Earnings Call: Q4 2017

Feb 22, 2018

Ladies and gentlemen, welcome to the presentation of the Q4 results for Sobeys. I'll now hand over to CEO Guido Ocus and CFO, Max Ola Fallen. Please go ahead. Yes. Hi, everybody. This is Guido Urques. And just a quick intro, let's say, who is here on the call, obviously, Matsuno Wallina, our CFO also our Chief Medical Officer, Milan Latovich and Phil Woods, Head of Hemophilia. So if you have more detailed questions at the end of the presentation, we would be very happy to take this. It's really my pleasure to introduce to you the results of 20 17. And maybe what we could do is go really right into the deck, so we go straight into to Page 3. When you look at, let's say, quick snapshot what have we achieved during 2017, And for me, this is a great opportunity to present what we think are pretty stellar results. We had fantastic sales growth. So excluding the one time credits in 20 16, company has grown 45%. And basically, when you look at the hemophilia business, the product business, we have a 6 fold increase. So very strong underpinnings of the business. But we have not only done, I think, a great operational job. We have also complemented our portfolio by the new extended partnership agreement with Bioverativ, giving us access to the new BEV C fusion Xtend molecule to Factor VIII and Factor IX. And with this basically creating a long term pathway for the group to also be at the edge of hemophilia treatment in the years to come. When you look at some of the endpoints, we have shown in a recent trial, let's say, that Elocta has very beneficial effects on joint health, publication by Professor Oltenberg in Bonn. And we are very gratified because these data have not only demonstrated fantastic results in patients from on demand move to refluxed treatment, but also from prophylactic treatment with other EHLs to Elocta, giving ways to believe that Elocta with the F. D. Fusion technology has more to offer than just the extent at half life. We have also been able to get a new dosing regimen for our colleagues, let's say, with 2 weeks and longer and allowing us to provide patients more choice in the individualized treatment. And what is also very reassuring is that we now brought into the real world evidence that we are collecting comprehensively for our molecules in hemophilia. We got a shoe of the woodwork and basically are now recruiting patients obviously and have also for our REITERATE trial, so for patients with inhibitors and who failed on previous ITI treatment. We have got this off the ground and have now quite a few patients already enrolled in the trial. And Bioverativ has done the same, let's say, is also now recruiting for their inhibitor trial where it in naive patients to the ITI treatment. When you think about the let's say, what is also obviously key is not only having access to the Xtend molecule, but we have also now first patient into the trials in Phase I now commencing. It's a very important milestone for the company that we were able to move this project from preclinical into clinical. And obviously, now when you think about Elocta, Pfizer not launched everywhere, has obviously made significant strides to further internationalize to be internationalized. On the Specialty Care side, this is something that we have set up, let's say, obviously, in Q2. You remember that we basically one of the first decisions was not to sell the partnering business because I think we thought it was just too good. And this has proven to be the right decision. You look at the growth of our more specialized molecule in Specialty Care, the KINDRA anti IL-one and OFDIN, Both products have shown double digit growth. And particularly, the OFRDIN performance is very gratifying considering that we have lost patent in the one in the other country. But we have been able to overcompensate this impact with the help of new formulations, but also with the help, obviously, of a very customized patient oriented commercialization approach. With regard to our PDANA, we have got the product also approved. The new formulation is approved in a couple of countries in Saudi Arabia and Canada. And for Kynuren, I think it's fair to mention that we also got approval in NoMed in Canada, whilst we kicked off the studies in gout and stills for Kynuren, very important indications for the product that will be particularly important in the mid term when we commercialize this product and bring it to an additional group of patients. And which is also given the raise to our belief in our R and D strategy that we were able to move a preclinical project into clinical, and this is SOVY-three and MPS IIIA. We can talk more about this later. So basically, when you talk about the events in the reporting period, we talked about Solvii 3. I think this is a fantastic achievement for the company, but also that we have been able to be accepted by the Irish Board to be the extended treatment now in hemophilia A and B on an exclusive basis for extended TAVR products. And this is a phenomenal achievement and it gives you, let's say, an impression of what can be done with these products in the right setting. So on that note, I'll go straight to the financials. I mentioned the 45% on a let's say, it's a very positive also for Q4. Gross margin obviously substantially increased to 70.1%, coming from 67 percent and very strong earning increase, let's say, more than, let's say, 195% and this coupled with strong cash flow. And I'm sure you will see later in this lecture that all of it presents that we were able to pay back debt and to increase our cash position. It's very positive from a financial standing