Welcome to Orexo Q4 Report 2022. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO Nikolaj Sørensen. Please go ahead.
Thank you very much, and welcome to this fourth quarter and year-end presentation from Orexo. The fourth quarter has been a quite eventful quarter from many aspects, both internally and externally. It's also been a quarter where we, on a quarter-by-quarter basis, had a decent headwind in terms of exchange rate development with the US dollar weakening compared to the Swedish krona. But on an annual basis, the strengthening of the US dollar have had a positive effect, and I will come back to that a little later. With me today, I have Fredrik Järrsten, who will go through the financial results a little later in the presentation, and I will take you through the key achievements for the year and also give some business updates on US Pharma, Digital Therapies, and our headquarter pipeline.
With that, I will start moving into the key achievements. If we take a perspective on 2022, as this is the year-end result, I think this year has made some good progress, in particular within R&D, where we have our new platform, AmorphX, has been tested in multiple different, both small and large molecules with consistently good results on particular stability data. We have also seen, again, strong clinical data when we test our platform in a new API, that's from OX640. We have started research partnerships both with leading biopharmaceutical companies and even before that, we had a partnership, or have a partnership with a U.S. pharma company who have a small molecule that we're testing in AmorphX.
We have ZUBSOLV is being launched in multiple different countries in Europe and hopefully something we'll see a good progress with when we come into 2023. We also have OX124, where we had expected filing in the end of Q4. We were ready, but we needed some final information or approval from FDA, in particular related to our pediatric plan. Also, we had to update some analysis in our own material in the submission. Right now, the only thing that is waiting is some administrative tasks that needs to be done before we can publish our application to the FDA. This should be done, be ready quite shortly, and there are no more risk to the filing. It's more timing issue.
When we come to U.S. Pharma, we have seen a ZUBSOLV which, as anticipated, is down compared to last year. We have seen throughout the year a relatively stable development of ZUBSOLV with not too much movement quarter by quarter. We also managed to keep our market access and increase market access in the public segment, now up to nearly 50% of the patients. We have maintained our quite fantastic market access in commercial, with 98% of the patients having access, and that is in a market where we have more than 10 active generics. Compared to many other products in similar market situation, this is a very strong result.
In the U.S. Pharma, we continue to have a very strong EBIT margin. After a little low Q3, we are bouncing back in Q4 with an EBIT margin of 54%, which is also the full year result. We have a good EBIT contribution from our U.S. market. The one thing that has been a disappointment for the year is clearly that the market growth is in the lower of our range. We had anticipated an accelerated growth in the second half of the year, particularly in Q4, which we didn't see. I will come back to that a little later. In Digital Therapies, we have managed to get Deprexis reimbursed on Veterans Affairs under their federal supply schedule. We have managed to have the operational implementation with Trinity Health.
We have more than 2,800 patients who have received MODIA through our early trial program. We have the first MODIA patients who are now in what we call billing test. That means we have submitted billing to the insurance companies and are waiting to get that confirmed. We have now, during the last part of the quarters, we have received or through healthcare providers in the U.S., we have been part of 2 grants. 1 for Deprexis and Vorvida, which is in Minnesota with the Wayside Recovery Center, and 1 in Arizona, where we have included what we call MatCor, which is kind of an umbrella concept including all of Orexo's different services, pharmaceuticals and MODIA as a digital therapy. However, in digital therapy, it's no secret that the commercial progress has not been up to expectations this year. When we look on an annual...
Just, I apologize, maybe if you can hear some background noise, but we clearly have a truck who's working right outside the office window, so, my apologies for that. Coming to the 2022 financial results, we have seen our revenues growing with 9% on an annual basis. That is explained by tailwinds from foreign exchange with the Swedish krona weakening compared to $. Since most of our sales is in $, that has been positive on our net revenues. However, that also has a negative impact on our expenses, and you would have expect to see a relative similar effect on EBIT, but we maintained and actually improved our U.S. pharma EBIT compared to last year. Despite most of the or all of the expenses in U.S. pharma is dollar-denominated.
