Earnings Call: Q4 2016

Feb 16, 2017

Thank you, Jerry. Good afternoon and good morning to those of you joining and welcome to the review of our Q4 and full year results for 2016 for Sobe. It's been a very significant year for the company, obviously highlighted by the launches of our 2 new long acting clotting factors, Alocta and Alprolix for hemophilia, strong performance across the base business, several important pipeline milestones and a significant number of new project starts to augment our pipeline. As usual today on the call, I'm joined by Alan Raffensperger, our Chief Operating Officer and by Matsala Fulin, our Chief Financial Officer. We'll make about 20 minutes of prepared comments and then look forward to opening the lines to take your questions. I just want to remind you that there will be some forward looking statements in this presentation. Of course, not everything we plan for will come true. So to begin with a review of the Q4, we had several highlights in terms of news flow. Most importantly, we brought the MAH home for Alprolix to Sobe. The European Commission granted SOVIO-three, our lysosomal storage disease product for MPS IIIA, an orphan designation. And we initiated a very important real life hemophilia treatment study and reported on results from past studies showing that the real life hemophilia experience is in line with our clinical development program and label. We also released data reinforcing the long term safety and efficacy of Alocta and Alprolix at the ASH meeting and this builds on the current real life experience of over 4,500 patients on Alocta and over 2,500 patients on Alprolix. Finally, in the quarter, we entered into a distribution agreement with Horizon Pharma for RAVICTI and Avanavs. This is a particularly important agreement for the partner products portfolio and really reinforces the genetics and metabolism component of that business going forward. There were a few events after the reporting period that I'd like to highlight several on the hemophilia side. Most importantly, as I referenced earlier, we began enrolling in a 24 month study called A SHURE, which will be looking at several important factors related to the real world effectiveness of Elocta in our territories. We further deepened the outlook and understanding of long term data for products at the EHAB meeting just a couple of weeks ago in Paris. And we also had a very important long term safety and efficacy data publication supporting Alprolix in Lancet hematology. In Health Canada, we had the approval of orphan capsules for tyrosinemia type 1. We had approval from the EC regarding a new dosing frequency for Orphan supporting once a day dosing. We're very excited about that on behalf of patients. And finally, we began randomization of first patients in ANAGO, which is a Phase 2 evaluating the safety and efficacy of Vanikender or KinRET in the treatment of acute gout and that is primarily a U. S. Initiative. From a financial perspective in the quarter, total revenues came to almost SEK1.3 billion, representing a 54% growth at constant exchange rates. Product sales comprised $1,100,000,000 of that total, growing 58% at constant rates. Refacto had a very strong year in the very strong quarter at CHF148,000,000 and gross margin was 67% with EBITDA closing at about CHF 210,000,000 cash flow from operations for CHF 26,000,000 On a full year basis, that quarterly performance brings us to a total of CHF 5,200,000,000 61% growth on a full year basis with no significant impact from exchange. Product revenues were CHF 4,500,000,000, a 70 7% growth. Refacto closed the year at $656,000,000 and gross margin for the company overall was 70% with an EBITDA of $1,500,000,000 Cash flow from operations on the full year basis was CHF 343,000,000 Obviously, as all of you know, we had one time credits from our partner Biogen during the year totaling SEK708,000,000. And on the next slide, I'd like to show you our results adjusted for the exclusion of the CHF 708,000,000, so you can have an understanding of the performance of the base business. The total revenues on this basis were CHF 4,500,000,000 representing a 39% growth product revenues CHF 3,800,000,000 representing a 50 percent growth at constant rates. Refacto closed the year obviously in the same place and gross margin excluding the impact of the one time credits, which were treated on a 100% gross margin basis was 66%, up 4 full percentage points from the prior year. EBITDA was SEK 835,000,000, up 90% from the prior year and reflecting an 18% native EBITDA margin for the business. Again, cash flow unchanged by this analysis. This brings us to a summary view of the portfolio for the company today, genetics and metabolism totaling on the year of GBP 770,000,000 roughly even with the prior year. The inflammation franchise closing the year at CHF 1,100,000,000, a remarkable milestone that we've crossed for the KINARET franchise and one that we're especially pleased to be celebrating roughly 10 years after the acquisition of this product from Amgen. Already, the hemophilia franchise of SEK 1,800,000,000 is our largest focused area just 12 months after launch and our partner products portfolio totaled this year SEK820,000,000 up 6% over prior year. And refacto year on year due to phasing is roughly flat. The Refacto business in the quarter was up, but on the year relatively even. This reflects the periodicity of ordering quarter on quarter. Just to remind everyone, this business grows on average between 3 5% year on year on a longer term basis. There were some dynamics related to the royalty revenue this year, where in May, the rest of world royalty on Refacto expired and our U. S. Royalty will endure until January of 2018. The full year, as I said before, totaled CHF656 1,000,000. So to give some color on the commercial business, I'd like to turn the call over to Rathesberger. Alan? Thank you very much, Jeff. Let's start with Kineret. Q4 sales reached DKK266 1,000,000, which is an increase of 20% over Q4 2015. On a full year basis, we broke the DKK 1,000,000,000 mark as Jeff mentioned, which is a growth of 24%. Main drivers continue to be the patient centric distribution model in the U. S, which we secured in 2015 and carried through with successful implementation during the first half of twenty sixteen. I'm also pleased to confirm that our clinical programs are on track for KINRA for the first patient recruited for the Phase 2 ANA GO study that