perspective. And with regard to the financial highlights, I mean, as I mentioned, 6 0.50 percent achieved. That's also clearly, you are beating quite a few forecasts that have been around related to our company, 25% absolute growth organic growth, taking away the onetime credits, 45%. Gross margin on a full year basis, 72%. And let's say, with over €2,000,000,000 EBITDA, 2.053 that's a 33% increase on an absolute basis, obviously, substantially more if you take away one time credit and very gratifying the cash increase. So when you look at the company now, where do we stand today? I mean, it's obvious that we are primarily present in Europe. That's clearly where we come from, where we enter by the company is emanating from. This is our stronghold position with our 2 where we have the 2 divisions. But North America, obviously, for us quite important. And it's clearly an area that we feel very strong about and that we want to expand as we have previously alluded to. And I think the function that our sales in other markets, I mean, in MENA, we start becoming a factor. And also, the recent successes in Saudi Arabia and hemophilia, I think, is right to believe that these positions will expand. But let's say, I think over the years, when we build portfolio, maybe there is also an opportunity to further internationalize the company. But at this stage, we are very centric on Europe and North America. When you look at the commercial results, I think for us, obviously, I mentioned the kind of growth momentum is I mean, we are obviously very excited about this. So needless to say that not just by the absolute uplift again in Q4, which is very gratifying that basically we picked up the speed and that our commercial effectiveness efforts and our efforts within the organization that focuses on execution appear to show results. And this coupled with very strong molecules, obviously, is propelling growth here. But it's also very positive to see that our colleagues from Bioverativ have done a spectacular job, hence the very significant evolution of royalties, particularly when you take away the one time credits that we had last year. So that basically, they have to take away this and you see obviously very substantial growth in America even though they are in the commercialization around 2 years ahead of us given the reimbursement situation of the product. So when you look at the Elocta, which is our flagship, I mean, you'll see, obviously, a very nice uplift of the product. And the growth is driven by across all countries. But given the patient number and let's say, the commercial success primarily driven by France and Germany to a certain degree. And we're very happy that let's see now that we further internationalize products. So for us, as we have outlined during previous events, we see a couple of vectors of Kumhoos, let's say, for us. And one of them is obviously further internationalization and further penetration. And let's say, in building them upon some other factors in a way, which we can talk about later. So when you talk about the landmark commercialization of Elocta, you see that we had a fast launch sequence. We were beating benchmarks, let's say, for regulatory, but also in the particular, the reimbursement area that's clearly demonstrating that the company is very proficient when it comes to patient access and payer negotiations. We had very good results with a couple of tenders, for instance, in Ireland, in Saudi Arabia, but also in the U. K. We have no leading positions, let's say, for instance, in France, in Ireland or in Switzerland. And we have been recognized by a couple of payers that this is a very cost effective treatment. We think that the effectiveness of the molecule could be leveraged more in the interest of the patient in order to increase further trough levels and protection level, but there is this opportunity to individualize this. And obviously, there has been quite a bit of evidence generation, as I pointed out, with regard to inhibitors or API treatment. So also for Alprolix, we see a very similar evolution now like Elocta, very strong uplift during Q4, and that's very positive because it's a little bit behind the launch sequence given the negotiations with payers. So now launched in 14 countries and but more countries to come and we'll keep you up to date in this regard. But when you think about look about let's look at this uptake, obviously, a very substantial increase in Q4. And the product, we believe, is one of those that actually when you look at this profile with half life of of with an application of more than 4 weeks for more than 2 weeks, excuse me. And with this profile that we talked later about it, I think it's one of these very strong forward positions for the company. So what have we done? Our strategic imperatives, we have created collected quite a bit of evidence, which clearly demonstrates our safety profile and efficacy profile. We provide individual choices. We have shown very favorable bleed rates where the products are individualized in prophylactic treatment, but it can also be used obviously in the on demand and when you need it most in surgery or in other serious condition. We have been able to demonstrate to eliminate inhibitors. Let's say, this is in the case. Now we have but very encouraging results from case records and 19 of those were published at the latest ISTH meeting that encouraged us to go now into a clinical trial environment, hence the ITI program with Bioverativ. We are driving, obviously, the joint health agenda because we feel it's important not only to focus on bleeds, but also on subclinical bleeds that affect joints. And here we have