Our EBITDA, when we take away the legal expenses and expenses for clinical trials, is a positive on a full year basis and is in balance in the Q4. We have a good and solid cash positions, even though we had a negative impact on the cash flow in this quarter. Fredrik will talk a little more about that later. We have a lot of opportunities right now, in particular in R&D, where we see good opportunities for partnerships would be revenue generating. If we decide not to make any further investment in clinical trials and have no new legal processes that we need to finance, we do have profitability in sight for the company. Moving into U.S. Pharma.
Something that I'm not sure have been that much noticed in Sweden is that the DATA 2000 waiver or system that has been in the U.S., where there have been a cap on how many patients you can treat and who can treat with buprenorphine and naloxone, was removed on December 28th by decision in the U.S. Congress. That is replaced by a new requirement to take an 8-hour education for prescribers of all controlled substance. That includes pain medication, ADHD medication, some anti-epileptic medications and similar. This is something that we expect nearly all physicians in the U.S. would have to do because most physicians will prescribe 1 of these categories of products. That would mean that ZUBSOLV and other products in the category would be able to be prescribed by nearly any physician in the U.S.
That also mean that the concentration of the prescription that we see today on what we call DATA 2000 waivered physicians is likely to be reduced, and we will see a change in the market. What you normally see when you have a much better access to a medication is that we will see a positive impact on volumes as more patients can have access to treatment, and particularly in opioid use disorder, we believe that access to reimbursed treatment is very positive. We know that about half of all of the clinics today who are DATA 2000 waivered do not accept insurance, but nearly all GPs in the U.S. accept insurance, and as they can now start to prescribe, we think this is removing a barrier for treatment for a lot of patients.
When we look at the impact for ZUBSOLV and for Orexo, we see of course that the market is likely to expand as we improve the access to treatment I just talked about. And we expect the market to evolve into a structure which is similar to what you see in other mental health diseases, where you have a primary care taking care of the more mild and moderate cases, and you have a specialist care who is taking care of the more severe cases. And when the severe cases are becoming mild or moderate, they are moved back to primary care. However, opioid use disorder is a tricky disease to treat and something where the patients are requiring a special treatment, in particular in the first sensitive weeks of induction.
It's also an area where you need access to counseling in a way that is not normal, I think, for the most of the primary care physicians to provide. This is something where we see Orexo with our field force, with the information, knowledge they have about the disease space, with all the material we have to support the physicians with our MODIA platform. We can fill that gap in the market and be a big support for these new physicians. That also increases the synergies between our Orexo digital therapies, our pipeline with other disease spaces significantly. However, it will mean that the market is likely to be more fragmented, that of course put a new challenge to our field force in the U.S.
How do you manage that, where we before had a pretty distinct target group DATA 2000 waivered physician, we are now have to look at a more fragmented market? Here we need to have a new approach, new thinking about how can we address this market in an effective way. We believe one way to do this is to combine our resources, the knowledge that we have within the company, the tools we have in the company under one umbrella platform or concept that we have named Medcor. This is where we see we can work with regional healthcare, with healthcare networks to support new physicians in having more effective treatment of Opioid Use Disorder and to reach new target groups. moving into Medcor. What is this?
Medcor is actually something we have branded and we have worked on for the last year, where we have been in dialogue with the attorney generals, with the states following the expected payout of the settlement money coming out of the opioid litigations and where we've seen what do you need to improve healthcare for Opioid Use Disorder. We have seen that the, you say, collected knowledge and tools we have within the company, if we put that into one concept, we're actually able to provide a platform which is much more comprehensive, where you can support both physicians and patients with counseling, with access to medication, with adherence tools, with knowledge, patient educations, and so forth.
We have our database and system that we have behind all of our digital therapies, which is HIPAA compliant. That means that we are delivering on the highest requirements in the U.S. for patient data, and where we can collect and analyze these, the input from we get from the patient treatment and feed it back into the states and the healthcare providers and the payers. This is a concept where we will provide that as an offering to work with local healthcare providers initially to lower the risk and to improve our effectiveness when we develop.
