Earnings Call: Q2 2017

Jul 19, 2017

Ladies and gentlemen, welcome to the presentation of the Q2 and Full Year Report for Sobeys. I will now hand over to CEO, Guido Oekhus. Please begin. Yes. Good afternoon, everybody. This is Guido Oekers. Today, I'm joined here with this presentation by Matt Ullofalin, our CFO and Armin Reiniger. Before we go into the deck, mindful of the time, we have a solid hour. Just wanted to give you a quick brief on who I am. My first call, let's say quarterly call, I'm here now for 7 weeks. Very excited to be at Solvay because I consider the company as a fantastic platform to build, let's say, a much bigger story than where we are today. We have fantastic 3 strongly differentiated products in the launch phase or in the growth phase, solid earnings that you have seen and obviously a fantastic team. Now with regard to myself, I'd want to make it brief, 30 years in the industry, let's say, started my career towards more recently, I've been working for NiCOmed as a Chief Commercial Officer for Gambro, let's say, as CEO and then for BSN. And it may be important to notice also that I was sitting on the board until the company was sort of made up. So a bit of exposure, at least to Swedish context. I think, let's say, what I've learned in the last years and what really what I hope I can bring you to the company, discipline of private equity actually teaches you a little bit to focus on what matters. And I hope that they can make a difference. I mean the reason why I've been a little bit more invisible and has been clearly related to the fact that I really like to talk about what we have done as opposed to only speculate what I might want to do. So it's early days, 7 weeks now on the job, But I still want to give you a little bit of a taste of where we stand today. And obviously, it's a great pleasure to present the quarterly results to you, which I hope you will agree are pretty decent. All right. Before we start, I'll go into the deck. I mean, forward looking statements, let's say, please take note of it. That's obviously not all. Everything that we might tell you might become true, let's say. But on this note, I think we can go right into the brief of the presentation on Page 3. So we had a very strong we have when you look at those numbers, very strong quarter on quarter growth now propelled obviously by our hemophilia business. And let's say what we have also done is establishing a specialty care unit. I mean, we mentioned this earlier, but for us, this was an important move for the simple reason that we saw, let's say, it would have been a shame to sell the partnering product because associated with the partnering product is a very strong platform that we think can be leveraged to and gives us reasons to believe that we can get more licenses and can be leveraged into broadening our specialty care platform and become a strong second leg. Those businesses are now of equal size. And I understand that we still owe you to show that this business actually has much more promise than what you might give them credit to at this juncture. We have in this deck, we provide you obviously with an updated outlook, and you will see that we have raised guidance. We'll come to this a little bit later. And as you can see, our franchise in hemophilia is really propelled by 2 growth drivers. One is that we see obviously great deal of penetration opportunities in existing markets, but also that we have not been taking full advantage of the territory that we have obtained as part of the deal is very relative. So we as a consequence, we just got approval in Saudi Arabia, and we think that this will make a significant impact on our business. And we're also very proud, and Arvind will, our Head of Medical, will talk a bit about modestness, that we were able to get a new dose regimen for Afrodix approved, which really, let's say, makes a huge difference in terms of competitiveness for this product. We also, as a continuous effort of expanding the opportunities of Kainue Red, which we believe is a very differentiated IL-one. Lithuania got recently approval in neonatal onset multisystem inflammatory disease in Canada. And this is more of an example, let's say, of how we're trying to expand the utility of Kynareth across board. So going now to the next slide, when you think of financial highlights, you have seen probably the numbers. Be a bit more brief in this regard. We had SEK 1,600,000,000 on the underlying growth, and we'll talk a little bit about later, without the onetime credits, has been for the quarter 51%. So pretty stellar growth, let's say, driven by really by the hemophilia business, but also very strong performance of the core brands. And let's say, we had a nice gross margin expansion, as you can see, by 8 points and really driven by the fact that we focus on what matters. And this is consistent triggers down to the EBITDA improvement of SEK 3,000,000 to SEK 4.92 dollars And this coupled with a nice cash flow growth. I think it's early days, so I don't I can't really take credit for this development yet. But nevertheless, it's really exciting to present good news. On the next slide, on Page 5, let's say what you can see is including the onetime credit, you can see the evolution. But that's really an anomaly. So we have 12% growth, let's say, if you take account for this and ORS earnings stay the same. Coming back to the half year and let's say, also on the half year results, the onetime credit make a significant difference, but underlying growth for the half year is 49%, so very satisfying. And let's say, and it keeps us giving the timing, the the gross margin improvement is a little bit less pronounced, but still very significant. So you see essentially an acceleration in Q2. And let's say an EBITDA of €839,000,000 which we started over the very nice evolution from where we're coming from last year. On the next page, you see basically the financial highlights, let's say, including the onetime credit. And then we are, let's say, down to 11% growth. And the gross margin improvement, let's say, what