now very strong data, as I outlined earlier. Pretty we feel that this gives us, for the years to come, a very strong position. And on the next slide, we wanted to show why the market for Alprolix is obviously smaller given the incidence of hemophilia B versus hemophilia A. This is a very strong proposition with the Fc fusion technology and the very strong extended half life. But I think it's also more, let's say, important to say that Alcolex has benefits that go beyond trough levels. And I think this is one of our challenges in the and tough in the weeks and months ahead to make sure that this is more widely recognized and explain why this product has much favorable lead rates versus competition. On the next slide, now we come maybe to the Specialty Care position. I mean for us, Specialty Care is really built on 3 strengths. We provide what we believe a world class commercialization platform. These services or these capacity we have not only in Europe, but also in North America. If you look at the track record that we have been able to achieve with the transformation of Kynaret in both parts of the Atlantic with the commercialization buildup for Orfodine. And all this in conjunction with our R and D capabilities also to prolong life cycle, to do indication expansion. We feel that we have demonstrated it quite a bit. We are very excited also with the successes that we have been achieving on the partnering side of the business. I talked about the life cycle indication expansion. We gave some examples at an earlier stage with regard to chynritinorferdin. And we have a true partnering approach, and we feel that this platform in Europe makes us an interesting partner, particularly for U. S. Companies who might not want to afford or cannot afford commercialization in Europe. Equally speaking, we also figured that our platform in U. S. Is quite attractive for European biotech companies who are considering on how to unlock value in United States and cannot afford to fail 1st trial. When you basically look at the business in Specialty Care, I think it was a fantastic year as well. I mentioned double digit growth with the 2 lead compounds, Kynareth and Orfadin. But let's say, when you look at the total business, if you take away the loss of Cometriq, we actually the business has increased by 9%. And that shows let's say, this business has actually a very strong organic growth profile, and it's clearly an asset of the group. And you want this across the board and we have very exciting products in the stable like for instance, Ciapex that is a very meaningful product from Enel in United States and we have the rights to our territory in Europe. When we go to ophodim, here you can see that we have been able to launch new formulations, 20 milligram oral suspension and got approval for 1 today, which is a fantastic achievement for our organization and have pretty strong performance across the entire M and R region, hence very substantial growth, obviously picked up the pace a little bit in Q4, but had a very strong year overall, this 12%. When we go to the next product, Hynerrest, this is even more stellar growth given that this product has been repositioned for growth for quite a while and is now stable. We are excited about the opportunities related to this anti IL-one that goes far beyond where it is currently utilized. And this understanding and when you look at the literature, how many times now Kynaret has been quoted or referenced, you can see over the last 5 years an exponential rise in publications, which gives you an impression why this product is really at the heart of many physicians and why they have so much interest, but also why they have such a strong underlying growth related to the product. So when you go to the next slide, you'll see the molecule connecting to IL-one. And basically, just 2 takeaways, gout and stills are very substantial indications. We basically figured that there is a very significant opportunity from now we are in Phase II. The trial is ongoing. Instills, we are already in Phase III. We think that this will propel the product further. We need to be obviously recognizing the regulatory time lines. So this is not something for this year, at least not in United States, but it's clearly a very important driver for our midterm growth. And last but not least, we come to the from a commercial perspective to the Facto business. Facto has been an important generator of earnings for the company historically. It's a very stable business. Doesn't look so stable when you look at the chart, but this has nothing to do with the sellout from Pfizer. Let's say, so when you look at the Pfizer report, you can see the in market development. We are not privileged to comment more on this. But what we understand is that this product is in a pretty stable condition. The and our revenues are more related to inventory adjustment at the level of Pfizer than to the demand that has been created in the market. So basically, we come to a pipeline. Let's just end basically here we just wanted to outline the following that the 2 studies in Gautengstil, SOVY-three, one more time, very one of those rare diseases that is completely underserved with high unmet medical needs. And the preclinical results, let's say, make us believe that this product is significantly different than preceding products in this product group that might not have changed all endpoints. We're very excited about it. And we filed an IND, got approval for it. And during the later part of this year, we will have first patient in. And it's a tangible truth of our ability to bring products through clinical development and then eventually