We have targeted grants in different states. We have the first grant awarded in Arizona to L.A. Psychiatry, which is a specialist addiction center in Arizona, who have received a grant to work with Orexo to make MODIA available for specific groups within Arizona. This is a very good opportunity to us to work with healthcare, have a financed rollout and implementation of MODIA from the start. With success, we will of course, look to expand this, but initially the target is to make grant applications in different states and through the grants, getting a financed implementation and rollout, which reduces the risk, and we believe is a faster way to market than going through more traditional product development. Into ZUBSOLV, we have seen in Q4 a mild decline versus Q3.
I must admit the development in Q4 is a little of a surprise to us because Q4 is usually the strongest quarter of the year, both for the market and for ZUBSOLV. We have actually not seen any years in the eight prior years when we've been in the market where Q4 has not been the strongest quarter of the year. That also mean both in terms of volume prescriptions, patients are getting more prescriptions before Christmas or before New Year because they come into a new co-pay period. We are seeing pharmacies and wholesalers traditionally are increasing their stocks, stocking before Christmas, but we have not really seen that this year.
We didn't see that in the market, and we didn't see that on ZUBSOLV, and that was a surprise to us when we look at the volume development. One thing that is positive now when we start the new year is that we haven't seen the normal dip that we have seen. We just have a few weeks of data in January, but in the first weeks of data, we haven't seen the dip that we normally see in January from December. That indicates we have a new seasonality, you can say, in the market, at least for 2022 and 2023. What we have also done is, of course, we go through all of the published reimbursement formularies in the US, and we can confirm that we have a 98% coverage in commercial, 48% in public.
In commercial, we have seen some plan where ZUBSOLV has been removed from the preferred plan, but we have also seen that we've been added to other plans. Which all in all before Christmas it was 99%, and now we have 98% access, which is still a very strong result. The market growth, as you can see here, and if you look historically, you will see every dip on the curve that we have on market development is in Q1. But here we actually saw that dip or flattening of the development in Q4. Where we have a 3% increase in sales compared to last year. That actually mean compared to Q3, it is stable or it's actually slightly negative.
Looking ahead, of course, with the new legislation, with the funding that is coming in, we believe that there are good opportunities for this market to accelerate. We know that today we have less than 2 million patients in some kind of treatment on an annual basis, but we have more than 10 million people in the US who are misusing opioids in some form. There's great growth opportunities and need for growth in treatment to reach more people in the US than what we have today. Digital therapies. We have made some progress, but it's clear it's not met our expectations. What is moving well is MODIA, where we are seeing that It's close to 1,000 patients who received MODIA in Q4 as prescribed by their physician.
Of these physicians, we now have in a select states, we have 40 patients who are in what we call billing test. That mean that the clinics have sent in a request to get financed the treatment, which is including MODIA. When that reimbursement is confirmed, we will invoice the clinic, and that will be revenue for Orexo, which we expect will happen in Q1. As we have these selected clinics in the States, we can roll out to other clinics in the same state and say, "Now we have reimbursement confirmed by your payers." We also made some good progress with having a first grant from the Wayside Recovery Center, who is going to treat 60 patients with either Deprexis or Vorvida. We have seen the first patients have received Deprexis now in the new year.
This is Orexo will sell Deprexis to Wayside Recovery Center, that will be recognized revenue. We have the first patients in Trinity Health, it's very clear that Trinity Health is so far not meeting the expectations. Here it's in particular within primary care where we have seen that the front-end physicians who need to enroll the patients have not really started to use Deprexis or Vorvida in any meaningful scale. Here we need to work much more with the pull-through and to get this reminding them about the advantages, supporting them in getting the first patients in, which is what we're used to do in pharma. It's not really been working for the digital therapies in the start with Trinity Health. There is more to do with Trinity Health in North Dakota.
