Ladies and gentlemen, welcome to the presentation of the Q3 results for Sobi. For the first part of this call, all participants will be in a listen-only mode, and afterwards we will have a question and answer session. Today, I am pleased to present CEO, Guido Oelkers, and CFO, Mats-Olof Wallin. Speakers, please begin your meeting.
Good morning and good afternoon to everybody. This is Guido Oelkers, and it is really a pleasure to welcome you to this call. We want to familiarize you today, obviously, with our Q3 earnings results and give you a little bit of an insight where we stand in the progress of company development. We have here, as the moderator was just introducing, Mats-Olof Wallin, our CFO, and also Philip Wood, who is the Head of Haemophilia, because we thought it is a good idea to provide you with some additional insight at where the business is going. On this note, I would like to go straight to page three of the presentation. I think the forward-looking statement is understood and the limitations according to this. We had a fantastic quarter, at least the way the management is looking at this.
37% growth from top line on a quarter-to-quarter basis. Quarter to last year basis. We had a phenomenal growth in Haemophilia with over 600% growth. Orfadin and Kineret, when you actually adjust for currencies, were growing very nicely double-digit. That tells you that the company overall is in a pristine condition. This prompted us also to revise outlook for the year, and we will talk about this later. Coming to the next page, what did we do in terms of organizational development? We have reduced the number of direct reports to myself and focused the team in an executive committee because we wanted to make sure that we have a smaller group of people driving the main decisions of the company. We have brought in a new Head of Specialty Care.
As you know, this was one of my first decisions that we did not sell the partnering product. We saw this as an integral part of forming a Specialty Care franchise. We brought in now Norbert who is true entrepreneur and to basically now build upon this and build out this business, which we believe is underrated widely. We are going to have a new Chief Legal by January 2018, and have signed an agreement with Torbjörn Hallberg, who is going to join us from Takeda. When we look at the financial highlights page five. There you can see quarter-on-quarter the growth story of the company, and we have adjusted for the one-time credits in the color of orange.
You see that we had a very strong quarter-on-quarter growth, while it's really the third quarter would have actually also increased if it wasn't for some inventory adjustments for ReFacto and some currencies effect. Considering that this is normally a slower quarter due to holiday seasons in Europe, actually we're very satisfied with the results. Strong gross margin was 17%. The very powerful EBITDA was SEK 536 million. Healthy cash flow, as you can see on the slide, is SEK 580 million. Going now to the next slide. I should try and outline that obviously Mats-Olof Wallin is going to lead you to the financial section in much more great detail. We'll make sure that we give proper justice to this part. When you come to the earnings side, basically you look at it, we have strong gross margin.
Our EBITDA is SEK 1.4 billion, let's say, on the year-to-date basis. The cash flow over SEK 1 billion. We think that the company, with a SEK 4.6 billion revenue line, is in a nice condition. The 18% increase is, let's say, not considering the adjustments. When you basically on this note, I think it's important. There has been a lot of debate and discussions around prospects in hemophilia. Hence, I thought it's a good idea to bring Phil Wood in. We just had quite extensive interactions with our key opinion leaders and customers to share a little bit about and bring some perspective on where do we stand with hemophilia and give you maybe a glimpse why we are extremely bullish about the future of our products. Phil.
Thank you. Good morning, good afternoon, everybody. Before we head into the numbers, let's take a look at where we are with our hemophilia franchise. Elocta and Alprolix both represent the first real advances in therapy in hemophilia for many years and have been established now for a number of months and years in many countries and really are very well established. These products have an established safety profile with a strong Fc profile and as such offer really reliable and predictable therapies in the care of people with hemophilia. The Fc technology as a route to extend the half-life is a natural approach that we feel we don't The concerns and issues around accumulation of the extension of the molecule. Our approach to pricing has been designed to enable rapid and widespread access without the delays of extensive and long discussions with payer authorities.
To get to your point, when I listen to the feedback from the field, I've just come back from a week in the Middle East. I've been around many of our territories across Europe as well. It's consistent in the confidence that the treatment community and the patient community have in our franchise for now and in the future. Let's look at the numbers.
