Hello and welcome to the Orexo Interim Reports Q2 2020. Throughout the call, all participants will be in listen mode only, and there will be a question-and-answer session afterwards. Today, I'm pleased to present Nikolaj Sørensen, CEO, and Joseph DeFeo, CFO. Please begin your meeting.
Thank you very much, and welcome to the second interim report. I will also say we have received some questions through emails, and Lena Wanger, who is our Head of Investor Relations, will join the call in the end for the Q&A session and ask these questions if they have not already been asked or addressed during the presentation. This quarter has, in many ways, been a very exciting quarter for Orexo. We have invested into a completely new area in digital therapies, where we, due to the circumstances with the COVID-19 pandemic, have had an opportunity, and also both commercially and regulatory, to accelerate the launch of MOVIDA and for Duprexis. We have also, during the quarter, seen that our R&D pipeline has progressed according to plan, and we had some very positive news in the end of the quarter with OX125 results coming out very positive.
In our aim and strategy to broaden our commercial base, everything has gone completely on track. It is safe to say that for Zubsolv, this quarter has been a little more of a challenge. The sales in net terms have been slightly up from net sales from first quarter, but if you compare to last year, it is down, and if you look at the volume development, it is down also. Some of that is due to events that we knew before the COVID-19 pandemic were hitting us around the introduction of generic competitors in the previous exclusive contracts with UnitedHealth Group and Humana. It is also, I think, during the pandemic, we have seen how unemployment numbers have raised in the US and where we really have our marketplaces among commercial insurance.
That means insurance that's provided by your employer, and that has had a negative impact on Zubsolv during the quarter. On top of that, our sales force has not been able to work in the normal way during the last month since mid-March. I'll come back to all of this a bit later and move into the presentation. I'll move directly into page number four, which is an overview of the events that we are in right now. The headline that we've chosen for this presentation is "Investing in Diversification to Drive Future Growth." We went out just a few weeks back, we went out and gave some new guidance on the expenses needed for Duprexis and MOVIDA.
We're also quite clear that some of those investments have already hit us during the second quarter, and in particular because we saw a need to accelerate the launch for both MOVIDA and Duprexis. During the quarter, the EBIT contribution from our digital therapy was minus SEK 35.5 million. On top of that, we also see an increase in the R&D investment, partly due to the first clinical trial on OX125, but primarily driven by the final preparation of OX124 to go into pivotal trial and registration next year. If we exclude those two, I'm pretty happy to see that the core business of Orexo is still positive. We have positive EBIT excluding those, but when we add these investments, which in accounting ways is counted as expenses, we end up with a slightly negative EBITDA of SEK 9 million during the first quarter, and our earnings are also down.
I think in the earnings numbers, it's a little cheated by variations, in particular in foreign exchange rates, which during the quarter have gone quite a lot up, and in particular later in the quarter down, which have hit us on the earnings in a negative way, just like in previous quarters have been a benefit to Orexo. Our net revenues is slightly down, as I said, year over year for Zubsolv, but I also just remind you just that we've been very transparent about the last, I think, several two years, is that Abstral will not contribute from Europe and the US in 2020 and beyond, and that will hit the comparison year over year from now on.
To a quite late news to come into the presentation or into the report, and that was on July 14, and to be transparent, it was July 14 in the evening Swedish time. We received subpoenas by the FDA in collaboration with the Department of Justice. This is normally how it works in the U.S. We received subpoena with regards to Zubsolv and the marketing and promotion of Zubsolv and other buprenorphine products. This is the only information we have received. We have not received any information about what is the background, what are the suspicions. There are no charges being made against Orexo that have been shared with us, and the same goes for any of our employees. We have transferred a quite substantial amount of information to the U.S. authorities, and we will now have to wait and see what will happen.
This came as a complete surprise to me, as we've been working extremely diligently to ensure that we're compliant with all legislations and follow our business conduct and ethics guidelines for the company. We even did a review with an external counsel on some aspects of the promotion in the US during the autumn last year, and we had no serious findings in that review. That we suddenly should have this subpoena on the company was a surprise to me. Unfortunately, I don't have much more information than what we have here and what we have in the report, because basically they have asked us to hand over quite a lot of information, which we have done, and now we'll have to wait and see what comes out of this.
When we come to Duprexis and MOVIDA, we have started the commercial activities for Duprexis and MOVIDA now in July. Duprexis first and MOVIDA will be ready. We have plans to be ready today, actually, but now it will be on Monday with the homepage, which will enable patients to actually use MOVIDA in the US. What I will remind people who probably read and in particular listened to our presentation on these two is the current focus is to work with market access. That is work with payers to ensure that we get reimbursement on the products and also to work with certain larger employers or healthcare providers for them basically to buy access to the product. We do not have a system in place yet which allows individual patients to go in and get a code through our channel.