We have Veteran Affairs, where we're making some very good progress. We have some important stakeholders, within Veteran Affairs is working with us to roll out a program, including deprexis. We have some other pathways that we're testing. In particular, our new chief medical officer has worked with Veteran Affairs and have some good network as a psychiatrist into Veteran Affairs that we believe we can leverage to find ways to make deprexis available for more patients. It is taking time. Veteran Affairs is probably one of the most bureaucratic institutions in the U.S., and that's something that we have seen during this autumn, that the distribution and administration to make an effective availability of Deprexis will take some time. We are making good progress, and we have some good buy-in from key stakeholders in Veteran Affairs.
When we look forward and look at where we are, we are looking at a market where we have data 2,000 removed, as I just talked about in opioid use disorder. That actually mean that we have now expanded synergies not only for MODIA and ZUBSOLV, but we also see that we will have new physician groups coming in and being able to prescribe ZUBSOLV. That is increasing the synergies with other products in the pipeline, such as Deprexis and Vorvida. We've developed Medcor, which is an integrated offering where we both have medication, counseling, and other services, which again, is targeting the same group of physicians with our field force in the U.S. and sales resources. We have a situation where digital therapies has not delivered on the expectations for the last year.
That has led us to take a decision where we will integrate our digital therapies into our U.S. Pharma business, and that will happen from February 1st. That also mean that some of the senior management positions that we have in the organization and some marketing positions are made redundant. Some of these tasks will be taken over by our U.S. Pharma Organization. The resources we will keep, dedicated DTx resources, will be integrated into the functional structure of our U.S. Pharma. We will add more sales-focused resources, so from marketing into clearly field and sales focused resources, will be a change in the constitution of the organization for supporting digital therapies. We will, however, continue with separate segment reporting for the two business areas. As we have started to do that, we will continue to do that.
The resources that's under digital therapies will increasingly be shared resources with our U.S. pharma business. This is a change to increase both efficiency and focus on sales and digital therapies. To our headquarter pipeline asset OX124, we are making good progress, but we didn't receive the response from FDA which was due in the late summer. We received that in mid-January, that then needs to be implemented. Together with some additional analysis that then was required by Orexo, that has delayed the process with filing OX124. We are at a point right now that the only thing that is needed is some administrative work to meet the requirements for the filing administratively from FDA.
This is a timing issue, and we're not waiting for any more data and input. I will also say that when we have filed, the ordinary approval timeline is 10 months. Some of the recent approvals in the category has been up to 13 months, so we'll see how fast this will take when we get our PDUFA date from FDA, approximately 60 days after the filing. OX640, we continue with the work internally to prepare large scale manufacturing. We continue to review the development and partnering strategy. That means that we're talking to potential partners to see what structures could be relevant. We basically, I think there was maybe a misunderstanding after Q3 that we stopped the OX640, but we continue the development right now.
Our ambition is to find a partner for some geographies in the remaining development steps. For AmorphX, we have our first partnering in biomolecules, which has been a key part of the strategy, is that we don't really work with biomolecules yet at Orexo. To find leading companies in that space who can make their proprietary API available and work with us to test whether AmorphX create value for their API is a very important step, and I'm very pleased with the two partners that we have contracted in this space. Just to give you an overview of what we work with. One of the strategies we had with AmorphX is to test a diverse set of both small and large molecules. We have seen consistently, as you can see in this picture, a positive development.
This mean not that Orexo is looking to develop all of these molecules, but these are picked because of unique properties for each of the molecules that we think is worth testing in AmorphX to strengthen the patent situation. Of course also this offers an opportunity for business development with companies who could be interested in developing products based on these APIs. I will again underline that we are not looking to create a COVID-19 vaccine at Orexo. We found that the spike protein was a perfect model protein to test whether AmorphX could add stability, and whether we could create a powder which could be used in a nasal spray. We have confirmed that with our test in the spike protein.
With AmorphX, we are looking at a situation where we have multiple different business development opportunities for several of these APIs that you see on the screen, but also for companies coming in with their own API. That's the situation with the two biopharmaceutical companies who are right now starting a feasibility study together with Orexo. With that, I will open up for Fredrik to take us through the financial update. Fredrik?