Thank you so much, Phil. When you look at slide number nine, when you look at total revenues, we have now SEK 805 million, and let's say in the off page, let's say 550 are product revenues and 391 are related to the royalty stream. As you can see, also our partner, let's say these are estimated royalties, but from any indication we are getting, they are also maximizing the value of their part of the territory. It shows the confidence in the franchise. Very powerful growth year to date, SEK 2.1 billion. Obviously with a very significant uplift, that is exemplified by the 600%. Overall, very pleased with the results so far. When you basically look at the Elocta launch, we did some own benchmarking with the help of some external sources and looked at this.
Granted, let's say this uplift is still a little bit delayed due to the lack of reimbursement in a number of countries still. We're working very hard on this to correct this. Let's say this is forthcoming, but considering all this, actually quite satisfying and gratifying results of the Alprolix. That is obviously quite, given the nature of the number of patients, is a little bit the smaller cousin of Elocta. The progress is quite formidable from our perspective. When you go to the next slide, Alprolix, it's really also taking off now.
Granted, let's say this uplift is still a little bit delayed due to the lack of reimbursement in a number of countries still. We're working very hard on this to correct this. Let's say this is forthcoming, but considering all this, actually quite satisfying and gratifying results of the Alprolix. That is obviously quite, given the nature of the number of patients, is a little bit the smaller cousin of Elocta. The progress is quite formidable from our perspective. When you look at the Orfadin situation on page 12, you basically you see an increase of 5% in absolute terms. Let's say that it's 8% of the quarter corrected for currency, 10% on a year-to-date basis, corrected for currency. Overall, we think it's a strong growth. Let's say, Q2 was obviously exceptionally strong, probably affected to a certain degree, Q3 as well.
We haven't yet felt the pinch of generic. It's why we talked about this, let's say earlier. I mean, we can also not walk on water and pretend that a generic entry will have no impact. So far, let's say we are managing quite well. We have some tailored formulations, new formulations for patients that are, we believe, are extremely relevant to address patient needs. We also have a very tailored approach to customers. Don't forget, many of our customers, let's say, basically owe their life to the existence of Orfadin. There's a different maybe also customer loyalty in this sector than you would expect maybe in the one or the other primary care. Let's say when you now look at Kineret. I mean, Kineret is a fantastic product. Very strong growth. Year to date, adjusted for currency, 11%.
The quarter was a little bit softer with 6%, adjusted for currency in absolute 3%. This is more, I would say, as a seasonal effect. We don't see that this is now a new trend for Kineret. We were quite bullish for the product, particularly also now forward-looking, entering new areas. This product is very relevant, in many areas of inflammation. We are very encouraged also that you see this with our commitment to further education development in the GARD and Still's , that we believe in this product and want to build it out. It's an important pillar for our company. When you look at the next slide, which is ReFacto. ReFacto, the revenues, they're always quite choppy, and it's not because in market sales is moving up and down like a yo-yo.
It is more that this is a result of the inventory management of our partner, Pfizer, that basically depending on their needs, we basically see these adjustments. We want to look at the in-market development, which is more stable. Let's say, I think you have to go to the Pfizer website, but basically what you see here is more of a result of our supplies into Pfizer. As a consequence, we had a consolidation after a very strong quarter in Q3, which is clearly beyond our control. We just supply according to the demands and requirements that are sent to us. When you look at it as a whole, I think management is very satisfied with the outcome of the quarter. Let's say, Mats-Olof Wallin, I think on this note, would familiarize you with more details on the financial results and provide more light. Mats-Olof Wallin.
Thank you, Guido. Good morning and good afternoon. As Guido Oelkers mentioned initially, the revenues for the quarter came in at SEK 1.6 billion, which is 37% higher than the same period last year. Sobi has negatively been affected by currency and at constant exchange rates, the revenues increased by 41%. For the first nine months, revenues came in at SEK 4,636,000,000, which is 18% higher than the same period last year. If we adjust for the 2 one-time credits that were received in Q1 and Q2 2016 of a total of SEK 780 million, the increase for the first nine months is 45%. Gross margin came in at 70% in the quarter versus 67% in the same quarter last year. Accumulated, Sobi has 72% in gross margin versus 71% last year. There were some one-time effects for 2017.
