Ladies and gentlemen, welcome to the presentation of the Q2 results for Sobi. I will now hand you over to the CEO, Guido Oelkers, CFO, Mats-Olof Wallin, and Head of R&D and CMO, Milan Zdravkovic. Please begin your meeting.
Hello, everybody. This is Guido, as just introduced, I will be joined by Mats-Olof and Milan. We have also here the incoming CFO, Henrik Stenqvist, obviously Mats-Olof is in charge for this meeting. Before we start, a quick forward-looking statement on the next page, which is obligatory, obviously. Then I think we can go right into the results, because as you have seen, we were quite excited to report positive results from our perspective. I guess, as I see the share price, also from many other people's perspective, 40% top-line growth. Clearly propelled by hemophilia, but also, let's say, very positive result in specialty care. This basically puts up the revenues for this quarter to SEK 2.289. Very nice is to see that we have operating leverage in the business. The earning was 94% on an EBITDA level.
Healthy cash position, now basically SEK 800 million ahead of where we have been, give and take, end of year with SEK 2.3 billion. Really, as I pointed out, I think what is very gratifying to see is that the Elocta is still on a nice growth path, more than doubling with 126% growth. Basically, we were able to address the relative weakness for Alprolix and now growing at over 200%, 215%. This shows that the work we have been doing with the teams in the field is gaining traction. For me, on a different scale but from a business perspective, equally positive is the fact that we are also acceleration now into the Kineret business.
Now basically with 19% growth, we can see that the investment we put into this business, in particular into the U.S., and the approval of the Still's indication in Europe is paying dividends. This in conjunction with the Orfadin results growing at 7%, despite the fact that we have lost patent, shows really that in rare diseases, yes, there is influence from patent expiry, but there is a certain loyalty given also the seriousness of the diseases that we are dealing with that goes beyond what you would typically expect in big molecules or small molecules or big pharma products. In addition to this, Milan will talk about this, we have been able to progress quite a few of our R&D projects. Let's say for those who have been part of WFH, pretty stellar results were presented for 001.
We will try to explain this a little bit more detail given the fact that we have an option here for this compound in our territory, and we are very excited about the results. We have progressed SOBI003, and now we're preparing everything to get the first-in-man in the second half of the year. We have concluded the recruitment for anaGO. All of these good news prompted us to lift the guidance. I'm sure you want to give more time for questions, let's say later, so keep it a little bit shorter. Very positive mood in the company about the progress. I think when you go to page four, where basically we show the quarterly results, you can get a taste why we are quite bullish because what you can see is now a strong acceleration on the quarter-to-quarter performance again in Q2.
Where basically, gross margin had very strong earnings, 94%. Obviously as a consequence, also EBITDA margin and EPS improved considerably. Let's go straight into the business review, into page six. Basically, just to remind everybody why we believe that we have a unique play in hemophilia. I think very important for us, we have products that have demonstrated safety in thousands of patients, not only in a study population. We feel that with the Fc fusion technology, we have a unique pathway and a significant point of differentiation. This is demonstrated, as we had talked about earlier, with the joint data but also with the data that prompted us to go into ITI treatment. We believe that with the product that we have on hand, we can individualize treatment.
Just to remind everybody, when we looked at this one arm with 100 patients and the average bleed rate of 0.8%, let's say prompted us to think that we can push the boundaries significantly in the interest of patients. Obviously, what we clearly think is important is that this is a natural way of replacing factor is obviously the products in our offering. Therefore, being less associated with topics that have been reported for some of the competitive products. Let's say, joint health, I have talked about. When you look straight into the numbers on page seven, you can get a taste of what really propels growth in our company, in hemophilia. There, obviously, the key that propels growth is really the product revenues. On slide eight, you can see the acceleration of Elocta.
With 126%, we got also approval in Croatia, so now reimbursed in 25 markets. The growth is really coming from the large countries in Europe. Whilst we see positive trends now also recently in Spain after we intervened in the local organization. Let's say when we go into Alprolix, I think this is very gratifying on page nine. We were basically now growing 215%, there we had over a couple of quarters we didn't make substantial progress or not enough progress. Now it seems that basically the business is very well responding and that our message comes across. We go through the adoption funnel. Obviously, the reimbursement in France has helped. The product seems to gain significant acceptance and that's, for us, extremely positive.