to market. So from an overall standpoint, we are, as a management team, obviously, extremely happy with the operational results. But I think that's not a story only of operational results, but it's a story also of moving important strategic and building the pipeline, securing Xtend was very, very important, Now demonstrating that we can bring products into clinical development for preclinical was an important endpoint. Overall, I feel it a pretty good year that makes us optimistic for the future. On this note, I would like now to hand over to Matt Olof Harlin, who will bring our financial results more alive. Thank you, Guido. As you have heard from Guido Olsters, the revenues in Q4 came in at an all time high of €1,875,000,000 which is 45% higher than the same period last year. And for the full year 2017, the revenues came in north of €6,500,000,000 And number to number, we have a 25% increase. But also, we have to consider that 2016 full year was impacted by 2 onetime credits of SEK 708,000,000 and they were of noncash flow impact. And disregarding those 2, revenues for the full year increased 45% 2016 to 2017. Gross margin for the quarter came in at 71% versus 67% last year same period, and that is due to the improved product mix that we have had seen continuously throughout the year. And for the full year, gross margin came in at 72%. EBITDA for the quarter came in at $690,000,000 which is also an all time high for a quarter for Sobeys. And EBITDA for the full year came in at $2,053,000,000 versus $1,543,000,000 last year. However, that should also be taken into consideration the €708,000,000 in onetime credit. And that goes also on the EBITDA line. So in reality, EBITDA increased from €335,000,000 to €2,53,000,000 an increase of 146%. Also, the EBITDA of $2,53,000,000 and also the top down of $6,500,000,000 is higher than the latest outlook that was given after the Q3 report. After the Q3 report, the outlook was SEK 6,300,000,000 to SEK 6,400,000,000 and the revenues came in at SEK 6,500,000,000. Dollars Guidance on gross margin was around 70%, and the year end numbers came in at 72%. And EBITDA guidance was €1,920,000,000 and the actual result was €2,653,000,000 Net profit for the period was €357,000,000 and net profit for the full year was €1,149,000,000 versus EUR 802,000,000 last year. Last year, it also considered the EUR 708,000,000 in onetime credit. In reality, net costs have increased from €94,000,000,000 to €1,149,000,000 euros Turning now over to the balance sheet. The balance sheet has been strengthened during the year with positive operating cash flow of more than SEK 1,300,000,000 during the year. This means also that the long term debt has been paid back. So the company is now debt free and has a cash and cash equivalents of close to SEK 1,500,000,000 at the end of December 2017. Inventories in accounts receivables have increased due to that business is growing and intangible assets have been reduced with the amortization. Equity has also increased from close to SEK 5,400,000,000 end of December 2016 to SEK 6,700,000,000 end of December 2017. With that, I hand over to our CEO, Guy Dorcas. Thank you, Matsura. So now we come to the outlook. And so what do we expect for 2018? And as you know, we are traditionally a company that is more focusing on delivery than the big when our aspirational projections. So what we basically see is a strong uplift of sales between EUR 7,500,000,000 to EUR 7,700,000,000. We have here a range affecting that there are the one or the other uncertainties related to the business. Feel very strong about our hemophilia performance. But obviously, you have to recognize, let's say, the situation is offered in and maybe the one or the other uncertainty regarding also manufacturing warranties income. So gross margin, clearly, it should be at least 70%. And on the earnings side, we feel very strong about achieving between SEK 2,500,000,000 to SEK 2,700,000,000, which would be up to more than 31% increase. And that's if we're very strong about this. And this is a reflection of top line growth and our effective programs. When you think about our strategic positioning, I mean, don't want to dwell too much into this. I think we have made very substantial hindrance to hemophilia, something that is not very trivial to achieve considering that we were rather small player not a long time ago. So I think we earned our respect as recent surveys also show. We are driving of the team of commercial effectiveness. We have built a pretty formidable Specialty Care business that we want to expand further. And we have made great strides in terms of late stage pipeline. We have not yet made a substantial move with regard to our North American presence. And basically, when you look at this asset from a future direction perspective, we want to further internationalize our business. And this will basically be a function primarily of our launches of hemophilia in more countries, particularly of Alprolix, but also there's still some room to capture. With regard to Elocta, We want to build further our Specialty Care position and be eligible as a preferred partner, particularly for U. S. Biotech companies, strengthen our commercial position in both part of the Atlantic and build, obviously, our pipeline. So really emerging from becoming a pioneer in rare diseases to somebody who is aspirationally becoming a leader. I think on this note, I want to now hand over the floor for questions. If there are any, would love to provide more color. Thank you. And our first question comes from Eun Yang from Jefferies. Please go ahead. Your line is now open. Thank you. Good morning. So I understand