In Q1, there was an inventory adjustment, and in 2016, as I just mentioned, the 2 one-time credits. If we exclude these extraordinary items, revenues accumulated January to September 2017 should be 70%. For the same period last year, the first nine months 2016 should be 65%, which means that we have increased 5 percentage units between the years. The operating expenses for sales and administration came in at SEK 371 million versus SEK 327 million the same period last year. The increase mainly relates to continued organizational investments and to strategy development initiatives. Operating expenses for the first nine months amounted to SEK 1,167,000,000 versus SEK 967 million the same period last year. R&D cost came in at SEK 214 million versus SEK 171 million the same period last year. For the accumulated nine months, SEK 679 million for 2017 versus SEK 520 million the same period last year.
The cost increase reflects increased spending on programs for Kineret, Elocta and SOBI003, as well as Sobi assuming its 50% share of bivalirudin's ongoing development cost. EBITDA for the quarter came in at SEK 536 million versus SEK 282 million the same period last year, and accumulated the revenue, the EBITDA came in at SEK 1,434 million versus SEK 1,333 million the same period last year. Again, adjusting for the one-time credits in 2016, EBITDA increased with SEK 750 million for the first nine months. Profit and loss for the period all the way down on the profit and loss statement. The profit was SEK 324 million after tax for the quarter versus SEK 135 million the same period last year. Turning over to the balance sheet.
As you can see, the cash position has improved during the quarter and Sobi ended with a cash position of SEK 1,758 million at the end of September 2017 versus SEK 1,189 million at the end of June and SEK 786 million at the end of 2016. Cash flow from operations in the quarter came in at SEK 780 million, and for the first nine months, it is SEK 1,076 million. The good Q3 results reflects, of course, the good performance overall, but also that cash collection has been good in the quarter, meaning that the accounts receivables have been reduced since June 30, but also that there are slightly longer short-term liabilities. By that, I hand over to our CEO, Guido Oelkers.
Thank you so much, Mats-Olof Wallin. When you look at the outlook, you can see that we are quite excited actually about the results of the quarter that prompted us to revise revenues for the year. Basically new guidance is SEK 6.3 billion-SEK 6.4 billion. We think that we can, as you have seen from our results, that we have built out gross margins for this previous year, and we think that we can sustain the letters to other, at the increased level. When you then basically make a deduction, say maybe a bit of me, on an earning perspective, EBITDA, we increased guidance to SEK 1.9 billion-SEK 2 billion and from SEK 1.7 billion-SEK 1.8 billion. We debated this in the management team, and we said that we can deliver this.
When you think about now the future growth prospects, what do we want to do? Where do we want to take this business forward? Obviously, when you have 600% growth in hemophilia sales, this is not the time to consolidate. This is the time now to take your fair share. We have made great progress in terms of patient acquisition rate during the last quarter. We believe that there is much more out there that we can do. We are convinced that we have, even with EHL, that might arise the best product portfolio in our hands, and we will go for it. We have made, as a company, trade-off decisions in this regard, to basically show that we are really, as a company, totally committed. That these companies and these products, in a way, we shape the product, but ultimately, they shape the company.
When you think about specialty care, we believe that there's great prospects. This is coming back to what I mentioned at the beginning. We felt that this is an underrated franchise. This is a very good portfolio. To have a market access platform like we have in terms of access to payers, access to KOLs, access to other relevant stakeholders, this is not trivial to replicate. It would have been a big shame to lose this, hence rebuilding upon this. This was, as I mentioned, a decision that I took. Now basically, it is up for us within the leadership to make and build a very promising portfolio and connect this also with our R&D efforts. In R&D, as you can see, we don't make a big deal now around strategy. We call it more focus on future growth.
Essentially what it means is we are obviously looking for the right assets now to complement our R&D pipeline and trying to move things into more later stage, but are also very satisfied with the progress that we have made. We just announced that we have recruited two patients, ITI patients, inhibitor patients for our ITI trial, which is very gratifying and shows that what we articulate and what our beliefs are, that these are center products we document and back up with action. We also have made some good progress in other areas. If there are questions in this regard, we have Milan here, Head of R&D, who can answer this in the Q&A session. Then there's another important aspect of our company.