this is a deterioration because obviously onetime credit is 100%. So you know that, that cannot be made up despite the still underlying growth. So when you look at it, it's a very nice company. On Page 8, you can see the Refracto, let's say, business for us. I mean, why are we so excited about Refacto? I mean, this is a stable source of income and basically allowed us to invest into and make choices that we would have not otherwise been able to do. And what we also like in Refracture and what's connected to this business is really the capabilities and biophrocessing that were clearly helpful when we got access to the hemophilia deal in the 1st place. So I think it's a full circle. I wouldn't worry too much about these swings that you see on a quarterly basis because the underlying business growth, when you look at the Pfizer Annual Report, it's very stable. It's business growth at 1%. And the quarterly movements are more a function of inventory movement and phasing. So getting now into the BIVOV commercial results and to the products. I mean, when you see and this is what I mentioned, why we are so excited with still with Kynareth, it's very, very strong underlying growth now with 18% for our product. And this shows that we see that this product has much more legs. And particularly in the United States, we are very focused on the patient access programs. And this seems to pay great dividends. For the quarter, we are growing at 20%, so very strong underlying growth and then coupled with some new indications. So we believe that this is a business that has more legs. On Norpyridine, let's see what you can see. We had a very good quarter and also half year results. And let's say, it's 15%, respectively, 21% growth. Obviously, you know that the patent expiry in one of the other markets has created some erosion, let's say, for our growth. But overall, I think we feel very well positioned with our 20 milligram new formulation, 20 milligram tablet and oral suspension. So we'll have to find out where this is heading. We're not hiding that there's an expiry, but we think that we will make the most of it, thanks to the new developments. And now we come on Page 12 to partner products. And I think this is, let's say, as I alluded to at the beginning, this franchise, I mean, taking away, let's say, discontinued products or terminated products, this print business is around flat. But it's not flat because it's not an exciting business. It's flat more the function of what we put into this business. So we basically thought that there's much more there, great infrastructure, fantastic access capabilities, particularly on the patient access side. So we believe that we can grow in this business, hence we didn't sell it. And let's say, I hope proof it in the pudding, but we are optimistic that we can, A, grow this business and B, let's say, have a margin expansion 5, obviously, new products. So now we're coming to the heart of the matter, the hemophilia business. And let's say, here, as you all have read, we had a fantastic development. Now let's say, on the chart, you can see the impact of the onetime credits. But really, underlying growth is very, very powerful, driven by our own product sales and that have grown very significantly. And when you go into the products, Afrolix, obviously, accelerated extremely rapidly and 65% growth versus Q2, Q1. And let's say, what we can see is that there's more markets, let's say, getting improved with higher penetration. We are really on the ramp, as you can see, in the acceleration in Q2. And let's say, the key markets for us is what is doing extremely well in Germany, UK and Ireland and see obviously, the EMA approval of our no dose regimen is clearly very beneficial for this product as well. On the next page, we'd like to talk about very quickly about Elocta. And also here, you can see an acceleration of growth during the first half and let's say 40% growth versus Q2, Q1. And let's say in the key markets here for us, France, Germany, but on a per capita basis, very gratifying development also in Switzerland and in the UK. And so we are very bullish and really think that elofta is a and acrylics, these are products that are more than extended half life products. And maybe we're very encouraged by the ISO results that were presented at ICH. And on this note, I really would like to hand over to Professor Armin Reininger, who is Head of Medical, who will lead you a little bit through and will try to give you a little bit of a glimpse what is beyond Elocta and why we are so excited and why we believe that we have a rightful place to expand this product beyond where we are today. Armin? Thank you very much, Guido. Good afternoon. Good morning, everyone on the call. Just maybe two sentences to my background. I shown so at the beginning of the year. I work at the University Clinic in Munich for quite some time at Harvard Medical School's Scripps Research Institute, and I had worked in companies back to back South Deshard in the various roles heading up medical affairs for hemophilia hematology. So particularly coming out of ISTH, I really want to stress that hair flight extension is one aspect that we actually really want to go beyond. The hemophilia patients have for many years had not really a big change in treatment, but now with the products that are coming, they can go and really have not only less bleeds, but literally the goal is that those patients don't bleed anymore. And the FC fusion technology products that we do have in hemophilia A and B reach beyond just that bleeds because it's well known and has been presented in one of our areas that not only the short term bleeds benefit or prevent bleed benefit is there, but also the subclinical bleed long term outcome for joints so that you have patients that with subclinical bleeds have joint damage after 10, 20 years that actually is diminishing. And we have ASPIRE data cut year 23 that actually show even patients that have been on prophylaxis before and other products had improved joint scores after year 23. And I think this is