Welcome to the H. Lundbeck Q1 2021 Conference Call. For the first part of this call, all participants will be in a listen mode only, and afterwards there'll be a question and answer session. Today, I'm pleased to present Deborah Dunsire, President and Chief Executive Officer. Please begin your meeting.
Thank you, Operator. Thanks to all of you for your interest in H. Lundbeck. Welcome to our teleconference covering the financial report for the first quarter of 2021. I'm joined today by our Chief Financial Officer, Anders Götzsche, Head of R&D, Johan Luthman, Head of Commercial Operations, Jacob Tolstrup, our Head of North America, Peter Anastasiou. Next slide, please. You see our disclaimer. I know you've seen it many times before. We'll move on to slide three. The first quarter of 2021 is one we feel very proud of. It's a continued unprecedented pandemic era. We know that physician interaction isn't yet back to normal. The promotional activity is still below the pre-pandemic times. We're glad to say there's movement towards a more normal world. We see this showing up in increased momentum in the brands.
We saw growth in our strategic brands of 8% in local currency, and we're very pleased with the momentum of VYEPTI in the U.S. The TRINTELLIX launch in Japan is accelerating, and we're also delighted with the strong data from two new studies, RELIEVE and RECONNECT, which further highlight the benefit of TRINTELLIX in major depressive disorder. The important factors influencing the Q1 2020 comparison are, of course, the stocking in Q1 2020, which was driven in the pandemic by people being told to refill their prescription. We've also seen significant currency headwinds, and in March, we experienced the first impact of SYCREST loss of exclusivity. Next slide, please. Our market shares remained stable or improved in many markets, and even though we definitely saw an impact on demand from patients not able to see their physicians, and also from our field teams being unable to work as normal.
Despite those challenges, TRINTELLIX achieved DKK 800 million in sales for the quarter, which is a growth of 7% in local currency. REXULTI showed a growth of 4% in local currency, achieving DKK 672 million. ABILIFY MAINTENA remains resilient through 2020 and into 2021. I'll address VYEPTI on the next slide. If I can have that slide, please. There's good, strong momentum in VYEPTI, and we've seen growth around 50% Q- on- Q, and it's developing as anticipated in the U.S. market, which is still experiencing some disruption in patient-physician interaction. The payer coverage for VYEPTI has remained extremely good, and patients have good access to VYEPTI even in times that require brand assistance. The global rollout will get underway mid-year, with launches in the balance of the year for five countries, and we're taking the next step on building this brand into a decade-plus growth driver for Lundbeck.
Next slide, please. One of the things that we're most pleased with is how VYEPTI is being received by the patients who take it. We see here Electra, who gives us permission to share her story and whose world has been transformed as her headache has been controlled when she received VYEPTI. We look forward to more and more of these patient testimonials of lives transformed as the VYEPTI rollout continues. Next slide, please. We all know that the COVID-19 related stay-at-home restrictions significantly reduced in-person visits, new diagnoses, and therapy initiation. That's impacted new patient starts for both REXULTI and TRINTELLIX. We're still experiencing some of the impact from the pandemic, but I believe we're seeing the early signs of recovery.
In Q4 of 2020 when the U.S. market was more open, we were seeing patients coming back to a degree, we were able to have our sales people interacting to educate physicians. We saw a good momentum pickup. We saw a close down a little bit in the beginning of the year. As you know, those next waves of COVID rollout, we saw a concomitant decline in new cases and NBRx, now we're seeing that begin to recover. That closed down together with the annual deductible reset, guides the dip in the early part of the quarter, we're very pleased with the momentum as the quarter finishes.
At the end of Q1, we're at about 55% of our pre-COVID in-person calls, and together with the virtual interactions, that achieves about 80% of the pre-COVID calls, and we're expecting that to continue to advance and improve as the months go forward. Next slide, please. There has been really good momentum for TRINTELLIX in both North America and in international markets. In Japan, TRINTELLIX has now reached a volume share of 3.5%, which makes it the strongest launch in the developed market among all our markets. We see a good growth inflection driven by the lifting of the two-week prescription limitation, which is something that's required for the first 12 months of any launch in Japan. The combined sales forces of Lundbeck and Takeda driving the education around the brand has been tremendous in driving uptake.
For Canada, that's our third largest market, I'm pleased to say that we've achieved public reimbursement for TRINTELLIX there, and we expect that to further enhance uptake. Anders is now going to elaborate on the financial performance in more detail. Next slide, please.
In this waterfall diagram, we have illustrated the pushes and the pulls that have impacted the quarter. VYEPTI delivered DKK 76 million in sales. We saw an encouraging growth of 8% for the strategic brands despite impact from the pandemic. NORTHERA was down with 35% in the quarter due to more aggressive launches from multiple generics than anticipated. In Q1 last year, the pandemic led to stocking of our products, which has negatively impacted revenue growth this year. The negative impact is approximately 2 percentage points. Depreciation of currencies have had a negative impact on the growth of approximately DKK 180 million. That is, of course, also the reason for having a total decline in revenue for the quarter. Next slide, please.
When looking at the core gross margin, it was 86.6%. It's thereby unchanged compared to same period last year. The reported gross margin declined due to amortizations of VYEPTI. SG&A declined 11% or approximately DKK 200 million compared to same period last year, which is mainly due to less marketing and promotion activities as a result of the pandemic. If you adjust for the impairment charges we took last year of some DKK 800 million due to the foliglurax write-off, the R&D cost increased by 4%. That is mainly due to the increased clinical activities for VYEPTI. The operating result, EBIT, reached DKK 882 million corresponding to an EBIT margin of 20.6%. The core EBIT margin faced a modest decline from 29.7% to 29.3%. Overall, we see the financial performance in the first quarter as very solid. Please turn to slide 11.