Hemophilia, I think, on track and I think we can maybe open up later for the floor for more questions. Going straight into Specialty Care. We believe that we have a world-class commercialization platform. We believe that radicalizing the focus of this business by appointing Norbert Oppitz as the head of Specialty Care was a very important move for us because this shed more light on this business and gave it a clear leadership. Let's say what we have been working on is lifecycle management and indication expansions. Lifecycle management for Orfadin in various areas of indication expansion with regard to Kineret and looking at partnering opportunities. Yeah. Okay. Yeah, I just get a signal that maybe I should get a little bit closer so it comes across even clearer. Anyway, let's go to page 11 in our Specialty Care.
Let's see, how did the business perform? Overall the business has performed very well with 11%. We have launched RAVICTI, I think, which is an important addition to our business. We have quite a bit of experience in the UCD business and with Ammonaps. For us, this is a fantastic launch, and we are now in a phase to expand on this. This helped us to overcome the discontinuation of the one or the other product that we had under other specialty products. Strong growth, as I pointed out earlier, with Kineret. Regarding Kineret on page 12, you can see how we have been able to propel growth basically with 19% nominal growth, very positive. This is across our regions, but really what drives it to a large extent is U.S.
In Europe, we are benefiting also from the indication expansion. We believe that the Kineret franchise is really the platform for us in inflammation, and we are thinking about opportunities to expand in this area. As you can see in the last quarter growth, it seems now that we get into a new acceleration mode. On the next slide, page 13, when it comes to Orfadin, let's say, I think we are very gratified by the fact that we have been able to overcome the Q3 difficulty in 2017. Product is now positioned again for growth. We have won a tender in Canada and basically this gives the foundation, but it's really a very individualized focus where we're supporting patients and ensuring that they have access to this elementary treatment.
I think this, in the interest of time and making time for the other presentation, I think I would like to close. Before I hand over to Mats-Olof, I would like really to thank him for a fantastic journey that I personally experienced over the last 15 months. I think he has done a fantastic job over many years for the company. This is his last earning call. Frankly, if you can choose your time, this is the results we desire to. He probably chose well. We believe the best is still to come, though. On this note, Mats-Olof, big thank you. Before we get into sayonara mode, Mats-Olof maybe you explain to us the financial results.
Thank you, Guido. Thank you for the kind words. Well, as Guido said, initially, Sobi had a very strong quarter. Q2 came out very strong. If I may add a personal note, I don't think this is the end of the story. I think that there are many good quarters to come, but that's my personal opinion. Looking at the financials, revenues came in at SEK 2,289 million in the quarter, which is 40% higher than the same period last year. 36% increase at constant exchange rates. For the first six months, revenues increased with 40% to SEK 4,253 million. Gross margin came in at 73% in the quarter versus 72% in Q1 and versus 71% in Q2 last year. Operating expenses increased with 10%, please compare that to the 40% revenue increase.
With this combination, EBITDA came out very strong at SEK 951 million, that is an increase with 94% versus the previous year's Q2. For the full year, the first six months, EBITDA came in at SEK 1,722 million. Net profit for the Q2 came in at SEK 685 million, for the first six months, SEK 1.2 billion. This SEK 1.2 billion for the first six months is higher than the full year 2017. Turning over to the balance sheet, intangible assets continue to decrease as the company is amortizing on the intangible assets. Inventories and accounts receivables have increased due to the increase of the business, the substantial increase of the business. As we say that revenues increased with 40%, we should also pay respect to that the product revenues increased with 55%. That has a substantial impact.
Cash has increased to SEK 2.3 billion, the positive cash flow in the quarter came in at SEK 556 million. Equity now is getting very close to SEK 8 billion at the end of the quarter. With that, I hand over to our CEO, Guido Oelkers.
Thank you so much, Mats-Olof. I think it's now time to give you a little bit more of a deeper deep dive on the pipeline as you know where we stand today. Milan, please.
Thank you very much, Guido. This is Milan Zdravkovic, Head of R&D and CMO at Sobi. This slide illustrates our pipeline and how we are working to increase the value of our pipeline. There are three assets that I will discuss in detail today. That's the BIVV001, a Bioverativ now Sanofi development program, through which Sobi has added to our collaboration agreement, but we have not yet opted in. I'll speak more to the phase II study with anakinra in acute gout, and I'll speak to the emerging clinical study with SOBI003 in lysosomal storage disorder, specifically MPS IIIA. If I can have the next slide.