When you basically look at Elocta, I understand that there have been the one or the other question, how will we measure up versus the competitors that are going to enter, particularly the hemophilia space. I think there are two things to consider. A, when you are operating in an often rare disease space, company scale does not necessarily mean that you have competitive advantage. Basically, our pathway is very clearly that we need to be an agile, very nimble organization. We have demonstrated great success in this regard in the past. Otherwise, we could not have shown the results that we are showing this year. I think there's more to come.
From our perspective, this is what we mean by empowering and creating a nimble organization where we connect with the therapy areas and, for instance, Phil with representing hemophilia, as it's in other functions, but we make sure that accountability and responsibility as close to the customer as it gets. We think this is a great opportunity for a company of our size. It's basically economies of speed that we try to achieve here. I think on this note, would like to open the floor for questions and answers.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad. If you want to withdraw that question again, you can do so by pressing 02 to cancel. Once again, that's 01 on your telephone keypad to register for a question. We'll now have a brief pause while questions are being registered. We have our first question from the line of Eun from Jefferies. Please go ahead. Your line is now open.
Hi, this is Carmen after Eun. Thanks for taking the question. We saw that there was a tender order in Saudi Arabia this quarter for Elocta. Could you quantify the magnitude of effect that had on total Elocta sales this quarter? Is that something we can expect to repeat in future quarters?
No, unfortunately, we do not want to divulge this. Obviously the number of patients that we were able to get committed are very significant, but I think this would be not appropriate for us.
Okay. What about repeating in future quarters?
Excuse me?
Do you expect those kind of tender orders to repeat in future quarters?
Yes, absolutely. This is an annual commitment, let's say that we got from our partners, we have no reasons to doubt that they can fulfill this commitment. We have won this tender, which is very substantial.
Okay, thanks. Then for the recently initiated ReITIrate study of Elocta, how do you expect the potential upcoming approval of ACE910 to affect enrollment, if at all?
Excuse me. You're asking whether we are expecting ACE910 to have an effect on enrollment?
Yes.
Maybe Milan, you want to comment on this?
This is Milan Zdravkovic, Head of R&D. We do not expect that to affect enrollment. We are confident that we have a very strong preclinical evidence supporting Elocta and the use of ITI. We have case studies that support this, and we feel fundamentally, and members of the community agrees, essentially to the fact that eradicating the inhibitors is the way to go. The bispecific antibodies are not able to do that. We have just enrolled the two first patients in Northern Ireland in our rescue ITI study. We are happy with our collaboration with Bioverativ. They're working on their first ITI study. We do not feel that will have any impact.
I think it's also important to note, we just saw some recent case studies actually in hemophilia B in Germany, where basically the inhibitors were eradicated within six, respectively eight weeks. It just tells you that we are extremely bullish about this and very confident that we can find the number of patients for our trials.
Okay, great. Then one more, if I can, and I'll get back in the queue. Bioverativ mentioned in the second quarter that Elocta captured around 15% share of the U.S. market. Do you have a comparable figure for Elocta in Europe?
No. I think we have some internal yardsticks, obviously, and we have made significant progress, let's say, according to those internally yardsticks, but we don't think that we want to divulge this.
Okay, thanks very much.
Thank you.
Thank you.
The next question comes from the line of Erik Hultgård from Carnegie. Please go ahead. Your line is now open.
Thank you so much. A couple of questions, if I may. First, what level of gearing would you feel comfortable operating with? Secondly, is your M&A strategy focused exclusively on bolt-on deals, or would you consider transformative deals as well, which would include equity as a source of funding?
Let's say, obviously, as you can see, we are cash positive, SEK 1.8 billion cash in the bank. We are not yet in the gearing stage. As you would expect from us, we are obviously reviewing all alternatives of external growth as you would do in a situation like this. It would be probably premature to speculate now, where this leads us, given the fact that there is no price for silver medal when you pursue M&A.
Okay, thanks. On size of assets that you're looking for, is it mainly smaller bolt-ons, or would you consider transformative deals?
It's a good point. I think it's not the size that matters, but we would look for assets that, let's say, if combined somehow, that obviously create a lot of value for the company and that is what is driving us and what we feel, let's say, obviously, there's a lot of encouragement now. It's purely speculative, to now to think about the size of the assets. If we make deals, we will make deals that are accretive in terms of value generation.
