Earnings Call: Q3 2016

Oct 27, 2016

Thank you, Annika, and thanks everybody for joining us to review the results in Q3 for Sobe. This is a great moment in the evolution of the company that's been talking about for some time. We've been focused over the last 5 years on the evolution of our diverse space business, returning those core franchises to growth and the company overall to a cash flow positive state and ultimately to profitability. We've next been focused on providing a launch framework for our hemophilia franchise developed in partnership with Biogen. And finally, preparing ourselves to further grow and diversify the business through a focus on M and A. In this Q3, I think you can see evidence of significant progress in the first two of these. We'll review, of course, the base business along with Alan Raffensperger and Matt Cipolla Follin, our CFO. And we will also discuss the early progress in the launch of our hemophilia franchise, where you can see the impact financially in the quarter, but also get an understanding of how we're setting the foundation for long term value creation in this franchise and setting the stage for our focus on 2017. We will make a few forward looking statements, but a very few in this presentation. So just keep in mind that everything we plan to do may not actually occur. So from the point of view of the quarter, let's start with some business highlights. As we released late in September, we had a significant new reimbursement decisions in England, in Italy, France and Spain. In addition, Alprolix gained reimbursements across the UK in the month. We also were able to present long term data from Elocta and Alprolis at the World Hemophilia Federation Congress. This is a significant number of patient years of experience for both products, essentially showing the maintenance of very low annualized bleeding rates, consistent consumption and a very strong safety record to date. The orphan capsule filing in Canada was validated and is in process and under consideration for approval. And very importantly, Milan Satravic was appointed as our new Head of R and D. We're very excited to welcome Milan to the company as it represents a renewed focus and invigoration of our efforts to bring our pipeline forward. After the reporting period, we received European Commission granting of the orphan status for our product candidates, so B003. This would be an intravenous enzyme replacement therapy for MPS IIIA, also known as Sanfilippo syndrome. This subtype of Sanfilippo is a neurodegenerative subtype of liposomal disorder. And we're very excited in this case because our intravenously delivered enzyme in preclinical models is able to penetrate the brain and to clear the CNS substrate. We helped bring this program forward to human development in 2018. Finally, the image transfer for Alprolix, so we was approved by the UC late in the quarter and that completes really the transfer of these assets from our development stage with Biogen into our own portfolio. From a financial perspective, the quarter was strong overall. Total revenues were SEK1.1 billion, representing about a 49% growth compared to last year. Product revenues topped SEK1 1,000,000,000 with a 56% growth. And I'll cover Repaxo in a couple of slides, but it came in, in the quarter at $162,000,000 Gross margin was 67 percent, EBITDA was $282,000,000 and cash flow from operations in the quarter was SEK 81,000,000. To place the quarter in a year to date context, you can see that the year to date total for top line was $3,900,000,000 representing a 52% growth year on year with product revenues coming in at about $3,400,000,000 Obviously, if you look at the year to date financials, the curve is somewhat Elocta and Alprolix. So if you take those one time credits out of our financials year to date, you can see the significant progression in our underlying revenues from the combined portfolio. Total revenues coming in at $3,200,000,000 which at the Q3 is equal in level to the close of our 2015 revenues in total. That overall represents a 33% growth of product revenues representing about $2,700,000,000 themselves growing 44% year on year. Notably, the gross margin, if you take the one time credits out is about 65%. Just to remind you, those one time credits come through at 100% gross margin. EBITDA for the underlying business was SEK626 1,000,000. If you look at the breakout of the revenues per business line year to date, you can see that Kineret has started to exceed total revenues for Orphadin. It is by far our largest product now outside of the hemophilia franchise. And then you can see that the combined revenues from hemophilia are even now larger in combination than genetics and metabolism and inflammation. So obviously, we are starting to move into a period of time now where hemophilia will transform the financial and the strategic landscape for the company going forward. Partner Products accounted for $617,000,000 of the total year to date progress and Refacto at 508,000,000 dollars So as usual, I'll briefly review the Refacto business before turning over the call to Alan Raffensperger. The Refacto business in the quarter was $162,000,000 growing 15%. The quarter to quarter growth rates are less relevant in this business. Just to remind you, year on year, the business growth in the low single digits. But we continue to meet and exceed our plan here with our partner Pfizer for the business. And in spite of the royalty structure expiring in the rest of the world, we continue to receive royalties from the U. S. And to grow the business overall. So with that, I'd like to turn the call over to Alan Raffensperger to review the commercial portfolio. Thank you very much, Jeff. I know you would all like to hear more about the progress with our hemophilia portfolio, but please allow me a few minutes to touch on the results of our other businesses. Kineret revenue for the 3rd quarter increased 23 percent to DKK 265,000,000 year to date revenues reaching DKK725 1,000,000. This is a 26% increase over the 1st 3 quarters of last year. We are achieving volume growth in all markets further enhanced by the U. S. Patient centric distribution model. We are identifying new patients in combination with a more active patient support program, driving improved adherence and compliance. I am also pleased to report that investigation new drug applications were filed with the FDA for acute gout and Still's disease and we expect these trials to begin enrolling in the coming months. Moving on to Orpudine, we are reporting sales of DKK 193,000,000, which is a decrease of 3% versus the Q3 of 2015. Year to date growth is positive. We are making good progress in Europe and rest of the world and converting patients from the 10 milligram, 5 milligram and 2 milligram capsule formulations to the new oral suspension for pediatric