Essentially, it builds on Elocta, to which there are two XTEND natural amino acids repeat sequences that have been added, as well as parts of the von Willebrand factor domain. Upon thrombin activation, both the two XTEND moieties, as well as the von Willebrand factor domain is cleaved off, and you are left with the pharmacologically active asset being the Elocta molecule with its known safety and efficacy profile. Interim data were presented at WFH, as mentioned by Guido, by Bioverativ. This was the first four patients that were dosed at a low dose of 25 units per kilogram. This showed a favorable safety profile, and quite impressively, the half-life was 37 hours at this low dose of BIVV001 single dose versus 13 hours for the comparison to recombinant factor VIII. This also translated into very high factor VIII activity levels, which was just above 5% after seven days.
Both, again, a single dose, which should be compared to the recombinant factor VIII levels, which was less than 1% after three days. We are very encouraged by the emerging clinical data and the profile of BIVV001. We think not only does it bring a convenience offering, but even more importantly, potential to even take protection of patients with hemophilia A even further. The high-dose cohort is currently ongoing, testing a twice monthly dosing regimen. If I can have the next slide. Here we are providing a bit of background around MPS IIIA, which is a lysosomal storage disorder. Fundamentally, it's caused by a mutation in the gene for sulfamidase. This causes incomplete breakdown and increased lysosomal storage of heparan sulfate. This, in turn, is associated with significant CNS morbidity and actually also mortality.
There are up to 2,000 patients across Europe and the U.S. estimated to be living with MPS IIIA, and there's currently no treatment available for this significant disease. We have been developing SOBI003, which is an enzyme replacement therapy that we have been modifying using our proprietary MODiFA technology, which is we have been changing some of the glycan structures. If I can have the next slide. This slide gives an illustration of the status. We have orphan drug designation in Europe and in the U.S. We, earlier this year, received the Fast Track designation, and on the right-hand side, you can see the first-in-man study that we are concentrating starting. This is a classical first-in-man, a sequential ascending multiple dose study. Patients will be treated over a period of 24 weeks with weekly IV administrations of SOBI003.
Following a 4-week safety review of the first three patients, there is the potential to escalate the dose to dose level 2 and dose level 3, respectively. Patients that have completed the initial 24 weeks will be offered to participate in an extension phase of 80 weeks, for a total study duration of two years. We are very encouraged by the fact that we were able to screen the first patient recently, and we expect to be able to dose the first patient later this year. If I can have the next slide. Here we're providing a bit more detail around the phase II study, where we are examining the efficacy and safety of anakinra in patients with acute gout flares. Gout is a metabolic disease characterized by increased uric acid levels that leads to crystal formation that accumulates in joints and in other organs.
These patients then eventually develop flares or acute attacks, and in the joints, this is associated with significant pain, tenderness, and swelling, and also in the associated tissue. Current treatment includes NSAIDs, colchicine, and steroids. There is also data supporting the potential use of IL-1 blockade in this disease. This is the basis for Sobi to initiate the phase II study where-
Ladies and gentlemen, apologies for the interruption. Please bear with us while we reconnect your speakers.
Hello again. Milan Zdrakovic. I'm sorry for the interruption. What I will do is I will start with the gout phase II study and discuss this slide again, to the extent that people were not able to hear it. This slide illustrates the phase II study that we have initiated, studying the efficacy and safety of anakinra in patients with acute gout flares. Gout is a metabolic disease characterized by increased uric acid levels that then forms eventually crystals that affects not only joints but also other organs. The disease is characterized by acute flares, which leads to significant pain, swelling, and tenderness in the joints and in the surrounding tissues. Current treatment of acute flares includes NSAIDs, colchicine, and steroids. There's also evidence around the potential role of IL-1 blockade in this disease to treat the acute flares.
This is the basis for Sobi to initiate this phase II study, where we enrolled approximately 160 patients with at least one flare within the last 12 months that were intolerant or unresponsive to NSAIDs and colchicine. These were randomized to two doses of anakinra, the 100 and 200 milligram dose, as well as a 40 milligram dose of colchicine. The primary endpoint of the study is pain over an average of the first three days, 72 hours, and the primary result readout will be based on the 15 days data. Patients will be allowed to continue for a period of up to two years, where we will accrue additional information around the efficacy and safety of anakinra in the treatment of acute flares.