indicating that the F. Diffusion technology is going beyond. So not just immune modulatory aspects, I want to come to that in a second, but also with respect to bleeds, it's a different and better product than the ones who are out there. And just a rough number when you think about the low trough level numbers with Elocta, you actually can reach 3x to 5x higher trough levels as well as in the course of the treatment over every day and every hour of the day, you have better protection. So I think this is crucial to understand about our product. So when you go into the immune tolerance aspect and literally hemophilia patients that do have an immune reaction against the foreign protein that is given to them, namely an inhibitor, an inhibitory antibody, that use the treatment for that usually is to get rid of that inhibitor with immune tolerance induction. And of course, there is a number of patients who do not really benefit because it doesn't work. It's failed attempt. But we have now data a chart review of 19 patients that was also presented at ICH that showed that not only for the ones who tried for the first time, but actually some who have failed up to 5 times failed ITI attempts actually benefited and literally got rid of their inhibitors, so the inhibitor tried to went down to 0. So I think there is definitely something in those products that go far beyond just an annual bleed rate. And with that, I also want to reach over to hemophilia B, Alprolixa. I think there is also very clear you have a product that is going far beyond the usual treatment regimen. You can dose and give huge protection to patients with the once weekly dosing. But the label extension, we had it in our clinical program and we actually got it also on the label 14 day dosing. Patients also benefited and could extend that interval with their dosing. So I think just to give you the frame, this is something that is real world evidence and we have more than 5,000 patients now on ELOP and more than 3,000 on Alprolix. So the real world evidence that generates more and more trust into the safety and efficacy of the product is what we're really proud of so far. Thank you. With that, I want to hand over to Marc Zollof. Thank you, Arvind. Then let's turn over to the financial statements. And as Guido just presented, the revenues the quarter came in at SEK 1,639,000,000. And looking at the statements, the revenues increased 12% in the quarter. However, in Q2 2016, there was a royalty credit of SEK 386,000,000 for Alprolix, which was a noncash item. And if we exclude that, revenues have increased with 51% in the quarter. For the first half year, revenues came in at $3,035,000,000 which is an 11% increase versus the same period last year. However, there were 2 royalty credits, one for Elocta in Q1 2016 of SEK 322,000,000 dollars and one for Alplix in Q2 2016 of $386,000,000 And if we exclude those, none of them were cash items, revenues increased with 49%. Gross margin in the quarter came in at 71% due to an improved product mix. And versus last year, you can see on the financial statements that gross margin was 72%. However, again, if we disregard the royalty credit in 2016, gross margin was 63%, which means that the company gross margin increased from 63% to 71%. For the first half, gross margin was 72% in the profit and loss statement and 73% last year. If we disregard the royalty credits in 2016 and also a onetime effect of inventory release of $59,000,000 for Kinrept, which we reported in Q1 2017. If we disregard those 2, gross margins for the first half have increased from 74% to 70%. The cost for sales and administration and research and development have increased quarter to quarter, and that is due to continued investment in the organization and also in the commercial and R and D activities in the company. EBITDA for the quarter came in at $492,000,000 versus $550,000,000 the same period last year. Again, disregarding the royalty credit, the EBITDA has increased from $164,000,000 to 492,000,000 Same goes for the first half year, also disregarding the royalty credits and the onetime KILRAB release of €59,000,000 in Q1 'seventeen. EBITDA has increased from $344,000,000 to $839,000,000 Profit and loss for the period was SEK 246,000,000 on the bottom line and SEK438,000,000 for the first half twenty seventeen. Turning over to Page 20. It's outlined what I said about the royalty credits and the clearance. So you can see how we mathematically can trace back the numbers that I just recently presented, and you can see how the increase in revenues and EBITDA have developed if we disregard the onetime items. Going over to the balance sheet. On the balance sheet for Sobe, there is a large portion of intangible assets. However, they now decrease quarter by quarter as we amortize on several of those items. The big ticket items in intangible assets are goodwill relating to the acquisition of Swedish Orphan and also 2 items relating to eloxa and alpholix due to the opt in. And also later ones. So we continue to amortize month by month and quarter by quarter. Inventories and accounts receivable have increased, and that is due to the growth of the business. And as you can see, we are in the range of 50% growth. And bottom line, cash flow. We had a positive cash flow for the first half of the year, meaning that cash has increased from $786,000,000 at the end of 2016 to $1,189,000,000 by the end of the first half. By that, I hand over to our CEO, Guy Dorkel. Thank you, Alain Matilda. Basically, what I would like to summarize now, also to give enough time for interaction and discussion, It's really when we looked at the numbers and that's the business, the good news is that we saw, let's say, a more probably in a good way, a more promising outlook than the guidance you have obtained earlier. So we raised the guidance to EUR 6,100,000,000 to EUR 6,200,000,000 from €5,800,000,000 to €6,000,000,000 And we basically also we stated let's say we left it at 70% gross margin and forecasting earnings from EUR 1,700,000,000 to EUR 1,800,000,000. I mean I should say that