Earnings Call: Q3 2020

Nov 4, 2020

Thank you very much, and welcome to this Q3 call for Rexo. Let me start with saying that there's no doubt that Q3 has been a challenge for Rexon on several different accounts. But I also find that there's a lot of light in the tunnel if you look a little beyond the top line news in the report. I think when you look at SUBSOLF, for example, our main product, while we are reporting a decline compared to Q2, I find that there are some very good signs that there's actually nearly no decline in the open business and where we're non reimbursed. And even when we look at the big driver of the decline during the last year, the former exclusive contracts, that decline has actually gone down to very low numbers. And if you look at the latter part of the quarter, it was actually flattening out quite dramatically. So while it's been a tough quarter for SubSorb, I think it has been there is definitely some light underneath. When we come to digital therapies, I also find that we're making a lot of good progress. We knew from the beginning that we're coming in, in a completely new business area with a new product that is very disruptive to the existing system. And it has also been clear that all of the efforts we are doing to build up a system to manage the customers' payment processes, insurance claims and so forth is worthwhile and it will be a major value creator in the future. But it does take time to set all of these processes in place. And when we come to our pipeline, we have made some very good progress on OX124. We got some new guidelines from FDA during the quarter, which is really what I call engineering problems. It's just things we need to fix, but it will have a little impact on the time and a little on resources for that project also. But I'll come back to that in a little more depth as we go into the report. So I'd like to move the attention to Page number 4 first, which is an overview of our quarterly result. We keep or I have a headline for this quarter, which is keeping focus on maximizing business opportunities in the challenging environment. And there's no doubt there's been some headwind against us during the quarter, both with some legal processes, but also we now start to see a real impact by COVID-nineteen. And when we come to COVID-nineteen, it's in particular in the soup soil section, we know that our stronghold in the market, that's in the commercial segment. That's where people have a private health insurance. And due to COVID-nineteen, we're seeing a pretty steep increase in unemployment. And although that is starting to turn the other way around, it's no doubt that that has had an impact on a number of people without health insurance or moving from a commercial health insurance to a Medicaid plan where subsorb is less reimbursed. But taking some of the headlines for Subsorb and why we actually believe that we are resilient, which I'm pretty sure some of you would say, so how can you say you're resilient? You reported a decent drop in sales compared to last year. First of all, because a lot of the drop is based on these former or all of the drop more or less in demand can be explained by the decline in these former exclusive contracts, UnitedHealth Group and Humana. And we're known about that for more than a year now. The other part is we're actually doing it pretty well in the market access arena and take the largest single payer in the commercial sector, Express Script and Cigna, have now decided to put Subsalt on as the only branded product on their commercial and Medicare formularies for 2021. The commercial formulary is actually already in effect and the Medicare one will be from 1st January. And to do that in a situation where you have heavy generic competition is quite an accomplishment. And Aktil now makes SUSAL the only branded product that is preferred by all of the 3 biggest PBM is Questscript, Optum and Caremark. That's a total of 59% of the private health insurance market where Subsalt is now the only preferred branded product in the category. When it comes to our overall net revenues, we have seen a decline. A lot of that is explained by Upstart. We knew about that. We've known about that for basically several years now. We have also guided about it. So that's not a surprise. We've seen in the quarter, we actually saw a drop in the currency of 9.1% in the currency between Q2 and Q3 of U. S. Dollars. That, of course, has a big impact on our top line as we don't hedge our dollars. And then, of course, we have seen some decline in subsalt demand. On top of that, there was an onetime effect for quite sizable change in inventory for some of the wholesalers during the quarter. But these wholesaler levels normally they tend to normalize when you're waiting a few quarters ahead. So in the quarter, we saw a slight decline of 4%. And we think if we combine the COVID-nineteen and look at the UnitedHealth Group and Humana, that actually explains it's a full explanation to that drop. And here, the COVID-nineteen effect, I actually believe that, that one will disappear when we see employment going back. But of course, it's a very uncertain situation at the moment. Our EBIT in the U. S, and this is something I'm really proud of in this quarter, is when we see that we get pressure from on the top line, we also immediately are able to respond on the cost side. And here on the U. S. Pharma side, we have seen a significant a good improvement if you look at on the cost side, which is basically putting us north of 50% in the margin. We have a guidance for the full year of 45% to 50%, and we're now increasing that guidance to exceeding 50%. And if you look at our EBITDA and also on our earnings, then if you exclude the digital therapy, the company is actually still profitable. So digital therapy had an investment when we exclude the digital therapy investment, we would actually have an EBITDA, which is of 50.3%, which is a pretty strong profitability if you look on the revenues that we are coming in with, with Subsoft. And then when we come to the earnings side, the big impact on the earnings is partly is exchange rate. But even if we ignore that and just look at the tax changes, you would have seen that the earnings would have been positive also had we adjusted for that. So the negative earnings in this quarter is actually not something that makes me worried at all. That was something that we expected due to the investment we have made in becoming the leader in digital therapies. And as I started now, when we have been working for now with about, what is, 5 months in the market with the T cell therapies. And one thing that is quite clear is we're coming in with a complete new product categories. And that's something that where the positive is, there's a lot of interest and excitement about these new opportunities. But there's also a lot of