That will be ready in September of this year, and I'll come back to that later. During the quarter, we acquired Duprexis, which has had some impact on our cash flow. We have decided to accelerate our OHD01 launch, and it's now expected to be in the fourth quarter this year on a very targeted launch with certain selected customers, and then with a broader launch in Q1 or Q2 of next year. Our DTX investments, we have previously guided on MOVIDA and OHD01, and we have deliberately not included our guidance to include commercial investments. We have done that now, and we are estimating the investments for this year to be around SEK 200 million on top of previous guidance. Some of that hit us now in the second quarter, but a lot of this will, of course, come in the following quarters.
On our R&D pipeline progress, I'm quite happy but not surprised to see that our nasal formulation technology once again delivered a very promising result, this time for OX125, which is an opioid rescue medication based on nalmefene. Basically, all three formulations that we were using and comparing that to an intramuscular injection of nalmefene showed very positive results. We are now in the process of finalizing the commercial manufacturing of OX124, which requires quite a lot of investments. It's a relatively complex supply chain as we are setting up a manufacturing chain for a non-established device and for a new formulation technology. This is something that we will need to work with several different suppliers, basically from a blank sheet of paper to establish, and that is what has taken some time and investments during this quarter.
What is positive is that the innovation has been recognized, and we were granted the first patent of our NovaNational delivery platform, this time based on naloxone, which is the OX124 product. We now have patent protection for OX124 until 2039. We are, of course, continuing to work actively with our patent strategy for our pipeline to secure that we have more patents than this generating over time so we can have an even stronger defense. We got the patent granted here during the second quarter, and we now have patent protection of OX124 until 2039. We, of course, also filed a patent for OX125. Moving on to a reminder on our strategy, and this is what I mean that we have really made significant progress during this quarter into delivering on our strategic objectives. We've broadened our portfolio by establishing a new business area, digital therapeutics.
We are now planning to launch, or we're actually in launch mode, of two products. We've seen our own R&D products of development from pharmaceuticals that basically work throughout the year according to plan, and the most unknown in this process have been, of course, the results of OX125, so we're very pleased to see they come up positive. Also to say that in OX124, as we're working with several different suppliers in different countries, both on this side of the Atlantic in Europe and also North America, it's actually quite amazing that we've succeeded to keep the timelines despite the inability to travel. It is important for us to keep Zubsolv as the foundation that we stand on and the financing vehicle for these other ventures.
It is, of course, important to keep the profit contribution, and while I, of course, would have liked to see Zubsolv seeing growing sales during the second quarter, I am actually quite pleased to see we have an EBIT contribution margin, which is, I think, a little more than 51% in the US during the second quarter, which is again a testimony to how we work very prudently with our expenses during this quarter when our sales reps have not been able to work in the traditional manner. Looking at our pipeline on page number 19, we today have a pipeline of four internal pharmaceutical products, OX124, OX125 that I talked about. OX338 is something where we are working on the formulation.
We had very good results in the clinical trial that we did with OX338, but we saw that we need to work on the formulation to secure a long-term commercially viable business. OX382 is something we've worked on for a while. We put that a little on the side because right now all focus has been on OX124 and OX125 as these are the closest ones to market, and that's really where we have to focus our efforts at the moment. OX382 is still worked upon by some scientists, but we're not putting a lot of resources behind that right now. OXMPI is an outsourced, is a former project of Orexo that we have sold to a company called Gedeon Richter, where Orexo has a financial interest in the progress of that product.
We're very pleased to see that they have passed phase one in a very good fashion, and they've just raised a lot of money to secure that they can continue into phase two, and they're doing that in some very exciting areas of unmet medical needs. We have our digital therapy, OHD01, that I talked a little about. There it's a little unique as you don't have the phase one, two, three. What we like to do with OHD01 is we will launch it, and then we'll generate data while we have it in commercial development. We are going to have clinical data collected for OHD01.
We need that to get the right label with the FDA, but given the current situation with COVID-19 and the public health emergency, we have now a shortcut, you can say, to the market to launch it and then generate the market as we are in commercial mode, and that's the plan we have with OHD01. So far, the development of OHD01 is going completely according to plan, and we will probably rather soon be able to reveal the name of the product. When you look at this pipeline moving to page number seven, if you look at this pipeline, I just realized that the page number have tricked us here. Before we were page number six, and now we're going to page number seven. I'm just looking at some of the headlines that we're seeing from the COVID-19 pandemic.
I've said that people who listen to me, I've said that every time we've seen this kind of basically an economic crisis, we haven't seen a pandemic for many, many years, but an economic crisis we've seen several times. What we have seen in addiction is that we see more people are getting addicted to whether it's alcohol or it's opioids or even saw an article recently that people start to eat more, so you're likely to see obesity becoming a bigger problem. It is a natural response to the uncertainty around you, and we've seen now more and more headlines coming from Washington Post just recently had a headline about death from opioid overdose increase. We've seen alcohol misuse increase in the US. We've seen the opioid misuse is increased, and not only overdoses, but also more people are getting addicted to opioids.