the guidance that you want to provide a conservative guidance so that you can meet or exceed. But based on your revenue guidance, it's like a new growth or like a low single digit growth from Q4 run rate. So aside from hemophilia, is there any area that you think that could provide difference in performance from 2017 to 2018? And the second question is on the U. S. Business. What percent of I would say 4Q revenue was from the U. S? And given the growth in Kynuren and Orphan in North America, what do you expect U. S. Growth would be in 2018? Thank you. Yes. I mean, thanks, Ewen, for obviously, as you alluded to, we are in the business of delivering. So hence, we provide a forecast that we can attach a high probability of success to. I mean, we don't want anything else I think would not be reasonable, that the tradition of the company, we have no interest to change this. So when you look at the different vectors for growth, let's say, why we are where we are. I mean, there is you've seen the acceleration of growth in hemophilia in Q4, very encouraging. And we think that we let's say that we have a strong role here to play also in 2018, no doubt. With regard to other parts of the business, I think where you see an effect, you could let's we don't there's uncertainty when you are in, let's say, in a patent expiry situation with orphanage. You don't know how this effectively will impact shot at this and have been able to drive growth and this shows our connection. And we clearly are committed to the product as we go along. But it's very there's it's to predict that this continues growing double digit, it's more difficult. And let's say, when you then look at the manufacturing business, where we are really in the hands of our partner, which we cannot influence. And basically, we don't have material insights that make us not believe this is the world is coming to an end, but we have to be we have to recognize that we are dealing here with uncertainty. And this uncertainty is reflected in our, let's say, in our forecast, while we see continued strong growth for Kynuren, but also obviously with our hemophilia business. Now let's say when you look at the growth of the U. S. Business, also one of your questions. There, this we typically don't comment on. We don't show, let's say, revenue by product, by company. But it is let's say, in our scenarios, we see that the Kynareth growth is, let's say, is contributed across the 2 regions of the Atlantic, meaning the U. S. And Europe, obviously. Thank you. You're welcome. Thank you. Our next question comes from Peter Osling from Pareto Securities. Please go ahead. Your line is now open. Okay. Thank you. I acknowledge that you have a history of providing very cautious guidance. But I think that this year, you're probably taking it to a higher level. So I'm just wondering, what is the sort of reasoning behind the current guidance if you don't clearly see the market differently than, for instance, your partner by Veritiv? And then second question, just if you could talk a little bit about how many of the patients on Orfadin has actually been switched to 20 milligram and or solution formulations? Thank you. Yes. I mean we can talk about the that's why we talk about hemophilia. When you basically see the data point in Q4, you basically look at it, we feel very encouraged for hemophilia. And let's say, when you're and I'm sure you have done this, you model the growth uptake, take away the let's say, adjust for the price difference. You basically will find us that we don't have to hide behind by a variety of forecast, the biovarative performance, just adjusting for the later time that we came into the market. So we have no data point that would make us now based on what we know and what we how we performed that makes us believe that we should be, let's say, we should be more conservative. I mean, we have to recognize, obviously, that there will be new competitors entering the market. I think, yes, everybody knows. But we also are convinced that we have a very strong proposition with our products based on, let's say, the data, based on the indication we got, indicated for across all age groups, on our very clean safety profile And then on the additional effects that we have just alluded to with the endurance health, but also the immunological effects that's manifesting itself in the case records in ITI patients. So overall, it will be good. But it's also good to recognize that other companies are also have something to offer. I mean, these are pretty formidable companies. So we know that, therefore, we don't go ahead of ourselves. And with regard to operating, let's say, we have give and take now, let's say, depending on the countries, between 30% to 40% of our business, let's say, on the new formulations. Okay. Thank you. Thank you. Thank you. Our next question comes from Erik Huttgard from Carnegie. Please go ahead. Your line is now open. Yes, hi there. A couple of questions, if I may. First, on market share, if you could provide the market share update on EU's top 5 countries for Elocta? Secondly, could you remind us of the price gap per unit on average between the U. S. And Europe? And finally, how close are you to deliver on your strategy or strategic priorities to expand into North America and establishing a late stage pipeline? Thank you. Yes. Maybe I mean, Eric, maybe I just started and I hand over to Phil. But normally, I think we have not provided, if I'm not mistaken, market shares by market, Let's say, and maybe I can because we have talked about it, let's say, more ranges, let's say, and there's a broad range that probably range from, let's say, 20 