hurdles from an administrative perspective. How do you implement these tools into the healthcare system? How do you get the payment processed if you're insured? And all of that is something we have been fully aware of and that's why we have worked with, I would say, a record speed to finalize the development of our customer support system and we were ready to go live with our VOBEDA system in the end of September. And anyone who have worked in the U. S. Environment would understand the complexity for building a system that can both manage cash payment and also manage insurance claims and other types of reimbursement and have all of that built into one system and do that in just a few months. So I'm quite proud of what we've accomplished there. The other thing that is important is that when we look strategically on digital therapy, we see that this reimbursement process, how to manage the payment process is really a hurdle that every other company in this sector fights with. We had a competition where Rexel was co sponsoring together with a company called LifeBulb early in October, where a lot of companies in the digital health space were presenting a business case. And then in the end, we decided to revolve 1 of them with $25,000 But the consistent feedback we got from them was the hurdles that they were seeing when they were working to get reimbursement. So the investments we are doing right now to build a system that's not only applicable to Boveda, but basically to any other digital health system digital health product that we can see is something that I'm sure will pay off not only for the products we have, but also the attractiveness of Oraxol to identify new products that we can acquire. And then finally to our pipeline. And here we have done a review together with our Board of Directors where we looked at the different pipeline opportunities, timing, the commercial potential, the likelihood for success and we decided to put most of our resources into OX124 from a pharmaceutical perspective and of course to continue our digital therapies. The 2 other products, ORX125 and ORX338, we have decided to slow down. That's not a stop. It's a slowdown on these two projects. When it comes to OX-one hundred and twenty five, some of the issues that we're working with on OX124 based on the feedback we have from FDA and particularly around some of the reliability data we need to show on the devices is fully applicable on OX125. So all of the investments in OX124 right now would be something that would be needed for OX125 also. So there's really no need to progress with OX125 before we have solved these issues for OX124. When it comes to OX338, we have very good data on the first small clinical trial we had, but we also saw a need to continue our formulation development. And we are actually doing that right now both internally and together with an external partner. But we are slowing down the investment in the project to be able to fully focus our resources on OX124 and digital therapies. When it comes to OX124, we are moving the timelines a little and we're right now still aiming at a filing in the end of 2021, but we see an increased risk that, that is moving into early 2022. And the reason for that is basically 2 things. 1 is that we have some new policies from the FDA where we need to show improved reliability data. That's not only for us, it's for every other product in the category. So if you can solve that, that's actually increasing the hurdles for new competitors. That is something we have to work quite intensively on. And the other area is COVID-nineteen because some of these policy changes that we're seeing, we would really benefit of working together with our sub suppliers to solve some of the documentation needs that we have been asked for by the FDA. And right now, due to COVID-nineteen, we can't do that. And I think that is I know that is a hurdle for us. But we still see that the project is making very good progress and we don't see any showstoppers or risk that the products won't make it to filing. But there's a lot of work ahead of us and we now see that it will be into move the pivotal trial that we had scheduled in Q4 this year will now be moved to Q2 next year. The important part of that is that, that was never on the critical timeline. So the pivotal trial has always been something that we could move without impact on the overall timeline because the real critical timeline is on the manufacturing, the commercial manufacturing of the product. And that's the one that's impacted a little bit with these reliability data we need to generate to the FDA. So just to summarize what we are working on, and I see no need for us to reconsider our strategy. We are working with SUBSOLB as our main profit contributor. And as a very strong foundation, we're working to broadening our commercial footprint. And we've done that through entering little therapies. We've done that by now setting full focus on one of the pipeline projects to be sure that we can get that all the way to filing. And we're working actively with business development to find new opportunities right now predominantly in the digital health space where we believe that we have a good opportunity to build from this infrastructure that we have invested in the U. S, but we're of course also looking at pharma opportunities should such an opportunity emerge. Then moving into the digital health on Page 6 and now to 7. Again, a summary for some of you, some of these slides will be a repetition of what we presented earlier in October. So our strategy right now is basically building based on the 3 products we have, Duprexis, Covida and Modya. We want to establish a platform that enables distribution, payment processes, customer support. And on that scalable platform, we're looking to expand our presence and add new products. One of the activities we've done is that we're working through the light bulb initiative where we basically had a beauty contest of I think in the beginning there were more than 20 different companies applying. And in the end, I believe it was 8 companies that 8 or 10 companies that presented to a panel and one of them were then decided as a winner. But that gave us a very strong insight into new projects, new exciting companies. We're really in the early stages. So to see are there any of these where we could do either partnership or probably also acquisition opportunities. And this is really part of the strategy right now is to build a core digital therapy engine where we can add on more products on top of those we already have. Moving to Page 8. So a short summary of the products we do have. For those of you who are new, we have Duprexis, Vovida and Mordea. Duprexis is a digital therapy for depression, Mobida for alcohol misuse and Modia is for opioid use disorder. We see all of these have a substantial