q3. In terms of expectations going forward, I think the guiding parameters are, first of all, the midterm targets that we have set, which is the existing corridor which we are navigating. So I think that's where I would leave it, because I believe it is overall a bit too early to give an indication for next year's R&D spend. I would hand over to Johan.
Yeah, thanks for that question. Yeah, I think it's important to reemphasize what Joerg just talked about. We have had actually, over the last three, four, five years, had quite a high LCM spend because we had success at pro- programs that went all the way to the market. Those were attached with a lot of post-market requirements, pediatric studies, indication expansion studies, line expansion studies, et cetera. Those are very predictable costs. Those we can really expect to have and when they will occur. Now we're shifting over, as Joerg talked about, to a more dynamic cost structure. And it's in the early development, things are moving much faster, and obviously, it's good for us to invest in this space. We just had a phasing here that was not entirely lined up with various activities.
Going specifically to 22 2. I'd really like to nail that one. We had a positive proof of concept that was done with, two doses, as you may recall, and a high and a low dose. Now it's time to really fully explore the potential of this molecule. So we took our time really to make sure that we have really the right design to move forward. So that spend, of course, will come primarily next year. Delay, yes, in terms of, the overall program, not at all. We're just de-risking what we will do in phase III, and I'm a firm believer, firm believer that you should do your job well in phase II before you go into, to phase III. You like to de-risk that.
Overall, we don't see a delay in the program, but of course, it's a phasing difference here, how we spend money in that particular program.
So Charles, just a few comments on your question around M&A, but let me start first by positioning in a sense what we're facing also from an industry perspective. We see clearly with policies that are changing in Europe and also in the U.S., that the hurdle for innovation is set even higher. So this area of how companies operate with what is remaining unmet need is important. And I firmly believe that with Lundbeck's history and legacy, that we need to remain in this very focused innovation space. And so having said all of that, what of course we are disclosing today, and when we think about our strategic brands, we have a strong midterm growth position.
And so when we think about what we're trying to solve for strategically for the company, it's really how we solve for the long-term LoE effect that we see on Rexulti at the end of the decade. And that's really where we are also focused when we think about our efforts around R&D and around M&A. And on the R&D space, of course, we will reveal more, but, you know, very promising areas there that can advance and if successful, will contribute certainly at the end of the decade to commercialization. Now, when we think about M&A, and of course, all companies need to look at organic and inorganic innovation, we do not see the need to do an immediate M&A to solve the short term, but really continue to think about the long-term opportunity.
And here, we do not necessarily see the need for one single deal that will solve that, but really a sequence of deals that make sense for us, that we can digest, that, in a sense, build on our strength. And, of course, there we would therefore prioritize deals that are more near-term commercialization, that might be at a phase III level or entry into phase III, with a view that they can contribute revenue in the second half of this decade, and then obviously into the next decade as well. So we see it more programmatic in our M&A approach, combined with a very strong evolution of the R&D pipeline that will bring us that sustained growth also into the next decade.
Thank you very much.
Our next question comes from James Gordon with JPM. Please go ahead.
Hello, James Gordon, JP Morgan. Two questions, please. Following up on some of the comments just there. So the first question would be about duration of growth, which I think you alluded to already. So where do you now see the company positioned to have growth until, without you licensing anything or having success in the pipeline? Is it having something to address the Trintellix LoE in 2027? Or are you confident that you've got growth until 2029 and the Rexulti LoE, and it's solving for the post-Rexulti growth is really the focus? That's the first question, please. Then the second one, also on M&A plans. In terms of how big M&A you're looking at, how you might fund it, so thoughts on potentially using equity. The stock split occurred a couple of years ago.
Is the clock ticking to potentially do something big that would involve equity, or is that now not seeming so likely? And how do you feel about funding it the other way with debt, in terms of leverage, how highly levered would you be comfortable taking Lundbeck to be?
So James, thank you for that question. First of all, I think on the growth dimension, we certainly feel confident with our current strategic assets we have and the evolution of Vyepti, that we can bridge that growth in the short term with the Trintellix LoE. And of course, we see that slowing down as we go towards the end of the decade. But I think I would sort of narrow that window of growth towards more the 2027-2028 time frame.