We are very happy that the enrollment was recently completed. We expect to have results from the first 15 days, you can say primary results analysis, by the end of the year. Based upon those results, if they are favorable, we expect to be able to have an end of phase II meeting with the FDA in the beginning of 2019 to get understanding and agreement, hopefully around how phase III could be initiated. With that, I hand it back over to Guido for the summary and conclusions.
Excellent. Thank you, Milan. I think on this note, let's go straight into the outlook. As you have seen, with the results that we have now been able to achieve in Q2, with some of the insights on Orfadin that we have obtained by now, we felt that it was indicated to increase our guidance to SEK 8.6 billion-SEK 8.8 billion on the top line from SEK 7.9 billion-SEK 8.1 billion the range. Gross margins, minimum 70%. We see positive evolution, obviously, as you have seen in the earlier data. With regard to the earnings, we also took it up to SEK 3.4 billion-SEK 3.6 billion. I think this also reflects the confidence we have gained into the momentum on the business, and that we see that our commercial strategies are working and that we're making significant progress.
Basically, when you bring this just into a strategic rearm, where are we at in terms of what we were set out to do? We further internationalized our business, obviously drive commercialization in hemophilia. We got more markets approved. The main driver is clearly penetration and becoming more standard of care in more accounts. We are focusing on Specialty Care. We feel convinced that we have got conviction that there's much bigger opportunity for us with Kineret in inflammation. Let's say we are working on strategies in this regard. We want to obviously work geographically on strengthening our position with 40% organic growth. That's clearly what we are on the way to do.
Working on the pipeline, as you can see from Eun Yang's presentation, we have a couple of things now going, and that is, I think, distinctly different versus maybe our situation a year ago. We have a couple of very exciting projects in our pipeline, and particularly 001 is for us a priority. On this note, maybe we open the floor for questions. Obviously we are here to make best use of your time, and maybe we can open the floor.
Thank you. Ladies and gentlemen, if you do have an audio question for the speakers, please press zero one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. Our first question comes from the line of Eun Yang from Jefferies. Please go ahead. Your line is open.
Thank you. Very impressive quarter. Congrats.
Thanks.
I have a couple of questions. One, on financials. Sequentially, second quarter is quite strong. Growth is about 17%. We saw that in 2017 as well. When you look at quarterly growth from second to third quarter, it seems to be kind of flattish for the last couple of years. I do not know if there is a seasonality. My question is, do you expect to see some seasonal weakness in third quarter if there is any seasonality, or do you expect hemophilia franchise to continue to drive strong growth sequentially?
Yeah. Obviously, we do not make forward-looking statements now at this point of time. What we clearly have to see is that there is a seasonal effect on our business in Q3, driven primarily by the vacation period, to be honest, in Europe, where the activity level in the hospitals is reduced and the number of patients getting switched to other therapies is reduced. That is basically this effect you have seen. We cannot make the holiday season disappear in Europe. Let's say we think that the business has still strong momentum. We will have to see this. I want to refrain from predicting, but it could be, let's say, that the business will be affected, but I do not want to make a forward-looking statement.
Okay. Second question is on the pipeline. In May, you presented low-dose cohort data for XTEND program for 001. In upcoming ASH, I think previously you mentioned we would be able to see high-dose cohort data there. With the high-dose cohort, is it reasonable for us to expect that the trough levels of factor VIII to be higher than the low-dose cohort? Also, at ASH, do we also expect to see some update for XTEND program for hemophilia B? Thank you.
Eun, you want to take this?
Thank you very much, Eun. I think it is too early to comment on when we will be able to release further data on the ongoing clinical study. I think the thinking has been that a higher dose, being the 65 units per kilogram, would translate into a higher trough, and that is also why the higher dose group is now being studied with twice-monthly dosing. Commenting when we would have, you can say, data from that cohort is premature.
Eun, when you look at the trough levels after one week in the low dose was over 5%, obviously this gives rise to confidence, yeah.
Okay. Any comment on XTEND program for hemophilia B?
Eun?
I think this is in a very early phase. We will update when there is additional information available.
Okay. Thank you very much.
Thank you, Eun.