obviously this is early days, 7 weeks in the job. And what we want to make sure is that what we that we're not only talking about things that might happen, but things we're extremely confident about. And that's basically how we think about this forecast. And it also allows us to invest in what we believe is a very solid business, particularly in hemophilia, where we think that we can support the one or the other activity. So that's really where we stand today. So we are bullish about the future. And on the last page, we will look before we go into Q and A, is really what we wanted to share is how you think about the business, 2 pillars hemophilia, Specialty Care moving forward In terms of sales contribution, both businesses very similar. But we believe that we can have still much more room to grow, let's say, also on the specialty side. And with some smart, let's say, activities in licensing and M and A, we believe that we can build this business up and, let's say, improve margins and move up the value chain. On this note, maybe I can give the floor to Q and A and if you have any questions. Thank you. And our first question comes from Eun Yang from Jefferies. Please go ahead. Your line is now open. Thank you and welcome all the new people from Sobei. This is Yoon from Jefferies. I have a question for Armin. You mentioned that currently there are over 5 1,000 patients on Elocta and over 3,000 patients on Alprolix. And can you talk about what percent of those patients are on prophylactic treatment versus on demand? That detail is actually something that we will look into. But in general, the ones who are on demand literally will benefit immediately once they see when they have the when they are in lock to how much better they do and they actually do and we have had actually a symposium at ISTH where a treatment from the UK showed that some of these patients that were reluctant to go on prophylaxis moved to prophylaxis once they saw what Elocta can do for them. So I think to answer your question in a different way, I believe the more patients and physicians see the benefit of Elocta, the more we'll move to prophylaxis on Elocta, which is actually what from a previous treater perspective, this is what every hemophilia severe hemophilia patient should be on. They should not bleed. I think that is what the hemophilia treaters in general think. And we want to give them the tools to do so. Yes. And we should say that the 5,000 is obviously the combined experience with Bioverativ, and it doesn't include actually the donation program where we make the product available as well, which is a different dose regimen, obviously, than what will be followed in some of the more developed markets. But it makes a very significant difference to this year, the WFH expects maybe 9,000 patients on this program. So it just tells you that we are extremely committed to the disease. I see. Then can I ask you what's the number for patients on Elocta or Pollux commercially in so visit territories? Yes. We are at this stage around, let's say, and this is primarily the prophylactic patients who we can really follow. We had around 1100 patients at this juncture. And obviously, there are 750 give and take, a lot of that, the rest is Apolix. Okay, great. And then coming out of IS ATH, clearly, there is a fair amount of enthusiasm regarding ACE-nineteen from Roche, particularly, obviously, in patients with inhibitors. But Roche is also going to present patients without inhibitors at ASH. So with that and as well as a potential gene therapy coming online next few years, how do you see the kind of a maximum market share that Elocta could gain in HMO-three IA? Yes. I mean, for me, obviously, it's early days, Ju Young. I mean, we can't go through the strategy process with some external help and to see how far we can bend the curve. But one thing is for sure, and I don't want to comment too much on competitors. I mean, we'll give you in a few moments some further data points on how we believe the situation is. But I mean, what we think is at this juncture that when we look at the markets, we have, let's say, significant patient growth potential in the existing markets where we are. We see increased momentum because of the benefits that are connected with Elocta and with Aprolix. What Armin has mentioned, very encouraging results, obviously, on the EBITDA patients, which are those 19 case records that were presented at IFTH. And let's say and more data coming along. So we believe that we have still a very significant room to grow is what we have today. We are just on the ramp. Now is this going to change, question mark, once ACE-nine ten is coming? Possibly. But the what we believe, I mean, and where we now invest quite considerably is that they will still have to prove a lot. We have reword evidence with thousands of patients. We have a clean safety profile and with a clean utility, and we do more to patients than basically just an extended half life product, as Armin pointed out, with additional protection. So we still feel encouraged that we are we have quite far not at the point where we are yesterday's news. In fact, we'll further invest into the product. And we recognize that this will be a busy place, and let's say, more choices will come. Then there's another element to this, it's going to be price. And we know from discussions with payers, this is not an easy will not be an easy game, let's say, to pick the right price. Everybody is very conscious about health economics and outcomes and benefits. So we'll see. I think they will have to show a little bit more than maybe what was shown. I think we need to also bring things into perspective. There's a difference between patient adoption and the high beta conference, which has a very strong scientific undertone, yes? And let's say, but it's not for us to make comments. We are I would say, we have a healthy paranoia, but we are supremely confident that we can build this business out over the next year. And maybe I will turn now to Armin, who will bring a little bit the A9910 and other things