Jeff mentioned. The purpose of this study is to evaluate pain relief in people with acute gout who cannot take or have not previously responded to nonsteroidal anti inflammatory drugs or NSAIDs and colchicine. Moving on to Orphadin. Q4 revenue decreased 15% to DKK197 1,000,000 with a full year top line of DKK 770,000,000 which is a decrease of 5% over 2015. Performance in North America has been boosted by the launch of the 20 milligram in oral suspensions in Q4. On the other hand, there was a generic formulation of Orphadin launched in Canada during Q4, which did have a negative effect a negative impact on our results in Q4. We expect Orphitting to grow, but as expected, we will also face some headwinds from generics later in 2017 2018. Our partner products business grew in Q4 to DKK 203,000,000 representing an increase of 5%. On a full year basis, revenues reached DKK820,000,000 The main drivers of the Q4 performance can be attributed to ZYOPEX with growth in both indications to petranscontractor and Peyronie's disease. Underlying growth in the pharma switch portfolio also supported the growth in partner products as well as XIAFEX. We confirmed on February 3 that we are currently in discussions regarding the sale of partner products reflecting our belief that this leading EU platform can benefit from the focus from a private equity ownership model. In regards to our hemophilia business, I would like to first start with an overview of the sales of Aloctane Alprolix in the Biogen and now Bioverativ territories. Both Eloctate and Alprolix grew nicely in Q4 with Eloctate revenue coming in at $149,000,000 and Alprolix reaching $94,000,000 This means that the combined quarterly revenue of both products is now up to roughly $250,000,000 representing a yearly running rate of approximately $1,000,000,000 Moving on to our hemophilia portfolio performance. As you are all aware, the revenue in the Bioverativ territories form the basis of Sobeys royalty revenue. This royalty revenue amounted to SEK277,000,000 in Q4. On top of the royalties, we booked sales of 174,000,000 for both the lockdown and PROLEX, which is a significant step up from our Q3 totals. Total revenue reached SEK452,000,000 for the quarter. Now I would just like to say a few words about some of the challenges people with hemophilia are having to deal with every day. It is at times a real struggle to find the right balance between a heavy treatment burden and trying to achieve enough protection to prevent bleeding, which increases the risk for acute intervention and or long term effects, including joint damage. All this while having to think twice about their level of activity, which could expose them to increased risk of bleeding. With extended half life Fc products locked in our PROLEX, we are helping to redefine protection for people with hemophilia. By delivering consistently higher clotting factors, we are now clearly seeing that patients are able to lead a more active lifestyle, while at the same time significantly reducing the risk of bleeds and enjoying the reduced treatment burden. Taking a closer look at Elocta, we sold SEK135,000,000 in Q4, which resulted in full year 2016 revenue of 2 67,000,000 dollars in addition to the royalties and one time credits. Total revenue reached CHF 304,000,000 for the quarter. Drilling further down into our business in Europe and the Middle East, we secured additional reimbursement decisions for locked in Spain, Belgium and Kuwait. In addition to the access decisions in these countries, I would like to provide a bit more color in regards to our revenue. As you recall, we entered Q4 as we entered Q4, most of the sales were coming from Germany and the UK. During late Q3, we secured reimbursement decisions in England, Italy and France. We now see the effect of these decisions with accelerated performance in France, followed by Italy and Spain, where we have been securing local access and pharmacy formulary decisions, and this process will be ongoing throughout 2017. The accelerated performance in France and in the recently accessed markets is in addition to continued growth in Germany and the other markets accessed earlier in the year. Closing my La ProliaX released SEK 39,000,000 in revenue in addition to the SEK 108,000,000 in royalties, resulting in a full year revenue of CHF 108,000,000. We continue to focus on expanding access for our PROLEX and on track to do so as we enter 2017, having just received a positive reimbursement decision in Kuwait. Still the majority of sales so far are coming from Germany and the UK. I would now like to hand over our earnings call to our CFO, Matt Zola Feline. Thank you, Alan. Turning over to the profit and loss statement. As Jeff said earlier, our revenues for the quarter came in at $1,292,000,000 which is a 59% increase compared to the same period last year. Gross margin came in at 67% versus 64% last year. And EBITA came in at 2 $10,000,000 versus $90,000,000 for the same period last year. Sales and administration expenses have increased. That is due to that we now have launched the hemophilia products in major markets. Research and development have also increased. That is due to that we now share all the development costs with our partner Biogen or did in 2016. And we also had major clinical activities in Q4. Amortization and have now increased as we now amortize on eloxa and alpulix due to the opt in that we have made with Biogen. Net profit for the period was $100,000,000 For the full year, revenues came in at $5,204,000,000 which is 61% higher than last year. Gross margin came in at 70% versus 62% in 2015. And EBITDA came in at 1.5 $43,000,000 versus $433,000,000 last year. And net profit for the year was $809,000,000 versus $65,000,000 in 2015. Turning over to the balance sheet. As we now have made the opt in of Eloctan Alplic, substantial intangible assets have now been recorded in our intangible assets line, which now is SEK 6,800,000,000. The big ticket items here are Elocta and Alkalik, but we also have goodwill of SEK 1,500,000,000, which relates to the acquisition of Swedish Orphanie in 2010. Inventories have increased due to that we're now building up inventory for Elocta and Alplix for the rollout in 2016. Accounts receivables have increased. That is due to that we had a very strong ending of 2016 with major revenues. We also now have entered new markets with longer payment terms. Cash ended the year with 786,000,000 dollars Turning over to