Earnings Call: Q2 2020

Jul 16, 2020

Ladies and gentlemen, welcome to the Sobei presentation of the Q3 results. Through the call, all participants will be in listen only mode and afterwards, there will be a question and answer session. I will now hand over to Guido Hochulis, CEO. Please go ahead. Yes. Good afternoon, everybody. It's really a pleasure to have you here as our Q2 webcast. And I think with this, having said, I will be joined today by Henrik Stenqvist, our CFO and Milan Ustakovich, our Head of R and D. And I think forward looking statement as per usual. And why don't we go right into the beef of the presentation? Yes. So basically, this is a difficult environment, and I understand that we are one of the we are in the first group of pharma companies presenting. And I think, therefore, it's I think it may be worthwhile to understand what happened actually in this environment. And I just want to refer to U. S. Data that I just we just got recently a hold of. So basically, in the U. S, total prescription between the end of May beginning of June are down 6% to 12%, and these are weekly data, so they're oscillating. But I think more important is that NRIXs are down 30% to 40%. And I think it's clear that telemedicine is also not as effective as the usual pharma model. So I think when you look at our milestones that we have achieved in this environment, I think they have to be seen in view of this. So half year data are actually quite strong for us. We have 20% top line growth, 20% EBITDA, adjusted EBITDA growth. We have healthy cash flows, and we have been able to get make a significant contribution to fight against COVID and got 2 studies that we talk later on published. We completed the enrollment of 2 key studies, the 6 trial in MAS CEGER and the CIT trial, which is also not understood in this environment. And we gain market share with Elocta and Alprolix. I think this is something that we want to spend a little bit more time on because it needs to be understood, particularly when you look at our Q2 number. And we have made substantial progress with our new launches despite the lack of face to face interaction, meaning Doctor. Leggamifant. And we are building the future. We're able to transact the license agreement for the global license of SEL 2.2 from Selecta. So overall, actually, we felt it was an ambitious agenda. And I think we need to understand a little bit more what are behind the headline numbers that you have all seen. Next slide, Peter, please. So these are the data as they stand. So I think important to note is and the narrative has been partially given already, we have a 4% patient growth give and take for our hemophilia product portfolio quarter on quarter. And this in this environment where not a lot of switches have happened. Doctor. Letty talked about 52% quarter on quarter growth. Dummy fund, 27% quarter on quarter Kineret, we maintained a very solid performance with 24%. And with Synagis, because I saw a couple of comments, I think you just have to recognize that the season last year was unusually long. Hence, we had more significant sales in April, which we didn't have because the season this year ended earlier. But we had a very successful season, as we outlined in the Q1 report. So there is nothing down with synergies. In fact, we are very proud of what we have achieved. Next slide, please. And here, you can see the quarter on quarter, let's say, development versus a half year development. And I think there are quite a bit of adjustment that has to be recognized when you look at it quarter on quarter. And partially, they are driven by stocking effects. But as you will see later, the consumption per patient in some countries in Europe in hemophilia has come down, for instance, and that basically has affected our results. And it's worth mentioning that Q2 in 2019 was also strong. But these effects are more smoothened when you look at it on a half year basis. And this is 17% growth at constant currency. At actual currency, it's actually 20% growth. And important to note is that the core business in the same period, the product business in immunology and hematology has improved considerably faster. Next slide. And this is, I think, something that we try to explain now what actually happened between in Q2, now what actually happened between in Q2 to make the performance a little bit better understood. We had an adjustment of our inventory, let's say, that reflect we felt give and take. In the example of our lock service was onethree of our growth last year last quarter was driven by the stocking effect, and that's around SEK 140,000,000 to SEK 150,000,000. That was a stocking effect. Then we had a negative effect from the patient consumption. And this is something we didn't really have on the radar, but I just saw market data, for instance, from France that is consistent for the entire hemophilia business. Where basically patients, because they didn't want to go to the physician office, they wanted to stretch essentially their effector. And elective surgery did not happen in Q2. As a consequence, we had a negative effect that outweighed our patient growth. Now we think that this negative effect is of a temporary nature, and we believe that this will correct itself during the second half of the year. But and then you need to understand that at the same time, we have a 21% H1 versus previous year patient growth with INOCTA and a 29% patient growth with Alprolix. And basically, I just want to give you some thoughts that we have become the number one prophylaxis company in Germany in Q2, and we have not lost any market shares in hemophilia in France either. So this gives you a little bit of a perspective that we do not have a competitive topic. In fact, we made significant progress. But when you look at the quarterly results, this is not as visible. On a half year basis, I think there's a certain smoothening effect. But still, the consumption per patient is an effect, obviously, also on a half year basis that we still think will smooth itself out during the second half. Next slide, please. For us, the partnering with Selecta is it was a fantastic move, let's say, because we get access to a very important product in chronic refractory