patients and a 20 milligram capsule for adolescents and adults. We recently launched both product presentations in the U. S. And I will keep you updated on progress moving ahead. The U. S. Launches are particularly important as we expect them to positively impact gross to net calculation forfeiting there in a significant way. I can also report that the first generic approvals were granted in Turkey where sales have begun and in Canada where a launch has not yet occurred. Our partner products portfolio revenue increased by 26 percent to DKK217,000,000, which includes a one time payment from Exelixis for SEK 24,000,000. This is related to the transfer of commetric rights to Ipsen. Year to date revenue increased by 7% to DKK617 1,000,000. Removing the one time payment, the portfolio is growing steadily, which is being driven by ZIAPEX by both Dupuytren's and Peyronie's indications in addition to the pharma Swiss portfolio. Finally, moving on to hemophilia total revenue reached CHF308 million for the quarter, driven by a combination of Sobe product sales and royalty revenue from Biogen. Sales growth from both Alprolix and Eloctate for Biogen continue to make steady progress with yearly revenue for both products at over $870,000,000 on a yearly running basis. This speaks to the value that Elocta and Alprolix offer to people living with hemophilia. Taking a closer look at our Alokta sales performance for Q3, I would like to point out a few important things. The revenue for the quarter was derived mainly from Germany, Ireland and Scotland. We also experienced lower than expected patient switching during the summer period. Treating physicians want to be able to plan switches for a time when they and patients can be available for follow-up. Training physicians and local treatment protocols most often advise converting some initial patients first to develop an understanding of a new drug before switching more patients. We see the same initial pattern in many clinics, which is perfectly understandable. We have now booked sales at 44% of the treatment centers in Germany and continue to pick up new patients in new centers. The centers where they are currently prescribing Allocta are treating over 70% of the patients in the country. I also believe it is important to emphasize that in early September reimbursement was granted in 1 of the big five European markets, Germany. We are now pleased to be able to actively promote and book sales in England, France, Italy and Spain with these reimbursement approvals coming late in the quarter. By volume, the big five hold over 50% of the volumes for Factor VIII and a larger fraction of the value. So access here is quite important for the launch. Moving on to Alprolix, we reached a total of DKK 110,000,000 for the quarter comprised of DKK 16,000,000 in product sales and DKK 93,000,000 in royalties from Biogen. As the national reimbursement process followed pretty much along the same lines as Locte, these initial sales are derived primarily from Germany and the UK. The value of our PROLEX has solidly engaged physicians and patients and is off to a good start. I would now like to hand over our Q3 earnings call to our Chief Financial Officer, Matt Soloffeli. Thank you, Alan. Turning over to the profit and loss statement. As Jes Messano said initially, revenues grew in the quarter with 49% to SEK1.171 1,000,000,000 For the full year, revenues are now at SEK3.9 billion with an increase of 62%. Excluding the one time credits in Q1 and Q2, revenues have increased with 33%. Gross margin in the quarter came in at 67%. Accumulated 1st 9 months gross margin is 71%. The reason for the higher accumulated number is, of course, the one time credit that occurred in Q1 and Q2. Sales and admin expenses increased by 20 percent to $327,000,000 in the quarter. And research and development expenses increased with 49 percent to $179,000,000 The R and D expenses now include also shared R and D expenses with Biogen. EBITDA for the quarter came in at 282,000,000 dollars and accumulated $1,334,000,000 And the net profit and loss for the period was $143,000,000 and accumulated 1st 9 months, dollars 710,000,000 Turning over to the balance sheet. The intangible assets have now increased compared to year end 2015 due to that we have now taken on the intangible assets for the Empire Gen assets. Inventories have increased in the period due to increased inventory for Elocta and Alprolix. And our cash is now at $824,000,000 And the long term debt is since end of Q2, dollars 502,000,000 meaning that Sobe now has a net cash position of $319,000,000 dollars With that, I hand over to our Chief Executive Officer. Thank you, Mats. To briefly touch on the outlook for the year, as you saw, we did raise that slightly this morning. We now expect revenues to come in between CHF 5.12 5,000,000,000 and CHF 5,200,000,000 for the full year, margin in the range of 70% and EBITDA somewhere between CHF 1 point 475,000,000 and 1,525,000,000 just reflecting further progress in the year and that's going to be great accuracy for where we're going to land. So as I said at the beginning, we're going to midpoint in our journey here at Sobeys, transitioning and diversifying further upon our base business by launching these first to market products, Elocta and Alprolix. We're in the early stages of what we envision being a 2 year launch window for these products and are really at a good position now in setting the foundation for each of those. And turning our attention in the future to further filling the mid stage pipeline here at Sobeys through a more external focus. And since several of you have asked how we're thinking about that approach, I've just put a few thoughts here on this final slide. Obviously, we'd like to continue to emphasize products that can have a transformational impact on rare disease. We want products that have an edge to them to allow them to be sustainably provided in a highly competitive and resource constrained environment. And we'd like to build on our own legacy here as a biotech innovator. And that to begin with, of course, leads us to focus on products with a biologics basis where we have a strong ability to understand and mitigate risk. We want products that can trade on our experience for commercialization in rare diseases. And we're looking, I think, with less rigidity at strong portfolio overlaps. Of course, there are many therapeutic areas where we could add value. And so we're not completely constrained to what's listed here around genetics and metabolic inflammation and hemophilia and benign hematology. Importantly, we have commercial capacity today in North America and we'll develop that capacity in Europe for core products or proprietary products from 2018 beyond. So just to give a frame for the way we're thinking about externally driven growth in the coming