from 20 above 25 to lower than 10. That basically gives you a little bit of a range. And that also gives you an indication that we are we feel quite strong that we can still grow, taking away now obviously highlight where it's actually simply 100, yes. Let's say, but so we are we think that substantial growth still, let's say, the price difference, Phil, you want to comment on this, between the U. S. Because it's a bit difficult given the nominal price and the effective net price. And you know that in the U. S, you have different reimbursement systems. So we probably cannot ascertain to really have, let's say, this is a privileged information that Bioverativ do not share with us. So at most, we can provide maybe a dimensional perspective. Phil, do you have a dimension? Yes. So good afternoon, everybody. Phil Wood here from the Industry Business. So we as I'm sure you're aware, the pricing environment in Europe is much more restrictive than it is in the U. S. And as such, we what we aim to do is to offer competitive pricing that reflects the premium that we believe the product value brings to the people in the communities and people with hemophilia. So we have a very competitive approach to pricing, but it is where we see value that we can drive into the business. Yes. Is it to be a little bit more specific on the price gap without providing any exact numbers? Well, I think it's probably not up to us now to speculate here, Phil, because these are privileged information from Bioverativ and we cannot even watch for the accuracy of the data. So I think it's not acceptable. It's not good. But in terms of and just adjust for volume, yes? Volume is basically where we had a pretty good idea that we are following the app performance. Okay. Thanks. And on the expansion into North American building a late stage pipe? Yes. I mean, we have let's say, we have screened, let's say, the market very substantially. So we have and we are currently pursuing a couple of projects. It's early days because as you know, it's still binary. You either get it or you don't. So cannot really speculate about the future, but we are working on a couple of projects now to address this and hopefully can inform you when we have scored, Let's say, but not until then, it's purely speculative. All right. Thanks a lot. Thank you. Thank you. And our next question comes from the line of Peter Seestad from Handelsbanken. Please go ahead. Your line is now open. It's Peter from Handelsbanken. Thank you for taking my question. I would like to follow-up to start with Eric's question regarding the strategic. I mean, when you talk about these strategic things, the conversation always gets at the high level and very, very naughty. But to get to the Middle East part, in the U. S, what exactly is it that you want to achieve in terms of, I mean, sales force presence, etcetera? So let's say, what is your medium term view? If you could just take the current phase that you have in the U. S. Right now, could you elaborate a little bit on what kind of presence you have there in terms of sales reps, in terms of whether what you want to do there is adding something that would expand your overall presence, your commercial presence in terms of the market? Or whether it's something you just add a pipeline product or a very base based product or product on the market that you could leverage with your current infrastructure to get some more feelings for your thoughts on this issue? Then I have a couple of follow ups when we finish with that. Yes. Thanks, Peter. I mean, unfortunately, I mean, we probably will not provide, let's say, with a detailed overview of our commercialization structure at this juncture. I mean, what I can tell you is that we have an adequate representation, let's say, in the U. S, which is in line with our with the needs of rare diseases. And when you have an anti IL-one with indication that you have, let's say, the good news is you don't need 100 of reps, let's say, to cover this and hence our structure is accordingly. It's competitive in these areas where we are in, but it is not we think it doesn't extend beyond. Let's say now what are we looking for, we will look for both. Let's say, obviously, let's say, late stage, but also bolt ons, let's say, and we'll see what we can in the end get. I mean, it's a marketplace. You might get something or you don't. I mean, you'll find out. But ideally, obviously, we find something where we can leverage the people that we have because that would allow us to be even more competitive and build on the strength. So I'm afraid that, let's say, at this stage, I cannot be more specific. But once we have we got something going, we're happy to provide you with more details of this, Henry. Okay. And my follow-up question we get regarding your exclusive contract in Ireland. You will not talk about the price, but could you provide some flavor on the potential for the similar deals like that in Ireland? Or is this just a special case given the size of the country? And my second question relates to I guess, it's all intertwined with your strategic potential question. I mean, it's sort of the potential for returning cash to shareholders. I guess with your strategic thoughts, we should forget all about cash distribution to shareholders in the near term. Is that correct? Yes. And congratulations on a good quarter. Excellent. I appreciate it. Thanks, Peter. Yes. So with regard to the Irish situation, let's say, this is we cannot and obviously won't comment on any prices. Let's say, I think one of these very unique scenarios where you have payers, patients, associations and also physicians collaborating extremely