gout. And we think that with this pegylated uricase that is powered by the ImmTOR platform, Essentially, it's a repamycin platform that can be also used in gene therapy to mitigate the effects of immunogenicity. We think that we have a very unique product, and there are around 160,000 patients. And we think that this product, for sure, could be useful in around 10% of those patients. So it's a very significant alone in the U. S, it's a very significant opportunity. We got the global rights, and we got the share in the company. So on the whole, we think it's a very strategic transaction in the immunology sector that is on target with our strategy. Next slide, please. So summarizing this first part, we continue to make significant progress in hemophilia even in this difficult environment. Strong progress with DOPTELET despite lack of face to face interaction. The Gamifant quarter on quarter strong patient growth, and we'll show you some data later. Yes, it has been a price effect, and yes, it has been an effect from the lower weight of patients. But also, over time, these effects will be washed out. Continued growth with Avast Kineret, progress in R and D, as I pointed out and portfolio expansion. So next slide. So now we go into the business review of hematology. And here, you see basically for both products on a half year basis to show the progress that we have made. But I think important just to note is the patient growth and I think and that we basically are able to continue expanding our share even though it's much more difficult in a Q2 environment to switch patients, but we were able to do so. And that basically gives us the confidence also for the rest of the year. Next slide, please. And here, you can see the progress that we have made with DOPTELET, actually quite substantial and using here, let's say, units as a proxy. And that gives you a feeling that we are actually making great strides with this product, very, very optimistic with the product and very gratified that despite this difficult environment, we were able to complete the enrollment of the CIT trial. And the team at the Dova is doing a fantastic job, very proud of them. Next slide, please. And then we basically want to talk about immunology. Here, you have to just notice notice the seasonal effect of Synagis and also the effect that we had such a fantastic season end of the season in Q1, but it ended earlier. Hence, the Q2 comparison for Synagis is really not relevant. And let's say, with Gamifant, we are now making some progress. And maybe next slide. And here, you can see basically the progress on a patient base. And basically, when you would index this, the absolute patient growth in Q2 2020 versus Q1 2020 in comparison to the progress we have made 1 year ago is around 50% higher. So it's a significant uplift of patient population. We wish it could be faster, but you have to acknowledge that this is significant progress as the economics actually are more influenced by the price reduction that we have established and by the lower consumption per patient because of the lower weight. But as we're expanding the indication, we also think that this will we will continuously grow up the product, and the product is on a good track. Next slide, please. Kineret continues making continues is continuing to make good progress, as you can see here. And we think that this is a product that has significantly more potential, but it's a crowded environment and it has shown some positive effect even in a COVID related environment. Just want to show you one slide and then before I hand over to Milan. Next slide, please. And here you can see one of the studies that was just recently launched, published in May this year in severe forms of COVID. And you see a beautiful separation of the Kaplan Meier curve and an improvement of survival. And basically, whilst you can always argue that there are limitations to some of those studies, but we were very happy and this confirms our hypothesis that Anakinra can have a significant role in this area of hypoglyphin inflammation. And basically, many authorities have now a positive to a neutral view whilst other compounds have been dismissed in this treatment regime. And we have currently 2,500 patients in different trials ongoing. Some of them have the grade of Phase III. So we are looking at this quite optimistically moving in the future. And I think this is a good time now to hand over to Mila. And maybe Mila, you can share your view on Kineret and maybe some of the data that we are generating. Yes. Thank you very much, Gil. Please turn to Slide 18. So on this slide, we're showing some additional data through the data that Gil just showed. Another retrospective cohort study, this one was performed in Italy. And this was from a group of patients that had a COVID-nineteen infection and they had acute respiratory distress syndrome and they also had hyper inflammation. And what we're seeing here in the 20 19 that we see tighter dose amapeno in comparison to the historical control of 16 patients. Then first of all, anakinra reduced inflammation. It also showed improvement in respiratory function. And then also, as Guido mentioned from the previous study, also a survival benefit. So when we add up the data that has been accrued on to now with anakinra, we think that these continue to support a potential benefit of Anakinra in this patient population. And of course, we can say on the strength of that, we will continue to support research into this area and we will also evaluate when there may be sufficient data also from randomized controlled trials, whether we can engage into a dialogue with regulatory anakinor here. And if we can move to Slide 19, please. So as Guido already mentioned, we have announced a partnership with Selecta around treatment of patients with refractory gout. So gout is an inflammatory disease that is essentially caused by elevated levels of uric acid that subsequently leads to the position of UAV crystals. This can occur anywhere in the body, but most frequently it's seen in the joints. If sufficient crystals accumulate then these can cause a trophi that may cause pain and restricted mobility. And as shown on the right hand side of this slide, complications