Basically, this slide does not contain any material new information compared to when we announced the financial expectations for 2021 in February this year. I think it's important to remind you all that Lundbeck's main currencies are USD, Chinese Yuan, Canadian Dollar, which together constitutes about 70% of our currency exposure. We have, as expected, seen depreciation for all the main currencies, which impacted the growth negatively in the quarter with approximately four percentage points. You should also be aware of that some of the other currencies, such as Korean won and Brazilian real, have also seen sizable depreciations in the quarter. Next slide, please. On the left-hand side of the slide, you can see the development in our free cash flow.
Profit from operations in the quarter has been quite robust, but the cash flow has been negatively impacted by change in working capital due to timing in payments from partners, but also received shipments of inventory. To the right of the slide, it's shown that we have continued to reduce the net debt since the acquisition of Alder Pharmaceuticals, leading to a healthy net debt to EBITDA ratio of one. We expect net debt to be around DKK 3.5 billion at the end of 2021. Please turn to the next slide. The financial guidance for 2021 is unchanged, and we still expect revenue in a range of DKK 16.3 billion-DKK 16.9 billion.
The generic erosion for NORTHERA following the LOE at the end of February 2021 has been faster than we anticipated. We therefore now expect a decline of approximately 70% in sales corresponding to around DKK 1.7 billion. Which is higher than what we communicated when we announced the full year expectation in February, where our expectation were approximately DKK 1.3 billion. This will, of course, put a bit pressure on our financial performance. The other strategic brands are expected to show high single digits or to show double-digit growth in the remaining part of the year and are expected to partly mitigate the erosion of NORTHERA. The mature brands are expected to decline around 10%. That is due to normal generic erosion, but also VBP in China impacting EBIXA. Included here is also the sales impact from our handing back of SYCREST to Merck late last year.
Sycrest realized a sales of DKK 31 million in the first quarter last year. The growth in revenue for the strategic and the mature brands is expected to be approximately DKK 1.1 billion, which actually is better than we assumed in the beginning of the year. We assume negative currency impact of approximately DKK 600 million and a hedging effect of approximately DKK 50 million, which will result in a net impact of around DKK 500 million. The explained movements in revenue are expected to lead to an overall decline in revenue for 2021. The financial guidance for the earnings figures are unchanged compared to Lundbeck's financial guidance provided in February 2021. For the full year, you should expect financial items to be a net expense of DKK 250 million-DKK 350 million, depending on the currency development.
We believe that the rest of the year will still be a year of uncertainties with factors that are beyond our control in relation to the pandemic. We are, as a company, optimistic that the increasing number of vaccinated people globally will continue to drive the rebound of the growth of our strategic brands in the second half of 2021. I'll now hand over the microphone to Johan for going a bit more into the details of R&D.
Thanks, Anders. Please turn to slide 14. Let me start with REXULTI in agitation in Alzheimer's type dementia. As we wrote in the release on April 13th, an independent interim analysis in the ongoing phase III clinical trial, Study 213, supports progressing the recruitment of patients to the planned full enrollment of 330 patients. Completion of the trial is expected in the first half of 2022. With regards to VYEPTI, we are progressing very well with the global expansion, and we have regulatory reviews ongoing in 12 markets, including EU and Australia, as well as countries in Asia and the Middle East. The clinical programs on VYEPTI are also advancing very well. The DELIVER trial, a phase III-B study that evaluates the effects of VYEPTI for the prevention of migraine in patients with prior unsuccessful preventive treatments, is well executed.
In spite of the pandemic, enrollment has been exceeding target, and we're expecting to look at the results at the second half of this year. Additionally, we have initiated the pivotal global program supporting major filings in Asia with the so-called SUNLIGHT study that is China-centric, soon to be followed by the SUNRISE study that is Japan-centric. We also continue to keep expanding and progressing the early-stage pipeline so programs can be evaluated in humans faster with gatekeeping experimental medicine studies. Overall, we expanded and built a broader set of phase I assets, including a couple of MAGL-targeted molecules that are evaluated in a number of early exploratory patient cohort studies. We are also continuing the further advancement of two promising early development programs, the alpha-synuclein and the PACAP programs. We continue to see a fluid situation around the pandemic, with clinical trial sites opening and closing again.
This is primarily impacting study starts, especially the early development stage studies, which are less flexible since they are heavily dependent on few sites and countries. In late development, the effects are more variable, with studies in migraine doing very well, while others are more challenged regaining the enrollment momentum. Next slide, please. I'd like to turn to interesting new data on TRINTELLIX /Brintellix. We're very pleased to share the positive data from the RECONNECT study. This study evaluated effects of vortioxetine in patients with primary diagnosis on major depressive disorder, MDD, that had a comorbid diagnosis of generalized anxiety disorder, GAD. This patient category represents the largest subpopulation of patients with MDD, with a prevalence of comorbid anxiety disorder perhaps as high as 60%.
This is also a patient population that generally has a higher severity of illness, with consequently greater impairment in functioning and thus more difficult to treat. In line with this, the patients enrolled in RECONNECT study were severely depressed and anxious, and the majority of the patients had already failed another antidepressant. Patients were treated open-label at flexible doses, 10 mg and 20 mg vortioxetine, with an uptitration to 20 mg after one week of treatment. Vortioxetine's effect on symptoms of depression was verified with an improvement on the Montgomery–Åsberg Depression Rating Scale. More importantly, there was also a significant improvement in anxiety symptoms as measured by the Hamilton Anxiety Rating Scale.
