Ladies and gentlemen, welcome to the Lundbeck Fiscal Year 2020 Results Conference Call. For the first part of Today, I'm pleased to present Deborah Dunthier, President and CEO Anders Gucci, Executive Vice President and CFO and Johan Littmann, Executive Vice President of Research and Development. Speakers, please begin.
The Hello, everyone, and welcome to the Lundbeck Full Year 2020 Results Conference. The As you've heard, I'm joined today by Anders and Johan, but also have Jacob Thorsopp, our Head of Commercial Operations and Peter Anastasiou, our Head of North American Operations, with us to answer your questions. Next slide, please. You've seen this disclaimer many times before. I won't read through it.
So let's go to the next slide. 2020 is a year that I am extremely proud to be part of Lundbeck for. We have accomplished so much in the midst of a global pandemic and faced with significant currency headwinds. Our employees came together to ensure seamless delivery of all our products around the world throughout the year, And that enabled us, in spite of the challenges, to deliver revenue growth within our guidance range of plus 4% the year and reaching DKK17.7 billion, in line with our guidance. We also were able to save the year, we weren't able to promote normally, and that resulted in savings that we could bring to the bottom line.
Our core EBIT the year. We the Our strategic brands grew in total 13%, and we launched Vyapti in the U. S.
The year, we have a strong year
of strong growth in the midst of the pandemic and were able to
move that brand forward, not as we would have liked indeed, but to get a lot done during the year. We've also had additional approvals in Canada and the UAE and initiated the regulatory review in Europe. Rig Zolty is on track for the interim readout of the Phase III study in agitation in Alzheimer's disease, and that will the year, we expect to be able to get the patients in for that interim analysis even in spite of the difficulties the pandemic has the year, we have a very strong impact on our clinical trials. The COVID-nineteen impact has been across the business in many, many different ways, Limiting patients from seeing physicians, limiting our promotion around the world, limiting our clinical trials. But the people of Lundbeck came together to make things happen, and we've been able to move forward regardless.
The fiscal year 2020 results conference call. We couldn't, unfortunately, do anything about the significant currency headwinds in the second half of the year, and that has had an impact that Anders will go through in more detail. But it is a year we're very, very proud of. Next slide, please. When we look at the underlying performance for the major strategic brands, the Brintellix grew to DKK 3,100,000,000.
And you can see that it grew 13% versus full year 2019, So at a slower rate, and you see the impact of the first and second half, very strong growth in the first half the year, we expect to continue to be in the second half, but the market shares have been stable and in some markets even increasing. The year, we have a very strong growth year and achieved DKK 2,600,000,000. We've continued to launch that brand in other markets, recently launching in Brazil and Italy. The biggest business, of course, is still in the U. S.
And also Canada, where we have the major depressive disorder indication as an adjunct therapy. Abilify Mantenna was very resilient DKK2.2 billion in sales. The LAI market, I think, has been growing well in the pandemic as LAIs the allow patients to come in less frequently, so Abilify Mantenna benefited from that. And we shouldn't forget Northera achieving DKK 2,500,000,000 the Danish kroner in sales with a growth of 10%. Next slide, please.
Focusing a little bit more on VIEpti. 4th quarter demand doubled compared to 3rd quarter demand, showing that this brand is continuing its momentum the Even though it is challenged by the limitations of the pandemic, we've had very, very positive testimonials from both patients and the physicians providing Vyapti to their patients that it really delivers on that powerful, fast and sustained the release from chronic and frequent episodic migraine. The work we did in our U. S. Operations to really get the the Bedrock of reimbursement in place for Vyepti was quite remarkable in a virtual setting.
We've had the average sales price is now published, the year, the permanent J code was effective from October 1. We had, by the end of the year, 130 the year, we have
a number of people
who are in the range of $1,000,000,000 of the company's covered lives by their insurance, providing access to VIEPTI with no branded step edits. And we've seen utilization not only in those people, but in people whose plans required branded step edits. They had to go through other brands because VIEpti the year, we also see that at the end of this graph here, the the normal reset at the beginning of the year as the deductible resets for people in their new insurance year. So we're confident that VIEpti has the potential we expected when we made the acquisition of Alder, the year, but of course, it has been impacted by the pandemic. Moving to the next slide, please.
This is a brand that we own globally, and the global rollout is beginning, and we're also rolling this brand into different indications. The There's a very big market for prophylactic migraine treatments around the world, and we expect it to grow considerably in the coming years. It's a market that has been served by the year, we expect to see a significant uptick in the the year, we have been able to provide a clear path to the U. S, Canada, UAE. And actually updating today, we have now submitted for approval in 12 markets around the world, the latest being Thailand.
The We importantly submitted to the European Medicines Agency in December, right on track, and they have accepted the Lundbeck's application for the marketing authorization, and we anticipate that approval in the Q1 of 'twenty two. We've started the trial, ALLEVIATE for the second indication in episodic cluster headache, and Johan will talk a bit more about that and got Also our Asian development activities underway, with trials starting in China and pharmacokinetic trials starting in Japan. So We're very excited about the potential for VIEpti to expand globally and then expand into further indications. Next slide, please. Hannes, over to you.
Thank you, Deborah. Our 5 largest products Have been quite resilient, growing 10% in 2020. And that is indeed a strong achievement considering the pandemic, but also the currency headwinds we have experienced during the year. The 4 key product delivered double digit growth in 2020 despite the impact from the limitations we have seen due to the the pandemic, there has been less patient interactions with health care providers, and we also have had a reduced ability to the the year, we expect the new to brand prescriptions, which Has impacted the growth negatively, especially in the second half, as Deborah also alluded to in the previous slides. It is important to highlight that we have seen strong recovery and also uptick in periods where countries have opened up the year, we have a strong year of 2019.