into context. Thank you very much, Guido. And back to your question. I think particularly from my previous experience as a treater, when I looked at things and I was medical director of some studies that where I really thought this is the ultimate golden bullet for the hemophilia treatment or inhibit the treatment in particular. And it turned out once we were into the clinical study that we had to stop it, that we actually had to terminate it. We have positive results in from clinics, actually real world evidence, and we thought that is already enough for us to be super positive. So I would very much caution coming out of clinical trial data and reports at a Congress and also in scientific journals to infer from that, that it will really be exactly the same in the real world evidence. There's always a very, very important aspect. You need to prove it over some time. And as Guido just said, we have a super clean and super nice safety and efficacy profile for our products, and I really would say that is very important. And it doesn't matter if you go into bispecific antibodies or any other aspect of the clotting cascade where you want to interfere. But I think all of that needs to be proven in the real world. So that is my big caution having been treated for many years. Thank you for the comment. Just one last quick question. The Kineret stills a disease. I think previously, Sobe was going to initiate Phase III study beginning over this year. And you comment on the status? And then when we might expect the data from it? Thank you. Sorry, I'm not Stills disease. Stills disease. Yes. So with Kineret, we're actually looking into acceleration of the studies to really get the recruitment going. And I think this is something, whenever we have something to report, it will be published. And it's also either in press reports, press releases. And for me, it is also now being half a year into the company. It's very important that we look also into acceleration processes in medical affairs and how we actually can improve and really get the product to the patients as quickly as possible and often the indication. The first patient in is now is due, let's say, is imminent. And then we keep you updated on the progress maybe in our next quarterly report. Thank you. Thank you. Our next question comes from Richard Parks from Deutsche Bank. I've got a few, but I'll just take them 1 by 1. So firstly, given the decision to roll partnered products into the Specialty Care division and your commentary around that platform to build that business. I'm assuming that, that will include targeting in licensing and M and A and maybe more sort of valuable type deals. So I just wondered what your priorities were in terms of that business development, particularly geographically, because I had sensed kind of recently some of the focus in the past have been shifting towards the U. S. I wondered if it was now shifting back towards Europe, where maybe you're more differentiated in there being fewer medium sized businesses with pan European distribution capabilities? So that's kind of the first question. Yes. So maybe yes, absolutely. I mean, first of all, we are very committed to Europe, Middle East, Africa and obviously United States or North America as such. But the partnering product decision was actually for me an easy one. You have 130 very specialized individuals who can create within a short period of time a significant difference that has proven over and over again for a lot of in licensing specialized products, rare disease products. And let's say, this platform, we thought it was just too good to let it go. And let's say, yes, we will use this, and we are currently already in ongoing discussions to do quite a bit, which is a natural, quite a few in licenses in a different economy than maybe some of the previous deals with us. And let's say where we take a little bit more ownership, that means longer to contract duration but also higher margins. The other thing is, yes, we will look at external growth. I mean, this let's say, we have to. It's evident. And there, the emphasis will be at this juncture on commercialized products and potentially companies. But the outcome of this is 7 weeks in the job, yes. And let's say and 30 days will be part of the strategic review, how big and how far we will think about it. And I think this is a very good discussion maybe to have then after the Q3 at the QVC earning call. Let's say, because we want to develop this business. We have a very motivated Board. We have a very motivated particular one shareholder, let's say, who encourages us to build out this business and take advantage of the opportunities that are offered to Soli. Perfect. Thank you very much. The second question was just I'm sorry to sort of pull back the discussion back to ACE-nine ten, but we're seeing companies developing 2nd generation bispecifics to Factor IX, Factor X. And I think Shire bauxhall to most recently. And I know Bioverativ have a compound, which I think there was some data at ISTH, which I assume falls outside of your collaboration. I just wondered how much of a priority it was for you to access your own program or are there options for you to partner with Bioverativ if that program progresses? Yes. I mean basically what you have seen, we have a cooperation with Bioverativ on further extended half life product in Factor VIII and Factor IX, which is the Xtend program. And Armin will comment on this. I think we will have an open mind, and this will be part of the strategic review process to think what should be our next step, yes, let's say, beyond, let's say, Factor VIII, Factor IX and extended half life. This stage is still open. We are looking currently at a couple of choices as part of the strategic renewal alliances with the Board and then obviously keep you up to date. It would be premature for me at this juncture to make any conclusive remarks in this regard. But Arne, maybe you could talk about the Xtend version. Yes. Thank you for the question. So the Xtend and particularly the Xtend and addition of the vinwilibrand