As we saw in another news article, there's this expectation that the mental health crisis will actually be an even worse problem than what we have with the pandemic today. If you look at all of these different areas, this is, of course, very much spot on where we are with both our digital therapies and also with our pharmaceutical products. With that, I'll move into our commercial products, and it's quite nice to see that we now can put three, and I'm moving into page number eight to see that we have three logotypes on the front of our commercial products, MOVIDA, Duprexis, and Zubsolv. If you look at today, the revenue-generating product, Zubsolv is, of course, number one. I will say that Abstral, while we are receiving much less revenue from Abstral, we do still receive royalties from other markets than the US and Europe.
Edluar is a small product, but we also continue to receive royalties from Edluar, and now we are looking forward to the launch of Duprexis and MOVIDA and see the first revenues coming, hopefully, during this quarter. Going into MOVIDA and Duprexis, these slides are basically the same presentation we had recently with the Head of our Digital Therapy business area, Denis Urbaniak. First, just a reminder, Duprexis is a fully automated digital therapy to manage or help patients to manage their symptoms of mild to severe depression. It has a multiple number of clinical trials where it's been tested scientifically and shown over and over again that it's adding value, whether it's used adjunctively to other treatments or actually even in some of the studies used as the only treatment.
Duprexis has definitely shown, and I think been a little of the front runner in showing the value of digital therapy, and we're very proud that Gaia has chosen Orexo as the partner for the commercialization in the US. When it comes to MOVIDA, MOVIDA is based on the same engine, but this time it's directed towards alcohol misuse. It has been launched in Europe, and it's again a product that has been tested scientifically and shown positive results. Both of these products have a significant net sales potential, although we have to recognize that this base digital therapy is still in its infancy, and there are a lot of infrastructure that needs to be placed.
Just to give an example, right now we have to work through payers and healthcare providers to ensure that they would basically buy and pay directly to Orexo for the licenses they get to Duprexis or products, in-lock licenses they get for Duprexis and MOVIDA. Whereas if it had been a pharmaceutical, there is already an established distribution chain with pharmacies and wholesalers in the US. Here we need to build this up basically from scratch, which, of course, is creating some uncertainty about how long it will take, but there are a lot of very serious companies working in this, and we have quite fast joined an alliance together with the other companies to ensure that we can build up an infrastructure to facilitate the rollout of these very valuable tools for the patients in the US. Where are we right now?
Basically, our focus at the moment, I'm moving to page number nine, is to work with access creation, and access creation is working with payers and basically making larger framework contracts. The payers could both be employers, it could be insurance companies, or it can be a healthcare provider. This is where we are at the moment. We haven't started to reach out to patients directly and physicians directly because we need to create that infrastructure to be sure that we can get paid for the product. This other stage in the launch will come in September when we'll have our homepage in place, we'll have customer support systems and others in place, and then we can start rolling it out directly towards physicians and patients.
Now we have to go more through to framework contracts, and that work has started, and I'm pleased to say I talked to Denis Urbaniak yesterday that we're making very good progress in setting up meetings with different providers, and there are some concrete negotiations in place. I can't say that we have sold any access to Duprexis so far. Right now it's basically out there knocking on the doors of larger payers and creating these framework contracts. Coming to page number 12, what we have today is what you can see on the left side of the page. It's meetduprexis.com. It's live as of July 2, and on Monday we're planning to launch meetmovida.com, so that will also be live.
That will be Orexo control homepages and also be the access point for patients who would like to use the products or for patients who get a login number from their healthcare provider or from their employer or insurance company. To give you a little sense on the positioning that we have, we have added here a preliminary MOVIDA advertisement material where we're kind of trying to imitate an alcohol advertisement, but with the opposite message basically, so now there's a way to take control of my drinking before it takes control of me. I think some of the creative work is quite brilliant, so hopefully we'll see that reflected in the sales of MOVIDA when we start this broader launch where we'll start using this advertising material to physicians and patients.
Coming to page number 13, the focus of us at the moment is what does it take so much time. Basically, to ensure that we have a system that works for thousands of patients, we have to ensure we have all of the infrastructure behind, coming from services to patient, customer relationship management, customer support. In the US, as you have the insurance system, we need to have hub services to ensure that we can help the patients to get through with the insurance claim and also to ensure that we get paid from the insurance when the patient gets it recommended or prescribed by the physician. We can then basically secure that we have a money flow going with the insurance companies. This is quite novel as this is an industry that doesn't really exist today or it's very early stages.
I think we're making very good progress, and we have basically all men on deck to ensure that this is being set up. We are progressing completely according to plan towards the broader launch in September. To give some early feedback from patients and physicians, what they have done is they have seen a trial version of the products, and as you can read in the citation on page number 15, I won't read all of these, but take a few selections, that it is generally pretty positive feedback. To give one example from a caregiver, I think this is better than live therapy. Actually, people sometimes don't like to go in person or look at somebody and speak about their problems.
A caregiver, but quite interesting with that is I saw in a Swedish newspaper there was a debate article just a few days ago. It was in Svenska Dagbladet, where three professors, I think they were, were talking about how we need to think differently about alcohol addiction treatment and use more digital therapies because they have shown to have even better effect than live therapy. Given the other one which, of course, is very important for us now is to ensure we get through to employers, and we have an employee benefit manager on the right side here saying alcohol dependence is something we do not talk about as an employee. Being able to do something digitally and the privacy of my own home seems like a great opportunity. This reflects very much some of the feedback that we are receiving right now when we start meeting customers.