Next slide, please. For 2020, The growth in net sales amounted to 4%, and thereby, we are actually meeting the expectations that we laid out in the the year, before the pandemic actually started. So to achieve 4% in an unprecedented year The reported gross margin was a bit lower than we expected, and that is, of course, due to the additional amortization of the year, we expect to be in the range of $1,000,000 for Yebtte and also additional sales and promotional activities as we started the launch of Yebtte in April 2020. If we adjust for this, then the cost development would have been flat between 2019 2020. So when we look at the underlying performance without these investments and the write down, Our reported EBIT margin would actually have been above 25%.
It's also important to emphasize That we delivered a very solid core EBIT of SEK 4,600,000,000 which is also the reason for the strong cash flow, Which I'll come back to in a minute. The effective tax rate for 2020 has a positive surprise as it ended much lower than anticipated due to a couple of positive impacts. It was increase in Danish R and D tax the Incentives, it was faster integration of the acquisition and faster utilization of NOLs the year, we are the Pleased with the financial performance for 2020, which is also seen in this slide. So please turn to Slide 9. As you know, Lundbeck has more than 50% of our business in the U.
S. We have 25 24% the year, we have a strong financial performance in the quarter. Our main currencies are U. S. Dollar, Chinese yuan, Canadian dollar.
These three exchange rate together constitutes about 70% of our currency exposure. We have seen declines across all these, including some very steep depreciations on some of the more exotic currencies the Q4, the impact on sales from depreciations in currencies was very visible in the 4th quarter. Reported revenue from the U. S. Was negatively impacted with 7 percentage points.
And in international markets, The impact was negatively or was an impact of 9 percentage points negatively. The depreciation of currencies is expected to impact Lundbeck's revenue with approximately $800,000,000 in 2021. It's also important to highlight that our assessment based on the currency rates we have now is that a the year, we expect Lundbeck's revenue by in a range between DKK 250,000,000 to DKK 300,000,000. The year, we will be
happy to take our next question. Next slide, please.
As you can see from the left hand side of the slide, free cash flow the year, 2020 was very solid and is a testament to the strong underlying growth and performance the business, to the right hand slide to the right of the slide, you can see that acquisitions the year, we expect to be in the range of $1,600,000,000 That debt has during 2020, Due to the strong cash flow being reduced to €4,100,000,000 at the end of 2020, leading to a net debt to EBITDA the year, we expect that net debt during the year will end or at the end of 2021, will end in a range between DKK3,000,000,000 to DKK3,500,000,000 Danish kroner. Next slide, please. We believe that 2021 will continue the
year, we expect
to be impacted by the pandemic
and we assume a gradual return to a more normal market situation by mid-twenty the presentation, we delivered approximately DKK17.7 billion in 2020 of our revenue of DKK17.7 billion. And in 2021, we expect revenue to be in a range between 16.3% 16.9 And we have tried to illustrate the moving parts in the bottom of the slide. And as you can see, we have maintained our expectation around the 50% decline in Nothera sales due to loss of exclusivity, which is approximately a decline of DKK 1,300,000,000. The other key brands are expected to show high single digit to double digit growth during 2021. And then we expect that the mature brands the year, we expect to see a slight decline in the U.
S. Dollars 900,000,000 for the key brands and the mature brands in local currency. We assume, as I said before, negative currency effect of around 800,000,000 And a hedging effect that goes in the opposite direction of $200,000,000 which means the net effect will be around 600,000,000 Despite having elevated investments, both from a SG and A perspective, but also from an R and D perspective in 20 2021 compared to 2020 or last year. For the full year, the year, you should expect financial items to be a net expense of DKK 250,000,000 to DKK 350,000,000 depending on currency development. With that, I would like to hand over to Johan for going through the R and D pipeline.
Thank you, Anders. Please turn to Slide 12. While we continue to maximize our brands, including by running critical life cycle activities, the call, we are simultaneously focused on filling the pipeline with innovative programs with an increasing focus on niche and rare diseases affecting more defined the subpopulations of people, where the unmet medical need is the highest. With regards to Yepti, Some of the recent activities I'd like to highlight are that we started a Phase III clinical study in episodic cluster headache. We also submitted by the end of the last year the European Marketing Authorization Application for the preventive the treatment of migraine in adults, which means that we can expect the CHMP review by end of the year and the formal EU Commission approval of Iepti in Europe the year.
By the end of last year, Vyapti was approved in UAE as our 2nd approved market, the the Q1, we plan to submit to over 10 other authorities during 2021. The For brexpiprazole, agitation and Alzheimer's disease, we have, as communicated earlier, somewhat changed the study with the introduction of an interim analysis. We have completed the recruitment of the patients needed for this planned interim analysis, and it's on track for the Q2. The I'll come back to some more details of that program in a minute. We continue to progress innovative programs in our research organizations in Valby and La Jolla the year, we are pleased to build up a steady
and dynamic early stage pipeline.
While our early development programs are in now are in armed with a systematic the divestiture of the program, we also diligently swiftly closed down less promising programs if we do not see the call, we continue to see a very fluid situation related to the COVID-nineteen pandemic. Many of our trial sites closed initially, then opened up, and now some are closing down again. This is primarily impacting study starts, especially in the early development studies where we depend on very few sites. The Nevertheless, overall, we have a strong sustainable Phase 1 set of assets. For example, we have a strong momentum in the PACAP the first part of the study and Maglupase inhibitor programs.