period. So with that, Annika, that concludes our comments. And let's open the lines so that we can take questions. Thank you. Thank you. The first question comes from the line of Ying Yang from Jefferies. Please go ahead. Okay. Thanks very much. So in terms of hemophilia product, the summer months was slow for patients switching to new product. But now we have gone through most of October. Do you see uptick in long acting product to use compared to summer months? Hi, Eun, it's Jeff. So we won't on October, but I can tell you the monthly phasing September was higher than each of July August. So the summer phenomenon, I think we were expecting, but I think it was softer and more significant even than our expectations. And stepping back from it, it's not hard as Alan was saying to understand why it is. But I can say in an early launch period, we're happy to have the summer behind us. Okay. And then a couple of the pipeline product questions. So when you look at O3 and O5, those are rare orphan disease products. And interestingly, these are the areas that are pretty active among other companies developing products targeting these indications. So given that there is a small number of patients in each category with several companies trying to actually enroll patients, How do you think your enrollment in a clinical trial will be gone once you start? That's a great question, Yuna. Maybe to comment on them, maybe jointly to begin with and then separately as a follow-up. To take the joint issue that you've raised, competitive enrollments for clinical trials is a key part of our development strategy. And if we don't believe that our approach can offer breakout value, then obviously, we'd be very significantly penalized by the competitive environment for development. I think we see these two fields in a slightly different way, each from each other. For SOVIO-three and Sanfilippo A, we have a devastating and progressive neurologic disease that leads to mortality in the 2nd decade of life. And the most important thing as we think about enrollments in that area is whether we believe we can fundamentally change the underlying pathophysiology of the disease. So I think the idea of getting an intravenously administered systemic enzyme that can address the disease in the small capillaries of the neurovasculature and from there, broadly penetrate the parenchyma to reduce substrate levels. I think that's a very appealing profile for young kids as compared, for example, to intraventricular delivered gene therapy or systemic gene therapy or an intrathecal enzyme. I think in C5, it's a very different situation as you point out. It's highly competitive. Most players are focused on rare disease indications. And while we believe a room temperature stable prefilled syringe and subcutaneous dosing could be interesting on a weekly or biweekly basis. I think we haven't yet decided where we believe we have that breakout advantage with to indications whether rare or large. So whereas I think for SYLVIA-three, we're quite set for SYLVIA-five. I think we have some work to do as we come out of Phase 1 to target that at the right indication where we would have that kind of an advantage. Thank you. Yes. Thanks, Ian. The next question comes from the line of Richard Parks from Deutsche Bank. Please go ahead. Hi, thanks for taking my questions. Firstly, just going back to Elocta. I'm just trying to understand a little bit better the sort of flat quarter on quarter performance. Obviously, I understand the summer period, but I would have thought if you had patients going on prophylaxis in the second quarter, then there would have just been a sort of annualization in terms of improvement going into the Q3. So, I saw quarter on quarter improvement. Is it that you're not the Q1, was there any stocking in there? Or was that more on demand use rather than patients going switching and moving on to prophylaxis? So that's the first question. And secondly, on Orfadin, given the first generic in Turkey, I'm wondering how that's impacting your expectations for generics in more commercially important markets and what how you think the new formulations could protect you in the event of generic launches there? Thanks. Yes, sure, Richard. So let's start with Alocta. First of all, all the business is a switch business, and I think that's a key thing to understanding the pace and the progress of a launch like this. The entire opportunity is coming from switching from products that have been in the market for 20 years, most of them. Secondly, in that setting, it is reasonable to expect that patient starts will result in a wave or base of revenue going forward. The trouble is that for European launch, we're still in a stage where we have very few countries and relatively few centers prescribing within those countries, some of which are fully set up to be reimbursed and to grow in a linear way and others are ordering in still some lumpiness, if you will, in the flows for the launch. Still some lumpiness, if you will, in the flows for the launch. So for example, we had a relatively important order in the Q2 anticipating reimbursement and switches in the Middle East, which was delayed. So those switches didn't occur in the Q3. So you see those kinds of dynamics, which will just get washed out as we get more countries involved with the launch and a larger number of centers prescribing. So your underlying assumptions are completely correct, but they will hold better when we have more markets on and more sensors of prescribing. From the point of view of Orphan, I think the relative commercial impact for Turkey is it's not insignificant. I mean the approval occurred there mid year. We expect the impact to be on the order of GBP 15,000,000 in the year. But obviously, we're very attentive to what might happen more broadly with Orphan and from a generic perspective. Alan mentioned this recent approval in Canada. We know of filings that have occurred in Europe, which could result in an approval by year end in Europe, as we mentioned in our last call. We don't believe that will allow or provide much in the way of real access, however, since the patents for Orpadin are in place until mid year 2017, so less than 6% of our total market would be eligible or addressable by any potential generics in Europe until then. And then following that, our view is that the liquid formulation and the 20 milligram capsules are important. They do in the case of liquid have much more durable patent protection. But importantly, these kinds of markets are not generally eligible for pure generic substitution. There's a very strong role of connectivity between patients and physicians and the manufacturers. So we have several examples in this genetic space where generic entry has not been as severe as it is in more broad areas. The only market, I think, where we're