Thank you. Our next question comes from the line of Erik Hultgård from Carnegie. Please go ahead. Your line is open.
Yes. Hi. Thank you for taking my questions. Congratulations to another strong quarter. I have two questions, if I may. First, on Alprolix, which was surprisingly strong in the quarter. I note that you highlighted the reimbursement clearance in France during Q1 as one driver. Were there any other effects that explain the large performance, like major tender stocking? Should we see this as a sort of new level for continued growth? Or should we expect this strong quarterly-over-quarter growth rate to continue in the coming quarters, or is it more of a one-time step change and then we're back to previous quarter-over-quarter growth levels? That's my Alprolix questions, and then I have one on BIVV001 as well.
No, with Alprolix, basically you have two effects. Obviously, France plays a significant role, and they're performing extremely well and making significant headwinds now to penetrate the market. It is generally carried by the other organizations who have also now significantly accelerated the business. We have overlaid the commercial effectiveness structure that basically we are working with and working with the teams to improve productivity in the field. That's a significant driver and obviously felt that, let's say, there was a much bigger opportunity for us with Alprolix than what we had initially realized. This basically triggered one or the other performance-based dialogue and hence the consequences. I think the product was always great but it didn't basically get the play it deserves. We have clearly, not that I know of anyway, stocking effects here.
We have created a new level and are now obviously very keen to go from here.
Perfect. Thank you. Then on BIVV001, do you think that a sequential phase III study in pediatric patients will be required for approval in Europe, as was the case for Elocta? Should we expect similar launch timelines in Europe and U.S.?
Peter?
Thank you. I think we would need to discuss with regulators before we would be able to comment on exactly which program would be required and associated timelines.
All right.
Yeah. It's probably too early yet.
Yeah. Okay.
Yeah.
Thank you so much.
Thank you, Erik.
Thank you. Our next question comes from the line of Peter Östling from Pareto Securities. Please go ahead. Your line is open.
Okay. Thank you. I would like to extend my congrats on a very strong quarter. Most of my questions has actually already been asked, I have another one on BIVV001. You may have said this before, but could you just remind me what the timeline is when it comes to you opting in in the program?
Yeah.
Is there any specific event that would trigger this?
In our agreement with Bioverativ, we are allowed to opt in after the availability of phase III trials, phase III results. Very much de-risk.
Okay.
Let's say given the excitement around the product, we might consider to opt in earlier.
Okay.
Yeah.
Yeah. If you would opt in earlier, would that give you any additional benefits?
I think when you look at the discussions at WFH, I think the late breaker on BIVV001 was probably considered as one of the main highlights of the conference. To be associated with this product at an earlier stage, we would consider as an advantage, yeah.
Okay. Just a quick additional question. Could you give us a little bit more an update on your M&A activities? You have clearly said that you're looking to add products and/or businesses within rare diseases.
Absolutely, Peter. We are obviously in very intensive dialogues as we speak. Let's say, unfortunately, at this juncture, I cannot disclose anything. It would be premature. We are working on things because we consider the expansion in specialty care and the bolstering of our pipeline as important elements of our strategy.
Yeah. Have you seen the M&A landscape or climate change in any way during 2018?
No, I think the key is really to find projects and also addressing concerns that some of the investors fed back to us. We don't want to overpay. You want to have a project that gives you growth, because companies like us, as we get it, need to grow, keep growing. You don't want to over-diversify the company. It's not like these products we can pick up in a blink of a moment, you need to work on this. We are doing this right now, and hopefully we'll be able to communicate good news in a not too distant future.
Okay. Thank you.
Thank you.
Thank you. Our next question comes from the line of Christopher Udy from ABG. Please go ahead, Christopher, your line is open.
Hi there. Thanks. Congratulations on a stellar quarter. I guess my first question is about the geographic expansion rate for hemophilia. It was obviously a little bit slower this quarter. Should we expect it to continue to be slow like this, or do you think it's just very hard to predict, or can you give us a little bit of clarity on that?
I think, with Elocta now being in 25 markets, we are, I think, not too bad. I think we have nicely penetrated. The biggest market where we are not is now Russia. We are in a regulatory process and obviously to get reimbursement approvals at a larger level across Central Eastern Europe. Whilst we got obviously inwards now into Poland and Slovakia. Not too bad. I think there, let's say, these last areas are still missing, who make a material difference to the valuation. On Alprolix, obviously, we are earlier stage and there we have a launch plan. We are in discussions also because sometimes with the payers, they would have different thoughts, and they use the emergence of new products also as an opportunity to negotiate prices. Obviously we are concerned about the entire franchise.