Okay, great. Just one final operational question. On Alprolix, do you have any information about market share in the U.K. and Italy, which is your biggest markets presently? Also, has competition from IDELVION had any significant impact on the uptake of Alprolix in Europe so far?
We don't have, let's say, validated market share information on the U.K. and Italy that we can also now share because I think it would be not serious. Let's say with regard to IDELVION, as you would expect, let's say they're a formidable competitor With the long heritage, yes. They have also one or the other, let's say, deal. Whilst we have also made some significant inroads and let's say, yes, that could have impacted let's say, obviously the uptake. It is also very natural when you think about it, the big opportunity obviously for the commercial organization is in haemophilia A. Let's say, towards the extent this has played a role, one can speculate, but yes, there is CSL is a good competitor. You always have to pay respect to the people you're dealing with in a competitive area.
I think we have got a very significant share.
Significant share, do you feel that you are on par with CSL in terms of share for factor 9? Are you above or below? What's your impression so far on the markets where both products are available?
I think our impression is that we have a very competitive product.
All right. Fair enough. Thank you.
Thank you.
The next question comes from the line of Lars Eriksen from Danske Bank. Please go ahead. Your line is now open.
Thanks. Can I just ask about the guidance for the remainder of the year? If we would assume the midpoint of the sales guidance and then the gross margin 70% as you have said, that indicates discretionary spending's broadly flat year-over-year and then around the same level, around SEK 600 million or so in the fourth quarter. Is that how we should see the phasing on your investments and the ramp-up of the marketing organization, et cetera?
Yeah. Obviously, when you're growing, let's say year-to-date basis, 600% with a franchise. You obviously feel encouraged to continue investing into this. It would be a myth to believe now that we should stop. Quite the opposite. We are encouraged. We want to invest into this business. We have some areas obviously that basically will come into the Q4 result. It will affect us. You might have read about our broader commitment to society and to haemophilia patients as such. We are working on a very significant donation program there with our partner, Bioverativ. Let's say this is a very significant effort, that both parties are let's say, supporting the haemophilia society beyond what the rest of the industry is doing. Just to give you a sense of magnitude, and that will affect our operating results, let's say in Q4.
We felt let's say, considering the upgrade of the forecast that we are still doing the right deed here, yes.
Can I just ask about the donation program? Is it possible to give any indication on the number of treatments, how many have been donated as a portion of your total deliveries, and how many have been sold through normal commercial distribution patterns?
Let's say, this is always a little bit difficult, obviously to get exact numbers. In terms of magnitude, and Phil can comment on this, you have a couple of thousand patients because some of them are not on prophylactic treatment, but on demand. Phil, you want to comment on this?
In terms of numbers of patients treated through the donation program with the WFH, it's into the tens of thousands actually. Over 10,000 people have received treatment, and there are around 1,000 life-saving surgeries or treatments that have been carried out as a result of those donations. It's an extremely significant program for a large number of people.
Okay. Thank you.
You're welcome.
The next question comes from the line of Richard Koch from SEB. Please go ahead. Your line is now open.
Hi. Looking at partner product, or I guess this is what you call the other part in Specialty Care that's doing quite poorly in Q3. Could you comment on what happened there?
Yeah. The underlying growth of the business is flat. What you see is a partner product, on a year-to-date basis is more the effect of the discontinuation of some of the partnering products. Underlying, actually, it's not as dramatic. You have to be also realistic that the EBITDA margin profile at this stage is not in an optimal condition. Basically, this is now something that we want to correct. I'm personally very optimistic about this franchise, but it needs to be furnished maybe with one or the other brethren. Let's say, then you will see a very nice result because fundamentally the organization is good. Yes, you're correct that there are, let's say that when you look at it on a quarterly basis, it's not exciting.
Do you mean that you've been cleaning out low-margin portions of partner products?
Yeah. We have lost in particular two contracts that have affected our business performance. Yeah. That basically is not yet hangover.
In Haemophilia with the lockdown and outbreaks, were you positively surprised about the performance this quarter? Given the fairly strong Q3 figures despite that having both July and August, the summer periods, which are normally slow? Or was this according to your expectations?