Actually this is from customers, of course. Just on page number 16 to round this off, we are right now focusing, as I said, on the payer models where we have something a little like the pharmaceutical model where we get reimbursement through insurance companies and employers. We are working now towards the insurance companies and employers, but also trying to do framework agreements models where basically they buy access to quite a few of their patients or quite a few login numbers. For example, an insurance company buying several thousands of licenses that they then can distribute to their clients. This is the focus at the moment, and then when we come to more patient-focused, that's when we have everything in place in September.
For those of you who are interested in knowing more, I'll just refer back to the presentation Denis Urbaniak did a few weeks back when we talked about the launch of our digital therapies. You can find it on our homepage. Moving into Zubsolv on the next move to page number 18, directly into Zubsolv where we are right now. This quarter has been very interesting because we've seen a significant growth actually in the market. In actual numbers, this is the fastest growing quarter since the Zubsolv launch in 2013. When we look at what is it that is growing, this growth is solely coming from Medicaid and some from Medicare. When we come into the commercial segment, we're actually seeing that the commercial segment, which is privately health insured people, has been flat if you look quarter over quarter.
If we look at the last few months, going through May and June, you will actually see the commercial market declining during the quarter. While the full quarter is similar to Q1, we actually saw that the commercial market had a negative trend in the end. The explanation behind that is basically COVID-19 and the significant rise of unemployment that we're seeing in the US. That probably also explains some of the Medicaid increase. People are moving from being covered by their commercial insurance over to Medicaid. As a total market, we have seen a quite fast growth. Those of you who have seen my presentations before know that the open market, that's where Zubsolv gets reimbursed. A lot of that is commercial. Where we have no reimbursement, that is predominantly Medicaid and Medicare.
That is, as you can see, where we saw a quite significant growth in this market. Just looking ahead, just going back to one of my opening slides, we believe that, unfortunately, the issues around addiction, opioid addiction, is something that will be growing as a result of the COVID-19. As such, we can believe that this market will continue to show a strong development in the next few years. A little more specific on Zubsolv. If we look at Zubsolv, we have seen that our open market, that's where we are reimbursed. We have basically seen a more or less flat development both quarter over quarter and compared to last year. It's a mild volume decline, I think, of a single percent compared to Q1. We have seen, if you look at, it's 4% compared to Q1.
If you look compared to last year, we have a, in the open segment, we have seen that we're basically stable with a small growth in the open segment. When we look at what's really been driving this decline in Zubsolv, it is the Humana, and in particular the UnitedHealth Group, where we've seen that we continue to see some decline during the quarter. This is something that has been a trend since we saw generic competition introduced last year. This time we haven't been able to compensate some of that decline with an increase in the open market as we would have seen in most other quarters, that the open market continued to grow.
If you look underneath the open market, you will actually see that in Medicaid, which is the growing part of the market, in the part of Medicaid where we have access, that's about a third of the Medicaid market, we have seen that Zubsolv have grown. The problem we've had is in the commercial part where the market, even though it's quarter over quarter, is stable, it actually shrinked throughout the latter part of Q2, which had a negative effect on Zubsolv also. All in all, it's been slightly down in the quarter and both compared to last quarter and also compared to last year, a little more significant compared to last year. We have known that during the last few quarters we have seen UnitedHealth Group and Humana had a negative impact.
The positive part is that the Humana part, where we now have passed one year anniversary of when we saw generic products being reimbursed by Humana, and we basically do not see a decline anymore. Where we have seen some decline compared to last year is still in the UnitedHealth Group. Just summing up for Zubsolv, where are we right now? Is this going to continue to go down? One uncertainty, of course, is what will happen with unemployment numbers in the US. Do we see a continued increase in unemployment numbers? That is likely to have a negative impact on the commercial market. That is where we have the lion part of our market that will make it more difficult for Zubsolv to grow.
However, we have to be somewhat optimistic to see that the COVID-19 pandemic is lightening up, and we see more and more states in the US opening up despite having some significant problems in some states with COVID-19. If we see that the unemployment is improving, that, of course, will quite immediately have a positive effect on the commercial market. Another positive development is that we have been added now to Louisiana Medicaid, where we before not had any reimbursement. From July 1, we will now have reimbursement in Louisiana Medicaid. We increase our public access or the part of the public segment where we have access from 35% to 37%. So far we have not seen any changes in the commercial market, and we continue to have 98% access to commercial insurers.
When we come to our field force, as I said, we were very fast at stopping office selling on March 16 and moved over to what we call a virtual selling model through telephone, video calls, and emails. Basically, we are listening to the prescribers, how do you want to meet us? When you were in the peak in April, we did a small survey among the physicians. More than 75% of the physicians had moved their practice over to telemedicine and not meeting patients in office. We have seen now during June that it has opened up, and today the entire team in the US are doing office-based selling. If we again look at the number of physicians who are still doing telemedicine, we say that the access we have to the physicians is still about 50% of where we were before COVID-19.