Thanks, Nikolai. If we continue to page 20, let's look at our revenue, and we start by looking on the top part of this page. You can see that our total revenue in Q4, SEK 156 million. That's 8.4% higher than in Q4 last year. Of that revenue, obviously, ZUBSOLV within US Pharma is the main contributor with SEK 143 million for the quarter. That's up 7% from Q4 2021. The main explanation for that growth is the strong appreciation of the US dollar. Net revenue was also in the quarter negatively affected by a one-time adjustment in accruals within gross to net of SEK 4 million, which was due to higher returns in 2022 than expected.
If you look at ZUBSOLV specifically, and Q4 compared to Q3 this year, this gross to net adjustment I just spoke about, that is also one of the explanations why net revenue decreased by 5%, as you can see from the waterfall graph on the bottom part of the page. We are pleased with the continued stable ZUBSOLV demand, although we, as Nikolaj told you, there's a mild decline in demand, as you can see in the first three bars in the graph. This was more than offset, though, by wholesaler inventory stocking in Q4 taken closer to the year-end, which is also a thing that comes back every year for us. That had a positive impact of SEK 7 million.
The FX effect was also positive quarter-over-quarter with SEK 2 million when you compare with average FX rates during the quarters. In conclusion, on this page, you can also see in the graph that in local currency, the ZUBSOLV net revenue declined by 6.5% between the quarters. Moving to the next page, we look at our P&L. I just mentioned the growth in total net revenues for the quarter. For the full year, that gross growth is 10.5% to SEK 624 million. The majority of that growth is again the effect of the strong US dollar. Increasing COGS is to a large extent also a reflection of the strong US dollar.
When you look at our operating expenses, we are, as you know, focused on driving future opportunities, which in this quarter included higher R&D costs in relation to the MODIA study, as well as costs progressing OX124 towards filing. We had increased expenses also defending our business in relation to the IP litigation. That was partly offset by significantly lower selling expenses in DTx. OPEX was also negatively affected by the stronger U.S. dollar. In conclusion, increased year-over-year from SEK 188 million to SEK 201 million. For the full year in OPEX, we landed within the anticipated range in our financial outlook 2022 at SEK 706 million. Our U.S. pharma business shows again a good quarter with SEK 77 million in EBIT.
That's a margin of 54%, which is the same as in Q4 2021, but it is up from 47%, which we reported in Q3. EBITDA, -53 million SEK. That's down from 49 million SEK, and this is obviously also affected from the stronger US dollar, and that effect was 6.8 million SEK. In financial items, we have a negative unrealized FX impact of 18 million SEK on our cash and cash equivalents held in US dollars. A higher cost of corporate bonds of 7.8 million SEK, and partly offset, though, by earned interest on cash and short-term investments of in total 2.2 million SEK. Right.
On the next page, we just wanted to highlight the point we want to make of Orexo having positive EBITA, if we separate what we define as distinct external non-repeating costs. In conclusion, for the full year, these non-repeating costs amounted to in total SEK 173 million. Our EBITDA, as you can see from this graph, would in that case be positive SEK 58 million. If you do this exercise for Q4, the EBITDA would come out as break even. As we said, this quarter was significantly affected by the increased R&D expenses and by this negative one-time adjustment of gross to net accruals. You can see the external non-repeating cost listed on the right-hand side of the page.
That is then related to the clinical trials of MODIA, OX640, OX124, as well as a cost for the legal processes. You can see that these trials of OX640 phase one and OX124 human factor study was finished in Q4. For 2023, we expect the MODIA phase three trial, completed by the end of Q2. The Sun litigation trial will happen in Q1 2023. That means that after the first half of this year, we will no longer have any of these costs. This is the main reason why we emphasize this key metric that is confirming our route to returning to profitability. On the next page, moving to this page, we can see cash flow.