The improvement in depression and anxiety symptoms were strongly aligned with improvement in patients' overall functioning and health-related quality of life measures, which obviously are particularly encouraging given the poor overall social, family, and work life functioning in this group of patients. Next slide, please. RELIEVE is a real-world study in which the ability of TRINTELLIX/Brintellix to improve functioning in people living with MDD was assessed. RELIEVE was a global prospective observational study conducted in patients with MDD that were prescribed vortioxetine. Data from 994 patients were collected at routine clinical visits at baseline, three months, and six months. The study demonstrated the ability of vortioxetine to improve the daily life of people living with major depression when measured using the Sheehan Disability Scale. That's a scale that evaluates areas such as family, social life, home, work, and school.
Additionally, the trial met all its secondary endpoints, measuring quality of life, measures of depression, as well as reconfirmed vortioxetine's positive effects on cognitive symptoms as measured in two very different ways, a questionnaire and a neuropsychological test. As in the RECONNECT study, the results of RELIEVE are particularly interesting in that it shows an effect on TRINTELLIX, Brintellix on family, work, and social life functioning. In the RELIEVE study, it's also very nice to see that we clearly demonstrated that vortioxetine can restore brain health in an everyday clinical practice setting. With that, I turn over to Deborah.
Thank you, Johan. As you know, we focus our business on medicines for brain health, but we also do it in a way that builds a sustainable company over the long term. Our sustainability strategy aims to ensure that the business activities are conducted in a way that supports as many as possible of the 17 sustainable development goals, mitigates any risks to the business, and creates a diverse and inclusive organization where the best talent can thrive. Lundbeck remains in the top 5% of comparable international workplaces on several parameters, and we've been proud to receive the accolades of Top Place to Work awards in multiple countries in the quarter. We drive diversity, equity, and inclusion across our organization and also at our board level.
With the addition of two new board members, we now have 30% of our directors being women, and we have seven nationalities within our board. Having achieved our 2006 long-term climate goals, Lundbeck announced in February a new 15-year climate target, which was approved by the Science Based Targets initiative. There are three pillars in this new target, and that includes the commitment to being carbon neutral no later than 2050, which is aligned with the Paris Climate Agreement. Carbon emissions from our production and fleet will be reduced by two-thirds over the next 15 years, and we'll also reduce the so-called Scope 3 emissions as we work with our suppliers and customers to reduce their carbon emissions by nearly a fifth over the next 15 years. Next slide, please.
As we forge ahead in 2021, we'll be working hard to continue to mitigate any effects of COVID-19 and driving those strategic brands forward to get to the patients who need them. We'll also be looking to drive forward the pipeline. The regulatory process for VYEPTI is continuing with expected approvals in Australia, as Johan said, and we're also expecting the recommendation from the European CHMP towards the end of the year with approval for Europe in the early part of 2022. Two of our early-stage projects are also getting ready for phase II testing. Next slide, please. We're off to a good start this year, and we aim to keep it moving. Our current top priority is to maximize the value of our brands, and they continue to perform robustly as you've seen from the financial performance this quarter.
The strength of the operating results over the past years as well as in this quarter give us that strong financial foundation to continue to drive our expand and invest to grow strategy and deliver a sustainably profitably growing company in the decades to come as we focus on restoring brain health so every person can be their best. With that, I thank you for your interest and open the Q&A session.
Our first question comes from James Gordon from JP Morgan. Please go ahead.
Hello. James Gordon, JP Morgan. Thanks for taking the questions. A couple of questions, please. First one was on REXULTI, Alzheimer's agitation and the interim and its implications. If I remember correctly, I think there had been comments that if the interim efficacy had been in line with what we've been seeing for one mg REXULTI in previous trials, it could be good enough to stop at interim. Does the fact that it didn't stop at interim, does that suggest that maybe the benefit that you'll see in this trial isn't as good as what you saw for REXULTI one mg in previous trials? The question here, how does this make you think about or how should we think about the chances of success at the final result now we know it didn't stop at interim? Any reason why it might not have looked as good?
That's the first question. Second question sort of connected to REXULTI and Alzheimer's agitation. Business development, given maybe some uncertainty around REXULTI and AA, and there isn't that much other late-stage pipeline shots on goal, does that make it more urgent to do some other deals ahead of the final data for Alzheimer's agitation? Do you need to have a plan B in place? Third and final question, just on SG&A. I think on the last call, there was a comment that SG&A could be something like 41%-46% of revenues for the full year. It seems like COVID is continuing on longer in terms of delaying people getting back in the office. Should we assume SG&A is going to be the low end of that 41%-46% range? Is it sort of Q2 similar to Q1, and then it's really the second half that it goes up at all?
Thanks, James. I'm going to ask Johan to start with the description around the interim analysis, and then Anders will take the SG&A question, and then I'll end with the BD question.
Yeah, thanks. Just a few background facts around the result in agitation. As you recall, we had two previous studies, and the strongest data was in the 2 mg group, either with a fixed dose or a subgroup analysis of the flexible dose that we looked at. The 2 mg was the one that we showed earlier to work and show effect. This study is looking at 2 mg and 3 mg in the pooled assessment. There are two arms here, a placebo arm and a pool group of 2 mg and 3 mg, where we aim to have at least 100 people on the 3 mg dose. The interim was done at 252 subjects, and we're now aiming for 330, the full enrollment. In terms of, I guess, what you're asking about are the bars that we set here. Let me first say the study continues.