less able to comment about what I suspect would be somewhat similar would be the U. S. Where we don't have that insight to ANDA filing. Okay. Thank you very much. Yes. Thanks, Richard. The next question comes from the line of Hans Mahler from Nordea. Please go ahead. Hi, Hans Mahler here. First a question on the uptake of Alprolix and Locte during the quarter. Come you were able to increase the sales of Alprolix by $11,000,000 by but not with the Locte? Are there some kind of different dynamics in the launches here? And also secondly, if we look on the U. S. Sales of Eloctate, it was also flat sequentially from the Q2. Have Biogen explained why the sequential growth has disappeared here? Is it pricing or patients switching away? Could you give some color on that? Thank you. Yes, sure Hans. Thanks for the question. So first, with respect to the Alprolix and Elocta dynamics, if you look at the Q1 of sales for Alocta, they behave very much like the Q1 of Alprolix sales have behaved, which is just driven by the fact that the first centers at the time of approval will lay in vials to allow for the first switches to occur. So that's occurring independently of the summer related to the launch, which was which led to availability at the end of May with first ordering happening in late June early July. So nothing strange about that and not a difference between them. As for the U. S. Sales, Biogen was very light on detail around the hemophilia franchise, I think in anticipation of the Bioverativ spin out. But I do know that as you say, Elocta was flat in the U. S. Quarter on quarter, but then again, it was also flat Q1 to Q4 last year and since then has shown an 11% growth. So again, it just goes back to the idea of these orphan rare disease launches. They just tend to be stochastic. They change quarter to quarter. It's difficult to predict them in a linear way. Of course, 3 quarters, 4 quarters makes more of a trend. So we're watching that carefully as you are. Okay, great. Can I also add a question about R and D? What explains the sequential drop in R and D in the Q3? And how should we model the Q4 when you both have your share of the Altraulics development cost, but also the trials with recruiting in Kineret? Hans, Matulof here. Well, if you look back historically, Q3 has always been the lowest quarter in terms of R and D expenses, if you look over the year. And but for this year, we increased the expenses to 49% in R and D quarter to quarter in R and D. So I don't think it's relatively low. We know that we have added on shared R and D expenses to the margin in the quarter, but Q3 is always the lowest activity relating to the summer months where the projects are not so active. So that's my answer. And do you have a more detailed view on the incremental increase that we should expect for the Q4 when Alprolixin full comes in and also the studies on Kineret? No, I don't think we have an ability to guide on it. But I would say, Hans, if you look at the relative curve sort of annually for R and D, the step up from 2016 to 2016 will not continue in a linear way related to biotin. We took the large majority of the step up for the biotin costs in 2016. There will be a small incremental run rate contribution from Alprolix. But what we are conscious of here is that the largest driver of those costs is the allocation or the joint carried cost between us and Biogen seems to be Bioverativ. So I think knowing your interest in this and of course it's a huge area of attention for us, we'll give stronger or clearer guidance around this early next year because obviously we'll be partnered with a company that has a different cost base compared to the partner we're working with today. Okay, very good. Fair enough. Yes. Okay, thanks Hans. The next question comes from the line of Erik Kot from Carnegie. Please go ahead. Yes. Hi, there. A couple of questions, if I may. On the Elocta launch in Europe, first, if you look at the patients that have switched to Elocta to date, can you say what proportion of those patients that are being switched from plasma products and what proportion are being switched from recombinant drugs? Secondly, I'm trying to put your launch so far in context with Biogen's launch in the U. S. And so my question is basically the markets where you had reimbursement and access to during Q3, I think it was predominantly German and a couple of few smaller markets. What portion of Sobe's total market in value did you have access to during the Q3? And how will that change with the late Q3 reimbursement clearance of Italy, Spain, France and UK? Okay. That's a great set of questions, Derek. I'm doing some quick mental math to try to make sure I get to them. So first, let's talk about the size and value of markets. In volume, the big five carry about 50% of the hemophilia market. I would expect that of the total market, they would represent closer to 70% in value. Germany among the big five in volume is about a quarter. And so it's quite a significant part. And if you look at the relative value of Sweden and Ireland and Scotland, which were the other key markets where we've had access and sales. I may be missing 1 or 2 small markets, but it's together they would be in the single digits. So I think the proportion of our markets, Germany is by far the largest single contributor and will continue to be. When you look at England, Italy and France and Spain coming on board, then that really brings us from that level of about 25% up to closer to 65%, 70%, I would guess. But I'm saying guess because while we have very good data on volumes, we have far less good data on values. So it's a lot harder to estimate the specific revenue potential for each country. But that gives you, I think, a flavor of how important these late additions are for us to focus on in this coming quarter and in the quarters ahead. Eric, forgive me, I've now lost the train of your first Elocta come to a lot that come from recombinant versus plasma drugs? Yes. I think it's too early for us to have good data on it. My gut is helping most of the switches are coming from recombinant so far, just because of the center distribution where we've been working, but I don't have good data on that yet. And I think something that we'll hope to understand better when we have a greater proportion of centers on. Would you just follow-up there, would you I think your plasma drugs are I think you've said before it's roughly 40 percent of the total market. Are you seeing similar proportions in the switch, so 60% roughly from recombinants and the rest from plasma or are you mainly getting switch from recombinants? I would love to know the answer to that. No, really, I think it's incredibly important question because in most markets outside of France and Germany, plasma is quite a low cost part of the market. And so it would tell us a lot