potential. We're talking north of 10,000,000 patients potential in both Duprexis and Morbido patients who would need would benefit from these tools. And when we come to MUDIA, we have a smaller group of patients in treatment right now, but we also have a north of 10,000,000 patients who are suffering from opioid dependence. So these three disease areas are definitely very exciting and an area where you have a lot of unmet patient need, where we think we can play a role, which could lead into quite substantial sales numbers when we evolve the company. Moving to Page number 9. So what have we done during the last quarter? The focus has really been for us to identify the right payer models. And those of you who listen to us, that has been the consistent story. We are basically looking have worked during the Q3 to understand what kind of model would work in this space. We have identified several different opportunities right now, which we have then integrated into the system that we launched in late September, and we're now basically rolling that out. But rather than doing a big broad rollout, we are targeting certain patient groups, certain regions in the U. S. To test that this is really working in a smooth way. So rather than coming out with a very broad big bang and then find out that the system is not fully operational or there's flaws in the system, we're now doing a very targeted approach. But we are starting to see some good tractions with several physicians who wanted to work with us and we also have some first purchases of the product. So one of the things that has been available since 25th September is for VOBEDA, an out of pocket solution, which today allows patients to buy for credit using debit cards or credit cards. And we'll also launch an opportunity to pay in installments quite soon. So there will be a lot of options for the patients to work everything from your employer paying to your insurance company paying all the way down to paying installments of the price of Morbida. Moving to Page number 10. So the system that we launched on the 25th December is basically a system where you go in and you get your access key. And you can then ask us to manage and support you in the insurance claim process. We will even soon offer a solution where we can guide you to a healthcare professional, so you don't only have your digital therapy, but we also put you in contact with a healthcare provider who would help you throughout the treatment. And then of course, the customer support systems who have customers who have different issues with locking in over the systems and so forth. All of that has been built to the 25th September. But we see that, that is evolving. I think the next add on is the installment. The people can basically pay in installments on a monthly basis rather than one fee. And then we are also looking to add on this opportunity to work with health care providers relatively soon. Moving to Page 11. So where we are right now is we're making some pretty good progress. We have found a basically confirmed that there's a big need for the product in the market. We have very good discussions with both national and regional payers, health care providers and other distributors that we've been looking at. We have launched the Bovida page, and we're soon going to add on to Prexis. And now Motea, which is the opioid use disorder digital therapy, has been finalized from a technical perspective and now we're moving into a technical testing before we'll start testing it with a select group of patients probably late this year. However, we also need to recognize this is early stage. We have no established reimbursement distribution process for digital therapy like the one we have for pharmaceuticals. So we need to find a way to navigate around in this reimbursement landscape. I think we have made very good progress with this customer support system I just presented. But I think this is an area which would need to evolve not only for Rexup, but for all other companies in this sector. We have started in October to promote directly to physicians. Our field forces, all of them were in a big meeting, virtual meeting in the beginning of October to be educated in the tools and they have now started to promote OIBDA to the physicians. The practice website is coming a little later in Q4. That will be very similar to the VOVITA website, but we're looking forward to launch that soon. And as I said, Modilla, we are now starting the technical testing, moving to patients late this year, maybe early next year, but definitely targeting a broader launch in the second half of next year. Moving to Page 12. So we already announced 2 partnerships. 1 is with GoGoMeds. GoGoMeds is a distribution partnership where they have a relationship with a lot of court systems in the U. S. With prosecutors and district attorneys. And they are basically offering VIBITA as an option for patients who would take who have been stopped with driving under influence offense. And this become an option for them to show that they take care of their problem. But GogoMeds have very good relationship with a lot of employers in the U. S, and they also have a right to distribute our other products. But we start up with the Vovita model. Gokomets wants that to go through some of their own systems to be able to manage the payment process, and I believe that they are now planning to go live a little later in November. Trinity Health is a large health care provider in North Dakota where we as a first step, we have provided the employees of Trinity Health who are North Dakota is right now the epicenter of COVID-nineteen. So we have offered them the employees of Trinity Health Care an opportunity to access the Prexis and Vovita, and we've seen a pretty good uptake for that. But I will also highlight that Oaxaca decided to sponsor that to be able to do it fast rather than finding a payment model. So during the COVID-nineteen peak, we will sponsor that process. But we're also working with Trinity Health to identify other groups where we will have a more commercial partnership with them in distributing our solutions. Then moving to Sub Sahb on Page number 14. And as I started the call with, we have seen a quite strong growth in the market. However, when we come to the commercial market, which is where we have a very strong reimbursement of 98% of the patients have access to SUBSOV. That market have actually declined both in Q2 and Q3. We find one of the explanations to that is definitely related to the COVID-nineteen and all of the restrictions put on people in the U. S, which have led to a lot of unemployment. The positive is, of course, that the unemployment numbers are now improving in the U. S. But at the same time, we also see that the COVID-nineteen is continuing to create new restrictions and we create an uncertainty around what market conditions