the outlook for 2016. The original outlook that was published on February 26, 2016, revenues were forecasted to be between SEK 4,800,000,000 and SEK 5,000,000,000 gross margin 68% to 70% and EBITDA SEK 1200,000,000 to SEK 1300,000,000. A new guidance, a revised guidance, was published after the Q3 earnings on October 27. And for revenues, the new guidance was SEK 5.125 million to SEK 5,200,000. That was now exceeded where we reached SEK 5,204,000,000. Gross margin was forecasted to be 70%, which is spot on where we ended. And EBITDA for the full year was forecasted to $1,475,000,000 to $1,525,000,000 and the 2016 year end result was $1,543,000,000 We also like to draw your attention to the next slide, which is summary results because 2016 was very much impacted also by onetime credits, which will not occur in 20,670. So to be able to understand and fully appreciate the guidance for 2017, we'd like to draw your attention that in the left hand column, the revenues and the gross margin and EBITA as they are recorded and reported. But without the royalty credits, revenue were $4,497,000,000 and gross margin was 65% and EBITDA was 8 $36,000,000 meaning that the revenues excluding the royalty credits was had a 39% increase and then EBITDA had a 93% increase and gross margin increased from 62% to 65%. With that, I'd like to hand over to our CEO, Jeff McDonough. Thank you, Matsulos. Building on Matsulis' introduction, a review of the outlook 2016, I'd like to briefly review the outlook for the year ahead here. On the top line, we expect revenues to be in the range of SEK 5,800,000,000 to SEK 6,000,000,000. At the midpoint, this would represent a 31% growth from the roughly $4,500,000,000 top line that Matzuluf referenced on the prior slide. We expect gross margin to incrementally grow again from the native 65% that Masoluf reviewed to 66% to 68%. And we expect EBITDA for the full year to be in the range SEK 1,600,000,000 to SEK 1,700,000,000, representing another 90% 97% growth from prior year and moving our operating margin from 2016 where it was about 18 point 6% to roughly 28%, again at the midpoint of our guidance expectation in 2017. To just put a few of our longer term thoughts into context before we open for Q and A, as we said for many years, we have three elements to our longer term evolution for the company. The first continues to be a focus on the diversity and growth of our base business. The second, as we reviewed in this call, the progress of launching these first to market long acting hemophilia factors. And finally, using the expanding operating margins and cash generation of the business to raise our gaze towards the advancement of our own pipeline as well as to expanding our pipeline through M and A activity. With respect to our own pipeline, as I said earlier, we've had several important milestones in the pipeline and new initiatives as Alan and I both reviewed for Anaco and soon Anastils for TINARET. But I'd like to just focus on a couple of particularly exciting initiatives that we're looking forward to in 2017. The first is the approach to the 1st in human dosing of our enzyme replacement therapy for MPS IIIA or Sanfilippo syndrome. This is an internally developed native biologic that has been chemically modified to enable CNS uptake. And what you can see in the graph on the right side is the sequential reduction in a derivative of heparan sulfate in the brain of mice who are being treated intravenously with this product. As I said earlier, we have orphan drug designation for the program and we're very hopeful to begin dosing at the end of 2017 17 or beginning of 2018 with this. From the perspective of our hemophilia franchise, we are particularly excited along with our partner Bioverativ to announce 2 new clinical trials this year in 2017. I think we've talked in this forum and others several times about the importance of immune tolerance, The appearance of antibodies against clotting factor is the single largest unmet need in hemophilia and represents roughly 15% of all revenues dedicated to the treatment of hemophilia A today. We will explore this very important area with Alocta to begin with in two trials. The first will be aimed at eliminating inhibitors that have arisen for the first time in patients and we call this our first attempt study. We will additionally mount a significant study looking to see if we can induce immune tolerance in patients who have previously failed prior attempts to induce immune tolerance with conventional factors. We have a small literature of case reports supporting the effect events of Velocca in each of these situations, but we believe that broader, more thorough clinical studies are needed to substantiate this potential for the product going forward. So we're very excited about this year. Finally, our partner Bioverativ has announced earlier this year their intention to move into the clinic in the half of the year with an even longer acting version of Fc fusion factor VIII, in this case modified with a series of Xtend moieties to further extend its half life. What's particularly exciting about this is that it's based on native clotting factor technology along with the Fc and due to a variety of interventions, we were able to achieve a half life significantly greater even than that of Elocta, which would allow our goal to be a minimum dosing frequency of once weekly for all patients with hemophilia A. In addition today, of course, we announced that we've added to our collaboration agreement the Factor IX FcXtend program, the difference between them being that in the case of the Factor IX extend program, the candidate has been specifically designed for subcutaneous administration, obviously, potentially offering another significant step forward for patients with hemophilia. Lastly, I've commented several times that we're quite active today and looking for additional elements for our pipeline or for our commercial portfolio. We obviously are prioritizing programs that leverage our existing expertise in biologics and commercialization in rare disease that can overlap with our existing TAs or be in new areas. And of course, we retain the ability to launch new products in both our geographies in Europe as well as in North America. So we remain active and engaged in this part of building the company and then this 3rd phase. So with that, Jerry, I think we said everything we wanted to say. And so let's now open the lines and take questions in sequence. Thank you. Thank you very much. We have our first question from Yuan Yang of Jefferies. Please go ahead. Your line is open. Thank you. Can you hear me okay? Hear you great, Yuan. Good morning. Okay. Good morning. I want to ask you a question on the recent report, your consideration of selling the partner, the product or franchise. Understanding that this is a low margin business, but nevertheless, it accounts for more than 10% of current revenue. So obviously, if you do sell the business, gross margin will improve, but I'm not so sure there will be enough to offset the potential impact on EPS. So two questions. 