We didn't hit futility, which was part of the analysis. We obviously have a drug that is working. The question is how well it's working. To hit the success interim criteria, we needed to have pretty strong effects. Obviously, with fewer subjects, you accommodate for the variability being a little larger with fewer subjects. We're aiming for a very robust effect to be able to have a solid conversation with the regulators. Now we're looking forward to finish the trial and see what kind of data we get in the ball range of working or working extremely well. That's what basically the design is now moving forward. I'd like to add also, we're doing our best to execute this trial as fast as possible. You may recall we had some issues getting patients into the study last year. We now have a number of activities, so we hopefully can speed up this trial.
Thanks, Johan . Anders?
Yeah, the SG&A, you should expect that the ranges that we have given is actually what we still expect because what we had also built into our estimate was that the promotion and marketing, or the promotion and sales activities will be less in the first quarter, and hopefully they will ramp up during the year. The range that we set in Q1 is still applicable also going forward.
I think that our Expand and Invest growth strategy, we're constantly looking at ways to build the future sustainability of Lundbeck, and we'd be active across all stages of the pipeline. That remains true. I think we've always said that we are going to be very disciplined about what we do. We're not rushing in any way to try and do something before the AAD readout. We'll always be looking to do the thing that's right for Lundbeck and that we believe fits and builds the company, and it'll be driven by the finding those assets, not by a specific readout timeline, if that just make myself clear.
Thank you.
Our next question comes from Wimal Kapadia from Bernstein. Please go ahead.
Great. Thank you very much for taking my questions. Wimal Kapadia from Bernstein. Can I just first ask on VYEPTI, please? Recent trends have stepped up quite nicely in the U.S., and you say the 1Q was in line with your expectations. Can you just provide a little bit more color on what that looks like for the rest of the year? Maybe you could comment in relation to the consensus expectations of around DKK 530 million. My second question is on REXULTI and borderline personality disorder. We're expecting the phase II in mid-2021, just curious how we should think about this opportunity here. In the U.S., you suggest 1.7 million treated patients, no approved drugs. How much of an inflection could we actually see from this label expansion?
Just tied to that, how much off-label usage do you actually see for the product in BPD at the moment? My final question is just on ONFI. We've now had four or five quarters producing similar revenue numbers. I just wanted to get a sense of how we should think about this trajectory for the product from here. How much downside is left, if any, for this asset? Thank you.
Great. Thanks, Wimal. I'll ask Peter to start on VYEPTI and its performance and how we think about it in the rest of the year. Johan, maybe you can talk about when we'll see the readout of Borderline, and Peter talk about how you think about it in the marketplace. Anders, would you comment on ONFI?
Maybe I can start with ONFI. You should expect our best guess it is 5%-10% decline in 2021 compared to 2020. I can start with VYEPTI, and then Peter can take over. The consensus, when you look at the trend line, and if you just extrapolate that, then we are on the way to the DKK 500 million, which is comparable to the consensus. Of course, we need to build in a caveat, and that is, of course, we expect that society is opening more and more up in the U.S., and then Peter can take it from there.
Yeah. Hi, Wimal. Thanks for the question. Yes, in terms of VYEPTI, it certainly was a good quarter and on track with our expectations. I think it's a combination of a number of things. You're seeing patient volume starting to return, although not anywhere close to full volume. Our reps are able to get in front of our customers. Physician practices are getting closer to being fully operational and back online. Also there's a number of things, as you know, that are now in place that are very important to create the momentum that we're seeing with ASP being published now for the first time, and then will continue to be on a quarterly basis. Market access situation is quite good. We have 235 million patient lives that have access to VYEPTI in the U.S., which is great. Of course, J-code.
All those things create a runway that we believe will get us where we need to be for the year. Of course, the big outlying uncontrollable factor is COVID, will there be future waves, that sort of thing. We're pleased with the momentum that we have.
Great. Would you like to comment on the borderline for REXULTI, Peter?
Okay.
Just in terms of the inspection, you want?
Obviously, I won't give specifics about what kind of a sales increase we would expect. Yes, there is, of course, off-label use that we hear about. It's tough to quantify the product, of course, in terms of DELIVER remains to be seen with the phase II readout, but the market opportunity is a meaningful one. There is no approved treatment. It's a sizable population in the U.S. These patients have a lot of disability, and are very challenging patients for physicians to treat. They are looking for new therapies. We believe this is shaping up to be a meaningful label expansion when the study results come out and we see those.
Johan, any comments on timing?
Yeah. Let me just fill in a little what Peter said there. Of course, REXULTI has a great profile, but we're going into an indication that is extremely hard. We actually running a proof of concept study here. It's a phase II proof of concept study because several things. First of all, there is no established therapy, and the readouts are also new readouts. They're not established. We have to pave the way here, completely new ground. This is a challenging study and challenging indication, and we're looking forward to see the outcome of the study. It's actually fully enrolled, so we know the timelines pretty well. We'll get it by the shift of the mid-year. Basically then we'll see what data we have and how we'll progress with this asset.
Great. Thank you very much.
Thank you. Our next question comes from Michael Leuchten from UBS. Please go ahead.
Thank you. Three questions, please. Michael Leuchten from UBS. Just a question for Peter. Has there been any stocking going into the year after Q4 or anything that will make the underlying growth less good than the quarter cosmetically looks like? Second question, Deborah, you've commented on your sales force and your digital efforts. Is there any way of quantifying the level of effectiveness of the promotional activities now relative to where you would expect it to be if there hadn't been a pandemic? Maybe it's impossible to say, but I just wondered if there's a way of measuring your impact at the moment, given that you're running a dual strategy. The third question is on VYEPTI DTC. Can you talk to timing on when you will roll out an initiative? When would you expect a return on that in terms of quarter?