we have. But if we look beyond the COVID-nineteen effect, as I said in the beginning, we actually see that we are standing against this negative decline in commercial pretty well as we actually see no change in our open market. That's where nearly all of that volume is. And we think that there is a good opportunity to grow again when the commercial segment will rebound, which is will sooner or later when people get back to work. When we come to other effects, we did start with our field force in the field from July 1. All of them were back in the field meeting the physicians. But we have seen that there have been restrictions in the access to clinics and also to prescribers. So we have a lower number of meetings than we had before. About half of the meetings we have are now with the physician and the other half is with office staff. And actually 20% of the calls are done virtually rather than in face to face meetings. And this is very fluctuating depending on the COVID-nineteen situation in the individual states in the U. S. So this is an area where we are still struggling. And while we've seen it gradually improving, it's still not where we were before the COVID-nineteen pandemic started. And then to the sub sort of situation right now, we have Express Script and Signa who have listed us on their preferred branded product formularies, both in commercial Medicare. We remain the we are now the only branded product on preferred branded product on the 3 top 3 U. S. PPMs covering nearly 60% of the market. We have not lost anything in our reimbursement coverage for 2021 and there have been some small changes in Medicaid, but that's not affecting the overall coverage rates. We see that sub start is dropping 4% in demand, but basically nearly all of that is explained by a drop in UnitedHealth Group. The positive part is in UnitedHealth Group and Humana. We have seen that we're actually starting to get to some of the lowest level of decline that we've seen since they made the change. Moving to Page 15. As you can see, the market growth has continues to be very strong. This is total market growth of 13%. However, the fastest growing part is where we say is non reimbursed, and that's basically in the Medicaid space. And as I said, the commercial part of the open segment actually declined during Q2 and Q3, which made it more difficult for us to grow. Moving to Page 16. This is more of a breakdown. And I will just highlight that the top line here, we have decided not to include any institutional sales. Some of our open market you would see is including institutional sales, but as we don't have that on a monthly a weekly basis, we have excluded it here. So when we look at the open market, we basically see nearly a flat development throughout the year. And this is where we are reimbursed and Subsorb has access to the market. So while we're not growing, we are not declining anything significant in the open market despite the decline in the overall commercial open market. When we come to Humana and UnitedHealth Group, as you can see on the green line on Page 16, you will see that the drop during the quarter is now 5.2%, which is much slower than the drop that we saw the previous quarter, which was 10%. And if you look at the drop more in granularity, you would see that most of that drop was actually during July, whereas during September has more or less been flat in United and Humana. And breaking those two down, we will see that basically all of the drop in September, the minimal drop there was in United and not in Humana. When we come to the non reimbursed, we also see that it's basically been flattening throughout the latter part of the year. So moving to Page 17, and this is a new slide and we bring in this section. But that's to illustrate how the effect we have on sales in this quarter is actually explained fully by United and Humana. So if you look at from the left, that is our Q2 sales. Our open segment, nearly no change non reimbursed, nearly no change UnitedHealth Group and Humana, we saw a drop, which is explaining the 4% drop in demand. Then during the quarter, we actually saw a quite sizable decrease in the inventory levels compared to Q2, which had a quite big negative impact. We did have a smaller adjustment for returns. So every month, we are reserving money for returns. And then we are looking back and see did we get the returns of products that we have reserved for. And if we don't, we're adjusting that. And that's something we have done in this quarter and actually did previous quarters also. And then when we come to our payer mix, we actually saw a small very small impact, nearly nothing between the quarters. What we have seen is that the Medicaid plans we have in open have grown, whereas the commercial have declined a little. So while the open is nearly flat, it's driven by a little more Medicaid than commercial. And then maybe one of the largest impact during this quarter is in the currency effect where the Swedish kroner has strengthened towards the dollars with nearly 9.1% if we look on average between the two quarters, which is quite a significant effect. But what I wanted to highlight is really we don't we have a flat sales. I would love to see it growing. But if you look at what's driving that flat sales, we are actually growing in Medicaid, but we are then losing a little in commercial, but that what we're losing in commercial is very much explained by the COVID-nineteen and the overall decline of the commercial segment. And then we have these two plants where we before were exclusive, which is still spilling over to a slight decline, but it's really fading during the quarter. So summarizing, for 20 for subsol, if you look beyond 2020, we actually now see we have a where we have been strong before. We have now an even stronger market access position, in particular in the commercial sector, but also now in Medicare, where EskreScrip is not as strong as in commercial, but they're still a significant player. And we are looking into even in the Medicaid and public space, we have Louisiana Medicaid, which were announced early in the quarter, so effective from July 1. And what's really positive when we look into 2021 is that there's been no changes in the overall reimbursement coverage for SUBSOL into 2021, where Express Script, I would say that's a very good improvement, but that's more because of our competitor has been taken off the list than we've been added because we are also preferred on Express Script before. But the main branded competitor Suboxone Film has now been removed. When it comes to our field force, they are now back in the field trying to sell in the office space selling. But as I said in the beginning, we are not back at the same efficiency and reach that we had pre COVID and the pandemic is still creating some uncertainty and there's a lot of fluctuations