of chronic gout includes joint deformities with potential disability, but these crystals may also form in the kidneys and here they may cause obstruction and or infection. Now refractory gout, which is, I would say, the potential we're discussing here with 212 are patients that are not controlled on conventional therapies, and I will share a little bit more of the data on the next slide, which would then be Slide 20. So it turns out that humans do not have an enzyme that can break down uric acid. So whenever you give the recombinant enzyme, this will elicit a very strong immune response in humans. And this not only causes safety concern with infusion related reactions, but also prolongs the efficacy of the enzyme that is being infused. So the beauty of 212, as Gino mentioned, is that this is a combination of the uricase enzyme and also rapamycin nanoparticles. And these rapamycin nanoparticles, when given together with uricase enzyme, causes tolerance induction. And this is what we're illustrating on this slide where we see 66% of the valuable patients from a Phase II study responding with serum uric acid levels less than 6. But not only that, but also a very significant reduction in serious infusion reactions if the INTRO or the rapamycin nanoparticles are added to the combination. So if I can have the next slide, please, which would then be Slide 21. So there is a Phase II study ongoing comparing T12 to pegloticase. The study is now fully enrolled. That's some early data that suggests a lower withdrawal rate in the 212 arm versus pegloticase, which further supports the potential differentiation of the 212 molecule. The Phase III program that I'm showing on the right hand side here has been agreed with the FDA and consists of 2 pivotal trials that are planned to start later this year. And if we can move to the next slide, which would then be to Slide 22. Then this slide illustrates how we continue to build the R and D pipeline around our 2 core areas being hematology and immunology. And just to give you some updates, since the last time we showed this slide, we have added 212 in Phase II, expect to start Phase III later this year. As Peter mentioned, we completed the enrollment in the chemotherapy induced thrombocytopenia trial with avatrombopag, and we expect results in Q4 this year. We got approval of FMF in Europe with Anakinra. We very recently submitted the 5 in the U. S. For Anakinra and DYRA. The 5 is under validation. We plan to add additional sites in the U. S. For the COVID-nineteen study in August to increase enrollment, and we also expect to initiate the Phase II study with emapalumab engraft failure somewhere around year end. And with that, I would like to hand over to Henrik for the financial results. Thank you, Milan, and good afternoon, everyone. So let's move to next slide and look at the financial summary for the quarter and the first half of the year. The revenues for Q2 amounted to 3.70 decline of 3% and 4% at CER. In Q2, as we heard, we had to pay back for some of the favorable impact that we reported in Q1, now in the form of destocking and other negative factors such as reduced consumption impacting from COVID-nineteen. So it's actually also relevant to reflect over the half year situation where we see a growth of 20% or 17% in CER. As we move on from revenue, we increased our gross margin to 78% in Q2 compared to 76% in 2019. We continue to trend positively due to various favorable product mix, but also including the diminishing share of the non core specialty care business. We expect to see an accelerated decline in specialty care in H2 as a result of discontinued products. The COVID-nineteen situation with lockdowns across most markets led to lower activity level and a lower spend in Q2. Operating expenses in Q2 of SEK1.344 billion were, in fact, SEK75 million lower than in Q1. And as a result, adjusted EBITDA reached SEK1.18 billion for the quarter, corresponding to a margin of 33%. So we hold the margin well because this margin reflects the seasonal weakness in Q2 relative to Q1. And as we can see, the margin year to date of 41% is in line with the same period 2019. Looking now a bit into cash flow and debt. Despite the relative seasonal weakness in Q2 that I just mentioned, we had an extraordinary operating cash flow in the quarter. And this is mainly the result of the reduction in working capital, following the collection of receivables from the high sales levels that we reported in Q1. And as a consequence, net debt was reduced to SEK11.8 billion from SEK14.2 billion in Q1. And if we switch to next slide, this illustrates the net debt development over the recent quarters, and it's evident that we continue to rapidly delever the company, having levered up in 2019 to finance the acquisitions of Synergies, Galifant and Dova. From the page in Q4 'nineteen of SEK 15,400,000,000, We have delivered now to SEK 11,800,000,000 in just 6 months. And this is, of course, very satisfactory, but we should also consider that Q3 and Q4 are expected to be a little less prominent in terms of cash generation due to the seasonality and the need to expand working capital, mainly because of the synergies we've seen. The net debt of SEK11,800,000,000 corresponds to the leverage, which is now down well below 2x EBITDA on a pro form a basis, which is, of course, very comfortable. And we maintain available liquidity of more than SEK7 billion despite maturities occurring during this quarter. And this position of financial strength, of course, provides us with opportunities going forward. And with that, thank you. And back to you, Guido. Thank you, Henrik. And maybe we go then to the summary. Next slide, please. Yes, so basically, when you look at it, we are making progress in a number of areas. With Fluorio, our digital platform, we are working on we have made significant progress more than doubled our patients on the in Q2 versus what we had. The project is on a good way, and it's starting to become meaningful to a larger group of patients. We have our trombocap with the CIT trial we talked about. ITP currently under review in Europe, and we are ready for launch in CLD and waiting now for the right environment to launch a product in Europe. With