Say, if you did it now, would that then be seen in Q2, or what do you think it's going to take a little bit more time to convert that into revenues? Thank you.
Peter, you can maybe start with the stocking and the VYEPTI DTC.
Yeah. Michael, you didn't specify a product, I assume you mean overall. The short answer is no, there's no stocking effects beyond normal quarter-to-quarter swings that would explain the first quarter performance. There's no one-time events, anything like that. This is true momentum. I think I'll steal a little bit of the answer from Deborah's second question about promotional activities. You can see from the slides that Deborah showed, that when we are able to get in front of our customers, the customers respond and the prescriptions go up in terms of new prescriptions. There have been ebbs and flows in our ability to do that. We feel confident that as the pandemic recedes, as we can get in front of our customers, right now, we're doing a relatively good job of getting back in front of our customers, the brands are responding. That explains, I think, the good performance that you saw from the strategic brands in the first quarter.
VYEPTI DTC.
Yeah. DTC is something that we intend to do with VYEPTI. Timing of it is something that in a little bit is out of our control, for two reasons. One, we need feedback from the FDA. As you know, for all DTC campaigns, you need to have those pre-cleared. Feedback from the FDA is critically important. Given all their other priorities with COVID and approving treatments, it's tough to know exactly when we'd be able to receive that feedback. The other piece is, of course, the timing really does depend on COVID and patient volumes. We certainly want to make sure that we're launching a DTC campaign when the physician practices are ready for the influx of patients, but also that the patient volumes are getting back to close to normal. It is in our plans, in our armamentarium. The timing remains to be determined.
Just commenting on the sales force effectiveness a little bit more. I think that what we do know is that the in-person call converts to a prescription much more frequently than the virtual engagements do. I think that we've seen that in our own interactions, but we also see it with telehealth. Physicians interacting virtually with patients also don't initiate new scripts. The virtual adds something, and I wouldn't put a quantification on it, but it's certainly not as effective in converting to prescription as an in-person call.
Thank you. Our next question comes from Martin Parkhøi from Danske Bank. Please go ahead.
Yeah. Hello, Martin Parkhøi, Danske Bank. First question is probably for Jacob. Just if you could elaborate a little bit on Japan and TRINTELLIX . In absolute terms, how much are we talking about now in sales in Japan? And maybe also a little bit on the combination because, of course, also Lexapro is still also active in Japan. How are these faring in combination respect to market share position? A second question to Anders or maybe Deborah. I think you were quoted on newspapers today talking about growth for the next six to eight years if we look beyond 2021. Maybe you can elaborate a bit on that and maybe discuss the growth on the regional development. Finally for U.S., maybe you could talk a little bit about the net price development you are seeing on your products right now in U.S. in 2021.
Thanks, Martin. Jacob, over to you.
Oh, absolutely. Thanks, Martin. As you've seen also from the release and the comments that we have made, I think you probably during the day, but I would say it's actually going really well in Japan. We were hit during the pandemic last year. Now we have about 50% access to our clinics and university hospitals and so forth in Japan. Last year, that gave us issues in terms of getting started. As soon as the two-week prescription ban was lifted in Japan, market share has climbed up very fast. Looking at volume market share, Japan is now our best launch ever for TRINTELLIX . They have done a super job in Japan for TRINTELLIX . I don't think we're commenting on how much sales that we get specifically for Japan on TRINTELLIX , Martin, so I can't help you with that.
Of course, as you know, Takeda takes the lion's share, and we get around 30% of that is coming back to us in terms of royalty for the brand. I don't think we've given specific sales numbers. If you look at new scripts and we are climbing up fast, and we are the leading brand in capturing new patients. Of course, we are still coming from a lower level than the others in terms of total market share, but changing fast. I think one dynamic that is about to change, is that we will see generics on Cymbalta relatively soon in Japan. That could change some of the market dynamics there.
In which way do you think it will change?
Yeah. Right now we are actually climbing up fast. That means that I think we're building up a great reputation for the brand. Difficult to know, but of course, that always gives a different pressure in the market that you have one more generic entering. I would say that that has always been part of our plan and looking ahead, we see no change compared to what we have estimated in terms of growth for the year.
Jacob, Martin also asked about how Lexapro and TRINTELLIX are coexisting.
Yeah, that's a great question. I would say Lexapro has done very well during the pandemic. One of the benefits of having a bigger portfolio. How we co-position them hasn't changed, meaning that in many markets where we're able to promote Lexapro, the focus has been on anxiety. Whereas for all markets, the focus for Brintellix/ TRINTELLIX has been around recovering your functioning. Sort of complete recovering of your function as a patient, not only looking at depressive symptoms, but total functioning. That has worked very well. Lexapro is primarily used in an anxiety setting.
Commenting on the growth in the coming years, I think that the major loss of exclusivities are behind us, and of course, we have to wash NORTHERA too, and we'll see that this year. We will have a period of relatively uninterrupted growth over the coming years. That's a good picture for us. With the robust financial base that we have, it's a great place to grow from. Anders, would you like to add any comments?
Of course, we expect the chance we'll have is, of course, in Europe, but we will have the pan-European launch of VYEPTI starting in 2022, which we expect would fuel the growth there. We strongly believe that we will see six to eight years of growth coming through 2021. We would see a continuously growing business. With respect to the net pricing question you had, I assume it was related to U.S.
Yes.