in the outbreak of COVID-nineteen, which can have effect on our feed force ability to reach their customers. But of course, me, together with, I guess, everyone else in the world, are really hoping to see some of our colleagues in the industry coming up with a vaccine soon, so we can get beyond this pandemic situation. With that, I will leave the word to Joe DeFeo, who will take us through the financials. Joe, please. Good afternoon. If you go to Slide 20, this slide shows our drop in sales. We'll get to Zubsolve on the next slide. As you as we've made you aware from the end of last year, we lost our agreement with our agreement expired on Abstral. So we have lower Abstral sales of about $40,000,000 And so and the rest is Zubsol. So if you go to Slide 21, so is DUBSOLV. You could see our from this standpoint, the predominant loss is in, as Nikolai mentioned, the UnitedHealthcare and Humana. That's where we see the steepest decline. But as Nikolai mentioned, that's been starting to slow down and flatten out lately. The open, although it's down 3%, that's due to institutional sales. If you look at you take out the institutional sales, the rest of open is actually slightly up. And then the non reimbursed that's been flattening out. It's really flat right now, but versus last year it's a 3.5% decline. And then wholesale inventories, we did have the wholesale inventories were slightly up and then we have the return adjustment, which is slightly negative to last year. And then our price increase plus our payer mix has been positive. And as Nikolai mentioned, we have the exchange impact, which has been negative in Q3, much stronger sec than last year. If you go to Slide 22, this really shows this shows you our U. S. Pharma business, which is Zubsolv. On the left, you could see as our sales declined in Zubsolv, there's been less of an impact on gross profit. As you know, we've improved our cost of sales for DUBSOLVE and really taken full advantage of that this year. So the sales declines have been somewhat mitigated by the improved cost of sales, which makes our gross profit less of a decline than the sales. And then on the EBIT side, we still have a very strong EBIT and our profit margin or EBIT margin is over 50%. So it's been holding up very well. We do a good job of making sure if we see we're losing business, we adjust our OpEx appropriately to mitigate that loss on the bottom line. If you go to Slide 23, here's our P and L. We just talked about our revenue reduction, but it's less of a reduction when you get the gross profit due to our cost of sales. When you look at our operating expenses, selling expense is obviously up because we're investing in our digital business. But we also, as I mentioned, with the decline in revenue in Dubsolve, we've had a lowering of our selling expense. So there's been some savings there. The administration expense is up and that can really be explained by this FDA subpoena in the U. S. Our R and D expense is higher due to the clinical trial in OX-one hundred and twenty five and the final development of OX-one hundred and twenty four towards registration in 2021. And some of our internal costs are slightly lower. When you look at other operating income expense and then also look down at net financial items, those are negative and that's really all based on exchange as I mentioned the stronger SEK. The net financial items is due to the cash we have in U. S. Dollars at a stronger sec level, give us a loss in the quarter. But you can see year to date, we still have a positive and that really is explained. We took some very good opportunity as you may recall in the Q1 with a strong dollar to transfer a bunch of our dollars, a large portion close to a third of our cash, little more than that into SEK from U. S. Dollars. So we still maintain a gain year to date. The tax loss, this is the reversal of our deferred tax asset. And the reason for this is as we're investing in our digital, as we're showing some EBIT losses, where based on IFRS taking a conservative approach and we're releasing some of that we're releasing a deferred tax asset. It's important to note that that tax loss carry forward asset is still there. And so when we turn profitable again, we'll be able to regenerate this deferred tax asset and reverse these amounts. So it's more of a timing issue being conservative with where we are investing in our business right now. And that leads to where we are from a net profit standpoint. But as you can see, our EBITDA is a small loss. We're still positive for the full year for the year to date. Slide 24, these are our segments which we've been reporting. I already talked about U. S. Pharma. If we go down to digital, you can see the operating expense investment in digital. And as Nikolai mentioned, we just completed the payment and reimbursement processing system late September. So therefore, that's the reason we don't have any revenues in Q3. And then on headquarters and pipeline, talked about the loss of the Abstral agreement last year. So that's the reason for the reduction in revenues. And then the operating expenses are up due to our investment in OX124 and a little bit from OX125. So that's our segment. If you go to Slide 25, this shows our cash position. You could see our net cash position almost SEK370 1,000,000 and our liquid funds almost SEK600 1,000,000. The important thing to note here is when you look at cash flow from operating activity, despite our loss, our cash flow is negative cash flow is very small. And with the amount of cash we have, we have plenty of cash to invest in our business. The investment activities are mostly related to our digital business and basically we put almost all of that behind us now with those investments. And the financing activities are small, but you can see that we did some of those, as I mentioned, opportunistic things in the Q1 related to the strong dollar that was the financing activity we did year to date, but they're very small now going forward. So really when you look at this, our cash flow from operating activities is small. We do a good job of managing our cash. We do a good job of managing our expense base as revenues materialize. So we're sitting on a very strong financial position. And with that, I'll turn it back to Nikolay for the outlook. Thank you, Joe. So I think it's Page 27. We have made a few changes to our outlook based on this result. So the first guidance we have is that market will continue to show a double digit growth. There's no doubt that, that will happen on the full year. When it comes to sub sol net sales, we before said that we expect it to be in line with 2019. That one has changed and we actually now expect it will decline compared to 2019. But we do expect that our Q4 will be stronger than our Q3 result. Here, I will note that in the first version of the report, there was a