Next slide, please. As I mentioned previously, the In the ongoing agitation and Alzheimer's study, we have recruited 255 subjects needed for the interim analysis. The call, I'm therefore confident that we can conduct the planned interim analysis sometime during the Q2. The main analysis the is a pooled analysis of the 2 3 milligram doses. With the upcoming analysis, it might be worthwhile to recap the presentation, we
will now begin the presentation
on the 2 conducted Phase III studies on brexpiprazole in patients with agitation and Alzheimer's dementia. The call, the program was initiated to assess the efficacy of brexpiprazole on agitation measures as well as safety and tolerability in 2 the 12 week randomized double blind placebo controlled parallel arm studies. 1 of these studies, Study 2/83, was a fixed dose study the quarter. Conducted at 81 sites and in 7 countries and recruited 433 patients. The The second study, Study 2/84, was a flexible dose study with 0.5 to 2 milligram per day of of brexpiprazole or placebo and conducted at 62 sites in 9 countries, recruiting 270 patients the year.
In Study 2A3, brexpiprazole 2 milligram per day demonstrated the year, we have a significant greater improvement in the Cohen Mansfield Agitation Inventory total score from baseline to week 12 the year compared to placebo at a level that is also considered to be clinically meaningful. In Study 2/84, brexpiprazole 0.5 to 2 milligram per day did not achieve statistical superiority over placebo. The year, we expect to be able to provide a benefit of the 2 mg per day the year compared with placebo patients. Combined with our broad knowledge about the molecule, it's therefore my view that bexepiprazole has the potential the call, we will be conducting a review of our financial results. Next slide, please.
This is our current pipeline. We have aligned the products according to our statistically price sized biological clusters. The year, we are currently active in 3 out of 4 of those clusters. During the second half of twenty twenty one, the year, we plan to start Phase 2 programs, 1 on PACAP in migraine and another planned on 82422, our alpha synuclein monoclonal antibody, ematippus system atrophy, or MSA for short. We also expect the Q1, we will now begin the Q1 of 2019.
With that, I'd like to turn over to Deborah again.
Thanks, Johan. Next slide, please.
As you
know, at Lundbeck, our purpose is to tirelessly dedicate ourselves to restoring brain health so every person can be their best. While we do that, we want to do it as part of a global community committed to moving the world forward. We support the sustainable development goals, and we make an impact on a number of them. A very important one the that we are focusing on is our commitment to carbon neutrality, and we have committed to the Paris the Climate agreement and aim to be carbon neutral definitely before 2,050, by 2,050 or the year, we have new science based targets approved that we're talking about in our sustainability report to keep moving us along that journey. The year, we made significant progress, reducing our CO2 emissions in spite of the fact that we are increasing production volumes.
A 14% cut in the carbon emissions from our production versus 2019 even. And we've over exceeded our the fiscal year 2020 results conference call. So we're a company that's working hard to become carbon neutral. And we did we made these reductions even without purchased certificates of origin in 2020, and it's our goal to continue to do that. We also have made progress through in creating a workforce that's even more diverse and an environment where people can be their best That is inclusive of all as we make progress against the Sustainable Development Goals 510, the Looking at gender equality and the reduction of inequalities generally, we're a company where discrimination is not tolerated.
We've also formed a donation partnership with International Health Partners to Help bring our medicines to places that don't have access to medicines for brain disease or mental health. This call, and we're constantly looking to reduce the stigma associated with mental health so that people facing brain disease can get equal parity of care. The Next slide, please. We released today our sustainability report for 2020, and you'll find that on our website. The year, and you'll see that Lundbeck has significantly improved our ESG ratings during 2020.
In this the new reporting format, we list our information on what we're doing according to the Task Force the Q1, we are very proud this year to be listed for the 5th year in a row as an A List the company by the Carbon Disclosure Project for our work on climate. Next slide, please. Turning to looking to the future. We've made significant progress on our Expand and Invest to Grow journey. The year, we expanded our disease operating space in 2019.
During 2020, focused our internal discovery in 4 very promising areas of biology to yield new medicines for neuroscience. The year, we expect to be able to grow our business in the future, where we'd like to go with that is always addressing the highest unmet medical needs, which are typically specialist indications. And we want to be able to bring that innovation forward for patients in those select segments that We want to do it in selected patient populations where we've got biomarkers to measure the progress and give us predictability All where we may be able to use a biomarker to select a group of patients where we can focus a medicine on that disease. That gives us more tractability in development and helps us reduce the size of our development programs. When we focus on bringing forward transformative medicines in these niche psychiatry, niche neurology indications, we also know that it helps us have a focused the year, we expect to be able to afford the commercial footprint the year, we're looking to bring those medicines as Lundbeck around the world.
And we're looking to be able to bring our medicines to all countries Given the transformation that we're looking for, you know that we have great medicines. Just Trintellix is a phenomenal drug, but there are some countries we can't launch it because we can't the year, we expect to continue to see the impact of the market share in the future. Next slide, please. So here's the trajectory: expanding the disease operating space, focusing our internal discovery in the most promising areas and then focusing the call, we will now begin the presentation of the presentation. Next slide, please.
We're on a journey, and we are very ambitious. We look to be 1 in brain health, And that will come through providing those transformative outcomes to patients in the most the Q1, we want to be recognized by patients and other stakeholders as the company's first priority, we want to be recognized for having a pipeline filled with premier neuroscience And having a commercial organization that partners with health care providers and patients around the world on those targeted the areas of niche neurology, niche psychiatry and rare disease neurology. We're working to become a more digitally enabled company the year, we will be able to use data and digital to improve patient outcomes, never forgetting that we're part of a global community. We need to be on track the year, we will be able to deliver sustainable growth in revenue and profitability the call so that we can address all our stakeholders' needs. So we look forward to working to the communicating with you over the years ahead on our journey to be number 1 in brain health.
Next slide, please. When we look at the news flow coming this year, the first half, we've already achieved one goal, which was the Canadian approval of VIEPTI. We're looking forward to the next after the year, Australia, the interim analysis for Axalti in Alzheimer's agitation in Q2. The year, the MSA trial with our Asimab, the alpha synuclein antibody the year, we'll start the Phase 2 with our PACAP antibody and migraine and then hope to finalize the the study with Rixalti in borderline personality disorder as long as clinical trials can accelerate the recrual and as the pandemic lifts. The first half of twenty twenty two, it will be a big milestone to have VIEpti approval in the U.