If you look at the majority of the products, the gross to net has not changed dramatically. Of course, when you come in the earlier phases like REXULTI, the gross to net has changed slightly. You have on top of that, you of course have the price increases taken. Overall, if you look at the average net price, it has been increasing, and that is also part of the growth that you're seeing. In some of the regions, you would say, it seems how can you speak about growth for the brands? If you look at in Q1 last year, you would also see that we had a super growth for some of the products, which was due to the stocking in March pre-pandemic. Overall, the underlying growth was actually pretty nice and also supported by the pricing actions this year and last year.
Thank you.
Thank you. Our next question comes from Trung Huynh from Credit Suisse. Please go ahead.
Hi, guys. It's Trung Huynh from Credit Suisse. Three questions from me. Firstly, on your guidance, just some of the reasoning why you're keeping the guide given North America is now 70% erosion for the year. Is it simply that the expectations for the growth drivers, just going much better than you thought since the start of the year? Is there anything else that's doing much better than you originally thought? Secondly, just on costs, following up from James's question on SG&A, just to clarify the cadence of spend through the year. Do you think 2Q is going to be a similar quarter than 1Q? Similarly, just on R&D spend, just how that progresses through the year. Finally, just your opinion on Lundbeck being taken out the MSCI, I think it's tonight. Do you think that's going to impact the stock indirectly? Any thoughts here would be interesting. Thanks very much.
For Anders, maybe you can comment.
If I start with the guidance, it goes without saying, it is approximately numbers. We went from approximately a decline of 50% to 70%, and we have estimated in our books it's around DKK 400 million down on revenue. That, of course, put a bit pressure on the guidance. On the other hand, we have seen some of the uncertainties we had when we entered the year seems that they're a bit less for the strategic brands. Of course, and that's due to we see that the vaccination levels are going up. We see that societies are reopening. We also accept that some countries are still suffering dramatically. In the major countries, we see a good momentum, and that is why we believe that we can be balancing out the faster erosion from North America.
Of course, that needs to be seen during the year, but we are still confident that we will be able to deliver the guidance. From an SG&A and R&D perspective, I do not want to go into details for each and every quarter, but it goes without saying that we have been building into our estimate that we had a gradual return to normal. You would see that in Q2, we hope that we will have more pressure behind the sales and marketing efforts, and then we hope it will be more back to normal in Q3 and Q4. We need to see how it plays out, and then some activities might be moved around the quarters. For the time being, we expect that the SG&A ratio that we told you in February is still holding up, and that is around between 41%-46%.
You could say, is it 43%, 44%? That is what we believe in now, and then we need to see how the quarters plays out. With regards to the share price and the inclusion in different indexes, I think you have as much knowledge as we have, and your speculation around the impact on the share price is actually better than ours. I rely on that you're more capable of evaluating that than we are.
Anything to comment on the R&D cadence of spend?
Yeah. I think we have said, I just need to double-check, so I don't say anything that is out of context. We have said that the R&D percentage should be between 22% and 24% for the full year, and that is still what we believe in. That is the spending level.
Thank you very much.
Thank you. Our next question comes from Carsten Lundberg from SEB. Please go ahead.
Thank you very much. I only have one left here. I was hoping to get a little bit more color on the emerging markets performance because you actually delivered 4% year-over-year growth in constant currencies despite having delivered the 17 in Q1 last year, and you have some headwinds from the VBP in China, et cetera. I was just wondering, Jacob, could you give us some more color on what's the driver here? Because you are up in growth versus Q4, and maybe also there's a lot of focus on this VBP in China. Is everything in the numbers now for Ebixa, or do you expect anything more in the coming quarters here? Thank you.
Happy to comment on that. There are different pulls and pushes for the quarter, Carsten. You're absolutely right on VBP for Ebixa, that is something that has taken us down in terms of growth for the quarter. On the other hand, also remember that China last year was going through the pandemic earlier than everyone else, and that meant that early on we were actually behind in China in Q1 last year. That sort of pulls in the other direction. Then for other markets, we had stocking going in. We had a product, Sycrest, that we've handed back to Merck, which also has a smaller impact on some of the international markets. It goes a little bit in both directions. That also means that at the end of the day, all of those effects basically equals each other out.
That means that what we're looking at is demand driven. It's performance that is driving the growth for the quarter for many of these markets. On VBP for Ebixa, we have lost market share after VBP. We are now at a level where we are able to then, you can say, promote and compete again. One of the generic suppliers last year were not able to deliver, and that gave us a little boost at the time. Now we are down at a level where we are promoting again, and we are actually able to grow Ebixa a little bit again locally, but at a lower level, of course, than what it used to be.
I think it's fair to say that our expectation for Ebixa for the upcoming quarters is also a bit lower. There would be a bit more impact also international markets in Q2 and Q3. Still it has been rebased to some level, but we believe that we need to see a bit more decline in the upcoming quarters. What we believe, on the other hand, is that the strategic products, they will actually be growing more in the upcoming quarters, but on the other hand, some of the mature products will be dragging a bit down.
Okay. Thank you.
Our next question comes from Michael Novod, Nordea Markets. Please go ahead.
Yeah, thanks a lot, and three questions from my side. First of all, to TRINTELLIX and the RECONNECT and RELIEVE data. How fast and how wide can you start to use the data, and how important is it also to sort of see the rebound in TRINTELLIX , in particular in the U.S.? The second question is to VYEPTI in Europe. Again, how fast do you expect sort of reimbursement to be concluded? We see that CGRPs in general have good access in Europe, and do you expect this to also be sort of a fast reimbursement process for VYEPTI? Lastly, on the TRINTELLIX generic court case, do you still expect this to be concluded during June, July?