typo. So the change was not fully implemented into the last version of the report. So you should use the one we have here and the press release that came later during today. We also in our OpEx guidance, we have lowered our OpEx guidance from SEK 750,000,000 to SEK 800,000,000 to now SEK 675,000,000 to SEK 725,000,000. Part of that is explained also by the dollar exchange rate because a lot of investments, in particular in digital health, is in dollar denominated. So that helps us to save some money during the second half of this year. But also what we're when we're looking at the business right now, as we saw that subsalt was not taking off and of course all of the COVID restrictions, the activity level in the field force is immediately spilling over into less expenses of running the field force. So all in all, we have decided to lower OpEx guidance for the full year. And then finally, we have the abstract royalties. I think that's more or less a given. And when we come to the U. S. Pharma EBIT, we have actually increased that to now exceeding 50% for the full year. And that's basically based on some of the reallocation of resources we're doing into digital therapies where we're moving people from the SupSol business into DTX. But yes, I will say that there's a lot of synergies between our digital therapies and our Sup Salt business. So there will be a benefit for both sides. But there is definitely an increased focus on DGX and we have moved some resources from one area to the other. Then to Page 28. Unfortunately, during the quarter, we had 2 new legal processes. One is that we received subpoena on July 14. We have, of course, engaged the U. S. Council to help us with this process, but that really hasn't happened anything since July 14. We have not received any further information or request than the ones that we were presented on July 14. So that one has right now stalled the process and we haven't heard back from the prosecutors and the FDA. When it comes to the patent infringement litigation against Sun Pharmaceuticals, we on September 13, we have filed an infringement action in New Jersey. That triggers a 30 month stay in the process from the FDA to review SUNS ANDA. And that would normally also be the guideline for how long time this process will be from a court perspective. I would say in these COVID times, we know that the court systems have been heavily under pressure in the U. S. So I think there's quite a lot of uncertainties to the time line. And I think it's safe to say it's not going to be accelerated, but there could be some delays. What I feel with the pharmaceutical process is that we have a very strong patent protection on subsalt. So I feel quite comfortable that we will be able to defend ourselves effectively also against this patent infringement. So just to sum up, while it's pretty clear that the quarter here was a disappointment for our stock market, I sincerely believe that there is quite a lot of good signs in our business. We are in a space where there is a large and growing market need. And I don't think any one of us need to open a lot of newspapers before we understand how the mental illness is increasing rapidly in the aftermath of the COVID-nineteen pandemic. Even Swedish television last week had a larger piece in one of the news casts about the opioid epidemic, the epidemic in the shadows of the COVID-nineteen pandemic. So there's no doubt all of the three areas, alcohol misuse, depression, opioid misuse is an area which is growing with an increased need for treatment. And that's right where we are. And even when the pandemic is gone, a lot of these mental illness issues will still be there. We are calling into digital therapies. It's a completely new business area for in the entire health care sector, but it's growing very rapidly. If you just look at some of the most largest deals that have been announced during in the health care sector the last half year, some of them have been in the digital health space. I know even in Sweden, we see a lot of the digital health companies are really thriving in this environment. And we believe that this is going to be a massive trigger for digital health to take place in the health care sector, and we are there right now with our portfolio. We have a very strong cash position. We did take a little beating because we still have quite a few dollars sitting on the bank accounts. So but at the same time, most of our expenses are in dollars as well. So that's in that way, we have a natural hedge. And we have the money we have and even if you ignore the bond, our net cash position is more than enough to drive OICs 1 to 4. And other have an existing infrastructure in the U. S, and it's more and more apparent in some of the works after the field force has started to promote Boveda. It's really a lot of the new leads that we have with customers is coming from our field force networks in their respective regions. So for me, that's a really strong evidence that there is a strong synergy between our field force and our digital therapies venture and new business area. And then we have a pharma pipeline and we have a digital pipeline, which is clearly in the right space from some of the needs that we see in the market right now where the opioid misuse disorder is increasing in the U. S. Unfortunately, so is the overdose. And I'm pretty sure when the overdose statistics come for 2020, we will unfortunately have seen a new record in number of people who are overdosing and the overdose is up predominantly from fentanyl. And that's exactly where we need ORX124, a new stronger, faster and longer acting overdose treatment for patients who are at risk or suffers from overdose. And with that, I will open up for questions. So thank you for listening for the last 45 minutes. Thank Our first question comes from the line of Samir Divani from Rx Securities. Please go ahead. Your line is open. Hi, everyone. I've got a couple of questions on the numbers and then perhaps one on DaVita. So maybe for Joseph. Just on the wholesaler levels, there's a bit of stocking this quarter, but the report talks also about it being lower wholesaler levels being lower than this time last year. So perhaps if you can just comment as to whether how are we at normal level wholesaler stocking levels for Zubsulf right now? That's question 1. And then just good to see the U. S. Margin improving on the commercial business. I'm just wondering how much more room do you think you have in terms of getting that margin up? Or are we sort of plateauing at this point? And then just on DaVita, I'm just wondering, Nicolas, you mentioned that you that the sales force has started promoting DaVita to physicians. I was just wondering what sort of feedback they're getting? And in particular, are you getting questions about reimbursement or challenges for them in terms of reimbursement? Thanks