When we think about M&A, then, you know, again, here we are thinking more in the space of also as we look at neurology and where it's going and where our area of focus will be, it's in well-defined populations where there's a clear unmet need, so smaller populations where scale is not that important, but really where there's a chronic, specialized focus in the market. So we're thinking more of smaller deals with, you know, again, a series of these that have peak potential of maybe EUR 500 million plus level, that in its cumulative effect, can essentially build a growth engine beyond that 2029 LoE window.
So again, that's how we look at them, and we see them not, in a sense, as a way of doing a series of these over the next years that are digestible also from a debt perspective for the company and can build on the existing pipeline we have. So I would leave it at that, but certainly would love to engage more as we build our strategic plan also into the next years.
Thank you.
Our next question comes from Brian Balchin with Jefferies. Please go ahead.
Okay, yeah, thanks. I think most of my questions have been asked, but I've got one on Vyepti. A note in the release says that the ALLEVIATE trial recruitment was halted following a planned interim. So can you just share if that's a good thing or a bad thing? Thank you.
Johan, do you want to take that?
Yeah, I guess that's for me. Yeah, that's clear that we had an interim. It was a scheduled interim, so it was not mandated by any safety concern or anything like that. Actually, the data, in terms of tolerability safety, was very good in this trial. As you know, this is slightly different population, males primarily, and very severe headache. The medical need is enormous. We did have a scheduled interim, as I said, where we took a look at the data, and we are actually going to reveal more of that at our Investor Day. So you have to be a little patient here. But, I can say this much, that it's intriguing data, and it really verifies that this is a strong drug in many ways.
I leave it like that, and we come back on the 30th if you join us.
Our next question comes from Marc Goodman with Leerink. Please go ahead.
Yes, hi. First question is, you talked about this over 65 prescriptions. I was wondering if you could quantify it. Maybe just tell us, like, what percent of the prescriptions that you were looking at were actually over 65 versus under, so we can get an idea of just, just, you know, how much it's helped so far, that new indication. And second of all, Joerg, could you just give us a sense of gross margin over the next couple of years, adjusted gross margin, and how to think about it? Will there be much change, or is this what we should expect? Thanks.
Tom, do you wanna answer the question on Rexulti?
Sure. Thanks, Marc, for the question. As we have looked historically at the 65+ cohort, it really had been stable over time through the last several years at about 12%-14%. Since May, with the increase or the inflection point with the AADAD launch, we have seen that increase over 40% since then.
And maybe I'd take the question on the adjusted gross margin. Again, we see a very nice development here to date that fully reflects the operating leverage due to the strong growth in our strategic brands. And I don't think we give any midterm guidance on the adjusted gross margin, but I think the current level is a good level to start with.
Our next question comes from Suzanna Queckbörner with SHB. Please go ahead.
Hello, Suzanna Queckbörner from Handelsbanken. My first question goes to Johan. I wanted to get an update on the alpha-synuclein antibody. Given that you said that you're expecting headline top-line data in H1 2024, what are the ambitions here and especially the next step? Is this something Lundbeck is going to explore alone in MSA, or are you looking to partner? Yeah, maybe some detail there. And then the second question to Charl. Now, 60 days into your tenureship here, which of the current pipeline products do you find the most encouraging and also especially in contrast to external expectations?
Yeah, so I start there. Thanks, Suzanna, for that question. You know, needless to say, this is the asset in a field where we have high scientific challenges and technical challenges, but an enormous upside. But the most important thing here is that it's an enormous medical need. There is really nothing to offer in this space. MSA has really no optionality in terms of treatments, other than a fairly rapid progressing disease and death to a very, very devastating loss of function throughout the body and, at the end, respiratory failure. So we feel it's almost an obligation to go into this field with this great asset, and we opted to go into MSA first. That's something that we can do, and we would be able to do that throughout the entire program.