regard to the let's say, with regard to Anakinra and immunology, broadening the foundation, you have seen the data on Anakinra, emapalumab making at least on a quarter to quarter basis, on a patient basis, nice progress. And with SER-two twelve, we think that we have a very meaningful addition to our immunology franchise and synergies we have talked about. And I think it's also important to note that now with portfolio, we further expense the company also geographically. We talked about expansion into China last time. Last year, it's Q1. And now we have set up a company in Japan as well. And we think that particularly our immunology franchise would be very relevant for those countries. Next slide. So when you basically look at the results, yes, there is some adjustments in Q2, but we are convinced that we see very strong signals from the market, from patients, for all our products. And we are not for our core products, we are really not losing anything. So we are gaining share, which is very, very useful. That makes us, even in this very uncertain environment, confident to confirm our current guidance and, let's say, and think that we can continue growing double digit our 2 core business areas. Core business grows well above 20%, 22% in constant currency. So we think that we are in a good way, and the same applies for earnings. Our EBITDA guidance also remains unchanged. And we think that we want to continue building the business. See, that's the example of Doctolix. You've seen this. There have been some question marks around the Doctolix performance. But the percentage of 52% quarter on quarter eases out the milestone. This is pure operating business, around SEK 100,000,000 in Q2 and around SEK 65,000,000 in Q1. And then in addition, we had SEK 87,000,000 euros of a milestone payment for China. So that's really where we stand. So quite feeling quite good about performance. Maybe it's a good time now to invite questions as they may arise. Yes, maybe we go to the question and answer session and the operator can help us. Thank you. And our first question is from Yingying Jeffries. The floor is yours. Thank you very much. So I have a couple of quick questions on the clinical data time line and then one financial question. So on CIT, I think previously you mentioned data for avatrombopag in Q3. So it kind of slipped to 4Q. So would that be kind of only part of a 4Q? And for KINARET and Gamifant Phase III trial for COVID-nineteen, given the patient enrollment now, and you mentioned increasing the clinical sites, do you think we should expect the data at least before year end? And the last question is on EBITDA margin. 2nd quarter EBITDA margin of 33% is similar to that of last year. So should we expect the full year 2020 EBITDA margin to be similar to 2019, which was close to like 42%? Thank you. Thank you, Eud. Maybe I start just priming it and then I can invite Milan and Henrik also to comment. Let's start maybe with regard to these COVID related questions. We think that we will have a continuous flow now out of these very different trials of information and data during the course of this year. And it's obviously it's always a question Some of them, let's say, will be Phase III grade. Will this be enough to get an indication? I mean, it's not I mean, we can we just make the data available. But we think with all these information and data that we're collectively providing, at least as meaningful evidence generated. And I think this is reflected in some of the positive views that we see around the world regarding the product, in particular, in view of this very favorable safety profile. So we'll but we will see quite a lot of data now coming in during the course of the year. Obviously, you have seen a reduction of ICU patients in Europe, but you have seen at the same time significant number of ICU patients in Europe and other parts of the world. So with this, there's sufficient patient potential. The other thing is now with the CIT trial, we will actually, we are on track exactly where we wanted to be. We will now, in this quarter, we'll basically conclude the trial. We'll then prepare submission. So we are still on track for a 2021 launch, yes, so in the U. S. So I think that's I mean, this is I think we are quite happy that basically this works out. And with regard to the EBITDA margin, I think you have seen this, that there was a rise, obviously, during the later part last year. I think we would rather stay consistent with our guidance, 5.5% to 6.3%. And then basically, it basically is the EBITDA margin that it will be, let's say. And then also in terms of top line, we don't want to speculate too much, but it will be, let's say, somehow in a range. And I would rather refrain from providing more precise guidance. Maybe we start with Milan, do you want to comment on some of the questions? Yes. So thanks, Ito and Joon. So with respect to the CRT trial, I agree there's not a delay. You can say it's more like whether you get data at the end of Q3 or early Q4. So I think that one is okay. Then we have the COVID-nineteen study. We initially was under the impression that we would be able to enroll the study in Italy. So we have now 4 and 6 sites. With the reigning pandemic, we are moving to the U. S. I think maybe unfortunately for the community as such, the pandemic continues. So we plan to add probably around another 10 sites in the U. S. In order to complete enrollment of the trial. And I think it's difficult to speculate. Depends very much on how the pandemic evolves, how long time it would take to enroll the patients. And I think, I don't know, Henrik, there was a question for you also, I think. I think Maybe we then open the floor to other questions. I hope Pierre answered the question. The next question is from Christopher Houde, SEB. So the first question, the EU ITP timeline is still 2021, but why the delayed launch in CLD in the EU? Because I think at the deal announcement, it was originally 2019, is the first question. Then can you provide some detail on your expansion into Asia? I mean, particularly, what products are sold directly by you there now? And what are your plans for the future with your current stable of products or are there those in the