about the value drivers for Switch to know in what proportion they're switching in those markets. In France and Germany, we're confident proportionally is much more expensive. And so the relative switch costs to go from plasma to eloxo will be lower even if it's still higher than it would be from switching from recombinant. So that's why I say, if I had to guess, I would guess most of the early switching is coming off recombinant because there the cost delta is quite low. And as I said earlier, we're still building the sort of foundation for the pole to switch. But again, I'm guessing a little bit here. All right. Thanks a lot. Yes. Thanks, Eric. The next question comes from the line of Johan Nels from Swedbank. Please go ahead. Thank you. Johan Nels from Swedbank. Some of the questions have been answered. But yes, to go back to the switching dynamics, although it's early days in Europe, is it possible to say anything about the proportion of sales that comes from patients that are already on preventive care and also percentage of sales that comes from patients with a very low level of natural factor remaining? So yes, I think the switching proportions are almost all from severe patients, which is of course expected since the largest proportion of ProPIA patients are severe. Having said that, I also can tell you that most of the switches by great margin are coming from patients who are already on prophy. And that's very consistent with what we've seen in the U. S. Experience, where about 10% of starts are coming on demand and those patients are converting to prophy. What we've seen in the long term data that we presented at the WFH is that patients who switched from on demand to prophy did so at comparable levels of consumption to existing prophy patients and the very large majority of them well in excess of 95 percent, stayed on prophy and stayed on Eloctate. So we do expect that as on demand switches occur that they will stay in the prophy bucket. But not surprisingly in the early stages of patients who are already on prophy who are switching. Great. That's useful. And some to go back on the guide, which you changed, hardly a surprise perhaps. But if we look at both the gross margins and the EBITDA indication, it still seems very modest. I think you can manage the gross margin with a drop of 4% or 5% in Q4. And in terms of EBITDA, you can manage with a drop about, I think, 50% or more from Q3 that seems to be very undemanding? Well, you would hardly be the 1st person to call Matsoula a modest person. He is a very modest person. But if I just comment on a couple of the dynamics that you made me think of, and the first one is to recall that the gross margin is, if you can think of it like this, artificially inflated in the 1st 3 quarters by the impact of the one time credits, which count as 100% margin for about $650,000,000 in revenue. So in that sense, we expect our margin will stay at our native corporate rate, accounting for factors like mix and so forth in the Q4. And that's what leads to the step down, if you will, from the current year to date run and our view of the full year. The second point about the profitability, it might be so, as you say, that there's more room there. On the other hand, as Mats was saying earlier, we do expect expenses as they always are to be higher in Q4 than they are in Q3. So I think those are the factors. Matsy, anything else you want to add? No, I think it's a good question, but I think the answers you gave, yes, are very relevant. Were they modest enough? Modest enough. Okay. You understand your point. That's sensible. And another question, there are many, of course. But in terms of your capital base, you're now a pretty decent sized company with financial resources. And are you prefer to acquire or add more semi mature products to invest a bit more? Or will you continue to do early stage add ons? Or should we, in an interim period, expect higher dividend or even share buybacks? What's the line of thinking? Yes, great. So what a pleasure to be thinking about those questions compared to 4 or 5 years ago. I think we're in a place now where we're really settling into this idea that we'd like to become a globally relevant innovative company in the rare disease space. And to be innovative, you need to be bringing new products consistently over time. And while we feel like we have some very exciting things happening on the later stages, as Alan said, we have our clinical trials enrolling for SILS and for gout. We will be doing additional work in the immune tolerance induction area and hemophilia. And we have some very exciting early programs. We don't have much in the middle and we need to fill the middle. And so I think as you think about our M and A targets or ambitions, we're really focused on finding products that can fill that Phase 2 and early Phase 3 gap that we have in the company. And while revenue in earnings accretion are not necessarily deficiencies in the coming 2 or 3 years, we really need to be in a position where we can be launching new products in 2018, 2019 2020. So these are the areas that we'll be focused on from an M and A and partnering and then licensing perspective. Yes, I guess you will follow the actions. And what about Xtend finally? Is that something you can push forward or is that on hold or? No, no, it's not at all on hold and we're really excited about Xtend. We're more excited that in the setting of Bioverativ, it will just become an even higher priority. So as you know, we've already opted into that program and very focused on getting stronger news flow on the progress for the program out sometime next year. Definitely not on hold, definitely moving forward and more to come. Okay, thank you. Yes, thanks Jan. The next question comes from the line of Per Forsling. Please go ahead. Yes. That is probably me, Peter Osterling from Pareto Securities. Hi, Peter. Hi. Hi. Hi. Hi. Hi. Hi. I took a wild guess that it was me that was introduced. You're right. Yes. Okay. Just an additional question about the switching dynamics within hemophilia in Europe. When I read your CEO statement, you have a couple of comments around this. But then you had added a new sentence that maybe I'm reading too much into it, but I got the feeling that you wanted to take down expectations going forward. And the sentence is, of course, that this is a process that will take time. And I was just wondering if you could give me or us a little bit more flavor around that sentence and why it was added at this time. Maybe you have learned something during the 3 quarters when these products has been on the markets that write the addition of this sentence. And then just 2 very quick questions. 