It's as I indicated, soon upcoming, in terms of our readout, and we hope that we designed this in a way so we have a clear cut, yes or no. That is obviously for MSA. This mechanism of action could also be explored in Parkinson's disease. Other people are doing that. That is a bigger undertaking, and that's something, of course, we have to consider, particularly if we have a positive readout in MSA. It's not automatically something that will work in Parkinson's disease, but then we probably also feel obliged to explore that. And that's something we have to think about how we can manage such a broad and still a fairly high-risk program.
That's all I'd like to say right now, but right now, I think we should look forward to that readout that's coming during the first half, part of 2024.
Yeah, thank you, Suzanna, for your question. Of course, you know, as I said, I'm excited by the pipeline, and we'll discuss more of that at the R&D day. And I'll use the words that Johan normally use, let's let the molecule speak and let the data speak for us. Of course, don't wanna single out any of the specific assets right now, but what I've certainly seen and what I'm excited about is the anti-PACAP results. We saw a novel mechanism of action, and we know that there's still a huge unmet need in the space of severe migraines. So this is, of course, where there could be an opportunity for really building a stronger migraine franchise in the future.
As Johan just highlighted, you know, with alpha-synuclein and MSA, you know, this is breakthrough, and so we really believe if there's something there, this will be a wonderful opportunity for us as well. But, very excited with the pipeline and of course, more to disclose in the future.
Thank you.
Our next question comes from Xian Deng with UBS. Please go ahead.
Hi, thank you. Thank you for taking my questions, two please. The first one is probably for Johan, regarding PACAP. So understanding that you, you will launch phase IIb, those findings goes up to next year. But just wondering, if you could give us some timeline for, you know, when do you think we could know about, you know, the pivotal trial design? And, in the longer term, just wondering, where do you think you will most likely position this asset? Are you mainly for targeting in the late line, you know, highly applications like Vyepti, highly applications, but probably like, like, like last result? Or you would also thinking about maybe putting this, giving the sub-Q, it could actually go for much earlier line, potentially combining with others.
And the second question is, regarding Rexulti launching AAD. Understanding this is very early days, just wondering, if you could give us any more color in terms of the patient segment. Is this mainly the patients actually, late stage, mainly in the care homes and institutions, or you're also seeing some use in the community setting? And also just wondering anything, comments on duration, et cetera, that would be great. Thank you.
Yeah, so let me start with the PACAP question. It's, it's a really good question that you're asking, actually, two good questions. The phase IIb design is a design that has lots of optionalities. And we will reveal a little bit more how we're going to design that when we launch the trial. But it has different ways of exiting, if I may put it that way. And with some good results coming up early, we could maybe go faster. But the most important thing that I tried to emphasize before is that we like to go in phase III with a really good understanding about which dose or doses to use.
This is something we also learned a lot from Vyepti, how critical it is to really establish the dose range for the drug, so you have a value position for whatever doses you have. So that's a little bit how we built it. So there are different possible timelines for that study. I like to, as I said, to be very, very swift in phase III, once you establish those very fundamental facts, that sub-Q works, and we know the dose range. The nice thing with migraine, even with the chronic episodic migraine we're dealing with, trials are fast. Well, we have competition now for enrollment from the CGRP class of drugs, so that may slow us down a little bit, but these are generally fast programs in migraine, and we know how to execute them.
So, after we establish this phase IIb, we can look forward to very efficient phase III. The question you have about differentiation is something that we honestly don't know yet. Our proof of concept was done in little bit of differentiation. There were patients that had failed two to four prior treatments, so it was a little bit to test what it can take. As you may have seen from the presentation at the headache conference in Seoul, we had very few CGRP patients, so we cannot, not really say much about whether this is a treatment for people that fail on CGRP. But the market dynamics are very interesting here. People cycle through a little bit different treatments, and there are new treatment paradigms being developed. And, remember, we had an IV, now we're exploring sub-Q.