I think it's in line with what we expected from these products because there's a lot of roles, where do you see the future? We are 100% behind these products. We believe in them. We get these very encouraging results, and we gain number of patients. We obviously monitor this very carefully by account and get a very good view on the situation. The results were in line with what basically we would have expected based on the patient acquisition rates. Let's say, we see this trend continuing. Yeah, it's always nice when the money is in the bank, let's say, but it is a consequence of the activities that we have performed.
Okay. Coming back to the targets for the R&D pipeline. You didn't want to comment too specifically on that, but could you talk anything about whether, is it going to be products that just about to reach the market, or could it be still a couple of years out, or how do you see that?
Yeah. Obviously so far we haven't done anything, let's say, we haven't scored a deal, so it's really premature to speculate. Based on the interaction we had with the number of, let's say, of the attendees of the call, the recommendation that we obtained is more late stage, let's say more phase III or phase II-B or so than early. Proof is in the pudding. We can speculate a lot. Let's say at the end, we are only as good as what we have signed up, and therefore, we didn't want to comment on this. When it comes, it comes. It's pretty binary.
Okay. Just lastly, to housekeeping things, what do you expect for the full year for net financials and the tax rate?
Mats-Olof?
Well, we do not give any guidance on except revenues growth margin and EBITDA. Those are the only committed guidance that we give out. I would say that if you extrapolate where we are right now on financial net and tax, I think that's probably in the right ballpark.
Okay, thank you.
The next question comes from the line of Peter Östling from Pareto Securities. Please go ahead. Your line is now open.
Okay, thank you. Can you hear me?
Yes.
Yeah, okay. Just one housekeeping question. The split of royalties between Alprolix and Elocta, could you just give us that? I would like to know what made you increase your guidance between Q2 and Q3? I think this is the, if not the first time, but still one of the first time that you actually increase your guidance or outlook two times a year. Usually, you give an outlook at the beginning of the year, and you revise it at the Q2 report, and then you keep that until you report the full year. What happened between the Q2 and Q3 that make you revise your guidance?
Lastly, when it comes to your strategy and your ambition to add assets, it seems like since you say in the report that you will rebalance your efforts somewhat towards North America, given the competitive environment when it comes to these kind of late-stage assets, what will make you successful in order to get any of those deals done without paying too much for those assets? Thank you.
Yeah. Maybe Mats-Olof first on the first technical side, and then I comment maybe on guidance and on the North America part.
Yeah. Thank you, Peter. Thanks for asking the questions. However, we do not comment further on the estimated royalty revenues beyond what we have said in the report. It is estimated royalty revenues. It also includes a correction for Q2. We do not comment on the individual products as Bioverativ is distributing their Q3 reports on Friday morning this week.
Okay.
That is an agreement we have with Bioverativ also, and we pay respect to that.
Yeah. Peter, maybe regarding the guidance, why did we change the rhythm? Let's say, the good news is that the business is actually doing very well, and let's say, when you go through a phase of exuberant growth, let's say you basically say, where do you peg it? Yeah. 600%, 550%, 650%. Basically as the more data points you get, let's say, we want to give obviously a fair representation of what we believe in, and that's basically what you see here. I hope this was okay that we didn't feel bound to the historical rhythm, but the business is actually doing well. With regard to, let's say the North America, I think this is. Yes, you can argue, let's say that for European companies, North America, for most European companies, North America is a little bit more difficult.
When you look at what our North American team has done, with products like Kineret and Orfadin, how they have repositioned these products that basically were existing, basically invested into them, repositioned them for growth. The team that we have there, and also the business development resources, they are actually Americans. Yeah. I think this is pretty good team. Yeah. Let's say why would we now believe that we could not compete head on, let's say, with other companies and the segments that we are looking for, they are not traditionally the segments that you would face Pfizer or Merck Sharp & Dohme. This is a smaller group of companies and, as I said, that's the reason why we don't want to comment too much on what may be or should be.
Let's say we hopefully can do something, then you know what the strategy is. Let's say, by the action and not by what we might elucidate to. I think, let us surprise you, let's say, with what we do.
Okay. Just a follow-up, quick follow-up. As you mentioned, Kineret, I expect that your search will include already launched assets that is maybe underperforming or maybe is misplaced in the market where you see that repositioning could make some good value.
Yeah, everything is possible. We will look for good opportunities that suit the skill set that we have in this company.