Basically are willing to discuss opportunities, but not at any cost. There, let's say, we have discussions with various regulators in this regard. It's not that we try to be slow here, but sometimes we're just trying to adapt to a new landscape. You can expect in the next year, but it's very difficult to speculate. Clearly, it wouldn't help some of the discussions that are ongoing if we make predictions forward-looking on solving some of those discussions because we have to recognize that there are different incentives for different players in this market.
Absolutely. I think that makes perfect sense, obviously. I guess the second question. You've highlighted in the past how important the science is in driving sales or penetration, let's say, of the Fc products. I'm wondering, looking at the REITERATE study poster presented at the WFH Congress, do you have plans to undertake further studies for the EHL products that would permit more than just hypothesis-generating conclusions, to quote the poster?
Milan, you want to comment?
Sure. At this point, we have two studies ongoing in collaboration with Bioverativ/Sanofi, the first ITI and then the study in patients that have had several failed ITI attempts. Those studies are currently accruing patients. As part of that, we will also be accruing additional, you can say, mechanistic information that would help us understand a bit more around the molecular characteristics of the Fc portion and the immunological effects that these may have. I think based on the data from those two studies, we may even decide to do more. I think that's a bit speculative at this point in time.
Okay, thanks. That was very helpful, though. To what extent can you influence BIVV001 development?
We are in discussions with obviously Bioverativ and also with Sanofi Genzyme in this regard because it's clear that the landscape in Europe and with the need for health economic data is a bit different than in the U.S. This dialogue is currently ongoing because there the understanding is that both parties sit together and trying to do the best for both businesses. We have here clearly a seat at the table and we'll be taking charge of the seat.
Okay, great. How much of Kineret growth can you say was driven by Still's?
It is hard to say. We don't have yet a prescription data that will tell us how much of the product sales in Europe was driven by Still's and how much is driven by other indications. It would be very speculative. What I can say is that we, and this is no coincidence, that we saw now in Q2 a very significant uplift in the U.S., where we don't have sales driven by the investment that we put behind, but also in Europe where clearly was sales, now the driver was the prescription of sales, I can't tell you. We have no more sales patient, but possibly also, let's say that the indication reconfirms the confidence in the product, and as it reconfirms the confidence in the product, it basically physicians see a broader utility of the product also in other indications.
I think that's probably at least as big of an effect as the effect of the indication as such.
Okay. I guess one follow-up on the Pfizer. How will the production shift to Pfizer impact Kineret margins? I saw you said that you expect it to be cost-efficient for you, but where should we expect that?
We don't provide indications, I think, on the indication. You will see a significant uplift on the gross margins of Kineret by two effects, which is driven by royalties that are stopping from the originator, and also the reduction of COGS. I don't think that we are commenting on individual products in this regard.
Okay, thanks. My very last question, sorry, you said in the report ReFacto results are due to phasing effects. Can you elaborate? Does that mean you're expecting them to rebound?
Basically, you have two effects and it's not up to us to comment, obviously, on the performance of ReFacto, let's say, because it's driven by Pfizer. When you look at the Pfizer publication, you will see that maybe the progress of ReFacto is not as large anymore as it maybe used to be in the years beforehand. That, I think, is probably a fair description, and I leave it up to you to look at the half-year report from Pfizer to get it. What we also can see is that basically, as you would expect, our sales are sales to Pfizer and not sales out of Pfizer. Hence, you have inventory adjustments, and these inventory adjustments just happen right now, and they're coinciding with some of the slowdown, of course. We are really the wrong party to talk about it.
This is something that should be asked to Pfizer.
Well, thank you very much, congrats again on a great quarter.
Appreciate it. Thank you.
Thank you. Our next question comes from the line of Peter Järrup from Handelsbanken. Please go ahead, your line is open. Peter from Handelsbanken, please go ahead, your line is open.