S. In the EU and then finalizing the the post traumatic stress disorder trial with Rexalte. Next slide, please. I think we probably are Done with presenting, and now we can go to your questions.
Thank you. First question is from Wimal Kapadia from Bernstein. Please go ahead. Your line is open.
The
call. Great. Thank you very much for taking my questions. Wilmar Kapadia from Bernstein. Can I just ask about the upcoming interim for Brook Solpi and Alzheimer's agitation?
So Firstly, what is the bar at interim? I'm assuming reasonably high. And just tied to that, what are management the in terms of primary outcome in terms of CMAI reduction is a good benchmark, the previous fixed dose study where we saw close to 20 point change? And secondly, can I just push a little bit on the target population? Clearly, there are a lot of large number of patients, but how does Lundberg think of which are the most likely to receive the product, I'm really just curious to hear how you think about the dynamics both in the care home institutionalized setting, where on label drug use is very important, but also in the community setting where carers are really trying to delay institutionalization.
And then my second question is just on Vyepci. You flagged in your release that the manufacturing the year, has been shown to be more cost effective and thus production costs will be lower going forward. Could you just help us better understand that in terms of accretion dilution versus the group COGS And what that could mean moving forward in terms of benefit. Thank you.
Okay. I'm not that sounded like a lot more than 2 questions, but let's the I'll kick off with the target population and hand over to Johan to talk about the trial. We know that agitation is the symptom that the year, we have to move out of community care into care homes, and it's very difficult to manage even in those settings. So we'd anticipate that this this study, we showed a very good tolerability profile in the previous two studies. And so we anticipate it could be used in the community to maybe enable people to stay with their families for longer, But also be used in the care homes to make the management of patients much better, both for patient and staff the question, we really look across both.
And then Johan, perhaps you can comment on the other parts of the question. Yes.
Just One more word about the population. So the population we're studying in this particular trial that's ongoing is actually the same population we studied in the 2 previous trials. This is a mix of about fifty-fifty people that are institutionalized in nursing homes primarily and people that are outpatients living at home. So that is the population we're targeting also in the trial and document in this trial work. In terms of the interim, obviously, this is a very classical interim.
There are 3 possibilities here success, futility or trial continues. And as you may recall, we talked about the trial going out to 3 30 subjects now, the interim is at 255 subjects. The bar, We don't go into details of the statistics here, but the fertility bar is set the pretty high because there is really no reason to believe that we will hit fertility. We have previous data from the 2 previous trials. In terms of the primary outcome measure and the size effect, we're actually aiming for similar effect as in the previous trials.
And the effect size is what is considered, as I mentioned before, clinically meaningful effect. And the effect absolute effect is also similar to what you saw in the previous trials. So that's what we're aiming for. The We are going to see the results by Q2. And obviously, we can only communicate the details whether it's a progression of the trial or to a different outcome, success and fertility at that time point.
On the VIApti question, perhaps Anders, you can
Yes. So what we have said before is that we have had a Pretty nice improvement in our COGS for producing Yebtii. But of course, it's not something that we are willing to go into if the margin that we have for Lundbeck around 78% to 80%, that will not be changed by launching by epti. So that is the indication we have said before.
Great. Thank you very much. The
Next question is from James Gordon from JPMorgan. Please go ahead. Your line is open.
Hello. This is James Gordon from JPMorgan. Thanks for taking the questions. One on the agitation and also Just one on prescription trends in U. S.
Growth. So on Alzheimer's agitation, if you repeated the efficacy you saw in the previous 2 Phase 3s the 2 mg dose in Phase 3, would it be fair to assume that, that would clear the statistical hurdle that you have at the interim? And also, could you just remind us, I think one of the interesting differences is that the current Phase III had a different geographic enrollment. You've taken out the Russian enrollment. There's a bit of an issue in the the 2 previous trials.
If you look at the previous trials and you did take out the Russian enrollment, how much better does the efficacy the Do you still think that is a big confounder for those previous trials, please? And the second question was just Ruxulti and Trintellect the and the post COVID-nineteen rebound. So I know there was a bit of an issue from COVID-nineteen in 2020 for these drugs in the U. S. But earlier this year, it sounded like you were seeing encouraging trends.
So Have those continued? And could they be double digit growers in the U. S. Again this year?
Great, James. Thanks for the questions. I'll have Johan start with the Alzheimer's agitation, and then I will move to Peter for the commentary on what we saw in the Q4 and what we're seeing in the first.
Yes. If I got your question right, you're really after, would it be sufficient at the interim the With progressing, for example, with filing. And we have a good understanding with the regulators that this would be the case. This, as I said, is a pooled analysis of 2 and 3 milligram. And we have, as I said, 255 subjects.
It's 2 to 1. So we have the sufficient subjects dosed the year, we have a very strong quarter of the year. At that time point, including the critical 3 milligram dose that is there really to create a headroom for safety. So Probably that's what you're asking if I got your question right. Can you confirm that was what you were after.
Yes, that's right, because I'm aware that when you take an interim, there can be a statistical penalty. So even it's not just how many patients you've got, but if you're splitting the alpha Sometimes the regulator or companies themselves say it's a higher hurdle for success at an interim versus the final result. So my question is, do you need In fact, you do need even better efficacy than you saw previously because it's an interim or the extra patient you enrolled boosts the power sufficiently that even though it's an interim, You only just need to repeat what you showed at previous trials for Tumiq?
No. So without going into details there, we expect we're looking for the same treatment Effect across the study at the total end 330 and at the interim. That's as much as I can comment on that bit. The
Thank you. So the bar is higher?