1 on Refacto, if you could say anything about the Q4 expectations. Has there been any I've noticed that the deliveries have been on quite a high level on over the 1st 3 quarters, if we should expect maybe a little bit of slowdown in the Q4? And then also finally, just if there were any stockings inventory stockings affecting the strong Kineret sales? Thank you. Okay. Thanks, Peter. Let me take the Elocta sentence first. I think the it's not that we've learned anything new and I wasn't trying to be mysterious with the sentence. I think it's more just to acknowledge 2 fundamental elements here. The first is that, while we have, I think exceeded our own expectations in terms of timing and outcomes on the pricing and reimbursement side, we're still not all the way done. And as we talked about earlier in this presentation, we're just now getting to address half of the opportunity in our territories on a volume basis with the addition of these major markets in September. The other half of that volume is in second and third tier markets, which are yet to achieve reimbursement. And now I'm thinking of Poland and other countries in the Central and Eastern European region as well as in parts of the Middle East. So just to remind people that in the sequence of European launches, there's the question of access and then there's the question of uptake. I think to take the other side of it on the uptake side, we just have a lot of respect for the reality that not much new has been offered in this space for many, many years. So while on the one hand, I think that's given us a level of recognition and excitement about these products, we also have to have respect for the process of engaging physicians and patients and helping them understand where this therapy can take the outcomes for their patients. And there's also this natural sort of spectrum of human nature, right? I mean, you can meet a third of people, physicians or patients, and they're delighted and eager at the outset to talk about new ideas. And the middle third want to wait and see and look at some data and the third at the end is sort of like hugging a cactus. You have to be slow and careful in getting your arms around it. So these are some of the things that were in my mind and making that statement. For me, I mean, when I step back from it and I look at the totality of this transformation that Sobeys is undergoing, the size and the value of the asset is not in doubt in my mind. I mean, I see where it is in the Biogen territories. I have no doubt that that value is accessible to us. But at the same time, I'm realistic that we're building a foundation that needs to support significant growth and penetration over the next 5 to 6 years. And we need to be patient and steady and really stick by our belief in the product to get there. From the point of view of refacto, maybe I'll ask Mats to just talk a little bit about the phasing there and then I'll come back to your point about Kineret. Yes, Matsullo here. Regarding Refacto, historically, this has been a bumpy business in terms of quarter to quarter. As you know, we are a subcontractor for the fact that, and in 2015, we had substantial deliveries in Q1, which was sort of very high. This year, we have been very even in our deliveries as a subcontractor. So if you look at the quarters, they are very much even quarter by quarter. And we also expect the Q4 to be in the same range as Q3. Thanks, Mats. Mats, to your point on Tiara, the short answer is no. We don't have any stocking. Maybe as recently as 2 years ago, we had pretty limited insight to stocking in the U. S. System. But since we've changed the distribution model there, we have quite good insights and we really don't have any potential stocking in other markets. Okay. Could I just add a very quick question, just a follow-up from a question that was put forward to from another participant. I think you said something about an order to the Middle East in the Q2 where they thought that they were going to switch some patients, but that never occurred. Do you know why? Yes, it's very straightforward. So that was a single hospital system that was and they will switch those patients, but they were dependent on the reimbursement decision that got delayed. So they bought the stock, they were waiting on the reimbursement decision, it didn't happen. They will work through that stock once the decision is in place. Okay. Thank you. Sure. Thanks, Peter. The next question comes from the line of Richard Kutch from SEB. Please go ahead. Hi. Just wanted to come back to R and D costs. Previously, you've guided for an increase of, I think, EUR 250,000,000 to EUR 300,000,000 versus 2015. But the comments you made earlier now was a bit vague. Is that not still valid? Yes. No, I think it's still valid. It is still valid. I don't think so. It is still valid. But let me be clear about the reason for there being some uncertainty. The reason we gave a range is because we weren't certain which month Alprolix would be approved and when the MAH transfer would occur. These are the 2 milestones that govern when we take on our half of the ongoing R and D. The second uncertainty is we're not exactly sure how much that our share of our R and D costs will be because like every company, Biogen and we are operating under forecasts and those forecasts can of course change. Lastly, as I mentioned earlier, there's some additional uncertainty coming from the fact that next year, Bioverde will be operating on a standalone cost basis and that may have implications for our costs. I mean, we would expect that to be a positive thing for us, but we just don't have full visibility to it yet. Does that answer your question? Almost. Good enough. Okay. Thank you. Tell me what we're missing. I'm just thinking I mean, if you're saying the $250,000,000 to $300,000,000 increase is still valid, then you should know what I mean or we can see what that implies for cost in Q4 and still you were just a few minutes ago saying that you couldn't really guide in Q4. No, I was just saying I just refuse to guide for Q4. I think we have a profit expectation that's in a range that reflects how we think our costs will evolve. I just we've never got it on that specific line before. So that's why I didn't answer that question specifically. Okay. Fair enough. Switching to Elocta. For the patients that are now using Elocta, how often are they using it prophylactically? Are they going I mean, are they using it less frequently? Or what's your experience so far? Yes. I mean, they are in general taking one injection per week out of their base regimen. We see a spectrum of therapeutic goals with these early starts. Some patients are being selected, well, let me back up. All patients are being selected with the idea that their level of protection can be increased. Most patients are getting that benefit, but also having one injection per week taken out of their regimen. But there are a subset of patients for whom the switch is being made because