1, how advanced is the talk of selling this business? And second, if we were to sell the asset, how does that change your commercial structure? And if we do if it does change, then how does that impact your consideration of acquiring a new product to the M and A activities? So Eun, I totally get your second question. Do you mind just repeating the first one? You're fuzzy there and I couldn't quite capture it. Sure. The first question is how advanced is this talk? I see. Okay, great. So let me take each of those. So the stage and sort of variety and mix of the dialogue is not something we're going to comment on until or unless we reach a stage where we're ready to announce a transaction. But on the other hand, I think your comment about the commercial structure and the impact on the businesses is extremely important and something that we've dedicated a lot of thought to. As you rightly say, we will be if such a transaction were to move forward, putting a significant fraction of our existing revenues to one side. Obviously, the impact on both the gross and operating margin for the RemainCo would be positive as it would be on the overall growth rate for gross profit and for the EBITDA lines. Having said that, to your point about the commercial structure, our motivation to explore this potential sale is not primarily financially motivated. I think our view is that this is a business that today occupies products and as a platform that can grow very rapidly with the right focus and capital model. And for that reason, we see it having a faster and more fulsome growth trajectory under a private ownership setting. By the same token, we see a similar set of benefits for the remaining company by allowing greater focus on our existing franchises in hemophilia, genetics and metabolism and inflammation. And to your point about the commercial structure, since we've built our hemophilia organization as a new organization for Sobe, we actually see impact being rather positive on both sides should we go in this direction. I should say at the same time that of course if we decide not to proceed, we are running this business on an independent basis within the company today and we're very pleased with the way it's running. So this is really an exploratory dialogue today, but we do see many benefits associated with it. Okay. Thank you. And then one more question. Bioverativ mentioned that one of the areas for the hemophilia franchise expansion is in heterozygous female hemophilia patients. But they don't have a specific numbers to provide what kind of market potential it could provide. Do you know if there is any use of hemophilia product in this heterozygous hemophilia patient, the female patients currently? Yes, it's a great question, Eun. This would, of course not be the 1st therapeutic area genetically derived or otherwise to underestimate or to misunderstand the impact of disease in one gender or the other. It's very often a case that an X linked diseases, the impact on women is underestimated and in some cases entirely dismissed. And it is the case in some women who are impacted by lower levels of factor that in certain circumstances they bleed either trauma surgery or in some cases associated with menstruation. And so you do see some factor use in those situations in women who have hemophilia. Of course, as you point out, it's very difficult to know how many they are and to quantify the factor use in this group. But I think Bioverativ is right and we certainly concur with their view that there is probably a significant degree of unmet need among women with hemophilia And it's something that everyone will benefit from trying to understand in a better way. But I do think it's much too early to try to quantify that. Whereas I think on the flip side, the ability to understand how these products might impact ITI is much easier to put our arms around because we do understand how the usage of Factor behaves in that area today. Okay. Thank you very much. Yes. Thanks, Ian. Thank you. Our next question comes from the line of Hans Meller of Nordea Markets. Please go ahead. Your line is now open. Hi, Al. Persky, can we go through the sequential increase in the sales and marketing costs between Q3 and Q4? I got the impression that most of sort of the platform for the expansion was already in your numbers? What was the exit driver between Q3 and Q4? Could you go a bit into that? Yes, absolutely, Hans. So I think we've commented several times that Q3 is always our least active quarter, not only for sales and D. And conversely, we've also highlighted in each year that Q4 is the most active, both for R and D and for sales and marketing. And that is as a result of the combined effects of summer vacation and also the fact that there is a large degree of concentration of key medical meetings and other activities in the Q4 that are drivers of cost. So this is really a periodicity or a phasing phenomenon. You're right in your statement that we are mostly built from the perspective of our hemophilia organization, although we're not totally complete. And if we look into 2017, should we use this as a base for the average spend during 2017? Or how should we look from that? No, absolutely not. I mean, we are not viewing our Q4 level of spend as a run rate for 2017. Okay. I think as you can see, we're growing revenues by 31% and we're almost doubling our EBITDA margin year on year. Understand. And secondly, could you elaborate a bit of the geographical split of your Elocta sales in the quarter? Is it still mostly Germany? Or how would you describe the mix in the quarter? Yes. So I think as Alan was saying, we really exited the summer with most of our sales deriving from Germany in a few rather small markets. As we moved into the Q4, what you started to see was the early participation of the United Kingdom and