The bar is higher.
Yes. The bar is higher at
the end.
And obviously, with fewer subjects, you have more variability and that's taken into account. So it's a pretty robust approach to the interim as well as the final readout if we have to go that far.
And then the geography, taking
Yes, geography. Yes. You're aware about that we had the Russian sites in the previous program. We don't Now this is a U. S.
And a crane based study where we have experience. In terms of taking out different subgroups, etcetera, in the previous study. Obviously, Russia is a well known problem in Alzheimer trials. So if you look at the totality of the data versus taking out the Russian sites, there are differences. But I think the most important thing is now with the ongoing trial, we have a good the set of sites, high quality sites, and we have experienced with those sites before from the 2 previous trials.
So we're pretty confident that we're picking the right geographies this time.
Yes. To put a fine point on it, the flexible dose trial from 0.5 to 2 milligrams without the Russian sites, The overall intent to treat was positive. But that's a post hoc analysis. So We can't claim anything from that, but we have excluded the Russian sites. And then Peter, would you take the question on What we saw when the society was opening up in the Q4 and then what we're seeing in the first.
Yes. Thanks for the question, James. The short answer to your question is yes, we believe we will get back to double digit growth with those brands. But it's very dependent on COVID about when that happens. And as Deborah mentioned, in Q3, Q4, the quarter, where we saw the lockdown fees, patient volumes were coming back, our reps were getting close to back to full promotion, Although about a third of those calls were coming from virtual versus face to face, where we were approximating some normality, we saw the the NBRx trends go back to their pre COVID levels.
So that's why we have the confidence that as this thing lifts, That those brands are going to recover, the big question is when?
And I think in the Q1, we've seen Much lower ability than the 4th quarter to be able to be out promoting, and that's also, of course, affecting patients' willingness to come into physicians and physicians' Offices being open. So I think we're seeing not as deeper impact in the Q1 as the Q2 of 2020, where It was a much harder lockdown, but it is less we have less availability to go out than we did in the Q4.
So So if I can add then, so when you look at the phasing of the growth for the strategic brands in 2021, you should definitely expect Also due to the strong currency or the strong dollar in the beginning of the year that the growth will be muted And in the first couple of quarters, and then it will gain momentum in the second half of twenty twenty one.
Thank you. The call.
And next question is from Trung Hyun from Credit Suisse. Please go ahead. Your line is open.
Hi, guys. Truong from Credit Suisse. I have a few on guidance and then just one on the Trintellix patent proceedings. So on guidance, if you have a look at the 2021 guidance at the sales level, it looks quite conservative. So I was just wondering what the the Q1, we expect to get to that upper end, but more importantly, that lower end of your guidance.
And for 2021, what are your expectations for that other pharma portfolio? It looks like consensus has a decline of 8%. Do you think that's And then on the EBIT level, just touching on Vimal's question, there's clearly an increase in costs coming through here. I I wonder if you could just take us through some of those other aspects of the cost structure beyond COGS that we should expect to the group in 2021. And then on the Trintellix patent infringement proceedings, I see they've started, you've settled with 8 people, there's a remaining 6.
I was previously expecting a decision in the first half of this year, but your release today suggests a decision within 7 months after the trial. So is an expectation for that decision in the second half of this year now or even in 2022? And is there any comment you can make about the case? The
conference call.
Okay. Anders will take all the numbers questions.
And then I'll take Okay. So Our expectations for the cost ratios in 2021 is that we anticipate that The cost of sales will be in a range of 20% to 23%. We anticipate that the SG and A will be in a range of 41% to 6% and then that R and D will be between 22% to 24%. And it is important to say when you look at the And then you can take the mid range and then you get kind of what is the mid of the guidance we are giving here. So if you look into the SG and A costs, We will use more money on VIEpti in 2021 compared to 2020, But then we will make some savings on other costs.
So why Epti is basically the only reason for increase in SG and A, The rest will be absorbed by efficiencies. When you look into R and D, it's pretty straightforward that if you compare with 2020, Then if you take out the follicularx, then you are more or less on the midst of the ratio. And Then within the portfolio, then there will be a substantial additional spend for YEPTI due to cluster headache, the trial For that, the deliver study and then we will reduce the spending on other programs. For I assume you asked about Did you ask about other revenue or other pharmaceuticals?
Other pharmaceuticals.
Other pharma.
Yes. We had of the year, we anticipate it to be declining a bit more than what you more than 10%. And that is, of course, due to pricing. But What we have seen in 2020 is, of course, the mature brand showed a really, really strong performance. And it is a bit difficult to predict what will the performance in 2021 be.
The underlying structural performance should indicate 5 the year, we have a 10% decline because you will see generics coming in. But then, of course, you also have the the BBP in China, that is taking out some DKK 20,000,000 DKK 150,000,000 or something like that. That is Definitely, meaning that the mature brand portfolio will have a decline around 10% or more. And the totality of the mature brand the portfolio will decline 10% because we have the VBP on top. Did I cover all the financial questions?
The Yes, what is what is Yes.
Hit the top and hit the bottom, and what are the puts and takes?
Thanks, Deborah. So it's definitely to go to the bottom of the revenue guidance then or the lower end, then it's we will be hit more by the pandemic, that we will not regain the year, we expect to see a Rebound into single digit, double digit growth in the second half. That is, of course, that could be A reason could also be if Nothera is declining more than 50%, and that is basically the 2 the Biggest uncertainties. As Peter alluded to, we have seen a very, very the strong uptick when we are back in the market and in the field, then BRx is regaining momentum immediately. And that is also why we have A strong belief that we will regain double digit growth with the key brands because there's a strong need for the products of in the market.
Great.
So I think the other thing we don't hope that we'll see more of is currency decline, but that's another wild the call.