very much. Thank you. Joe, will you take the first one? The first two? Sure. I'll take the first two. So on the first one, yes, we are at normal wholesaler level. You can see that they're down versus prior year, but as demand comes down, you also have your wholesale inventory levels come down because they keep a certain weeks of supply. But they've been pretty tight and efficient there and that's also been why we've been able to keep our return rate lower and take some positive benefits from that. So, their inventory levels are at normal levels, and we continue to monitor them that they stay in those type of levels. Can you question 2 was related to the margin on U. S. Pharma. I believe the margin will actually get better. As we mentioned for a while, we have the infrastructure in the U. S. To support new products and now we have the digital products. And really in Q3, what you see right now is mostly all that infrastructure is sitting on U. S. Pharma. Now as Nikolai talked about, the sales force is now starting to get involved in promoting VORVITA and then next year they'll get involved in MODEA. Now we're going to start seeing some of that infrastructure move on to the digital business and that will actually improve the EBIT margin most likely in Q4, we might be we'll be in the mid, maybe even high 50s. Okay. And then the last question was on Vovita. So what's the feedback? So it's still early in the days with the field force, but we have some excellent examples of some of our sales reps who have been or health care liaisons who have been very active of building networks for people suffering from addiction. And one of the big issues with addiction, opioid addicted patients, we actually heard that from one very large clinic who said that when people come in and get treatment for opioid addiction, he actually feel he have a pretty good control of them. But the most difficult patients to treat are those who also suffer from alcohol addiction and have depression. So combining the opioid addiction treatment with SUBSOV with a treatment for the alcohol addiction where he really had no offering to the patients today, there's no tools available for alcohol addiction treatment, was a big opportunity. And that was clearly field force driven that we have a large clinic where we're now discussing a way for how he can add Borbida into the space. We have other examples where some of the physicians we have worked with in some of the northern regions have good networks into large employers. And some of these large employers have now led us into discussion with some employers about how these products could be added to the benefit plan for these employers. So all of these small opportunities and some of them actually pretty large opportunities are driven by Fieldforce who is now coming out with Vovita. And I'm pretty sure that, that will just build. But we will also see that some of the health liaisons are probably more pharma reps and then this more complex selling of these digital therapies will require either that some people will be replaced with other people or we are moving some people to work more with pharma and some other people will then come in to work more with digital therapy. And that's just all an evolution process we are going through right now. Then clearly, you're putting your finger right on the spot with the reimbursement. This is one of the number one questions we're receiving from all of the physicians is how can we make this reimbursed? What are the opportunities to get it reimbursed either as a pharmaceutical benefit that we see a prescription detects or as a medical benefit. And this is really one of the areas where we are working tightly right now, both with dialogue with insurance companies, also with the prescribers to see how we can create programs where this one will become part of their reimbursed business that they're providing. So this is an area that still evolving, but it's pretty clear that reimbursement is a very important topic not only for the prescribers but also for the end customers, the patients. And can I just ask one follow-up, Nicolas? Just on the sales team, how are they how's their reception been to promoting a DTM? So like, obviously, that's something quite new for them. So in normal years, I would have been with them on we had this what we call a POA meeting, so plan of action meeting, and that was done in the 2nd week of October. I would have been there with them. I would have been sitting with the sales team to get the feedback. This year, that was virtual. So I was, of course, included in part of the program, but it's not possible to enjoy or to join the full feedback and get that. I think the feedback you hear around the coffee machines is often much more honest and transparent than the one you hear in the rooms. And I'm pretty sure that you will have a broad range from those who are very comfortable and see this as a fantastic opportunity to those who are more nervous about it. But what I do see is that there are really some of the sales reps who in a record speed have started to generate leads to the digital therapies. And actually to the extent that one of the sales reps I was sending an appreciation email to just last week, copying in my full Board of Directors explaining what she has done in her region to promote digital therapy products because she's just generating lead after lead for these products. And that's an evidence of how the digital therapies the sales team can work with this. But then again, that was one sales rep. So we have more than 50 of those. So I'm pretty sure you have a like anything else, you have a normal distribution of those who really enjoy and find this is very exciting to those who are finding it a little more challenging to stop promoting these products. But again, this is something we need to learn and see who are successful and then how can we learn from their success and educate the rest of the team to do the same. That's great. Thanks very much. Thank you. We have one more question on the ball. Our next question comes from the line of Magnus Baader from Daret. Please go ahead. Your line is open. Yes. Hello. I was wondering a little bit about the selling expenses that were up in the quarter. How will the selling expenses develop in Q4? Of course, you're launching the digital therapy. So maybe there will be a new level that we have now in Q3 or Q4 or what do you think that selling expenses for digital therapies compared to selling expenses was subs sold, would that differ somewhat? Also, you're in red numbers on last row. So will Oraxol be profitable on last row 2021? And how will the digital therapies contribute in 2021 since you said you will show your preferred revenues in Digital Therapies in Q4? So I will start and then Joe might jump in and might even correct me. If we look at the selling expenses