well and assessing product on their own merits and then making choices which are in the interest of patients. I mean, we don't that this becomes now the prevailing model in all countries. But clearly, we see obviously a merit to make sure that the patient has a voice. And we can only commend the Irish patient organization, how they have been able to assert themselves and making sure that the patient voice is heard. Shirley, do you want to comment on this? Yes. Just to say, I think that's exactly the point here, because whilst we don't expect to see this procurement process replicated, let's say, in many places of the tender, what we do see increasingly is patients having their voice heard in reimbursement decisions. And I think we'll see many, many situations going forward, particularly in hemophilia as the patient organizations gather pace and momentum. I think interesting to see that in France we've recently had Alprolix pricing approved and currently the only approved extended half life Factor IX treatment even though we've been reviewing others as well. Yes. So then basically, Peter and I think there was another question, let's say, which was regarding sorry, the Yes. It was regarding use of cash distribution to shareholders in digital? Yes. No. I mean, when you give a forecast of up to more than 30% EBITDA growth, we think, let's say, that this actually suggests that there's still a great future in this company. And we hope that shareholders agree with us and that we can make efficient use of their funds, let's say, in the interest of the business and continue investing into this business because when you look at the vectors of growth for hemophilia, we still have a lot of ground to cover from a penetration, let's say, but also from an internationalization perspective, recognizing obviously that obviously the competitive landscape is going to change. We are fully aware of this. And let's say, you don't and that this will have the one or the other impact, but we are convinced that we had a strong offering. Okay. Thank you very much. Thank you. Thank you. We have a follow-up question from the line of Peter Osterling from Barreto Securities. Please go ahead. Your line is now open. Okay. Thank you very much. Two quick ones. On your comments on the potential price gap between Europe and U. S, I acknowledge your replies there. But I think that you sometime in the past have said that the commercial value on for your markets are similar to the ones that by relative controls, mainly due to even if there is a pricing difference there is for instance, I guess the use of prophylactic is more common in Europe. So it maybe evens out a little bit. That's my first question. If you could just reiterate if that's the case still. And then also if you could comment a little bit around the extended half life market related to hemophilia B, because some of your competitors in that space or several ones have said that they are market leaders. So if you could put some flavor to the dynamics into the hemophilia B market. Yes. Absolutely. So maybe with regard to the I mean clearly, as long as I'm here, I've never commented on the U. S. Versus Europe, let's say, and the equal potential. The only thing I said is that there have been analyst reports out there when I started suggesting that and they have recognized surprise difference, let's say, as they saw at the time that suggested a higher sales line for the U. S. Versus, let's say, versus Europe. But Innovia but we're also recognizing now we are at the beginning of this of our penetration. So I mean, I cannot say more. I don't think we have really commented on price differences, at least not a little time there. And therefore, I don't want to refrain from this. With regard to the second part, it's a bit like this phenomenon When you ask 10 country managers, are you going to grow above market, 8 will tell you, yes, which is mathematically obviously difficult, yes? So and let's say and you're not obviously many people want to feel like leaders. I think we can safely say that we have more room to cover because I think we have to explain, let's say, still I think the stronger to the community that you have actually superior protection with Alkulix. And it's obviously difficult to ascertain some of these comments. We have got X percent of switches because there is no real database that in an objective fashion can support either of those. And then you have to basically try to extrapolate from data that are available in a certain, let's say, confined space. I mean, we don't make a secret out of this that we are not yet satisfied with our performance. But I think it's also good sometimes to have an area that you can improve. And clearly, given the product profile, given that the product has achieved in United States, we are encouraged to improve. Just a follow-up on the market. It was not the price difference I was after. But could you verify my notion or comment on my notion that prophylactic use of factor based products is more common in Europe than in the U. S? Thank you. Sure. Yes, that is the case And that's prophylaxis tends to be more widely used across the European regions because of the way that the products are reimbursed. So in the U. S, there is a higher degree of on demand therapy due to the insurance system. Okay. Thank you. Thank you. We have a follow-up question from the line of Eun Yang from Jefferies. Please go ahead. Your line is now open. Thank you. So both the elocta and Iprolix have been in the EU market more than a year. Are you seeing some price adjustment in certain countries, including Germany? No, we don't. We basically we have obviously, when