We can see that liquid funds, which is the cash and cash equivalents, as well as the short-term investments, that amounted to, in total, SEK 352 million end of Q4. That is a decrease by SEK 92 million from the end of Q3. What is that? Cash flow from operating activities was negative for the quarter with SEK 49 million, which was obviously impacted primarily by the negative operating earnings. We have gross investments in fixed assets for the development organization of SEK 12 million. We also had amortization of leasing debt of SEK 6 million, and we had a realized FX effect of SEK 2 million on cash assets in USD bank accounts. The remaining difference explaining the SEK 92 million being a negative FX effect also on the short-term investments, which end of Q4 amounted to SEK 220 million.
The pure cash and cash equivalence was then SEK 132 million. That gives a total of SEK 352 million. With that, I want to hand back to Nikolaj with financial outlook.
Thank you, Fredrik. The financial outlook, maybe I should just comment on 2022. Out of the financial outlooks we gave for 2022, we were missing on one of the points, maybe the most important, though. We were correct in the market development with the growth rates. We were in the lower range of the range we provide, I believe, of 5%-8%. We had expected that the growth would pick up in the second half of the year, which it didn't. As I said before, we were surprised to see the normal seasonality with Q4 being the strongest quarter not repeating itself for 2022. We can speculate about the reasons for that.
I think there could be some related to new structures around how you can store controlled substance at pharmacies. The one thing we had not anticipated for sure was the adjustment for returns. We're normally very conservative in how we are reserving or accrue for returns in our gross to net calculations. That has led consistently to some positive adjustments coming in quarters. In particular, when we get to the end of the year, we are normally reviewing these accruals and then decide if we should do something different or reverse some of the accruals, which would have had a positive effect.
This year we had a negative effect, and that's the first time since ZUBSOLV was launched that we had to make a negative adjustment into the gross to net calculations, and this time a quite sizable one. It is due to a third-party logistic provider who is managing the returns for us, had not reported the returns that they had received during 2022, before mid of December. That came as a surprise to me and to the organization.
unfortunately, instead of a positive, expected positive result on positive adjustment on accruals, we had to do a negative adjustment on accruals, which had a negative impact on the target we had with the second half of 2022 to have higher sales of ZUBSOLV® compared to the first half, together with lack of growth in the second half of the year. On the OpEx, as Fredrik said, we were correct also for the year. Just looking into the target for this year, we have now lowered our expectations a little to market growth to 4%-7% compared to last year. However, we have not taken into account the changes in legislation that are effective right now, but there's still uncertainty about what it takes for other new physicians to prescribe buprenorphine.
Before we know the timeline of the implementation, we have based our trajectory on the growth rate that we're seeing at the moment, where we're seeing a slowing down in the end of 2022 and actually also year-over-year in the beginning of 2023. However, we have not seen the drop in the beginning of the year that we used to see. On the group revenues, we expect ZUBSOLV will have a total increase of revenues. We expect that will come from our partnering with Akot, with ZUBSOLV in Europe. We have business development opportunities from our R&D pipeline, that will support us. We also expect that ZUBSOLV revenues will remain stable at least throughout the 2022. That will be...
put them in line with our 2023. That will put us in line with the 2022 numbers. On OpEx, we expect us to increase a little now in the first half of the year. That's in particular now in Q1. Where we have our court case with Sun Pharmaceuticals up next week, which is the most expensive part. We also for OX124, we have just paid the filing fee to FDA. That comes in Q1 also. That's about SEK 17 million that we have to pay to file OX124. We expect that OpEx in first half to be slightly higher, not a lot, but slightly higher than the second half of last year.
In second half of the year, we actually expect to see a decline both in Q3 and then again in Q4. We expect that our EBITDA will be in balance when we look over the 2 quarters, Q3 and Q4, and that means around zero in group EBITDA. This is our outlook for the next year. Moving into the legal situation. See where we are. There we are. On the ZUBSOLV patent dispute with Sun Pharmaceuticals, we are getting very close to the district court. It's starting on Monday in Trenton, New Jersey.