Yeah. Do you have a goal of actually striking a deal if you want, say, within the next 12 months?
No, to be honest, with all due respect, we are not commenting on this.
Okay. Thank you.
Thank you.
The next question comes from the line of Peter Fyrstøyl from Handelsbanken. Please go ahead. Your line is now open.
Yeah. Hi, it's Peter from Handelsbanken. Thank you for taking my question, at least. Relating to your visibility into potential future competition coming into the market, and what sort of things are you looking for in the profile of competing products, in order for you to sort of judge the future? I think it's basically to address investor concerns or concerns among those investors that believe that it's game over after competing products come in and also the sort of needs for you to do M&A or business development or call it whatever you want. How dependent is that on your assessment of the situation as soon as a competition either releases data or comes into the market? Sort of just to gauge your thinking on strategy and sort of the sequencing of events that may lead you to take one or the other action. Thank you very much.
Yeah. No, thank you so much. I think it's a very relevant question that obviously it has been extensively debated. Frankly, we have a more positive view of life. First of all, we believe that we have the two best EHLs in our hands today. Secondly, we have access to two even more extended half-life products in the wings. Let's say that are, one of them going into patients within the next weeks. Let's say it's imminent. For this reason, we are actually quite confident. Basically we also asked people who should know, did we make the wrong career choice? Yeah. Let's say, is there something that we are missing? Actually from the KOLs that are determining the therapy today, as Milan said, the first goal is to eradicate inhibitors.
This is exactly what we believe based on the case studies that we have that we are doing. Secondly, given the nature of the disease, there's a lot of concerns regarding safety, particularly when you look at the longer history of this therapy area. This is what we are addressing with many thousand patients now in our database and safety real world evidence. Let's say, when you see the progress that we are now making. Yeah. We think this is widely acknowledged. It's a conservative area, but we have been able to make inroads. Yes, while we see, let's say that there are new therapies coming, let's say like bispecific agents, we think we are quite well-equipped there.
I'm sure that they find a place, but we don't see that the place is as broad as some people are speculating. There is going to be a case for EHLs, let's say, given their very positive efficacy-safety profile. We remain confident in this regard to gene therapy. Armin Reininger was our Head of Medical, and he has been following the area for many years. He said recently in a conference, 17 years ago, there was a great prospect which is going to change hemophilia therapy, which was gene therapy. 17 years later, there is still this great prospect of gene therapy that is going to come in the next couple of years. I don't want to downplay this.
Let's say, I think, there were some, let's say, encouraging signals, but they are not yet data on a couple of thousand patients and with real-world evidence. Basically we live in a world with, let's say, with a certain degree of uncertainty. Frankly, I'm extremely happy to be in our clothes and not in somebody else's clothes at this juncture. We have the real data, we have, let's say, the uplift. We can see the traction. We have the connection with the KOLs. It's not so easy to replicate this. Yeah, let the dice roll, we will find out, let's say, at the end. We can speculate a lot, but I don't feel that we are in an exposed situation as visualized by the one or the other commentary, whatsoever.
We will also, obviously, in the forthcoming months, as you know, evaluate. This will be a consistent evaluation of new therapies, what will be the, let's say, therapies that have a mid- to long-term prospect, and we will not be ignorant to this. For now, we feel extremely confident and positive about our products. Phil, you want to add something?
Yeah, thank you, Guido. I'd just to echo your thoughts really. Consistently what we hear back from the community is that they see replacement therapy as the future. There are interesting things potentially on the horizon, but they're likely to be interesting for a very small portion of the community of people treated for hemophilia. Yeah, I absolutely echo your thoughts that we feel very confident in Elocta, we're very confident in our products. The evidence and real-world experience really underlines the value that they bring to the community, and hence, the enthusiasm that is increasing for the conversion from existing treatments to them.
Yeah. I hope this gives you some data points, let's say, that helps you to evaluate the space. As you can see, we are not in a situation where we feel, wow, the world is coming to an end at a certain given point of time for our franchises whatsoever, yeah. We encourage 600%. You can speculate a lot, numbers talk, yeah.
Okay, thank you. Perhaps just a follow-up question. You said something about continuing investments to build up the business. I think this is talking into 2018, but can you provide us a little bit with some modeling input with respect to how we should think about the incremental level of SG&A and R&D spending, going into 2018? Thank you.