pipeline? Yes. I mean yes, perfect. Maybe we start with COD. I mean COD is approved in Europe. And basically, what held us back a little bit was the COVID and supply chain. And because we got a certain formulation approved, now we have everything in place. But it is very tough in these at least at this moment of time to create the right level of excitement. So we think that this is that the CLD launch will be late Q3, beginning of Q1, Q4, sorry, Q4. And there's nothing more to it. The product is registered, so we're eager to get into the weeds of it. And then basically, beginning of 2021, we should be in a good close for ITP should everything works in Europe. And with regard to Asia, I think it's really the when you look at the number, for instance, of HLH patients in markets like China and Japan, then this is very significant, yes? And this prompted us to rethink the geographic diversification. And for these two markets, we take ownership ourselves. We know what it takes. I've heard 18 years in this part of the world to build representations there. And we have made quick strides. We have been able to win the chair from a big pharma company who was running one of the largest companies in China. We have a very experienced team in sorry, in Japan. We have a very experienced team in China now. And basically, products like Gamifant, like Kinered, like Doctor. Led, then obviously, Selecta and also Kineret will make it will make perfect sense for us to launch those products and have a very significant, let's say, expansion of our overall global franchise. So we think that these were strategic moves and very excited about Asia. We have already got the one or the other accolade, for instance, now in China going. So we are very optimistic. Current sales is 0. So these are preoperational activities, but we may actually be able to record our 1st sales next year in China, Japan in 2022. Okay. And then a couple of questions on hemophilia and cell-two twelve. So hemophilia, in the wake of the UK tender agreement, will there be any temporary negative impact from lower pricing? And if so, when should we expect it? And then as far as hemophilia factor consumption is concerned, how much of the effect year on year was the result of lower surgical procedures, if you know? And then for SEL-two twelve, are there any obvious antitrust potential antitrust issues that I'm missing? Or do you expect this to be straightforward from an antitrust perspective at least? And then lastly there, is there a scenario in which accelerated approval on the basis of compare? Yes. I think, why don't we take it one step at a time? I mean, we have got we were listed in the UK tender, very happy about this. The price concessions, let's say, that we have made in the U. K. Are within a reasonable frame and actually we enacted this already ahead of the tender. So we are very happy with the busy outcome of the UK tender. With regard to the consumption versus reduction as a consequence of activity and surgical procedure. That granularity, unfortunately, we do not have, yes? So we but consumption is more than this consumption effect in Q2 is more than €200,000,000 So that gives you a little bit of a flavor where we are currently at. And then with regard to the SEL-two twelve, there, we don't foresee, I mean, any trust because the launch sequence is around 2023, end of 2023, 2024. We don't think that we don't aware that we are in violation of anything. We should be able to launch this. And we are very excited once you're in also, we can publish the Phase II data, let's say, about this product. Yes. Great. And then the last one was about whether you could get accelerated approval for it on the basis of the COMPARE trial. No. Maybe, Milan, you have a view on this? I don't think so. But maybe, Milan, what is your view? Yes. So I mean, I think we're encouraged, you can say, by the differentiation potential of 212 also with the rapamycin tolerance induction. I mean, I think it's to your point, Gito, I think it's too early to speculate whether that's, you can say, potential clinical differentiation would translate into an accelerated approach, but we are encouraged by 2 12. Okay. Thank you very much. Appreciate it. Thank you, Christopher. Appreciate it. Our next question is from Peter Sest, Handelsbanken. Your floor is yours. Yes. Hi, it's Peter from Handelsbanken. Bunch of questions, but I'll just fire 2 away and get back in the queue. The first one on CELP-two twelve. Just wondered how we should look at the data when it comes out here in Q3, Q4, in particularly in view of the fact that the response rate seen with KRYSTEXXA in combination with the trixate, they are topping at 80% to 100%. I am fully aware of the issues with methotrexate. But on the other hand, every rheumatologist on the planet has probably experienced with that product, whereas very few probably know where rhepomycin. So on top of data, some perspectives on how you see the differentiation versus Krystexx plus methotrexate? And then secondly, on the hemophilia franchise, should we anticipate that Elocta and Alproex will be back in growth mode during Q3 and Q4? Thank you. And I'll jump into the queue. Yes. Yes. Now maybe we go back to we start with SAL-two twelve. I think the we know that basically, KRYSTEXXA has a certain group of patients. I think they have made announcements how many patients they currently have on the product. And you can read the report, so it's a fraction of the 16,000 that I just mentioned. And it is because of these of the immunogenicity that we think we can address very well. So it's not just side effects because the product has done some, let's say, doesn't seem to work also in certain areas. So we think that our combination is going to be a meaningful addition, at least for a larger group of patients. And so I think the with regard to hemophilia, I mean, we if you take it if you believe that the, let's say, the patient the consumption reductions is of temporary nature, which we believe, then you would assume that the product will go again in the rest of the year with the hemophilia franchise. And yes, so I mean maybe, Mila, you want to add some additional flavor to ImmTOR and the differentiation on the selecta PASEL-two