While we do have the field force in the field, we see that they still have to access some of the physicians through virtual channels. While that is a replacement, I think in this space it can't replace a face-to-face meeting. This is some of the uncertainty, but as we basically week over week we're seeing more and more physicians going back to normal operations. We anticipate that will have a positive effect on Zubsolv moving beyond where we are right now. With that, I will open up for Joseph DeFeo to take you through the financials, and I believe Joseph will start on page number 22. Joseph, please.
Yes. Good afternoon. I'll start on page 22. I would like to start with our profitable US pharma business. As you can see on the left graph, there has been a slight decline in net sales, which Nikolaj talked about. You can see that our gross profit continues to hold up very well as now we are recognizing the full impact of our lower cost project that we completed last year. Our cost of goods sold on Zubsolv is significantly lower and generating more profit for us, which you can see on the right graph that our last 12 months, our US operating margin has grown to 47.8%, and in the quarter, Q2, it was 51.5%. We continue to optimize our cost base for Zubsolv and generate very strong profit for the US.
If you then go to slide number 23, here's a look at sales. You can see, as I mentioned, Zubsolv had a modest decline in sales over the prior year. As Nikolaj mentioned before, we will no longer receive royalties on Abstral for Europe and the United States. There is a decline there, but we continue to get royalties on Edluar. Overall, you could see the reduction in sales from the previous year. If you go to slide 24, this further explains the United States. You could see that we had a modest 1% increase in the open business. The reason this is modest is, as Nikolaj mentioned, the COVID-19 situation and our sales force not being able to go out into the field and promote Zubsolv.
We've had the decreases, as mentioned, in our non-reimbursed business and also United and Humana, and that's prominently due to United. There's an 11% decline in that demand. Those were offset. As mentioned in Q1, we had a significant drop in wholesale or inventories. Those levels have come up some. We did have a positive impact from that. We continue to manage our trade situation very well on our inventory at wholesale levels. We were able to recognize another lower return adjustment for Q2, which had a nice positive impact on net sales. Our price, which we took a 3% price increase at the beginning of the year, plus our payer mix and our favorable gross net was positive. We also had a slight currency improvement. Overall, a 6.4% reduction in net revenues for Zubsolv. We go to slide 25.
As you know, in Q1 we started reporting our business in business segments. You can see on the top one, as we talked about the profitability of US pharma, you can see that the EBIT increased from SEK 83.8 million last year to SEK 88.8 million. Good profit improvement again for the US. The next one, you can see Digital Therapeutics, where we're making our investment predominantly in the launch of Orbita and Duprexis, where we invested a total here of SEK 35.5 million. Finally, our headquarters and pipeline segment, where in net revenues that's the reduction I mentioned in Abstral. Our investment in our pipeline, you can see the increased operating expense, which overall gave us an investment level in headquarters and pipeline significantly above, roughly a little more than double last year. If we go to slide 26, this is our overall P&L.
Talked about the net revenue reduction. I mentioned the cost. You can see significant reduction in cost of goods sold related to Zubsolv. In our operating expenses, we've guided that our operating expenses would rise. In selling expense, the increase there is due to the Duprexis and Orbita launch, predominantly the preparation for launching Orbita. That's the increase in selling expense. Administrative expenses are up due to our long-term incentive plan. We had a very good positive development in our share price in Q2, so that led to an increase in the expenses related to our long-term incentive plan. As I mentioned in our pipeline, that's the reason for the R&D expense increase. When you look at other operating income expenses and net financial items, that is due to the strengthening of the SEK in Q2, predominantly in the second half of the quarter versus the dollar.
We gave back some of the very strong positive exchange gains that we had in Q1. We gave back some of that in Q2. That overall led to an EBIT, as in it was slightly negative at SEK 13.3 million and a net profit of SEK 32.5 million lost. Our EBITDA was, when you take out the exchange issues, only SEK 9 million lost. If you go to slide 27, this is our cash flow. We continue to have a very strong financial position. We did have a slight negative cash flow from operating activities due to investing in our pipeline and also in Digital Therapeutics. We also acquired Duprexis. That is the predominant reason for the investing activities. In financing activities, as predominantly most of it was done in Q1, we did also acquire some additional bonds at a discount.
That is the majority of the financing activities, along with completing our share buyback in Q2. That completes the financing activities. We did have a negative cash flow for the quarter, but still remain with SEK 677 million liquid funds and a net cash position of SEK 453 million. As mentioned, we do have a very strong financial position. With that, I'll turn it back over to Nikolaj to go over the outlook.