Great. Thanks, Michael. I think on RECONNECT and RELIEVE, I'm delighted with the performance of the TRINTELLIX profile in major depressive disorder. All of these things help. They don't change the label, as you know, so they'll be presented at scientific meetings, they'll be used in medical education, but they're not promotional in a sense. What it does is it highlights the benefit of TRINTELLIX on function, even in patients who have concomitant GAD. It helps us with payers that we can really talk about how TRINTELLIX does perform extremely well in the real world, because we get questions sometimes about placebo-controlled clinical trials. Do they demonstrate what happens in the real world? RELIEVE really does that.
I think that they will add to the body of evidence that this brand is an ideal brand for people facing major depressive disorder who need to be able to function normally and, frankly, who doesn't. I'll stop there and maybe, Peter, you have any further comment?
Just to emphasize your points, these data are extremely helpful to be in the published domain and with key opinion leaders and other scientific exchange venues. While I completely agree with your point, while we have excellent coverage, payer coverage with TRINTELLIX, these data just further reaffirm the value that TRINTELLIX brings to patients in the real world and help us on those levels.
Jacob, perhaps you can comment on VYEPTI and RELIEVE?
Hopefully the plan is, or not hopefully, the plan is that we expect to have approval of VYEPTI early next year, and then we will begin the European rollout. There's a couple of things that you have to look for here. First and foremost, this is an infusion product, being a biologic. There is a little bit of longer lead time for us to have product available in the market. That's one factor from approval. When it comes to market access, we believe at that time we will have all the tools in place to have that discussion. Actually, looking at the other CGRPs and the success that they've had in most markets of getting through and getting good pricing, we believe actually will help us in the discussion. I don't expect it to take longer than what has happened for the other CGRPs.
In fact, it should actually be more helpful for us that they've sort of established a pathway. With the DELIVER trial that we are coming through with, we believe we have all the data to go in to have a good discussion with authorities around that. It will be a typical, you can say, European rollout, where you begin with the markets where you can easily get into and secure a price. Then it will be sort of a phased rollout as soon as you can. That still means that it takes anywhere between two, three years before you're into all European markets, which is very common and not something to do with VYEPTI. Also, the same that it took for TRINTELLIX, as an example.
I was touched you can comment on the TRINTELLIX generic lawsuit?
TRINTELLIX lawsuits? Competition, Peter.
I think the meat of it is that there's nothing telling us that the timeline has changed.
Okay.
We know that sometimes there's COVID delays. Right now we haven't heard anything different. It's going to be driven by the old timeline.
Okay, super. Thanks a lot.
Thank you. Our next question comes from KC Arikatla from Goldman Sachs. Please go ahead.
Hello. Thank you for taking my questions. KC Arikatla from Goldman Sachs. I have two related questions, please. On your guidance, would be great if you could share your refreshed assumptions behind the top end of the range, especially given the steep decline that you now expect from NORTHERA. On a similar note, relative to the start of the year, do you think you're more or less confident about achieving the top end of the sales guidance range? Thank you.
Yeah, thank you for the question. Thanks for the question. At this point in time, I'm not willing to go into speculation around what kind of level where we are heading into the range. We believe we will be within the range and then we will see in the upcoming quarters where we ending, if it is the top end or the low end. That I don't want to speculate on now.
Thank you.
Thank you. Our next question comes from Peter Welford from Jefferies. Please go ahead.
Hi. Yeah, thanks. I've got four quick ones left over. Just firstly, with regards to the synuclein antibody, curious if you could outline, is the plan only now to consider orphan indications like MSA, or are you still considering moving forward as well with a proof of concept study in Parkinson's? Secondly, just on the PACAP antibody, anything you can give us with regards to what the phase I told you? Were there any conclusions from that, or was it just a case of it's passed and now going into phase II? Thirdly, just on contract manufacturing revenues, obviously weak in 1Q. Is this just phasing and we still sort of seem similar for the year, or is there anything that's happened there contract-wise that means we should be looking at a different number for this year on the contract manufacturing line?
Finally, just on VYEPTI U.S. coverage. Appreciate that in terms of the number you've got access, but I wonder if you can talk a little bit about the type of access you have for VYEPTI in the U.S. with those 235 million lives and how that's changing at all. Thank you.
On Esmab, I think the first indication of MSA, we think it's a great place for Esmab to go. It will give us a lot of insight into the profile of the molecule, we'll be able to see, is it something that we can and should take into a broader indication in Parkinson's disease? I think we want to see some clinical outcome data on MSA to guide us in the path forward. You have any further comments on Esmab or, and then on to the PACAP question.
Just to add a little bit on the alpha-synuclein. Of course, we're going into MSA, as you heard. We'll talk more about that in the fall. We expect to start that study before the end of the year. There are obviously many things you can do beyond that. We like to see some encouragement in the data set. There are many things beyond Parkinson's you can do in alpha-synucleinopathy. We're considering several other things on the way. For PACAP, we're basically wrapping up phase I. We have good data so far. It looks fine from a kinetic perspective. Tolerability, et cetera, is acceptable to progress. We still have to go through some regulatory views to progress into phase II. We're sorting that out with Europe and FDA. We also need to see a little bit more of biomarker data, target engagement data, really, to fine-tune the program, phase II proof of concept program that we expect also to start by next half of the year.
Great. Anders on the contract manufacturing?
You should expect a 10%-15% decline compared to 2020. That is our expectation for the time being. Yeah.
Peter on the buy-in to coverage.