you have in the customary negotiations with accounts, there's an ongoing process. But and sometimes this can go different ways. But you have not seen, let's say, an adjustment as an enforced measure, let's say, to our price situation. And let's say, at this stage, we're still encouraged by the fact that people recognize the superior profile of the locked and our products and what it can do to patients. Okay. And then a quick follow-up on the pipeline. So you provided some color on MPS IIIA enzyme replacement therapy. But how about O5 for the antibody for C5 as well as IR1 Effibody programs? Maybe Milan can give you some color. Hi, Ion. It's Milan Faivis, Head of R and D. So regarding 5, this is our C5 blocking agent. And we are currently conducting preclinical experiments to figure out how we could potentially differentiate this in this space. So this is an early preclinical project. Regarding 6, which essentially has the same pharmacological profile as Anakinra, so it's an IL-1a and beta blocker. This is currently in CMC development. Okay. Thank you very much. Okay. Thank you. We have a follow-up question from Peter Seestad from Handelsbanken. Please go ahead. Your line is now open. Peter, your line is now open. Sorry, I had it on mute. Yes, you should be able to hear I was on mute. So starting off with a couple of highly exciting house keeping questions such as tax rates and CapEx for 2018. And then I have a follow-up question. Excellent. Thanks, Peter. Maybe my good option, Kevin. Goodbye. Tax rate is currently 25% for the year 2017. The actual tax rate is around 22%. The actual tax rate is around 22%. However, due to the new tax reform in U. S, we had to take a hit of around 3 percentages also on the tax rate for 2017 of a onetime nature. But around 22% is the actual tax rate. Regarding CapEx, what was the real question? Need for CapEx in 20 18, was that your question? Sorry? That is correct, yes. We don't see any extraordinary need for CapEx to run the normal business in 2018 compared to 2017. No. The answer is no. No additionals beyond 2017, same rate. Okay. Thank you very much. So perhaps just a final question on tendering in Europe because there are some reviews out there. The public domain, we can see there is lots of so many countries, particularly in Southern Europe, where you only have access to the markets if you were engaged in tendering. Could you just elaborate a bit on perspectives in terms of access for your products in countries with and countries without tendering? And what is your strategy in that respect? Yes. I think we obviously have to adopt to the system that is prevailing, yes? And we try to provide in these tender situations, we try to provide attractive prices, but we are not obviously going to levels that sometimes may be more commoditized competitors are willing to accept. So we want to get still some recognition for a superior product at the obviously, at the center of our intent is also the patient because we feel that more patients should be able to benefit from Elocta. Hence, we are doing this extensive donation program. So that's really at the heart of the philosophy of the company. But we don't go down to the 7. And basically, yes, there are quite a number of tender countries out there. We just got a price approved in Poland as well. We're thinking of how we can deal with this. But normally, our philosophy is make the product available also in our private markets on the strength of signs and on the strength of a superior product profile. And we have got very positive recognition. And in a less in a non tender market, what we do is we try to provide medical interesting propositions to physicians as everybody else tries, but we think that we have a little bit of an edge. And as you have seen in our clinical trial program, we try to generate more evidence to even more cement our safety profile and our superior features of the product. Thank you. Give some flavor. Thank you, Peter. Thank you. Our final question comes from the line of Peter Osterling from Pareto Securities. Please go ahead. Your line is now open. Okay. Thank you. I promise this is my final one. Maybe for Mazzola, could you comment a little bit about the operational cost in the quarter that was a little bit high? Are there any one time items included in that? Or should we use that items included in that? Or should we use that run rate into 2018 also? I think that's a run rate that you probably can use for 2018 as well. We don't give any guidance on the cost development per se, but you have seen our guidance on top line, on gross margin, on EBITDA and sort of doing the math, you can see where we will land given that if you believe in our outro service streams. But will that if you look at 2017 and the selling and admin expenses, they fluctuated quite significantly between the quarter. Would we see the same kind of pattern in 20 18? Yes. I would guess that Q3 is always a very low quarter or the lowest quarter in terms of cost yet. And of course, Q4 has been a high quarter in terms of cost. But also our EBITDA is also very, very high in Q4. Yes. Okay. Thank you. Stellar quarter, by the way, if I didn't say that before. Thank you. Appreciate it. Thank you. I think on this note, we probably can close the conference given the timing that everybody had. And we really like to thank you for your attention and for a pretty interesting dialogue. Obviously, you know how to reach out. We have Jorgen and Linda if you have further questions. We are happy to be at your disposal. Thank you so much. Wish everybody a great weekend. Thank you. Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect your lines.