Thank you very much, Joe. Looking at page number 29, this is basically the same page that we showed to you previously when we were coming up with our news about our increased investment in our Digital Therapies. Basically, as we said before, this is now the time for us to invest. We think we have a market situation that enabled us to get a kickstart out of the launch of these products. We've seen an opportunity to accelerate OHD01, the Digital Therapy for Opioid Use Disorder, with more than a year. Basically, to right now start being out there talking about the different products to payers, healthcare providers, and employers, we think it's a unique opportunity given the situation with COVID-19. That said, we also recognize that, like it's difficult to get access to all healthcare providers, the same also goes for all the customers.
I think in these payer contexts, we are more used to have most of the interactions through more digital means like video conferencing, telephone conferencing, etc. One of the things that's important is, while we're investing, of course, quite significantly, we have the financial capability to increase the investment should we see that the market is receiving this better than we anticipate and vice versa if we see some of the implementation take a longer time. Most of these investments are what you can say variable cost, so we can actually pull back on some of the investments should we see that take a little longer than anticipated. I think this is the strength that we have in Orexo and have built up during the last few years is a very, very strong balance sheet that can enable us to do investments like this.
Our financial outlook for the year, as we said before, there is some increased uncertainty due to COVID-19. Of course, we've seen exchange rates going up and down. The average during the quarter, I think, was more than it was around SEK 9.7. If we look at today's exchange rate, I think we're down to SEK 9.1. Sweden's grown up a dollar. It is very fluctuating. We've seen in the US that while the overall market is going well, the commercial segment due to unemployment and others have had a negative impact on the development. That said, I think this is something that would correct itself over time, we will be back to growth. When we come to the Buprenorphine/Naloxone market, we already see that we have very strong WTG growth.
Zubsolv net sales is right now on a trajectory to go down, but we still think there's a good opportunity if we see that the commercial market rebounds during the autumn to see a more positive development quarter over quarter of Zubsolv during the remainder of this year. When we come to R&D investments, we've talked about that. We have increased our investment in both R&D and the guidance for Digital Therapies to a somewhat higher number, SEK 750 million-SEK 800 million. We anticipate that Abstral will decrease due to the product, the contracts we gave on the US have been terminated as completely according to plan. We believe that the US EBIT margin for the year will be between 45%-50%. I am, of course, pleased to see that we actually exceeded 50% in this rather challenging second quarter of the year.
Just looking ahead from where we are right now, we're moving into Q3. The big thing for us this quarter is, of course, the launch of Orbita and Duprexis. We have a dialogue with the FDA about the Fast Track designation for OX124. We hope that will be resolved. That said, we do see that the FDA have quite a lot of delays due to COVID-19. They are less responsive than what we have been used to previously. We think with OX124, we definitely have a very strong case for getting a Fast Track designation. We expect to see that OHD01 technical development is finished, which will enable us to start the launch in Q4 with a targeted audience and then a full launch probably around second quarter of next year.
We are still planning to initiate the OX124 pivotal trial very late this year. I will say that that is a so-called PK study. We are basically comparing in healthy volunteers the pharmacokinetic profile of the product to an injection with naloxone. That is not on the critical timeline right now. It is basically setting up the manufacturing and getting stability data for commercial manufacturing of commercial product that is on the critical timeline. Should we be a little delayed in our OX124 project, that does not have any impact on the overall timeline for the project. With that, I will thank you for your attention. Oberta, I will open up for questions.
Thank you. If you wish to ask a question, you may do so by pressing 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will be a brief pause while questions are being registered. Our first question comes from Safiya Devani, RX Security. The floor is now open to you.
Thanks very much for taking my questions. I appreciate there's not a huge amount that you can add on the DOJ investigation, but perhaps you can just give us a color on how many subpoenas, how many personnel have received subpoenas and how in terms of the communication from here, these investigations can take many years. I guess, when do you think you'll be updating the market next on that process? I guess that's question one.
I have to be a little cautious about how many subpoenas because we have restrictions on what we can say. I can say it's very, very few members of the team who have a subpoena. I can also say that the Head of US Operations, Bob DeLuca, has not received a subpoena. It's not on the top level of the organization. He has not received a subpoena, but there are a few people out in the exactly predominantly sales organization who have received some subpoena, but very few people. That, of course, while we have no clue what this is about, it is interesting to see that the head of the overall company is not included so far in the subpoena. When it comes to the timeline, I have, of course, very, very limited information.
What I have heard is from our lawyer and told us that we shouldn't expect to see any significant progress during this year. We will, of course, as we have now engaged a specialized lawyer in FDA matters, the authority who have initiated this is the FDA. They will reach out to try to understand more about suspicion and what this is about. We don't know at this time. It can be lengthy. That's the advice we have received also. It can be a lengthy matter.
Okay, great. Just second question is just on Zubsolv. I guess Q2 was a bit harder than maybe you had originally been expecting. You've maintained guidance for the full year. I guess you've also mentioned that you saw some wholesalers stocking in Q2. I guess the question is, what do you feel needs to change in Q3 and Q4 to sort of get that revenue number up to meet guidance?