Yes. Hi, it's Peter from Handelsbanken. Another complex one this time. A couple of questions here. First of all, in terms of market share for Elocta across your markets where you are right now. Second, on tax rate, what is the best tax rate for the full year and again, on [marriage health] the formula change could you elaborate whether that has that impact from Q3 at all on it? Finally, I have some additional questions if I can just jump on with you again. On the guidance, if we just extrapolate sort of the current runway that we have seen with Elocta and then your guidance as you just reformulated as seems a bit conservative. Sort of that your answer to that would be, would that be usual one that you rather, let's say, surprise positively once again? Thank you.
Thank you. Yeah. Thanks, Peter. It might be our line, but at least for us it's quite difficult to get all the points, but I try to paraphrase what I understood anyway. Let's say, maybe first to market share. Let's say, where do we stand? As we have communicated in the past, we think that our market in hemophilia is give and take, $3.5 billion in our territory. Basically, when you look at, let's say the total sales we have in a quarter, let's say in hemophilia growth sales, then you divide it, let's say you times the number of quarters, and you divide it by $3.5 billion, that gives you give and take, where we stand in total market share. Our market share in certain markets it's obviously higher. In the most extreme scenario, like Ireland, it's close to 100%.
We have markets also where we are around 30, and then markets where we are really at infancy. Basically our market share in on-demand is lagging behind because there is a timing effect. We focus at this juncture on more prophylaxis. That gives you all of magnitude at least a sense, where do we stand in market share. Now, the other part I understood, and maybe then you could give me the third element to the question one more time, because I didn't catch this, was on the guidance. They are basically, obviously the big question when you go through this substantial growth is where will it lead you? Obviously, as pointed out in the past, we don't want to impress by promises. We rather impress by delivering results.
We know what we basically felt is now that yes, we have enough data points to raise guidance because we feel that we have a better sense where the Orfadin patent expiry will lead us. We have a better view on, particular after the acceleration in hemophilia, where the hemophilia situation could lead us to. We basically raised guidance. What I can say is, we cannot obviously guarantee this, but it is looking at the data points, it is what management feels very confident about. We want to build this business, and that's really what prompted this. There's probably not much more to add to this.
Maybe, if you wanted, the third element of your question, which I didn't acoustically really get, and if we cannot resolve, then we can obviously come back to you offline and provide you with information. Maybe if you could say this one more time.
It was one regarding the tax rate, which you factor in for the year. The other one was with respect to the formulary changes at UnitedHealth with respect to the Orfadin. As far as I can understand and see one of your competitors has been preferred instead of Orfadin.
Maybe we start with the tax rate, Mats-Olof can give you a view on this.
Sorry, I did not catch your question fully, but I'll try to give you an answer and please come back with further questions or we can take it offline. The effective tax rate for the quarter was 17.9%, and for the first six months, 19.8%. The applicable tax rate in Sweden for 2018 is 22%. There was a decision by the Swedish government on June 14th that the corporate tax rate in Sweden should be reduced to 21.4% from January 1, 2019, and to 20.6% from the 1st of January 2021. We have also used that also to calculate all the deferred taxes, and that has a positive impact on the quarterly statements with SEK 39 million positive impact in Q2, but that is relating to deferred taxes.
Yeah. With regard to the Orfadin situation, we would not comment on individual countries. Not only as such, as basically we corrected our topic in Canada and basically gained back the largest tender there. The good news is for us that we have a significant part of our business on new formulations and patients appear to see utility in those, oral suspension and the 20 milligram. These products gain popularity and have market shares of over 50% depending on the market.
Okay. Thank you.
You're welcome.
Thank you. Our next question comes from the line of Erik Hultgård from Carnegie. Please go ahead, your line is open. Erik Hultgård from Carnegie, please go ahead, your line is open.
Yes. Hi. A follow-up question or a few follow-ups on the pipeline, please. In the quarter, you spent 10% of sales on R&D, which is below industry average and also below levels usually considered required for sustainable growth. Should we expect this level to increase gradually going forward as you sort of speed up or increase or accelerate the activity within your in-house pipeline? Or should we wait for some bolt-on acquisitions before you sort of get the R&D spending up to more sustainable levels? That's sort of a strategic question for you, Guido. Then a more detailed question maybe on Kineret. I was wondering if you're planning to develop that drug within oncology, given some of the encouraging data that has been presented within IL-1 from competitors the past year. Thank you.