for our digital therapies, which is quite in line with the U. S. Pharma, then nearly all of the expenses on digital therapies is related to building up the system. Some of the system investments are balance sheet investments, but that's really minimal. So a lot of these investments are building all of the brand material, all of the educational material, building the homepage that you've seen we have launched during the quarter. And we are so it's a different type of expenses. It's basically marketing expenses more than its real field force, whereas when it comes to the farm expenses, that's nearly all field force, even though there is some marketing expenses also, but it's more sales driven. When we look ahead, as Joe said, we are expecting the U. S. Pharma expenses to go down a little as we are moving sales resources over to the digital therapies, which will mean that the digital therapy expenses will go up. And when we look at the expenses moving forward, I anticipate the total selling expenses for the Q4 will probably be close to where we are right now in the Q3. But it will be distributed more towards digital therapies compared to the pharma. So go down in pharma and go up in digital therapies. Then I would also say that part of the driver for some of these investments is really what's happening with some of the payers. So if we have a good dialogue with payers and others where we need to do investments in preparing material or even start launching, that would be a driver for increased investment. When we come into next year, we haven't provided any guidance. And I would say, at the moment, I don't see having a positive contribution from digital therapy is our priority. Our priority in digital therapy is to build the business area, get traction on the revenue side, get more patients, more customers to use the digital therapies. And as long as we're seeing that building, we will continue to invest. It's the time when you start to see that you have a strong foundation where you don't see those growth opportunities. That's when you will start looking at these products to turn profitable. But we're, of course, doing that with an eye constantly on our cash position. So I don't I will not say that we have a for digital therapy, which is really going to be a great investment area also for next year. It's not a priority right now to reach a positive contribution. And I would actually say that the more success we have, the longer it will take before it's positive contribution because then we see there's a continued opportunity to invest, to build and broaden out the business. And I can't give you more guidance on that for 2021. I would just add, when you look at Digital Therapeutics, you have to recognize there's 3 products. Velveeta is launching now and we're going to be using some of the resources like the sales force from U. S. Pharma. And as Nikolai mentioned, as we get more market access, then we will invest into the pulling through that business. The practices are now starting at the end of the year going into next year and then we'll have to evaluate where this business comes from and will we need it will it make sense to have a sales force also to sell the practice. So we're moving kind of more into that. The infrastructure has been built and now we're moving more into reinvest as we say sales opportunities. And then when you look at the back half of next year, Modia will come along, but we have this strong U. S. Infrastructure, particularly the sales force to sell that. So you can look at digital as a whole and say, okay, did it turn profitable. You really have to look at the 3 different products and where they are in their lifecycle as we launch them now, Herveta, now Duprexis is coming next and then Mor Dia in the middle of next year. Did you have more questions, Magnus? No, that's all for me this time. Thank you. Okay. Thank you. Thank you. Our next question comes from the line of Ross Blair from Rx Securities. Please go ahead. Your line is open. Hi there. Thank you for taking my questions. Just 2 today, please. Firstly, on OX-one hundred and twenty four, could you comment on what kind of reliability data are the FDA requiring? And secondly, on MODIA, could you provide some color on what the patient trial might look like starting in December? Thanks very much. Okay. On ORIX124, it's a policy that is applicable for all rescue medication devices as we understand it. The policy is that the reliability of the device has to be 99.999%. So one out of 100,000 devices are allowed to malfunction. The previous policy was that it could be 99.99 percent, so the one out of 10,000 devices that were allowed to malfunction. So of course, that is increasing the need to test and ensure that all parts of the manufacturing chain is fully functional and that you have control stations to ensure that there's no mistakes in the product. So basically, you have to add more control points into to the chain. Did you say the positive of that is, of course, that it when you saw that, that increases the hurdle quite significantly for other products to enter the same market. When we come to MUDIA, we are right now we have a couple of advisory boards, both with payers and health care providers during the last few weeks to discuss how the best trial design and the need for real world evidence is what kind of real world evidence do they think that they need. So we are right now finalizing the development plan for Modilla, but we haven't done it completely right now. So I will have to wait before I can share all the details of the plans right now. But we're, of course, drawing a lot also on the experience from Gaia, our partner in Germany, who have done multiple trials on all of their products. And actually, they were the 1st company to get a product fully reimbursed by the German government just a month ago with their anxiety product. So they have a good track record of driving clinical data that is convincing for both payers and regulatory authorities. So we're working closely with Gaia to finalize the design of our trials and evidence base that we think would be needed in the U. S. Okay. Thank you very much. Thank you, Ross. Thank you. We have no more questions from the line. I will hand it back to our speakers. Please go ahead. Okay. Thank you so much for all of you to take an hour out of your busy schedule. I understand we are not alone of presenting our Q3 results today. And I also heard there was an election in the U. S, which is taking some attention from some of you. So thank you very much for your time. And once again, while this has been a challenging quarter, I actually think and I hope that you understand that we see that there are a lot of opportunities underneath of the headlines of the financial performance for Q3, which is very promising for the future of Oraxol. So thank you for your attention.