No, what we would need to see is basically that the commercial segment is bouncing back and going back on the same trajectory it had before. What we've seen is a temporary hold in the commercial market. We would need to see that the UnitedHealth Group very, very soft, but still bleeding quarter over quarter, that that actually stops. We did see that in the end of last year, that basically in Q4, we saw the United decline was softening a lot. We had very little decline in Q4. We did expect some increased decline in Q1 because the patients, their high deductibles are zero. They have to pay for the full price of the product early on in the year. That, of course, with Zubsolv, when you come down and pay this price.
That is significantly more expensive than the generic versions. Then often for most patients, it's just one or two prescriptions, and then they would have passed a high deductible. United will pay for it, and Zubsolv will actually be cheaper than the generic. These first prescriptions would be more expensive. Here, of course, COVID-19 could have another impact, is that if you're worried about your financial situation, your willingness to pay the full price for a Zubsolv prescription compared to get a generic is maybe not that high. We would have expected United to go down a little. Now we saw it continue in Q2. That, of course, is something we would need to see stopping. Commercial going back, we'll see United bleeding is basically showing the same as we saw in the end of last year.
That will stop and maybe even start to grow. Because that's really the challenge we have, is that we're growing on some accounts, but at the same time, we're losing on some other accounts. If we can stop the losing, then, of course, the impact of the growth would be much more.
I would just add, you mentioned the wholesaler stocking. That stocking was getting back to normalized level. They are not carrying excess inventory. It is getting it back to normalized level. We do not anticipate any kind of destocking or anything like that in Q3.
Okay, that's great. Thank you very much.
Thank you. Our next question comes from Kraspik Nordia. The floor is now open to you.
Hi, and thank you for taking my question. I have only one. That is on research and development expenses in 2021, 2022, and forward. If you could elaborate a bit on how you think expenses will develop. That's it. Thank you.
A lot of the expenses that we have right now for weeks one through four is for setting up the commercial manufacturing. That, fortunately, is the same process that we need for weeks one through five. The cost of next year will be there will be a decent part of the pivotal trial cost for weeks one through four will come in next year. Of course, pivotal trial is bigger than the trials we've been doing right now. I would expect R&D expenses to be about the same next year as we're looking at this year. We, of course, come with more specific guidance as we come closer.
For 2022, that is too early to say because there would need to be other projects than the one we have most of our attention to right now, weeks one through four and weeks one through five. For OX338, which is the one that would be closest, that depends on which regulatory pathway we decide and how we end up in our formulation work right now, whether that's how the cost will look like for 2022.
Okay, thank you for the clarification.
Next, we have a question from Jovanna Omnokrist, Redeye. The floor is now open to you.
Hello, and thank you for the presentation. I have the same question as Klaas, but about the digital therapies. Could you explain the investment there and how long will they go on in the future, in the next quarters?
I think if you look at the commercial expenses right now, what is it? For the next half year, the expenses that we have for variable marketing and promotion cost, we expect that to be about SEK 100 million. The other SEK 100 million is basically for, what you say, very launch-specific activities in developing the campaigns, developing the homepages, a lot of the infrastructure that I talked about. The variable cost is around, on an annualized basis, around SEK 200 million. Whether that will be higher or lower really depends on how fast uptake and how broad an uptake we see. Do we see more interest from a particular OHD01? We think there's a market for direct to patient.
If that is something that we see is trickledown, we might look at promotional activities that are a little more costly, but will have a more immediate effect on patients. It is a little early, but I think if you just look at the next half year, the annualized is about SEK 200 million. Then we have the R&D expenses for OHD01. That one, as we now decided to go faster into the market, we actually are planning to run some of those trials in partnership with, hopefully, with a payer. That way, we could keep down the cost. I am happy to, you have to wait until a little later during the year when we know more about how we can run those trials before I can give you more guidance. That would, of course, come on top of the SEK 200 million.
The follow-up question to this one is, how far did you get in building this infrastructure? Because it's quite a, I mean, it has to be very scalable and it has to be very secure. How far are you in this process?
Running the system is basically the infrastructure that is on Gaia. If you look at there as a cost of goods item on the list, that's actually the infrastructure running the practice and OVIDA. When it comes to running the payer processes, we are not building anything in-house. Everything is using vendors externally who are used to work with either large e-commerce platforms or in pharma, and in particular in specialty pharma, the hub services is quite established concept, although we have to adapt the processes to digital therapies. Again, we will use a vendor and not build it up internally. That is, of course, also important from a data privacy perspective that we do not, as a company, have any interaction directly with the patient. We will not know who the patients are. That will be kept at the vendor level.
They have been approved for keeping that kind of information.
Okay, thank you. No more questions from me.
Okay. Thank you.
Thank you. Just as a reminder, if you do wish to ask a question, you may do so by pressing 01 on your telephone keypad. There will be a brief pause for any other questions that have been registered.
Maybe we can take some questions from Lena, who has collected some questions that have been sent to us by email. Lena, could you please read?
Thank you. I have noticed that some of the questions that we have got by email have already been raised or covered. The remaining we have, they are all related to sales. The sales, this is peanuts and IP protection. They will go over to you, Nikolaj. The first question reads, can you please provide us with an update concerning marketing of Zubsolv in Europe and/or other regions outside the US and Australia?