twelve? Absolutely. And thanks for the question. So I think, yes, you can say the rheumatologists are used to it, but rheumatologists will not be the ones that have to take the combination. And I think in this particular space with gout patients, I think methotrexate has a significant number of black box warnings across a number of different organ systems from the bone marrow to the kidney. To the liver, the dose has to be adjusted in patients that have chronic kidney disease. We know that there are also convenience issues with KRYSTEXXA every other every 2 weeks plus methotrexate, plus folic acid versus you can say a once monthly therapeutic option that covers everything. Then there is the alcohol issue and liver toxicity with methotrexate. So while it may have achieved some acceptability in a rheumatoid arthritis space, I am less confident that you would see the same acceptability, you can say, in a gout than a repertory gout space. And I think having a combination with the tolerance induction, I think we feel quite comfortable about where we are and the potential for TUTORIAL to differentiate itself. Just a follow-up question here. Correct me if I'm wrong, but doesn't rafamycin have a boxed warning as well? Reformation also has, you can say, safety and also a boxed warning, but it doesn't have the systemic boxed warnings that you see with methotrexate. And more or less, every organ system is affected. And there's even a prescription restriction on physicians having to understand metatrexate. So I think out of the 2, I think rafamycin is far more benign. But do you think you can evade the boxed warning on the cell No. I don't think the idea is to negate boxed warnings. I think definitely not, but I think the idea is more what is the relevance of the toxicities observed in the target population that you want to treat and what is the likelihood that any of those safety liabilities would have a translational impact into the patient population. And here, I see more of an impact of methotrexate than I see of rapamycin. Okay. Thank you. I'll jump back in the queue. Thank you very much. Thanks. Next question is from Emmanuel Filippas, Barclays. Thanks for taking the question. I have enough copies. Maybe I'll take a couple. One follow-up on Elocta really. Just if you could give us a little bit more color on the regional dynamics, particularly how France is looking, maybe quantify for us the potential in the UK. I mean, where I'm really going with the question is, you talked about the 140 to 150 destock in Q2 and lower consumption. But for us to get anywhere close to consensus expectation this year, for the full year of the second half, would need a pretty significant recovery. So your confidence in that and how regional dynamics might help that would be of interest. And then the second question, Guido, really is a bigger picture question around guidance. You've reaffirmed guidance this morning. We've discussed in the past after a very strong start to the year that it seems like you might have room to increase guidance. Consensus expectations currently sit at the top end of your existing guidance range for both revenue and EBITDA. So your confidence in meeting that upper end and how H2 may facilitate or not scope to increase that would be of interest? Thank you. Yes. Thank you. I mean, just maybe, let's start with hemophilia. I just saw the GRS data from the first half France, which is obviously important market from us. And there, we basically our consumption data mimic the market data. We have not given in market share. In fact, we have gained patients on a net basis. So that actually gives us confidence that we still have a very competitive package. We have as I mentioned earlier, we have become the number one prophylaxis product in hemophilia in Germany in Q2. So there, let's say, it's also resonating. We have overall in Europe gained significant number of patients despite the impact on face to face lack of face to face interaction. And I think you have most of you have seen these studies where face to face interaction versus the current environment has a 30% to 40% productivity difference. So just recognizing this, I think and people have other worries than switching patients typically in COVID times. So that gives us also confidence in Europe that basically we should be back. Obviously, there is a proliferation of competition, But we have still we hold firm on our offering. We have the FLORIA platform, let's say, expanding. And the product advantages we have talked about in many sessions. So we think we have a strong offering. And with regard to the U. K, I commented on, I think that I think we are quite actually satisfied with the outcome because we are no longer held back now in this new environment by the share of the market that we can we are allowed to complete in. So that gives us a good opportunity also. Well, I think we've I mean, obviously, the when you look at hemophilia mid- to long term, there will be limitations to growth. But then we have also if there is a one knocking at the door, which actually looks pretty good as we speak. So we think we have a significant role to play, yes? I mean, we don't give guidance now on a product basis. But the as I alluded to earlier, it would it seems that we should be able to show growth in the following quarters. And therefore, we see no reason to change our guidance. I mean, whether we are now at the higher end of the guidance or not in this environment, I don't to precise our guidance. Guidance is the guidance. But we are confident that we will be in line with the guidance. And we will and you can be rest assured that we will do everything to be at the upper end. So that's what I can tell you. But I'm not now, let's say, basically narrowing the window of the guidance. I think this would not be sound. Thank you. You're welcome. Our next question is from Victor Sandberg, ABG. The floor is yours. Hi, thank you for taking my question. So first of all, I just wondered if you could give any indication of when you're going to pay the upfront payment to Selecta for the licensing agreement. And on the same topic also, Selecta said that there is a cost savings of at least USD 100 and 50,000,000 with the Sobe deal. How much