fact the D3, D prime molecules is literally intended to go beyond the cap that the protected and half life in the A area extended half life in the A area, extended half life products are reaching that ceiling of 1.5 fold, roughly 1.6 fold half life extension. The Xtend BWF conjugates on our Fc fusion protein actually is intended to go and break through that ceiling and literally move around it. And I think the promising data that we have so far indicate that, that will happen to a very large degree. But I also have to caution the proof is when we have evidence in human beings, but that will actually will happen hopefully very soon and then we will really go in that direction. But the science behind this is very promising. So it's not just in silencing RNA by specific antidotes or other areas, but literally with the product that you have, in particular with the factor VIII substitution of what is missing, which is the Factor VIII, I think that is the approach that we are taking here and just overcome that ceiling. Okay, perfect. Thank you very much. Just my last question, just on the hemophilia royalties, maybe for Matt Zolaf. The royalties that you've been reporting have been a bit higher in the last couple of quarters than I was expecting. And I think it seems to be implying a slightly higher royalty than the 12% on one modeling. I just wondered if there was any other adjustments in there or kind of what the royalty rate we should be assuming. Yes. Thank you. Thanks for the question. Well, the royalty revenues that we report are estimated, So they are not final. And so but the royalty agreement the cross royalty agreement that we have with Bioverativ still stands. But as they report substantially later than us, this is just so far only estimated royalty revenue. Okay. Thank you. Thank you. Our next question comes from Peter Ostink from Pareto Securities. Please go ahead. Your line is now open. Firstly, on the sales of Elocta and Alprolix in the quarter, can you confirm that there is no stocking driving up those numbers and that the sales that we see is actually end user demand? That's my first question. I mean, if you can take it right now, I mean, we spend quite a great deal of work on this to validate with the country managers that these are true sell in data because not, let's say, sell in data, but through patient driven data and that there's no selling effect. There might be a little bit of stock movement in France because of the of the, let's say, season, the holiday season. But on a very marginal way, Clearly, every of the general manager has confirmed to us that this is that there was no stock movement in just to show a nice quarter because clearly, we don't encourage this. And clearly, if we would find out that there was take stern action because this is not how we do business. Okay. My next question relates to it still seems or you state that in the report and the presentation that sales for Elocta and Alprolix still is derived from a handful of countries and now you have almost 20 countries where reimbursement is approved. What's holding back the sales from these countries outside the core ones that you because you have mentioned it in every report since well more than a year ago that it's still a core number of countries where most of the sales is derived from. So what's holding back the expansion? Yes. I mean basically, first of all, there's a different weightage obviously of patients related to the large EU5 markets than others. That by definition forces the distribution curve as for many other products, yes, to be quite honest. We have now 18 markets registered. When you look at the patient theoretical patient pool, that basically means that we have, for instance, at the example of a Locter, we are now let's say we have we provided access to 55% of the patient pool. But on the other 45%, which we are now obviously, we have programs in place to unlock this, Let's say there and we are talking here Protelexis, yes, let's say. But there what we do is let's say we have also turn. There are certain markets, for instance, in the northern belt of Africa, where basically where we might have to make a decision, is this for us or not given the price level that are established? Or is this more something for 1st generation, like, aluminum products or for more plasma derived product, this is a decision that we will have to take very consciously. So basically, when you think about the uptake of the curve, I mean, it's all driven out the way this disease these treatments work, yes? First of all, this is a very conservative, let's say, area. For the reasons that you all know, let's say, driven by these big scandals of the plasma issues that we had years ago. I mean, you look at some of the studies, and you still have in today's studies sometimes up to 27%. I saw recently a study with HIV infected patients, yes, I mean even today. So this is not an area a disease area that is free of complications. Secondly, let's say, you have also to recognize that many times the patient is only seen by the physician once to twice a year. So you have not so many data points where you can influence and create the right momentum. Plus, you have a conservative patient population that is very well aware of what happened a couple of years back. So that basically is our factors. The other thing is and that keeps us makes us positive is the more we talk about Elocta, the more basically you can see you can see this in the quarterly numbers. People are excited and they let's say to prescribe it. And we had quite a few physicians who will say to tell us Elocta should be and April 8 should be for all patients and not discriminating. So we got some extremely positive feedback. And today, we have around 400 accounts. And I think what we basically where we are now at the threshold when you think about our business model is to move from trial, from basically gaining experience to become more like standard of care. And let's say, so you actually you have a pretty broad distribution. So it's not in terms of centers that you are just a