Yeah. In the report, we also announced that Mundipharma has not been successful of getting reimbursement of Zubsolv in Australia. With that, the rights to Zubsolv will be returned to us. Mundipharma has done a good job in Australia, but the market has been genericised on the TAP side. For that, it has been more difficult for them to obtain price and reimbursement. When we come to other markets, one of the key aspects we have been working on for quite a while is to establish the supply chain. That needs to be in place to be able to compete on a price level in Europe. Here, to be very transparent, we have found a site in Europe that could package our US-produced material. That site needs an inspection. Right now, the inspection has been delayed due to COVID-19.
We need to have that in place before we can hopefully finalise the negotiations we have for Europe. We do have ongoing negotiations for the rights outside the US and more particularly in Europe. Before we can finalise that, we need to be sure that we can provide a competitive cost of goods.
Okay, thank you. How will you report the following progress for the DTX launch? Only on the quarterly reports, or is it possible with solutions similar to the RX data for Zubsolv?
On the quarterly reports. That's the short answer.
Okay. We move over to some cues for the subpoenas. The first goes, have your competitors been approached by FDA too? Is that to your knowledge?
It's quite well known that our largest competitor, Indivior, has been in a process with the Department of Justice for quite a while. I would say that it's very easy when you look at these processes and then you think Indivior, you think Purdue Pharma. You say, wow, this is a very big thing. I will say that the vast majority of these cases, in comparison to these large headline stories, are much, much smaller. The fines and penalties, even though they, of course, are money and a significant amount of money, it's not that kind of transformative amount of money. I just, since I have no clue what investigation is, and I'm actually a big question mark because I feel confident that we have good compliance structures in place.
I just went through a list of the penalties that have been given by FDA, and where, of course, are some very, very high penalties in the billion-dollar range. All of those high penalties are associated with very, very large products and large companies. When you go to the next pages, you will see that the big, big majority of the fines we are talking, single number of millions and several one and a hundred thousand dollars range. As I have no idea what this can be about from that we had these subpoenas, I would be surprised if Orexo is found to have done something that is just remotely comparable to some of these other competitors. Indivior has been in a process for a while.
When you look at companies who are promoting controlled substance, and more specifically, pharmaceuticals containing opioids, I think nearly every single company in that space has been subject for these kinds of investigations.
Okay. If FDA in the end decides to do nothing after its inquiry, will they go back to Orexo and say no or say so, or will they just do nothing, which means that they will publish no information at all?
I think there's a good chance that there won't be any published information, independent on what happens. Of course, if they come with a fine, we will have to publish that. Most of the cases are basically done in settlements. If they come, which based on how we have been working, I hope there's a good chance that they will find that there is no systematic, at least, abuse of the compliance rules in the company. I think it could even be that this has nothing to do with Orexo specifically. It could be a former, it could be a current employee, it could be partners we've been working with. In some of these cases, we won't be informed.
I think the most likely is that they will inform us, even if they decide to close the case. Again, that will take time before we get to that stage.
Okay, thank you. We had two remaining questions that is for the IP protection. The first goes, the granted patent for the new nasal drug delivery, is that the same patent that you have been waiting for to be able to continue the development of OX124?
We have not been waiting for patents to be able to continue the development. This is we have announced that we are waiting to get a patent granted, and this is the one we have been waiting for. That, of course, is based on an application that was made last year to the US Patent Office. This is completely according to plan and something we have expected, but it has not had any impact on the development.
Okay. The final question, maybe it's a bit related to what you just said, but are there still any outstanding issues concerning the patent of OX124?
Maybe I should just correct my last answer. Of course, if we had not been granted a patent, that would have been a little of a headache because launching a product without patent protection would make it very difficult, even though a lot of the process development we have for manufacturing is unique. It has definitely been a delicate work for my development team to establish that manufacturing in a large scale. Taking this as the first patent, the natural path for Orexo is now to continue to work and see what are the unique value that this technology brings, and then seek to patent protect that unique value as we can document it.
The patent protection is something that will evolve basically until 2039, more or less, for this product as we learn more about how the product is used, what the effect is, what are some of the benefits. I think one of the first next major times is, of course, when we have human data from the PK studies that will tell us much more about the product and potentially lead to other IP.
Okay, thank you. That was everything that came from email.
Okay. To all of you who are on the call, thank you so much for listening. As you understand, fantastic quarter in terms of developing our digital therapies, in terms of developing our R&D portfolio. Zubsolv has been a little more struggling. Some of that can definitely be explained and associated with the COVID-19 pandemic. You are as educated as I am to how this pandemic will evolve as we go into the second half of 2020. That will have an impact on Zubsolv. We are doing that from a very profitable US operations. We have our EBIT contribution margin north of 50% for this quarter, which is the strongest ever. I think that is an important enabler for us to continue the investment in our portfolio of digital therapies and new R&D pipeline projects. Thank you very much for your attention.
I hope all of you will have a great rest of the evening and vacation for those of you who are planning that for July. Thank you very much.
Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your line.