of that will be increased cost for you going forward? I can take those questions first and then I have some follow ups. Yes. I mean, we see with regard to the upfront payment, the upfront payment will be due upon closing, which we expect within the next 1 or 2 months, we don't expect any issues with CBC competition authorities. And then this will become due. Henrik, you want to mention more about the accounting of this now you see this? No. And I mean, it's absolutely right that we expect closing to occur relatively soon, and then we pay and we capitalize the upfronts. And the €150,000,000 that Selecta can save, I think this is baked to a certain degree in our upfront as well. Yes. So when it comes to yes. So what we say regarding the guidance is that the guidance excludes any impact from Selecta. When we close, we indicate it's in a note there in the report that it could mean increased R and D spend of up to SEK 150,000,000 for the rest of this year. So that is where we will incur the impact. Insec, yes. Insec, yes. And we will have to come back to the longer term impact of these developments. Okay. And staying on Celypta for CELL-two twelve, you talked about the 66% response rate. But if you do a modified intent to treat analysis on the higher dose scores, 10% to 12%, putting back patients that discontinued, it seems like your response is closer to 46%. Can you speak a bit how you have optimized the compare trial to limit these continuations and where you expect the response to end up? Maybe how much better do you need to be in order to be outside of the confidence interval to its superiority for that trial? Thanks. Miran, you want to comment? Yes. So I think it's difficult to compare studies across, as you correctly point out. The 66% refers from Phase II, a variable patient analysis. And I think even in a comparative study, the patients that say it was true for non safety related adverse events are non withdrawal criteria will also be the same in the KRYSTEXXA study. So the differentiation potential of 212 and KRYSTEXXA, I think, as I said, and this was also announced by Selecta in December 2019, they have seen a numerical imbalance in the withdrawal rates and the withdrawal due to the 6 less than 6 milligrams per day of withdrawal material for uric acid. And they have seen that in favor of 212, both for the stopping criteria, but also to a certain extent for adverse events. And this is why we continue to believe that 212 would be differentiated against KRYSTEXXA. The study the 212 study is sufficiently powered to detect what I would say a meaningful difference between 212 and KRYSTEXXA on sustainability of being able to lower uric acid. Okay. And just a final question on DOPTELET. Can you give any more flavor on how the launch is going to ITP? Any patient numbers, prescription data that you could share? And also maybe a quick comment on Novartis that is planning to file a food effect free formulation in 2021. How do you view that competitive threat to the doctor that? Thank you. Yes. Thank you. I mean, the product makes very significant progress. You have seen 52% growth quarter on quarter. So that's very positive. And that's basically also reflected in the number, obviously, of patients now that we have been able to increase. And I think the ITP, obviously, I mean, we were let's put it, we were a little bit impacted by, like many other companies, by the lack of ability to see physicians, yes? And when you look at the data from the U. S, from IQVIA, 30% to 40% less NRx's in this time period from end of March to beginning of June. Obviously, this was most of the quarter. So then in the 2nd part of June, the things were coming back, clearly had an impact on our launch. So the hope is by the opening of the economy, we will be able to accelerate the ASE again. And that's really what we have in mind. And let's say, but the so we are very positive also by the product. We also think that the CIT indication remain convinced will be a significant move for the product. So the evaluation of the product in our books has not changed. And basically, the advantages, maybe, Milan, you want to summarize how you view the new formulation from Novartis, Opamecta. But we think that we will continue going strong irregardless. Yes. So I think we have also seen this. We have not seen any data, but the safety liability continues to be the same when it comes to liver toxicity. So even if that is, you can say, a blunted or less aggressive food effect of the new formulation, which remains to be seen, the fundamental issue around the toxicity profile is unchanged. So we continue to stand by the differentiated profile of the IVETRANBOK pack. I think when you look at the totality of the package that IVETRANBOK pack can provide, I think it's very meaningfully differentiated against any other TPO in this space. Okay. Thank you very much for taking my questions. Thank you. Thanks. Our next question is from Steen Gustafsson, Nordea. Your line is open. Hi, everyone. Thanks for taking my questions. A few. First of all, on Elocta, just to make sure I understand it, should we use the Q2 sales figure adding back the stocking effect and then look at some patient growth going into the second half when you talk about that you see growth opportunities for that product? That would be the first one. My second question is regards to your OpEx spending and if you could perhaps help us with the phasing of how that will develop in the second half. And my final question is, if the CIT indication is included in the $500,000,000 sales potential you talked about in, I think it was in the Q4 presentation half year ago? That would be helpful. Thank you. Yes. Maybe we'll see if we start with the CIT. I mean, we looked at the product and gave the growth guidance as holistically, but if CIT really works well, then yes, you can model yourself, obviously, I mean, 70,000 patients. That basically should give you some comfort for the guidance that we have given on the CIT strengths alone. I mean, 70,000 patients alone in the U. S, yes. But this is not the time for us now to change the guidance. And yes, I think that gives you a little bit of a flavor. The first question I just did. The first can you repeat the first