I will say that yesterday evening, we received the outcome of the Markman hearing. That's where the two party, or that's where the judge and the court decide on the claim construction and on disputes between the two party in how to interpret certain parts of the patents. I'm quite pleased to say that the court went fully on Orexo's side, and were deciding in favor of Orexo on the claim that was in dispute in the Markman hearing. That's just one step, of course, an important step when we go into the court hearing next week. On the subpoena, we have not seen any material activities during Q4, and not seen anything now year to date in 2023 either. Future value drivers, just a short overview.
we do, as Fredrik was saying, we do see that we have very high non-recurring expenses right now. This quarter was also hit negatively by exchange rates, which otherwise have been positively affecting Orexo throughout the year. Q4 over Q3 was impacted negatively. Overall, when we take away these recurring expenses, we do have corporate profitability in sight. We have an R&D pipeline where we expect to see some revenue generating partnerships during 2023. That could be both for OX640 but also for some of the other amorphous opportunities. We do expect to see some DTx revenues coming, not only both for Vorvida and Deprexis, at least from the grant process.
We're expecting to see the MODIA billing test turning positive which would enable us to revenue or recognize the revenues from these first 40 patients that have been included in a billing test. We expect to see ZUBSOLV sales being stabilized, and we do see some quite exciting opportunities to grow both from the MatCor that we're providing out of the settlement funds of $54 billion, which are coming into the U.S. for improving treatment of opioid dependence. It is the new legislation that open up access to more physicians. There are a lot of stuff that happens in the buprenorphine naloxone market in 2023, which could be a lot of opportunities for Orexo, but of course also some challenges associated with that.
With that, I am done with the presentation and will open up for questions.
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Yes. Hi there. This is Klas Palin, Erik Penser Bank. Hello.
Hi, Klas.
Hi. I have a couple of questions, if I may, a little bit about the Trinity Health collaboration. The sort of a hurdle for you right now, is that coming from physicians, or is it patients that are reluctant to enter treatment with a DTx therapy?
If we start with that question, on Trinity Health, the main challenge right now is the primary care physicians want additional information and education about how to introduce patients to the products. They don't feel comfortable in how the product is going to be used by the patients and the role that they have to take. We have started a series of educational activities with the physicians. It is a little of a challenge in North Dakota. We don't have any sales resources in place in North Dakota. We need to find ways to reach out to Trinity Health.
It is what we in pharma would say traditional pull-through activities to make physicians comfortable of using a new product. That's the same challenge you would have with a new pharmaceutical that they are not educated and used to use. It's not what we hear from them, it's not about the patients, it's more the physicians who I think are turning to old habits and how you treat it rather than testing something new.
Okay. Okay, I understand. A question about the MODIA. You mentioned that you had about 1,000 patients coming in treatment during Q4. I guess some of these patients are perhaps also in your clinical trial. Could these patients be patients that you eventually could convert into commercial patients? If you could give a flavor of what kind of patient is it?
No, the 1,000, or to be exact, it's just short of now 1,000, is first of all, it excludes clinical trial, and it's part of what we call MODIA one, where we, through our field force, is offering physicians that we know from ZUBSOLV to test MODIA on some of their patients. This is to overcome the challenges we've seen with Deprexis and Vorvida, where physicians are uncomfortable with these new tools. To take away all hassle around reimbursement, prescription, and introduction, we are offering the products for free under what we call MODIA one early trial program. These patients have received the product unreimbursed and will not be able to convert them to paying customers.
However, the physicians, when they have tested a certain number of products, we will make a commercial contract and say, "For any future patients, you will need to make a commercial contract with that." Here, we have identified 3 states, I believe it's Michigan, Pennsylvania, and New Jersey, where we're running what we call billing tests. We have clinics in each of these states who are making reimbursement claims for patients, and that's right now 40 patients that we've started with, divided out on these 3 states. When we have positive confirmation reimbursement, we will start very actively to convert more physicians in these states into commercial contracts. We have a pipeline of clinics waiting to do commercial contracts. Hopefully this is something we'll see building when we get the reimbursement confirmed.
Okay, great. Then my last question will be about your latest press release about your collaborations surrounding your AmorphX platform, and if you could provide some sort of little date. I understand that you could not give us the names of the companies and so on, but perhaps some sort of an indication about the timelines.