Yes. And that's also why we gave you some indication of what is the change in dollar actually meaning with the 5% And then it's also important that you the hedging we have guidance we have given you, of course, the hedging will impact Q1 and Q2 mostly because that is where we had high U. S. Dollar rates last year.
Right. And then to the Trintellix patent, obviously, the most the strongest patent for any product is the compound patent, and that's the 2026 'twenty seven expiry, the court case, if we are litigating the other very important innovations that we've put around Entellix, and so the outcome of that is what's being litigated in the court case. And we don't provide guidance on ongoing the litigation, but we have innovated around Trintellix, and so we will defend those patents accordingly. As to when we'll see an outcome of that, we can't tell. We do know that there had been delays because of the pandemic the year, we'll be happy to take that.
And there may be more. So I wouldn't really hazard a guess as to whether we'll see it this year or early next.
Very clear guys. Thank you.
And next question is from the line of Michael Novo from RIDEA Markets. Please go ahead. Your line is open.
Thank you very much. It's Michael Lobos from Nordea. So maybe a bit of a strategic the question to sort of your European launch and rest of world launch of Yevtii. There's been a lot of focus whether you could do more M and A, but Maybe you could talk a bit about whether you could consider doing more sort of product in licensing for drugs that are Very close already on the market in order to support sort of the range of products that your sales force is going to target the market with Given that you are probably going to invest anyway in significant promotion activities for YFG. So more of a strategic question to that.
And then secondly, we've seen your Abilify maintain a 2 month formulation and we're waiting for the production ramp up. But what about the brexpiprazole long acting version? I know you have one in the pipeline as well. How do you see the progress for that? And if that's successful, how would that also fit into a potential Alzheimer's agitation indication?
And also regarding the length of the IP protection for a long acting injectable of Rexulti. Thanks.
The Wow, that's a tour. So Jacob's going to start with VIEpti Rest of the World and then thinking about how we build the portfolio in the Rest of the World.
Yes. So hopefully, I'm answering correctly, Michael, just to start on YIPTIS. So as you know, we will be starting the end of this year in the first markets outside of North America, Which is obviously exciting. So the first launch will be the Arab Emirates and then we'll move into Europe in early 2022. And there will be a phased rollout of Yebtze over some time, some years as you are normally well aware of for Europe.
It's also a different launch for us this time compared to what you've seen in the past that this is more of a hospital based the few clinics opportunity since it is an IV product. That also means that we were positioning it Towards a specific segment of migraine patients where we believe the benefit speaks the most and where we have good data also compared to the other CGRPs in the market. So for the strategic point of it is that we will have YEPI Launching in 2022, rolling out over the next 2 to 3 years after that in Europe. And then at the same time, we will, in 2024, lose Abilify But that still means that we will have 2 large scale promotable brands in Europe. And we would obviously like to add to that the portfolio, and that's where we come to the BD part of that question that we are constantly looking for opportunities to add to our product portfolio.
And we have been Looking at opportunities that are very close to market or even on market basically During 2020, I'm sure we will continue to look for those in 2021. So you're absolutely right. It will be good to add Something more to our portfolio in Europe where we have a full scale infrastructure.
Yes. Just we'll continue to look externally the things that might have global rights, we've said that we'll look for license, we'll look for partnership, we'll look for M and A, we would be prepared to do regional deals. So So it's a question about finding the right strategic fit for us at the right price. There are a number of things that are a little bit priced the year, we'll be disciplined in how we invest, but definitely looking to supplement from the external innovation. Johan, maybe I can ask you to comment on the BRICS LAI.
Yes. Well, first of all, the Abilify maintain a 2 month, we We delivered very good clinical data that we think are supportive and that gives you the answer to the brexpiprazole. 1 needs good data. And this is a very early stage program. Obviously, in collaboration with Otsuka, we're exploring a lot of formulation and possibilities.
But It's too early to tell in that program. We're exploring different options, formulations, and we have ongoing clinical studies to see whether we can deliver Upon the pretty challenging demand to put some long acting molecules into the right space and format.
And I think if we do find a formulation that works, it's been a challenge. Brexpiprazole and aripiprazole don't formulate in the same way. They are different products. So it's been a lot more challenging with Brexpiprazole. But that would carry its own protection around that formulation, and we would anticipate bringing it forward A number of different indications, and you're perfectly right.
A longer acting formulation in an agitated the Alzheimer's or dementia population would be a benefit. So I think we could see lots of different possibilities there. But first of all, we need the formulation to deliver the parameters that make it worth investing in.
Okay. Can you say whether you're
seeing progress in the formulation work on Brex? That was my sort of My feeling then that in recent discussions that you've seen some progress in this formulation work.
It's too early to tell, quite frankly. We are still running a number. We have We've gone through a number of formulation and tests. And as Deborah alluded to, not every molecule is made the same way. And there are some technical challenges with this molecule, quite frankly, the year, we expect to make a long acting.
In terms of the question of different indications, I may add to what Deborah said that traditionally, this kind of the classa molecule has not been very big for long acting because the tolerability is an issue. So and obviously, we hope to be able to deliver better tolerability, Which we've seen in the 2 previous trials in agitation and our summary, but it's an area where you usually have stayed away from long acting injectable because of the tolerability challenges.
It's Michael at UBS. Two questions, one for Anders and one for Deborah. Anders, you referred to tax benefits the The acquired companies, I just wondered if that's something that's a one off just on the tuck in or if that's an ongoing process that could help you the with your tax rate going forward. And then for Deborah, I think in Q2, maybe Q3, you talked about Sort of how the mental health issues coming out of the pandemic might lead to a benefit for you, but patients have to go through the genetics first. Is that part of the dynamic you're seeing early in the year?
Was that slightly more dynamic behavior of your portfolio in the U. S? Or is that yet to the call, or is it just impossible to say because it's not something that can be analyzed? Thank you.