France and to a lesser extent of Italy and Spain, which although we have national reimbursement, they are working through the process of regional approvals. Is it still fair to assume that Germany is half of the revenues? Well, we haven't broken it out in that way Hans, and I'm honestly not in command of the figures to tell you one way or the other, but I can give you a qualitative reaction, which is that the traction in the UK and France and Italy has been very much in line and actually ahead of our hopes. We're really quite pleased with what we've seen headed into the end of the year and the uptake so far in the year here really confirms that we're in a position now to observe significant traction for the launch. Great. And my final question, when it comes to refactor royalties in the 4th quarter, you still have the royalties coming from the U. S. Seeing only $3,000,000 in the 4th quarter, I thought it would be a bit higher than that. Could you comment a bit on the absolute level there? Sure. I'll let Matsoula jump in if he wants to. Let's see if I get the answer wrong. But we have a royalty structure with our partner Pfizer, which is actually not evenly distributed in the quarters during the year. So it flows up and down. So we don't nothing happened that should lead you to think that the business has changed. Okay. But you are reluctant to comment on what sort of a baseline for the coming quarters would be? No, no, I'm not reluctant. I mean, I think we published the royalty rate and Pfizer does break out refacto. So it's very easy to observe the relationship between the U. S. Refacto sales and our royalty income. I have no reluctance about that. I just don't want you to conclude anything about what's happening with the business based on the fact that our royalty rates go up and down quarter to quarter. Fair enough. Thank you so much. Yes. Okay. Thanks, Hans. Thank you. Our next question comes from the line of Johan Unerez of Swedbank. Please go ahead. Your line is now open. Hi, it's Johan Unairos of Swedbank. It's a little bit on similar themes on the sales and marketing. Q4 was the main surprise, at least in our view. So we shouldn't view this as sort of run rate going into 2017. Should we expect similar levels in initial part in 2017 and then sort of a bit less on launch cost in late 2017? Is that how we should view it? That could be the first question. Yes. So I mean, I think I'm not sure how to comment on the phasing of costs, at least on the sales and marketing line through the year. I mean, I do expect that Q1 will be in line or lower than Q4 just based on our normal activity levels. As I said, Q3 is always low, Q4 is always high. And in general, Q2 is usually higher than Q1. Mean that's sort of as qualitative as I think I can guide you on the costs, Sean. Okay. And the full year should be slightly less than? No. Full year, we continue to expect OpEx in total, R and D and sales and marketing to increase. I'm just saying that we don't believe Q4 is the run rate to build your base from. So if we just look sales and marketing, it should still go up on a sort of a On a year on year basis, yes. Yes. Okay. And R and D, how should we look at that? Will that move up as well? Of course, on a yearly basis, you had an uptick lately. But if we look at Q4 moving as sort of base, Is that a reasonable base quarterly moving into 2017 or should we No, I think it's a similar case. And I think for us on the R and D side, there are 2 dynamics occurring here. 1 is we're bearing full year cost on Alprolix, which we only took on board late in Q3 in 20 16. The second is that we are mounting a number of significant new clinical programs. 1st, KINRET in gout. 2nd, KINRET in STILLS. 3rd preparing for Phase 1 dosing for SOVIO-three and 4th and 5th launching these 2 very important ICI trials for the hemophilia franchise. So we have an undiminished and I think an expanded scope for what we intend to do on the R and D side. Again, as I said, managing that within the context of almost doubling our EBITDA margin. So we are not stepping away from a commitment to profitability and growth. But obviously, we have our eye on building for growth in the 2018, 2019, 2020 2021 timeframe as well. Yes, that seems reasonable. When can we expect you to give better indication of the sort of milestone timetable or get sort of feedback from these studies? Is that something that can come recently soon in 2017 or? Yes, we do actually. So it's a very interesting point. The gout study is a Phase 2 study. So we hope to have a data readout by the end of 2017, which will confirm efficacy, safety and also to allow us to make a dose selection to go forward. The STILLS trial will be longer and slower. It's a much more rare condition and will take time to generate data. The SOVIO-three program should have a data readout in 2018. That's a relatively small Phase 1 that we have in mind, but it's likely to be quite late in the year because it's very rare and then hard to find the patients. And then as it relates to the ITI programs, I think these are going to take different timeframes depending on their nature. Obviously, dealing with new incidence inhibitors is going to take quite some time to enroll, whereas the rescue trial will go much more quickly. So we'll be giving further guidance on those programs later in the year. So RESCUE trial, could we have that in sort of end 2017 or early 2018 or something? I think end 2017 sounds too quick. It will be sometime in the course of 2018. Yes. And it's possible to say anything about X10? Yes. Only that the A program will go into the clinic and have to. That's what Bioverativ has said. So we'll be working with them to clarify longer term milestones, but obviously it's a gated program. So it will behave very much like the timelines did for Alaska. But we need to understand how it behaves in Phase 1 first. Great. And finally, tax rate, what should we expect in 2017? We are now entering to a tax position. So we should be expecting around 20%. Great. Thank you. Thanks, Jan. Thank you. Our next question comes from the line of Erik Hultegard of Carnegie. Please go ahead. Your line is now open. Yes. Hi, there. A couple of questions, if I may. First, going back to costs and your predictions for 2017, I was hoping to get some more color on R and D and SG and A spend. Could you sort of indicate whether we will see mid single, high single, low double digit growth in OpEx during 2017? And then yes, sorry. No, go ahead, Eric. Go ahead. It's kind of what you want to cover. Yes. Sorry. And then just secondly on the Elocta launch in Europe. If you could comment a little bit around what patients that you are getting? Is it a similar pattern as you have seen for Biogen in the U. S. And in Japan? Or are you seeing somewhat different patients that are switching in Europe than what Biogen have seen? Okay, great. So on OpEx, I mean, I think it's relatively straightforward. I mean, if you take our guidance and you take out your expectations for royalty income and you understand where our EBITDA lies, I mean, you'll come up with a low double digit expectation for OpEx growth. And as I said, we intend to invest vigorously to do 2 things. 