Yeah. Erik, absolutely. Basically, where are we at now in R&D? We are basically in a transition. We are not oblivious to the fact, let's say that in our industry, other percentages are spent. We think but it's not about the number, it is about the project. Really, more pre-clinical is now not what we believe we need. What we need is late stage. And we cannot invent now, create what has not been seeded many years back. Our strategy is obviously focusing, as we have articulated, on bringing in projects. As a consequence, once we have been successful, you will by definition see an increase of R&D spend, let's say, which will be driven by the investments into phase III programs. We are very cognizant about this, but we feel that we will basically make our way. We are committed to R&D 100%.
We are not a brand generic model. We need to do this, but we need now to start from late stage and making our way then to earlier stages as opposed to from earlier stages to late stage. We need projects now that kick in faster, and that was also our takeaway from the discussions that we had with a number of investors who felt that this was important. Then basically with regard to Kineret, Milan should take this in more detail, but clearly we have realized the utility of this project also in other indications among those oncological indications. Probably it's a bit early to talk about definitive projects. Let's put it this way, we are more confident about Kineret than ever. Maybe, Milan, you want to comment?
Thanks, Guido. I agree. You can say currently we have two main programs ongoing. We have the gout study that we discussed, phase II, and we have the phase III Still's study, hopefully enabling an approval in the U.S. Beyond that, we have a number of programs that we are thinking of in oncology, and you can see the encouraging data that came out of the canakinumab study. Prevention of lung cancer is one of the ideas that we are juggling with, we have a number of other ideas, and we'll prioritize those against each other and see where is it we have our strengths and when is it the opportunity could arise. I think it's a bit early to say exactly what we would do beyond, but we are aware of it, and we agree that it looks encouraging.
All right. Thank you so much.
Thank you.
Thank you. Our next question comes from the line of Rajan Sharma from Deutsche Bank. Please go ahead. Your line is open.
Hi. Just a question on Orfadin, please. Are you able to quantify the quantum of the impact of the contract in Canada, and how sustainable do you think the defense against generics is in the medium term?
Yeah, the quantum in Canada, we would not comment on, let's say, because we don't comment on a product by country level typically in terms of revenues. We got, let's say, significant part of the market back, and we're very happy about this. Let's say, is the defense for Orfadin everlasting? No. Let's say I don't think that this is a reasonable assumption. I think, the utility of the product is there. There is a lot of loyalty. Don't forget, the patients are today 20 years old. They owe this to the availability of Orfadin. I don't want to speculate how this can be sustained. I don't think that you will see also in the foreseeable future, the classical erosion curve as you will have with these big pharma molecules that run out of patent.
We have 7% growth for the second quarter, so quite encouraged. We don't think that this is overnight changing. We also are not saying that we can defy gravity. At this stage, let's say we have to accept that there are a couple of uncertainties, but it will not fall off a cliff anytime in the short term. This is not what we're seeing.
Okay. Thanks a lot.
You're welcome.
Thank you.
Approaching three o'clock, and maybe one more question.
Absolutely. Our last question comes from the line of Eun Yang from Jefferies. Please go ahead. Your line is open.
Hi. Thank you for taking the follow-up question. Question on BIVV001 product for hemophilia A. As you increase the dose, is there a kind of a target trough levels that you are going after given the competitive environment?
Thanks for the question, Eun. It's Milan. As I mentioned, I think we recognize convenience, but we also want to bring therapy forward and provide even better protection than the therapies today. I'm not able to give you a trough level that we're specifically targeting, but we are aware of, and we want to try to make this product into more than a convenience offer.
Okay. One quick question. The Still's disease with the Kineret. You are running phase III trial for Still's disease in North America. When do we expect the data?
We are currently enrolling patients into the trial. We have enrolled six patients out of the planned 81 that was pre-planned. We are not entirely happy with the rate of enrollment, I think it's a bit premature for me to say when we would be done. Right now, we have opened quite a number of sites, we are maybe running at fuller thrust, and then we'll have to see when we can accrue the patients. There is maybe a certain seasonality around Still's. Maybe it occurs more in the winter period. Nevertheless, I think it's too early for me to say when we would complete enrollment.
That's helpful. Thank you very much.
Thank you.
Thank you, Eun. On this note, I think we would like to end the call. If you have further questions, please do not hesitate to reach out to Jörgen or to Linda, and we'll try to address further questions as they may arise. Thank you so much, and wish everybody a great day.
Thank you.