question one more time? Sorry. Yes. That was when you talk about Elocta growth for the second half, should we add back the stocking effect? You said EUR 140,000,000 EUR 150,000,000 to the Q2 number and look at growth from that level. Is that representing? Yes. I think you watch basically the stocking effect is really something that we had in Q1. Now it's in Q2. So that basically increases your base for Q2. Then you have obviously and then basically you will have patient growth that will drive ultimately sales growth. And then the question is only do Claudio still have an overhang, a little bit of consumption saving because people are still affected by COVID in terms of yes, I think elective surgery will be a little bit down also in the second half of the year. I mean, we heard that in Q4, that should normalize. But the main driver is probably that patients now get back into the right regime. And there, we are working with physicians as well as the patient associations to make sure that patients don't under dose and are enjoying the full protection. So there should be an offsetting effect in the second half of this year. And let's say, with regard to OpEx, we have I mean, the main one of the main drivers in OpEx is going to be the some of the studies that we're undertaking that we are now ramping up, like SAMIFAN-ten, like the acute graft failure study. And this is impacting OpEx. And obviously, we want to remain competitive launches in Europe for CLD and the prelaunch or end launch and hopefully depending on how it falls for ITP. And that basically has to be seen as main factors. Maybe Henrik, you want to comment to give it more of a flavor. Yes. I mean we do expect the generally higher activity level in H2 than we've seen in H1. It's not like we think COVID is over, but we do expect an easier environment to operate in. And in addition to what you said, Guido, we also continue the international work, including not only China and Japan, but also Russia preparing for the future launch of Bobanox. Yes. But is it fair to assume that it will be more Q4 than Q3? Or do you I mean, now in Q2, we saw OpEx coming down. And yes, on so do you expect when do you expect it to increase basically? Over the full and half year, but obviously, Q4 is a much higher activity level quarter than Q3 in general. So more in Q4 than in Q3, obviously. All right. Yes. That makes sense. Thank you. Thank you. Our next question is from Christopher Roode, SEB. Hi. Yes, I just want to had a couple of quick follow ups. So I guess the manufacturing revenue, 2 consecutive quarters of quite high performance. Should we be expecting that to drop back down or is this the new normal? And the last question I have was this Type 2 variation submission, is this I mean, I'm a bit confused because I thought that was basically like a reformulation. Is this an SNDA or a type of thing equivalent for Europe? Or I mean, why bring it up if there are no safety findings? Okay. Maybe we start with the safety findings. Miran, do you want to comment on this? There's a new formulation. Which variation application are you thinking of, Christophe? Sorry? Which variation application are you thinking of? It was the Kinaret for where is it? It was the one referred to in the report. Yes, for the Sobe. Anakin 302 and Stills. That's a very I mean, I need to come back to you on that, Sorry. Okay. Thanks. That's not really the mainstream because of the manufacturing income. I mean, this is a relatively stable business, yes? So the growth that you see now, I mean, we are here following, obviously, Pfizer's lead. So I think if you want to know over the longer run how our manufacturing revenues are performing. You just look at the forecast for Refacto. And our last question is from Peter Thest, Handelbanken. Yes. Hi, it's Peter again. Thanks for taking my follow-up. And they were actually related to costs related to HCL-two twelve. If you look at Selecta, in 2019, they reported HCL-two twelve related costs, R and D costs of roughly US26 $1,000,000 That is roughly, let's say, SEK266 and that is just for the smaller studies. Assuming a larger Phase III study to be initiated this year and rolling 2021, perhaps 2022, I mean, it would be I mean, just a doubling of these costs sounds sort of in the lower end of what we should expect in terms of additional costs for 2020 sorry, 'twenty one, 'twenty two. Is that sort of the right calculationweight to look at it? And I just want to get back to ILOCTA and the competitive landscape in France. I think one thing that sort of spooks the market a bit is that you talk about additional patient growth across the board. But in France, you specifically just mentioned that you are maintaining your market leadership, which basically could assume that you are maintaining the leadership in the replacement factor segment, but the overall market share of that segment is going down. So my question very specifically, have you seen patients switches out of Elocta and into other products during Q2 in France? Maybe Henrik, you want to talk about it? Yes. I think we Peter, we I don't contradict you when you say what you say about the cost for the Phase III trial. But I think it's fair that we come back with a firmer opinion once we've actually closed the transaction. Okay. And then on Elocta and switches out of Elocta in France, if you had seen any of that during Q2? Actually, to be honest, we had a net patient gain. There were many in fact, there were maybe 2 or 3 switches from Elocta, but most of this was overcompensated by the gains, yes. So it's still we are still going strong, yes. It's the overall number of switches to Enlivra is minimal for us. And we have no further questions. I give this back to you for the final remark. Yes. Thank you so much for your interest, and apologies if some of the questions were not sufficiently answered or we were not broad enough. But at least, you can see there's quite a bit of robustness in this business. And in Q2, it deserves a bit of a second look, some additional comments. But as hopefully, we have communicated, we think actually these are solid results and further building the future. Thank you so much for your interest and wish you a great day. Talk to you soon. Bye.