1, to enable a €1,000,000,000 over the coming years here for the hemophilia products. And secondly, to really build a longer term R and D future for the company. So I think that's the range that you should have in mind. On the Elocta experience in Europe, I must say it has been absolutely fascinating to observe how Lacta is being taken up at different countries. We have a full spectrum of experience depending on the culture and the treatment orientation of physicians. The characteristics of treaters, for example, in Germany are quite deliberate. They're very interested to experience the product in their own hands. They generally have a center based investigation plan. They want to work with the product over period of time and make up their mind based on that experience. We have a more kind of nationally oriented adoption plan in countries like the UK and England and Ireland who approach it in that way. And then we have other markets like France and others where it's a much more individual physician driven uptake based on their comfort with new technologies and their appetite for engaging with those. So we see very different kinds of behaviors in different countries. But across them, we see absolutely similar patient selection desires. In other words, it's all about managing the three factors that Alan went through earlier, the level of activity for the patient, their relative level of desired or actual protection and their ability to deal with the treatment burden. So I think what we're seeing is patients actually have many types who are coming in because patients who are bleeding can be controlled, patients who are well controlled can access fewer infusions. So we're seeing the same kind of broad spectrum of appeal in our market so far as Biogen, now Bioverativ has seen in theirs. All right. Thank you. Yes. Thanks, Eric. Thank you. Our next question comes from the line of Lars Hogreng of Danske Bank. Please go ahead. Your line is now open. Yes. Thank you. Can you comment upon the since the reimbursement coverage for the lock desk gradually broadening, should we expect or do you expect an element of more significant tender sales, particularly when you're getting in 2 countries in the Middle East? So, hi, Lars. Definitely tenders are part of the European structure. They tend to be more common the further sort of east and south you go, as a generality. But of course, England has a quite a tender driven or a structure commissioning kind of environment. So I think we are participating on local terms, whatever they are, tender, structured commissioning, managed environments are rather open to acknowledging that the extended half life products are different, but they don't all do that. And of course, then it's a matter of how much they include other quality attributes in the tender. And in Middle East countries, is there any country where tender the yield tender amounts where they are, we will participate in significant tenders? Yes, actually it's kind of interesting, Lars. We have not encountered meaningful tender dynamics in the Middle East at all. In our experience, the Middle East is behaving in many countries much like Western Europe or even the U. S. So they're very focused on accessing the latest and best technology. Of course, it's not a straightforward environment. It doesn't evolve in a straight line. But so far, we've been very pleased with the reception there. Okay. And can I just ask about the cash flow performance in for the full year? If I remember correctly, you said half a year ago that you would see cash flow neutrality roughly for the full year. Now it seems to be plus $300,000,000 or so. And the difference in earnings performance is not that great in that you have a negative contribution from working capital. So could you say what's in terms of cash flow generation, what was better than you thought a couple of quarters ago? Sorry, Lars. You mean your view is that the cash generation is greater than we have led you to expect? Yes, yes. So operating cash flow, I think you said that you would be around 0 for the full year. Mark, you need to come over today and cheer up Matsoula. He's very unhappy that our cash flow was not as good as he was hoping because we had such strong sales in Q4. But maybe Abbas can comment on that. Okay. Well, compared to what you I think we should go back to the outlook that we gave when we started the year or after the Q4 earnings for 2015. As you see, Lars, we have revised our guidance for the full year and we also met or slightly exceeded the range of our guidance also that was published after Q3. And of course, that impacts also the cash flow. Okay. And then finally on when as you make X10 for the longer acting formula for Factor VIII will go into clinic second half as by a variety of. So is that going to trigger any payment from you to them? No. Actually, I'm glad you raised that, Lars. Maybe that's an SC SC Factor IX Xtend programs. From here forward, all costs will be borne by Veritiv for the clinical development. And only unless or until a filing is made at the EMA, we will not bear any further costs. At the time of an EMA filing, we have the option to fully opt in to participate in the final development and commercialization of the programs. And at that time of opt in as it occurred for Elocta and AlkaliX, we will take on, as Montolito said, a goodwill component on the balance sheet and we will also take on a responsibility to repay half of our or our half, if you will, of development costs at that time. If we decide not to opt in at that point, we would bear no further cost. Okay. And at this point, I guess, Bear Verte has been open about the sub q potential for the Factor IX version. But is that you also have a sub