The partnership is what we call a feasibility study. That means that Orexo, we do, we formulate a powder based on the AmorphX technology and their API. They will supply the API to us, and then we will make a powder that we will then ship to them, and they will then make tests on the powder to see that the powder or the API retain full activity. They will look at the stability of the powder or of the API, which is a biomolecule for both of them. One of them is a vaccine, and the other one is pharmaceutical. If that turns out positive, we will have a discussion with those parties about a co-development, long-term co-development program.
Here I know that you say the part that we should do is relatively fast, something that will definitely be completed during the first half of this year. How fast they are in their testing depends a little on how much stability data do they want. It depends on whether they want to do some first preliminary trials on animal models or similar, which always take time because you need to make research for ethical approval and others. Then I know one of them at least is also saying that if we start this project, this will be a significant investment for the company and because it's a pretty big product that they're looking at.
That will take some time for them because they want to do then to be sure they know about the regulatory pathway as they're moving from an injectable to a nasal solution, and know what kind of clinical programs is required. That requires interactions with EMA and probably FDA also. I guess the latter part then that would probably go into next year, but I'm sure that there could be opportunities in those two partnerships for license agreements which go faster. I think 2023 is probably a year where we will need to do research on both parties and then a license agreement could come late in the year or next year.
Got it. Thank you so much.
Mm-hmm.
There are no more questions from the teleconference at this time, so I hand the word back to the speakers.
Thank you. We received some questions online. We'll see here. When do you expect to see features of any significance for DTx revenues? I understand you expect that in 2023, but will the numbers be significant already in Q1, and when do you expect it? I can first say, I don't expect significant numbers in Q1, but we do expect to see it build throughout the year. We have made a reorganization of the DTx team, and we now need to get the new team up and running, working with DTx. We do have quite a lot of expectations to the Veterans Affairs deal, which is the one reimbursement platform where we take away a lot of the hassle we have with the medical benefit system that we're setting up with Trinity Health and even for MODIA.
If we first can get the distribution up and running with Veterans Affairs, I believe there are very good opportunities for Deprexis in particular. I will not give a specific on there more than that. Could there be any positive financial benefit if you win on all elements in the IP litigation, and can you say anything about the potential magnitude? Unfortunately, IP litigations in the U.S. are not associated with any damage payments, so the two parties will need to cover their own expenses. There's a question about how much DTx have cost us today? It's something that one you can look into our segment reporting historically. However, I will say that a lot of the expenses are also allocated expenses from our U.S. pharma.
We've used our sales force, which has come into the DTx. You say the direct investments to purchase the rights and also to build the systems is about SEK 200 million. On top of that comes marketing and allocated expenses. Historically, ZUBSOLV sales for second half has succeeded sales for first half every year, except for 2020 due to COVID outbreak, as well as Q4 succeeded. Sales have succeeded Q3 sales. In 2022, both sales H1 succeeded second half and also Q3 succeeded the Q4. The historical development between Q3 and Q4 has usually been explained as a consequence of increasing stockpiling. What's the reason behind the quite large decrease in ZUBSOLV between Q3 and Q4? I did address that. I think the number 1 reason is in demand.
We did see a U.S. market which was very little negative, but it was negative between the two quarters as in volume demand. That, of course, behind that, you have different volume demand development between the different payers. Each of the payer groups also have different rebates. As we've seen throughout the year, the less rebated commercial payers are the ones which are having the most negative development, and that's where we earn most money, whereas Medicaid and Medicare is growing faster, but we give higher rebates to that group, so they are worth less to Orexo. The other part that we have is what we talked about is the returns that we were that we had to take negatively between the two quarters. That also affected sales negatively.
Of course, most important, I think, both looking ahead and for Orexo is not these one-time adjustments that is around volume development, where we did see the market slowing down. As I said before, I believe that there are good reasons to believe that this market will grow. The challenge for Orexo is, of course, to make sure that we are part of that growth as we will see expansion to new physician groups. I believe that was the last question we received. I want to thank all of you for your participation and attention, and wish you a continued good day.