I appreciate obviously that this would be an interesting aspect, but unfortunately, this is not part of our guides.
Thank you.
Thank you.
The next question comes from the line of Samir Devani from Rx Securities. Please go ahead. Your line is now open.
Thanks for taking my questions. Congrats on a good quarter. I've just got a couple. First question is just on Elocta. I just want to confirm that there were no unusual stocking effects, because obviously it was a very strong quarter. If you could just confirm that for me.
Yeah. Definitely not encouraged by management. Definitely we are not aware of any stocking. Let's say, can I 100% guarantee you that there's not a representative that has found something? No. I don't think we can see any anomalies whatsoever in our supply chain, and we are very vigilant on this.
Okay, very good. Just secondly, just you mentioned, Guido, on Orfadin that you haven't really felt too much of the pinch of generics. I'm just wondering if you could just remind us roughly what proportion of Orfadin sales are still in the U.S. and what penetration of the new formulations that you've recently launched have you achieved to date?
Yeah. I think the U.S. business is roughly half, let's say, of our Orfadin business. Let's say, we have a considerable share already on the new formulations. Let's say, the generic from Cycle Pharmaceuticals, at least to our knowledge, has not
That's great. Thanks very much.
You're welcome.
We have a follow-up question from the line of Erik Hultgård from Carnegie. Please go ahead. Your line is now open. Please go ahead, Erik. If you're on mute, could you unmute yourself?
Yes. Thank you. A few follow-ups. Given the strategy review suggesting increased investments for future growth, do you feel comfortable with consensus earnings expectations for 2018? Which I believe ahead of the quarter was at SEK 2.7 billion on an EBITDA level. Secondly, will the Specialty Care model change from now on? Would you consider paying more upfront for product rights to gain higher returns long-term compared to the previous model?
Yeah. To the first one, obviously, the time for guidance, let's say, is for, I think, if I'm not mistaken, Q4. Then we will at that time obviously provide you guidance. Obviously, when you look at comfortable is always a big expression, but we are in the delivery game. We will give guidance when we have reached Q4, and then we can talk more about it. With regard to, let's say now the investment strategy and into new assets, it's purely speculative, obviously, at this juncture. I think we are cognizant about the fact that if you want to increase your margin, and you don't want to, let's say, have a distributor model, well, then you have to show also a certain commitment.
That typically includes milestone payments or upfront payments and let's say because otherwise you will not achieve that. I think we are cognizant about it.
Okay, great. Will it continue to be sort of a diversified approach within specialty care, or will you look for a more focused approach on a few larger products?
At this stage, it's obviously purely speculative, but to the extent we can align this therapeutically, we would be nice. This will depend on the opportunities. It will be an iterative process. Let's say we want to make sure that we take this in a very measured approach. When the time is there, I'm sure we can update you on what we have done soon.
Perfect. Thanks a lot. That's all.
Thank you.
We have another follow-up question from the line of Peter Fyrstøyl from Handelsbanken. Please go ahead. Your line is now open.
Thank you. If I take this follow-up, which I just forgot before. The story or notion of share buybacks, dividends, et cetera, that has been popped on and off during the course of the past couple of years. Given your investment strategy, is that something that we should essentially forget everything about over the next foreseeable future? Thank you.
It's a broad story. Let's say. Maybe Mats-Olof Wallin who is a very good custodian of our finances, maybe can comment on this.
Well, thanks for the question. Regarding share buyback or dividends, that's a decision by the board that should be approved by the AGM. So far, the company has not been in that position. What the future hold remains to be seen. No decisions yet, and it's not management's decision, it is a decision of the board and of the AGM.
Okay. Thank you.
I remind you that if you would like to ask a question, please press 01 on your telephone keypad now.
Yeah. I think we might have room for one more question, and then we have to probably close the call. It is 3:00 now. Yeah.
There appear to be no further questions.
Thank you so much for your interest in the company. We are obviously, as you can hear, we are excited about this, about our prospects, and about what we have done so far. Look forward to updating you in the latest in a quarter from now. Thank you so much. Yeah.
This now concludes the conference call. Thank you all for attending. You may now disconnect your lines.