q formulation installed for the Factor VIII. So I guess they're preclinical findings of both an IV and sub Q formulation. There are, yes. I don't think we're optimistic about getting to a sub Q formulation for Factor VIII. There's really a significant difference in the amount of material that's required for Factor VIII. And as a result, a subcu formulation, I think, will be quite challenging. Okay. Thank you. Thank you. Our next question comes from the line of Peter Oersling of Pareto Securities. Please go ahead. Your line is now open. Open. Yes. Thank you for taking my question. Most of the ones that I have has already been answered. But I just wanted you if you could just elaborate a little bit about the competitive landscape that you see in Europe right now price pressures and so forth? And also if you could just confirm that there were no major inventory buildup in the Q4, especially for Elocta? Thank you. Sure. Thanks, Peter. So I think on the competitive landscape side, let me make separate comments for Elocta and Alprolix. For Elocta, obviously, the main competition is existing conventional factors, whether recombinant or plasma. And of course, the competitive dynamics there, since there's little or no differentiation among the conventional factors is based mainly on price and relationships. And of course, we are building now, as I said, on over 4,000 patient years in real practice for eloxa and outcomes data that is increasingly robust, basically confirming that the label is what's happening in practice. And as I think I mentioned at the end of last year, we're also starting to see first data supporting the fact that for large centers in well controlled patients, they're starting to see a decrease in consumption over time. And these are dynamics that are very, very favorable for Elocta. So we are obviously price pressure is part of the European environment, but we feel that we have a very strong position from which to further Elocta. Alprolix, all those same dynamics exist versus benefits and other products. But there's an additional element here because of course we're launching in a similar timeframe to idelvion. So the dynamics for Factor IX, I think are more complicated for that reason, but the fundamentals are very similar, looking at improving outcomes and over time, decreasing consumption for patients. So no major moves in either side, but obviously very dynamic environments and in both cases. For your point about Elocta, we had a very minor contribution in the 4th quarter from inventory, but there was some inventory in Q4. I can tell you that the sales to date in 2017 are on a linear basis very reassuring. We do not believe there will be any one time effects when you look at the curve or the evolution from the end of the year to the beginning of the year. So yes, there is some inventory, but there is always some inventory in early launch and nothing strange or unusually large and certainly nothing that will be overwhelmed by sequential growth. Okay. Thanks. Our next question comes from the line of Peter Sester of Handelsbanken. Please go ahead. Your line is open. Hi, it's Peter from Handelsbanken. Thank you for taking my questions. I have a couple. Firstly, related to the partner, the products potential divestiture of that. Sort of market timing, it's pretty whatever you interpret as dramatic or not, but it's a strategic move that comes right before a potential new CEO coming in place. I mean, could you just comment on the timing of why it comes right now and why not let this be a decision for a potential new CEO? And also whether this also means, let's say, M and A, etcetera, will also be a decision for a new CEO to take? And secondly, on your guidance revenue guidance for the full year, could you elaborate a bit on the midpoint and the swing factors? Is the swing factor between the high and low end, mainly eloptaHymofidis sales driven? And in relation to that, could you comment on the market share run rates heading out of heading into 2017 in both France and Germany? Thank you. Okay. So Peter, I'll do my best to capture everything. I think I've got it here. On the SPP timing and M and A as it relates to decision making, maybe 2 general points and then a couple of specific ones. I think the 2 general points are, don't expect anything about our strategy in broad terms to change through the CEO succession. And as a result, we are focused on executing on our strategy through every minute that I'm here and every minute that a new CEO is here. And our senior team is both capable and focused on executing on that strategy. So whenever and whatever is in line with our strategy to pull through, we will pull through today, tomorrow, a month from now or 2 months after the new CEO arrives. The SPP timing, of course, as you recognize, was not proactively announced by us. We've been in a process considering this option for the company for quite some time. And again, whenever and wherever it becomes possible to execute on things like this, we're going to do it. So we're not in a pause mode on any aspect of the way the company is running during this transition. To your point about the guidance on revenue, I mean, we believe the midpoint is sort of a reasonable approximation. All we know is that we're probably wrong. I know we're not very thoughtful today about what drives us up or down. I mean, we look at the whole portfolio when we make these decisions. We hope by the mid year we will have more certainty and granularity on where we'll land. And if it's appropriate to update, we'll do that then. To your point about the market shares, we don't track today because the granularity of data is not available, but the market share So I think that the ability to talk about market share on a per country level, it's just we're not there yet. We don't have that kind of granularity in these markets. But maybe just as a reference point, in the U. S. Launch for Eloctate, their full 1st year market share in the U. S. Started to approximate 6%, 7% at the end of 12 months. And on Alprolix, I think they were closer to 10% or 12% at the end of the 1st year, again in an environment where they did not have competition at that time. Just a follow-up then, but I guess the purpose of showing the 2 maps respectively for Elocta and Aprolyx, I guess it's off to say though that at least with Aprolix, there was sort of a pent up effect that we should expect in 2017? Yes. I think it mainly reflects a difference