Yeah. Thanks for the question, Peter. To give a little bit more insight, about 110 million covered lives have no branded steps that are required. There are generic steps that are required. That's the norm for all the CGRPs. Branded steps, zero required for 110 million patients. There's another 33 million patients that are required to have one branded step. What we've seen actually is that irrespective of having branded steps or not, our market share is quite similar. I think that speaks to the fact that there is a high degree of dissatisfaction with current treatments, whether they be the generics or even, quite frankly, some of the more recent launches in the space. That dissatisfaction is the norm, our market share is comparable, irrespective of whether there's branded steps or not.
The balance getting up to the DKK 235 million, those are a variety of other restrictions that might be in place, two or three branded steps that are required. In total, that's what we were trying to describe, that substantive access is available for DKK 235 million. Hopefully those other details I gave you provide more insights.
That's great. Thank you.
Our next question comes from Rosie Turner from Barclays. Please go ahead.
Rosie Turner from Barclays here. Thank you so much for taking my questions. Just two from me. An apology to being a third person to go back to NORTHERA. In the prepared remarks, you said you expect the strategic brands to partly mitigate this increased erosion and obviously, kind of the top line has probably felt more acute than the bottom line given the kind of solid margin profile we expect for NORTHERA historically. Just to clarify, do you expect the strategic brand to mostly offset this increased erosion or are there going to be other levers you're going to have to pull to maintain guidance? It'd be fantastic if you could comment on that. Then secondly, in terms of strategic brands in terms of growth, and here I mean kind of REXULTI, TRINTELLIX , ONFI.
I mean historically before the pandemic, they were growing in a kind of 30% range. I think you said next year we kind of see a return to an uninterrupted growth. Does that mean we can expect getting back towards those levels in 2022, or do you think that's a further out event, or perhaps am I being too pessimistic and that's something we could expect to come through at the end of 2021? Thank you.
Great. Anders, do you want to start with the?
It was a bit difficult to hear the questions in the room, but if I understood your question right, it was around the NORTHERA decline or?
The strategic brand offset.
The mitigation by the strategic brands.
Yeah.
Yeah. What you know is that we have tried to lay it out in the presentation, what is the equation you should look into from what is the decline in NORTHERA, what is the growth for the strategic and mature brands. On top of that, we have also said that we believe that double-digit growth for the strategic brands in the second half of the year is pretty realistic. We do not see any roadblocks in front of us why we shouldn't be able to generate the same kind of growth numbers that we saw before the pandemic. That is what you need to take into the equation of looking into how should you evaluate the year. We basically have no more input to that.
I think we'll have to take the last question because I think we're beyond time.
Our next last question comes from Mark Edmond from SVB, sorry. Please go ahead.
Yeah. Hi, Peter. I was wondering if you could comment on how you think the oral CGRPs are impacting the migraine market so far, and obviously with prevention indication coming least expected on one product and then AbbVie's product, separate product for prevention comes in. Just curious how you think that's playing into the market? Secondly, just in R&D, can you give us an update on where the tau antibody is and the D1/ D2 in Parkinson's? Are these moving forward? Are we going to see data anytime soon? In the same way that you helped us with the alpha-synuclein thought process. Thanks.
Great. Peter?
Yeah. Thanks for the question, Mark.
Yeah.
From our perspective, the oral CGRPs, we don't see that as having an interruption to the momentum that we now have with VYEPTI. This market, as you know, is an enormous market. There's 14 million patients that qualify for prevention treatment. Only half of those have either been treated in recent past or are currently being treated. There are plenty of patients out there. As you also know, with the whole anti-CGRP market, that's only penetrated the market as a class by about 10%. I don't think we're anywhere close to a share battle between either the subcu or the oral CGRPs kind of taking share away from each other. All boats can rise. All of us together can continue to have the greater penetration of the market. I don't see the oral CGRPs as being disruptive to VYEPTI.
Great. On your tau question, the tau antibody, it's a great antibody. We believe it addresses the right disease, and we believe it's best positioned in Alzheimer's disease. Therefore, we would look for a partner, and we would not take that forward alone in a disease prevention in Alzheimer's disease. That is progressing, but we will not take it forward into further development unless we partner it. If you have any further comments, and then perhaps you can comment on the D1/D2.
Yeah. The anti-tau antibody is basically through phase I, and it looks like a good antibody. You heard the rest of the story. We have actually target engagement biomarkers also that we looked at. It's a good package around that antibody. It's a little bit too big for us to take on to move forward, and you know the uncertainty in the field on tau antibodies. For alpha-synuclein data, I think the question was when we can expect to see data. Obviously, we will come back to that in more detail, but we're going to run a sort of a stage phase II-III program, which is going to be a biomarker enhanced with readouts looking at neuroprotective effects and clinical effects.
We're going to gradually in the coming years, I have to say, because it's a disease-modifying approach, release data that will be package-wise, more a proof of concept part, and then more clinical full pivotal data if we continue. I cannot give more details then.
Mark's question also went to the D1/D2.
D1/D2. I didn't hear that. Yeah, that is progressing. It's the DART 2G program, as we call it, for off-time effect in Parkinson's disease. It's basically on its way out of phase I within sort of sometime next year. We have really nothing that could stop us progress with it. It's of course a matter of differentiation and get strong enough effects. We do look at some patient effects right now, and we'll see how that evolves. It would require a proper proof of concept study, of course.
Great. That's the last question. I think we'll wrap. Over to you, Operator.
Thank you very much. There appears to be no further questions, so I'll hand back to you for any last remarks.
Well, we look forward to the rest of the year evolving, the world opening up, and the momentum continuing to build in our strategic brands, the growth of VYEPTI in the U.S., and the rollout of VYEPTI globally. Thank you for your interest in Lundbeck, and we look forward to speaking with you when we report the second quarter. Thank you.