Yes. So if I start with the tax question, You should expect that our reported tax rate from a structural point of view will be around 23% going forward. What we have done here is, of course, also to optimize our tax payments. And so for the next 3 to 4 years, you the year, we see way lower cash tax rates. And then, of course, on a more long term basis, it will be the sustainable impact on lowering the corporate tax rate, that will be around 23%.
And then on the the impact on mental health, we're still seeing that there's a tremendous discussion about the impact on mental health. As society opens, Some of that diminishes. We've seen in multiple places a difficulty for patients to get in to see physicians to be diagnosed, so a drop. IQVIA data in the U. S.
Suggests that there's a drop in patients New patients coming into to seek care by up to 40% in some categories. And so we would see that reverse. So I think it's going to be dependent on how much of the mental health impact that the pandemic has had, based on isolation, concern about jobs, those kind of things, Whether that resolves when the pandemic resolves or whether we see people coming through requesting care and going through the the first generic SSRIs, SNRIs. So I think the dynamism we saw in the 4th quarter, We see as a return to a much more normal. We don't see that as sort of a wave coming through after the pandemic.
It's a normal
the
the Next question is from Peter Seysbill from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi, it's Peter van Heijn, thanks for taking my questions. I can't relate to the call, so I apologize if they have been the If so, please say so, I'll just listen to the replay. But I have 3, if I may. Saver performance in Q2 to Q4 has actually shown positive growth rates in constant exchange rate terms, is that a trend that you see going into 2021 as well?
This is my first question. On the upcoming interim analysis, with the target sample 255, It basically corresponds to that upon which the 2 prior studies were designed and they were designed For the 85% power and 5% level, So my question, but I guess that you are probably using a spending function here during the interim, which all else equal suggests That in past efficacy is higher than that we have seen in the first two studies. So my question was here, is it correct in terms of that the Basel effect is higher? Or conversely, Can you confirm that you're using a spending function here in the interim analysis? And secondly, With respect to agitation, what is the effective I guess you're getting some the data exclusivity, what is sort of the effective exclusivity period on this particular indication?
Thank you very much. The
Okay. So Anders is going to start with the Sabre question.
Yes. The annual growth you have seen in 2020 is more or less what we anticipate in 'twenty one, what is, of course, that is with the assumption that only One generics in the market, if more generics interest and that might be the case, then it, of course, can drop the negative growth can Accelerate it because then you don't know what the second generic will have of pricing strategy and all other stuff. But If it's the same one generic play, then we assume it will be more or less the same growth negative growth rates.
Yes. On the interim analysis spending function?
Yes. I mean, obviously, there is a spending with IMEI in interim analysis, but it's the way It's not a major panatil for it, so alpha hit, if that's what you're asking about. The overall trial is slightly increased in sample size, the That's for many reasons. First of all, we like to make sure that we have a strong trial at the end to really make sure that if the drug works, we detect it. That is not a big impact of the spending function is not very high.
It's not a big impact on it. It's a handful of patients more basically. In terms of the corresponding data and sample size, obviously, at the interim, we have the somewhat fewer patients than at the end of the study. But remember, I went through the number of patients we had in the previous studies. And those were split between different treatment arms, etcetera, here we have a pooled analysis, which means that already at the interim, we're going to have a pretty sizable the cohort of about 150 subjects versus placebo, so slightly more than that even.
So it's not a small sample size. And the effects we are after in terms of statistical details, I'm not going into details, but you can assume we're operating with similar assumptions.
Right. And then there was the 3rd question on agitation and exclusivity. Yes. So there is data exclusivity, but we also know that the compound patent is the strongest patent always. And while we defend our patents, I think we would still guide you to the 2029 the Compound patent for Rick Salty.
Thank you very much. The
Next question is from Carsten Lundboff from SEB. Please go ahead. Your line is open.
Thank you very much for taking the time here. I have a little bit of more of a conceptual question left. If I look at Lundbeck's average R and P to sales ratio over the last 15 years, then it has, of course, jumped up and down. On average, it has been 22.5%. And on top of this, you have made several acquisitions.
But even on the back of these investments, it sort of feels like Lundbeck is not in tip top shape. And before you Excuse me of being too bearish, then you are guiding for a relatively bleak outlook here in 2021. So my question is longer term is 22% to 24%. Can I remember what it was you said, Anders, I think you said 22% to 24%, is that really enough to make Lundbeck an interesting case not only in the next the year? But also on the 10, 15 year horizon.
That was the first question. And then secondly, I was just interested in hearing whether there are some huge patient differences in the patient trials we've seen already, the 2 eighty three and the 2 eighty four study simply because when you look at the absolute responses, it seems like data is less Impressive in 283 versus 2.84 where patients respond much more in terms of reduction in the scores.
Okay. So I'll start in saying we are a company that keeps looking at building strongly the forward, I think we've had a great success in the past with molecules that have come out of our internal pipeline, the Q1 of the year, we've had a sustained the compound annual growth rate over the last, I guess, since 2007 or something, so before of 7.4%. And we will continue to be able to do that in the future through a combination of the drugs that are moving through our own pipeline, and we have quite a robust the Phase 1 pipeline, and we're working in new biologies that will continue to yield an opportunity to bring new molecules forward. And then we will continue, as we have in the past, to make licenses, partnerships, acquisitions to supplement the growth the year, we've been very successful in the past with the Ovation acquisition, the Chelsea acquisition. So Like almost every other pharma company in the world, we're built on a combination of both internal and external innovation.
Anders, I'll hand it over to you on the ratios.