in phasing because Alprolix launched 6 months more or less later than Elocta. So it's just moving through the same sequence of approvals a little more slowly or not slowly, but just on a time delay versus Elocta. To your point about Elocta demand, I mean, it's a fair point. We have thousands of patients who have access to Eprolix around the world today and people know what to expect. And I think there is a high level of anticipation. Of course, whether that's the competitor products land. So I'm not sure whether that will the competitor products land. So I'm not sure whether that will translate into a faster curve for us. I think it's unlikely to do that, but still we feel very good about the launch so far. Okay. Terry, we have time for maybe 1 or 2 more questions before the top of the hour. Okay. Our next question comes from the line of Erik Holzgold of Carnegie. Please go ahead. Your line is open. Hi, Jan. Two follow-up questions, if I may. First, on Bioverativ's Capital Markets Day, they mentioned that the global hemophilia market was growing at, I think if I remember it correctly, 7%, which sounded quite high. But can you comment a little bit on the market growth that you are seeing in Europe and in your territories? That's my first question. Then secondly, also Bioverativ, they showed market share trends both in the U. S. And in Japan where they achieved above 10% market share 20 months post launch in both U. S. And Japan. And I guess those markets are quite different. So my question is basically, is there anything in the European market that is very different from Japan and the U. S. Market suggesting that the uptick should be different? Eric, can I just ask a quick clarifying question on your second point? The greater than 10% market share of 20 months, that's an Alokta figure, right? Yes, that's correct. Okay. Yes, thanks. So no, I think that kind of a range on a per country basis for us is absolutely reasonable. We are very forward leaning in our views of where Alokta can end up and that doesn't sound unreasonable to me. From the point of view of the overall hemophilia growth, everyone has a different number it seems and I think the reality is there's not really good enough data to know exactly how the market is growing. But I would certainly concur with the overall view that the market is growing. I mean, we see actively in markets, not only that patients continue to grow and have weight based adjustments in dosing, there's also an increasing desire to see outcomes improve. And of course, many of the methods to get to that improvement are related to dose. And finally, we and finally, thirdly, we have patients converting from on demand to prophy. And lastly, we have more markets participating. So we have younger and earlier markets who are taking steps to provide treatment for their patients. So I do see that market growth in the day to day work that we're doing. And perhaps that's relevant to say here as well that our global donation program has just donated our 200 millionth unit of factor to the developing world in part in partnership with the World Federation of Hemophilia. We see now over 12,000 patients have been treated on this charitable basis. And of course, it's not enough. I mean, 3 out of 4 patients in the world are not treated today. But by the same token, I mean, coming back to your point about overall market growth, it will be the case over the next 10 to 20 years that some of these markets will start to participate in the care of their citizens and that growth of the developing world will also contribute to global growth over time. Thank you. Yes. Thanks, Eric. Jerry, maybe if there's one more in the queue, let's take it and then we'll wrap it up and take further questions offline. Thank you. And I guess our last question comes from the line of Joseph Hedden of Rx Securities. Please go ahead. Your line is open. Hi, thanks for taking my questions. Firstly, just on Alprudix reimbursement progress. I was just wondering what that's looking like relative to Alokta at a similar stage and whether you have any indication at the moment as to whether things are happening more slowly or indeed faster? And then just secondly on Kineret in Stills disease, when can we expect the Phase 2 to start? And just in general on Stills disease, what kind of market opportunity are we looking at? Thanks. Okay, great. Thanks for the question. So first of all, on Alprolix reimbursement, as I was saying earlier, we see about a 6 month phase delay between when Alprolix is going through reimbursement versus Elocta, but reimbursement is not delayed. It just launched 6 months later. So that's why we're seeing the difference in those maps. The relative speed is quite the same. The dynamics, as I said earlier, are a little bit different because there's more competitive interaction, but the reimbursement is going well. I think for the KINRAAD STILLS question, it's a very interesting space. So first of all, we're planning to do a single Phase 3 study. It's not a Phase 2 study. The Gout study is a Phase 2 study, but the STILL study is Phase 3. It's quite a rare disease and it's a study design that will enroll both kids and adults. So we do expect that the study enrollment will take some time. Interestingly, KINARET is today one of the preferred medicines for patients with stills. And so we don't believe that the product or the trial will lead to breakout growth for KINARET. We think roughly 30% to 35% of patients with fills are already treated with KINARET. But on the other hand, we do expect it to substantially increase the share in that indication if we're able to successfully demonstrate efficacy in the trial. And it will also hedge against a failure for patients to get reimbursement for TINARET in the future. So it's an important trial, but it's not something that will be enormously significant from a financial perspective. Okay. Thanks very much. Okay. You're welcome. All right, Jerry, I think we'll hold it there, if that's okay. And as usual, just to say thank you for joining us for this review of the 2016 results. If we have missed you in the queue and or we didn't quite get our answers to your questions to be thorough enough or where you were intending the questions to go, please as always feel free to reach out to us. We'd be happy to follow-up later today or in the coming days. Thank you very much. This now concludes our call. Thank you for attending. Participants, you may disconnect your