So there are a lot of optionalities here that patients are asking for different solutions. And there are also variants how we can go in early with IV and shift over to sub-Q. So there are many possibilities here to build differentiation way beyond just beating head-to-head CGRP. But the biology is very rich, as I talked about, so there is great potential already built into the mechanism of action to have differentiation. And often, that is what happens with a new mechanism of action. You discover that they differentiate. And I'd like to remind you, our IV CGRP antibody is differentiated against the sub-Q ones. So we already have, just by way some maneuvering the assets, differentiation. So that's probably what I can say at this stage.
So Xian, this is Tom. Thank you for the question. And I, I answered the question from Marc as it related to the 65+ cohort with our, our weekly TRX data. As I said earlier, the claims data, I think, are more representative of how the launch is going. And since you asked questions about patient segmentation, I'm actually gonna start quoting some of the early claims data, and this is based upon July data. If we look at the different patient segments from an age standpoint, the 66-84 patients, we see up over 55% versus, versus launch, and again, this is July data. If we look at the 85+ segment, that's up almost 310%, in the July data.
So from a patient segmentation standpoint, you see that those that are more advanced are being treated more prominently than those that are less advanced, which again is not surprising based upon the dynamics of new product launches. Then if we look at segmentation from a channel standpoint, as I said, the long-term care prescriptions within the long-term care have been very robust. If we look at those data since launch, it's up close to 100%. So once again, you're looking at patient data is suggesting, as well as channel data, that it's the more severe patients that are being treated now.
And again, that is what's expected, and that's why it's so important as we think about the launch of our DTC campaign, to be able to push the prescribing for this significant unmet need more into the community setting and for those that are less severe.
Thank you so much. Our next question comes from Manos Mastorakis with Deutsche Bank. Please go ahead.
Hi, thank you for taking my question. Hope you can hear me. So, just wondering, how long do you plan to continue investing behind Vyepti? Or how is that decision going to be made moving forward? So as long as you see a return, will you keep backing, backing it with marketing and sales? If you could be a bit more specific on the breakdown of sales, marketing versus distribution component of the spend, that would be very helpful. And in other words, as competition continues to increase, will you need more of an investment? Thank you.
Manos, can I just clarify your question? You, you're referring to Vyepti in terms of investment?
Correct.
Okay.
Correct. Yeah, yeah.
Maybe, Tom, you wanna comment on our, I mean, as I commented, of course, in the opening remarks, we see it as a investment for the long term, so it remains an important investment asset for us. But, Tom, do you wanna comment as well?
Sure. Perhaps I'll comment for the U.S. and then turn it over to Jacob more broadly for the ex-US. You know, first of all, when we think about where Vyepti is within its life cycle, we're clearly beyond the turnaround of Vyepti, and we're really into the acceleration phase. We've grown, as you saw, 73% from a revenue standpoint over prior year, and I think that's representative of the investments that we've made from a sales point of view, from a marketing point of view, with patient activation, as also from a market access point of view as it relates to patient experience. I have been incredibly pleased, quite frankly, to see what the marginal return on investment analysis suggests of those three key levers in terms of driving investments. I'm sorry, driving results.
I think there's an opportunity, quite frankly, to expand our investments based upon the positive return on investments that we're seeing to either even further accelerate growth in the U.S.
Yeah, maybe I could just add also for ex-U.S. markets. I think it's important to highlight what Tom is saying. We're still early on, so we've been going for a little more than three years in the US, and for rest of world, we basically just have been launching within the last 6-12 months. So that means that we have several years ahead of us with, I think, very strong growth rates from Vyepti. And, of course, also remember that this is a brand that will live long. We're looking into mid-late 30s for LoE. So this is a brand that will stay with Lundbeck for a long time, with significant growth ahead, very early in its launch. So I think it's there will be some time to go before we can start discussing investments and what is needed.
Thank you.
There are no further questions at this time, so I'd like to turn over to Charl van Zyl for closing comments. Please go ahead.
Thank you very much. Again, thanks for joining today. As you would have seen, you know, very strong confidence around our growth profile going forward, and we will look forward to engaging with you also during our R&D day, where we will talk more specifically about our exciting pipeline. So thank you again for joining today.