I think I will not go into any kind of speculation in R and D to sales ratios for the next 10, 15 years, what we have said is that we definitely want over the next We aim for during or we believe that the next 6 to 8 years will deliver nice growth numbers. We also believe that we'll see a margin expansion. We need a margin expansion over the after having invested heavily in YFC, as we said when we made the Alder acquisition, then you would see a substantial margin improvement of both reported and core earnings. And I think it's important to emphasize that the core margin for this year is 25%, and it will expand Over the next couple of years. So that is what we're aiming for.
And then another time, we can look into data for the next 15 years.
The question. Gerhard?
Yes. Maybe I can comment on that percentage also a little bit first. Obviously, the 15 years from now, things have changed tremendously in how we run trials, what we do and what populations. And you heard about our strategy when we go more to niche and rare diseases, that means that you have different clinical pathways. You have different requirements on the study.
I wouldn't say there are lower bars in any way, but sometimes smaller studies, more directed studies. So You can get more bang for the bucks, if I may say so, also out of R and D with a strategic change. In the In terms of the graphs, I guess you're looking at Study 2/83 and 2/84 in the graphs, and you see that they look slightly different in the outcome there. The For someone who's been in this business a long time with psychometric readouts like the CMI score, this is what you normally see between studies.
So I think it's actually more encouraging to see
that there's a robust treatment effect I think it's actually more encouraging to see that there's a robust treatment effect in both of those studies. The absolute difference is, yes, they are slightly different here. There's also the influence of, as we talked about, different countries and geographies that could also have an effect. It's well known in Alzheimer's trials that you have country differences. The study, we had 7 countries and 9 countries in the 2 different studies.
And that's this is just basically what you expect randomly across the study, the populations were aimed the inclusion criteria were aimed to be identical between the two studies And as also the 3rd study we're running.
And remember that the 2/84 is a post hoc the subset analysis. Yes. Right.
Yes. Yes. Thanks for that. That's very important to see.
Good. So next the question, unfortunately, needs to be the last one. So, here it's done.
Okay. Yes. The question is from Mark Hedman from SVB Leerink. Please go ahead. Your line is open.
Yes, hi. Couple of questions. Number 1, can you just talk about your alpha synuclein and how it differs? Biogen announced that they had stopped theirs and obviously Roche had some disappointments last year. So just so we understand the difference in the products the In the way that you approach it.
2nd on borderline disorder, can you just give us a sense of how enrollment has been? I'm just trying to get a sense of how much demand there is for that type of therapy. I'm just trying to get an understanding of that market. So that you can the COVID had a major impact or if you believe everything is pretty exciting there as far as the demand. And then just on VIAFTA, is there any way you could just give us the actual number of patients that were on the product and a sense of was January stronger than December, which was stronger than the previous month, Any type of trend from a pure patient perspective.
Thanks.
Great. So Johan is going to start talking about our Alpha Synuclein and the the Borderline enrollment, and then Peter will comment on VIEpti. But I will preface it by saying we won't be giving you actual patient numbers.
So for alfaseniklien, yes, I understand your question because it was just very recently, Biogen announced that they were stopping that program. That's the It's actually a binder to the 1 to 10 the Domain residues of the alpha synuclein molecule, a very different binding domain than we are targeting with this one. We are actually the C terminal domain with our antibody, which is mechanistically a very big difference. Pranecimab, the Roche molecule, is targeting about the same area as we are. So we're kind of in that ball range more mechanistically.
And as you may know, the Roche patina study showed some interesting data on the UPDRS score, Particularly at the higher doses, and they showed also some effect on progression over time. So they are very different molecules, basically. And that's how we view them right now. In borderline, yes, that's a study that the was hit quite a bit by the pandemic. So we had pretty and it was also at an early stage of the start up of the trial.
The Otsuka and we have jointly worked very hard in trying to regain the momentum of the study. We are not Really clear on the time lines. We're talking about delays, obviously. We don't know exactly how long delays we're going to face because the year, for which done recently seemed to have an impact on the study. So we're regaining momentum.
But with recent events in the U. S. And the study is a U. S.-based one, It's very hard to tell really where we are.
And I think in terms of using the study to think about the ultimate the size of the market and demand, I don't think it's going to give you a clear picture. Borderline is a very difficult disease. There's nothing approved for it. It's almost a diagnosis of exclusion and a difficult patient group the year, we expect to see a very challenging bar for the study, but at a high unmet need. The question, Peter, do you want to comment on VIEpti?
Yes. Thanks for the question, Mark. And as Deborah said, we won't give specific the presentation on patients, but I will point out what we said in the release, and that is that each quarter we have doubled the amount of demand and volume the that we've been on the market, so a good growth trajectory, albeit off of a lower base. And as we in the 4th quarter, the As we were starting to get some normalcy, as we were starting to get patient volumes come back, one might even argue that there was a little bit of an acceleration the Q4, as you can see on the demand curve that Deborah showed in the deck. So all that is progressing well.
The the types of patients we're typically getting are like in many launches, a little bit sicker at the beginning because people are trying new therapies on partial responders, I think it's particularly true here. Because of the pandemic, the risk benefit ratio of patients who are willing to come out the and get treatment tends to be those patients who are a little bit sicker. But as doctors are getting experience and the drug is delivering even in these sicker patients That have been unresponsive or partially responding to other therapies. They're getting good results. We're getting very good feedback from both the patient and the physician the community.
So I expect as the product becomes more familiar with customers, as patient volumes continue to come back, that that will move earlier in the algorithm.
Great.
Are these patients on CGRP already?
Peter?
Yes, some have been. Certainly, some have been. I mean, almost everybody has been on a previous preventative of one of the older therapies That's required by payers. So, but yes, we've received patients who have tried and have had the satisfactory
the So unfortunately, that I will have to call the end of the meeting as we have another meeting backing onto this. So thank you, everybody, for your interest. And again, I'll just summarize by saying I'm so proud of the year that Lundbeck delivered in 2020, and we look