they either are having so much and such significant breakthrough bleeding or they have a level of activity restriction, which they'd like to get past, where they're being given a lot on a usual injection schedule, say, 3 times per week, but with very, very high levels of trough and factor replacement. So I think the majority are being prescribed in accordance with our expectations that they would be dosed twice a week or less frequently, but there are some who are being dosed with the same frequency as existing conventional factors to achieve very high levels of factor replacement. How concerned are you about ACE-nine ten? Well, I think the program seems to be making good progress for development for patients with inhibitors. And in one way, I think it's very nice that we'll get a chance to look at a full data set for the inhibitor population well before it could be further advanced for the prophy indication. So I think then we'll have a better understanding of the product profile and we'll be better able to see what that looks like. At the end of the day, we fully expect that the hemophilia field will continue to evolve and we'll have a number of new entrants over the coming decade, some of which I hope will come from us and from our partner, Biogen. And all of these will come into a new competitive equilibrium over time. So we're not particularly focused on one more than another since they're all going to continue to evolve and develop data. Okay. Thank you. Yes. Thanks. The next question comes from the line of Peter Sisto from Handelsbanken. Please go ahead. Hi, it's Peter from Handelsbanken. Thank you for taking my questions. It's mainly relate to Elocta in Europe. As you said, Biogen has took the foot off the pedal with regard to their marketing. Is it also a part of the explanation, please, behind the flattish development in Q3, I. E, that you're not potentially fully up to speed with your sales infrastructure and therefore potentially not able to sort of address all the potential sensors that are out there? That was the first question. And the second one is, can you give us a hint as to the sort of run rate market share that you are seeing in Germany right now? And when I mean market share, I talk about share of total hemophilia patients, hemophilia A patients. Sure. Peter, forgive me. It's a little bit noisy where you're calling from. I think you're asking has Bison somehow reduced their focus on marketing into the U. S. Or? No, the question was relating to your sales effort in Europe, but also because you also commented that one of the reasons for Biogen's flat quarter on quarter sales were that you took a foot off the pedal with respect to marketing. And I just wondered whether that sort of is the same situation that we are experiencing in Europe. So and that way through getting to sort of comments from your side with respect to your marketing infrastructure, if you think it's adequate enough at this point in time to push it forward to meet the consensus expectations? Yes. Thanks, Peter. So now I'm glad to ask that question. So I think maybe I either misstated something or just wasn't clear. We don't believe Bison has taken their foot off the gas in marketing in any way or in any other part of their support for the franchise. I think what I was just trying to remark upon is that the business is not necessarily a continuous business. So whereas I think Q2 and Q3 were flat for Biogen, Q4 and Q1 were flat also, but with an 11% growth between the two periods. So I think it's too early to conclude where the shape of that curve will go going forward. But I have no feeling or intimation that Biogen is doing anything to reduce focus or reduce marketing. And for our part, I mean, we are in the most intensive period of marketing support and medical support for the brands at this stage in the launch. So we feel like the size and the reach of our support for these products is really strong and definitely on a line with the companies who are competing with us here. I'm sorry if I may include the question. No problem. And the first question was actually relating to your market share in Germany. And when I say market share, share of total hemophilia patients hemophilia B sorry, hemophilia A patients? Yes. Sorry, Peter. So I think it's too early for us to give an estimate of market share. We'd expect to do that sort of at a year end basis, both in terms of how we see things and also how we'd like to see things. But in perspective, I mean, in the Biogen market, I think the 12 to 15 month run rate for Biogen in the U. S. Was about a 10% share for Aloctate, maybe slightly less than about 9% and somewhere around 17%, 18% for Alprolix. Okay. Thank you. And just a follow-up to the question relating to your concerns about ACE-nine ten. Now I have one relating to N9GP from Novo Nordisk, which should be on the market within the next 12 months or so. So what's your view there? Thank you. Yes, sure. So I guess the Factor IX market is going to be an interesting one to follow. We currently have a situation that Alprolix and Adalvion are newly launched in this space. And it's hard to see in a space so small, how 3 or even 4 long acting products eventually can win significantly. So we're not so much focused on new entrants in that field. I think we're really focused on trying to make sure that Alphamix has the best possible position in the market before anybody else comes forward. It's probably a little bit too early to say how NIM GP will be perceived or how its overall profile will be presented. But our focus is really on Alcolytics right now. Okay. Thank you. I have a couple of financial questions, but I'll just jump back in the queue. Let someone else go through first. Thank you. Yes. Thanks, Peter. Most welcome to follow-up offline on those as well. I think we have time for maybe one more question. I don't know how many are waiting, Annika. We have another 2 questions. Okay. Let's take those 2 and then we'll wind up. Thank you. Thank you. The next question comes from the line of Erik Kotz from Carnegie. Please go ahead. Yes. Hi Erik here again from Carnegie. A couple of follow ups. On Alprolix, it took you achieved reimbursement in only 4 months in the U. K, while it 10 months to get clearance for Elocta in the same country. So should we expect a faster reimbursement process for Alprolix in other EU markets as well? And is the difference that you use some of the experience from the Elocta reimbursement process? Or is it just simply different value position of the 2 different drugs? Yes. I'm glad you noticed that. It was definitely on my mind as well looking the progress in England. I can first just say that the difference in timeline was specific to England. It was actually quite brisk and the same for each of Alokta and Alprolix in the rest of the UK. And the issue was less about the