couple of centers who want to try. So many people see, but they are now at a point where they have to make decisions. Do I give 1 out of 4, 1 out of 3 patients, let's say, to Elocta, let's say, or even more. These are this is the current period that we are in the business model. Okay. Thank you. My last one is a quick one. It's probably for Matolov. Could you give me the split of royalty between Alperlix and Elocta, please? You have provided that in the past. I have provided that in the past. That's correct. However, we have an agreement with BioRelative that we are not supposed to disclose the royalties by specification as it is still estimated. So I ask you to wait until Bioverativ will publish their Q2 earnings. So I'll be happy to share that later when Bioverativ has shared their Q2 earnings or published their Q2 earnings. Okay, great. Thank you. Thank you. Our next question comes from Lars Herring from Danske. Firstly, could you just make some comparative comments about the commercial uptake for Lotte in, say, France, UK, Germany, a bit longer experience than also Spain and Italy? How is the how these countries differ in terms of commercial uptake? Then the other question, if you could say something about the commercial relevance of your extensive donation program, I mean, how sizable it is to date? And what's the potential longer term commercial benefits from that program? Very good. Let's say let's start with Fahren. I mean we have a fantastic uplift here. Let's say we have the most rapid uptake here. Let's say we've made the product, let's say, really in the interest of patient available at a very competitive price where they could take full advantage of the pharmacokinetic profile and the higher trough levels and higher level of protection. And then that has paid great dividends. So very, very strong, very rapid, let's say, uptake in France. In Germany, it took us a bit longer. But in Germany also, you have to recognize that 40% of the market is driven by customer products in order to basically reduce the average price, let's say, per patient. So this is a bit of a longer haul, but we saw a very nice evolution over the last two quarters in Germany, while we had a very slow start. And let's say that's probably a little bit driven also by the more conservative nature. In the UK, we made some great strides. We were able to get acceptance. And you know that this is a tender business primarily. And let's say in there, we basically we have now on a patient basis a very nice development wise. The prices are a little bit more reduced there. So overall, nice uptake, let's say, in those three markets and deferred in Germany but very rapid in France. But all markets point in the absolutely right direction. And you can see very quarter by quarter, month by month significant uplifts here. And with regard to the commercial relevance of the donation program, I mean, this is a bit of a tricky issue. I mean, we didn't go I wasn't given this when this was signed, We didn't go into this donation program to make money, yes? Just to make it very clear, I went recently to Morocco. And I mean, just to give you a little bit of an anecdote what we are talking here about, I saw a 19 year old, let's say, who was crippled. All his joints were crippled. And he was sharing with me, let's say, that he was very grateful that we did this donation program. And I said to him, well, when do you get operated? And he said, no, let's say, I felt that my brother needed it more. Yes. So I'm you will understand when we think of this donation program, we might think less of commercial relevance, to be honest, let's say. But let's say, what we hope for is that the medical community will give us kudos for being committed to this disease because when you think about hemophilia today, 400,000 patients, 100,000 are only treated. Yes? So I think that this is probably not something which you can put an ROI on with a 6 months return. But I hope that this is something that will clarify that we are committed to this disease, that we are able to provide product, let's say, when it's needed. And unlike other competitors, we provide fresh stocks to those so that these programs can be planned and patients can be treated when they need it, yes. Thank you. Thank you. Our next question comes from Samir Devani from Rx Securities. Please go ahead. Your line is now open. Thanks for taking my questions and congrats on a good quarter and congrats to you, Gilead, on your appointment. A couple of questions, pretty much housekeeping really. Was there any price rises taken on Kinaret in the quarter? Sorry, I didn't catch this. Was there any price increases taken on Kineret in the quarter? Yes. I mean at this stage, you understand price increases in Europe, practically nil. Price increases in United States at a very moderate level, talking more like 2% or something in this range because with all the excitement around price increases in United States, I think we have to be very careful. This is primarily volume driven. Okay. And then just on Orfadin, are you expecting any further generic launches in the remainder of the year? I mean in the remainder of the year, I mean there will be in a couple of markets, there will be launches. I think the big question is more what will be the outcome in United States. And we know that that's been the one or the other filing. And let's say and how will then this play out, but given the new formulation that we have, given the connectivity of this business with individual patients, I mean, met a couple of patients as well, and some of them wouldn't be around if Orphanin would have not been around. So there is a bit of a more of a connection to this product than you would typically maybe have. But I can't predict the future. This will clearly affect us, but to what extent is very speculative at this stage. Did I answer the question already? Yes, you did. I'm just wondering in line with the confusion over some of the hemophilia royalties, is there any reason why you can't report your results after Bioverativ? Well, we have taken a bit of a historical view on this. Last year, when Bydrian was our partner, we were always reporting almost always reporting after them. Now they have a new company, as you know, the spin off to buy a relative. And this year, they are reporting substantially after us in all quarters. Our schedules were already set late 2016. So we have been communicating with them and trying to align the reporting dates. But hopefully, that will take place in 2018. Thank you. Our next question comes from Peter Seesteps from Handelsbanken. Please go ahead. Your line is now open. Hi, thank you. It's here on hand. If I can take my questions, meaning the housekeeping stuff, could you please remind us about the tax rate for the year? Also could you give an indication about the expected year end of the year cash position? In terms of the market sales, trying to get a bit of grip on those numbers. Could you provide a little bit more flavor on geographical distributional sales, if not, by a little bit of observation about what kind of market share is it cheap, France and Germany? Peter, it might be our line, but we have really difficulties to hear you, let's say. But maybe let's say the first thing we heard at least was the tax rate. And maybe, Marcio, you or if you can talk about the effective tax rate that we expect for the year. Sorry, I didn't catch your question fully, but I can try to answer it. And please send me an e mail if you need further clarity. But our effective tax rate now are in the range of 20% to 22%, and that is due to that we are in the parent company or in a tax position. And in addition to that, there are deferred taxes that have been recorded. However, they are not of cash impact. So But maybe, Peter, you could ask the question one more time because we had a bit of an echo in the line. Yes. I'll try to cut out the background noise. I hope this is better. The second question was relating to an indication of your year end cash position would you expect? And the third question was just to get a bit more flavor on the sales for the quarter. Could you if you could indicate your geographical distribution of sales? And if not, some kind of indication of around market shares achieved in France and Germany, respectively? Yes. I mean maybe if I got you right, it was more the geographic distribution of our business. Let's say for let's say, basically, we wanted to have market shares for hemophilia, yes? I mean, basically, at this stage, obviously, market shares are only that there is no real IMS data on this, let's say. But maybe I can give you a flavor. I mean, let's say, we have around 11%, let's say, market share, let's say, at this juncture in Europe, let's say. And so that tells you also that there's a few more percent for us to grow to. And let's say, whilst we had, let's say, we are above 15% in France. And in some other markets, we are at an earlier stage, probably more like 3% to 4%. And let's say, in Germany, we are now basically at the average mark around 10, 11, yes? And then in the distribution of our business as such, I mean, geographically on the is I mean, you have seen the numbers on, let's say, on the North America versus Europe. So you have around about, let's say, EUR 2 let's say, EUR 1 point 3,000,000,000, EUR 1,000,000,000 in North America and then the rest, let's say, in Europe. That's obviously taking away the royalties and the refractory manufacturing business of almost 600. I'm not sure whether this was whether you wanted to have more reasonable distribution on hemophilia? No, that is perfect. The market share information was actually quite informative. The last question was regarding your expectations for a year of interest cash position. I'm frank. I mean, I probably didn't get this question. Peter, what I would propose is in the interest of time because we have nearly reached, we might be open for 2 more questions. And if you can drop me an e mail, we're happy to address the question maybe offline after the call, yes? Maybe we are open for 2 more other questions because it's very difficult to hear you, to be honest. Our next question comes from Erik Huttgard from Carnegie. Most of my questions have been answered already, but I have one more on the gross margin of your hemophilia products in Europe. Is there any upside in the gross margin from economies of scale? Or are you purchasing the product at a fixed price from Bioverativ? Yes. We have at this stage, we have a fixed price agreement, but we have next philosophy that we get charged at cost. And this is an ongoing dialogue with our partner. Excellent. Just one more. The ITI opportunity, where in time, I mean, obviously, I have a couple of studies ongoing, 2 studies with planned interim analysis. At what point in time can we expect to or is it possible to see some more data from those two trials? Armen? So with these data, as you know, it's always difficult to do interim data cuts because then you may really not see the full picture. But overall, time with observation is a year, but we really need to look deeper into how quickly can we do this. And as you can imagine, the one run by SOVI is one where we have already patients that failed. So they don't need to be found. They're already available. So I think we do have opportunities where we can actually accelerate, and this is absolutely our intention here. All right. Thank you. You're welcome. You're welcome. There'll be one more question. As there appear to be no further questions, I'll return the conference to you. Excellent. Yes, I mean, on this note, I mean, I hope you found this informative. I mean, as I said at the beginning, for me, it's early days. I mean, team has done a great job. I believe at least thanks for the patience with us. And we're happy and obviously very excited to tell you a little bit more about the progress a quarter from now and we'll set up obviously various meetings via Jorgen, let's say, in the next couple of months. Thank you so much. Wish everybody a great holiday season and look forward to catching and to staying connected. Thank you. Wish you have a great day.