difference in value proposition and more about the size of the markets. And in England, I think the NHS is very conscious of how large the hemophilia A bucket is and how significant the entry of eloxa could be to that bucket. So there was some administrative work done on their side to try to ensure that they could understand or better model the impact of the entry of eloxa in England. Where I think Alkrelixa and the hemophilia B side of the equation is perhaps a little simpler for them. I think overall to take the other part of your question, there's no question that we benefit from having been in front of payers for Aloxa up to now. Whether in the end that will allow the reimbursement for Alprolix to be faster, hard to say because not only are the product profiles a little bit different, but the dosing is different, the relationship between the dosing, the pricing is different. So each of these cases sort of has its own peculiarities. So right now, I'm more or less estimating that things should go at the same pace, but let's see how it unfolds here. Great. And just final question from my part on the markets, U. K, France, Italy, which was cleared late Q3 for Elocta. In what way are those markets different from Germany? And how should we sort of face the uptake on these three markets gets to coming quarters if we compare that to Germany? So I think I can answer the second part of your question by year end or sometime mid Q1 because I mean my experience tells me if you've seen one market, you've just seen one market and we just have to learn how each of these ones develops. So I don't think you should take any of the comments I'm going to make about the difference between the markets as a guidance to change your expectations for how to phase the launch, but there are important differences. So Germany is a country where you have a single national reimbursement, but then you have negotiations that occur at individual center levels and also at regional sick fund levels. So there's quite a lot of complexity in working your way through the access environment in Germany. Whereas in England, you have a single commissioning framework, which basically takes the centers and any regional payers out of the equation. So it's quite straightforward. France is very like England in that way. You have a single price and a single reimbursement, but you still need to have local pharmacy engagements. So it's somewhere between England and Germany. And Italy is more on the side of spectrum like Spain, where you have a national reimbursement, but then you have very specific regional negotiations that need to take place in sub regions of the country. So each of the countries is quite different and those difference will probably show up in those dynamics. It's just a little hard to model what that will really mean. Thanks a lot. Yes. Thank you, Eric. Okay, let's take one more, Anika, and then we'll wrap up. The last question comes from the line of Mr. Davani from Rx Securities. Please go ahead. Thanks for taking my questions. 2 nonchemophilia related, very good performance from Kineret in the quarter. I was wondering if you can just take us through what the volume growth actually was and what if any price increases you took during the quarter? And then just on Orphadin, again, I was just wondering if you can give us a bit more color in terms of the pricing and volume dynamics. What sort of patient numbers are you at compared to last year, for example? Okay. Thanks, Sameer. So the Care Med dynamics are virtually all volume. We had a small price increase at the beginning of the year in the U. S, but we have little or no price flexibility in Europe, although there have been a few modest shifts related to the approval for cats in Europe. But it's really driven by volume. And that's related, of course, to the interest in the IL-one biology in a variety of diseases. And so, KINRA is one of those rare drugs where the biology is sort of caught up with the drug and that's I think showing up in our experience with Kineret right now. With respect to Orphan, there are 2 main dynamics for the growth of Orphan. The first is the fact that we continue to identify new patients. There is an incident pool of patients that's growing because we're more and more present in additional markets. But of course, the other major driver is that patients grow and gain weight and it's a weight based drug. So those pieces are important drivers of volume. We have historically increased price in the U. S. Primarily for Orphadin, but have not done so in the last quarter. And to be fair, in the U. S, I think the impact of those price increases is virtually nil when you talk about it from a real income perspective because the gross to net differences are so enormous on the basis of Medicaid rebates that the growth you see in Orphan now is driven entirely by volume. Okay. So just to press that a bit more. So if I look at your dynamics for opening for the 1st 3 quarters versus last year and you're giving some of the guidance that the patients that you have are probably taking more drug, is it just pricing that's driving down the decrease that we're seeing in the absolute number? Yes. So great. I'm glad you clarified. So that actually is a very special circumstance. I see what you're referring to. So there are 2 things that are happening in that orphaning curve that I can just give you a little bit of extra insight to. So if you look back at the shift in the growth curve that occurred in the 2nd and third quarters of 2014, You can see that at that time, we had changed our distribution to a single distribution, which had a major positive impact on several dynamics primarily in the U. S. Market related to the ability to get and maintain patients through the prescribing process as well as supporting compliance over a longer period of time and other aspects related to patient support. If you look at the impact through the 1st part of 2016, what's occurring there is 2 things. 1st, we lose the run rate impact of the switch in the distribution model in the U. S. And you also have 2 quarters worth of very significant growth to net changes in the rebates to Medicaid and other entitlement programs in the U. S, which you can see is starting to moderate here in Q3 as we begin to bring the 20 milligram and later the oral suspension to the U. S. Market. And that's what Alan was referring to earlier, why those introductions are so important because they significantly changed the gross to net discounting in the U. S. Great. Thanks very much. Okay. Thank you. For those of you who had questions that we didn't get to, apologies for that. Please know that we're fully available to take further Thank you Thank you again for joining us for this review of the Q3. And Anke, thank you for hosting us. Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your