Ladies and gentlemen, welcome to the presentation of the Q4 and full year results of 2015 for SOBI. I will now hand over to Geoffrey McDonough, CEO. Please go ahead.
Thank you, Malin, welcome everybody to the review for SOBI's Q4 and full year results from 2015. I'm Geoffrey McDonough, CEO of SOBI, I'm joined today, as usual, by Alan Raffensperger, our Chief Operating Officer, and Mats-Olof Wallin, our Chief Financial Officer. We're quite excited to spend some time with you today, we'll have a slightly longer presented set of materials to reflect the density and richness of topics that we want to review, both in the year behind us, most importantly, in the activities that will characterize 2016. Last year was an incredibly important year for SOBI. It was a year of solid operating results, which we'll review in the first half of the presentation, some key milestones related to the upcoming launches of our hemophilia products, the first of which, with Elocta, is already underway.
It also marked the beginning of deliveries for our largest-ever donation program in conjunction with the WFH, and the launch of Orfadin Liquid in Europe, as well as the granting of a citrate-free patent to give us a different lifespan or horizon for thinking about further investments in Kineret, some of which we've outlined in our press release earlier this week. These events and others provide a very exciting platform for the year ahead and look forward to reviewing some of these components here today. Our presentation today will contain some forward-looking statements. They might not all occur, just keep that in mind. From a business perspective, I think the key events in 2015 from a Q4 perspective, of course, were dominated by the approval of Elocta in November.
In addition, as part of the ASH conference, we started to see significant new data coming forward on both Elocta and Alprolix based on a significant outcome study, which has started to generate now up to three years of total treatment data on these products. They show that low bleeding rates and the maintenance of longer interinjection times or periods has been maintained and even extended over the longer term, we'll touch on some of that data here on this call. As I said, we began this donation program, which we're enormously excited about on a global basis. We also had the approval of Xiapex for dual course in Dupuytren's contracture, we're very pleased to mark a significant milestone on our journey towards creating a global quality organization and company with the addition of Lars Trygg to our executive leadership team.
After the quarter continued to be eventful, again, highlighted by the beginning of sales with Elocta in Europe. We'll give a little more detail on that between Alan and me later in the presentation. We also added a nice small portfolio of products under our existing collaboration with PharmaSwiss and our partner portfolio. We're in a place now where we can feel quite secure about the patent estate for the oral suspension for Orfadin with patent life into the early 2030s. We also earlier this week announced both a new patent estate for Kineret, as well as two new late-stage trials that we will initiate to expand the indications for Kineret into acute gout and Still's disease. I'll make a couple of comments on those later in the presentation as well.
In brief, Q4 continued to be a solid quarter for the business from an operational perspective, with total revenues at SEK 814 million, with a growth of 15%, 9% at constant exchange rates. Product revenues grew to almost SEK 700 million, a growth of 21% versus the prior year, with ReFacto being the only part of the portfolio that had a down quarter, and as expected, with the first half of 2015 being much higher than the back half was for ReFacto deliveries due to phasing. Gross margin in the quarter was 64%, EBITDA was SEK 90 million, and cash flow from operations were SEK 13 million.
Perhaps more relevant on a full-year basis, total revenues came in at just over SEK 3.2 billion, representing a growth of 24% or 14% at constant exchange rates, with product revenues at SEK 2.5 billion, with a growth of almost 30% year-on-year. ReFacto on the full-year basis, taking into account what I said about Q4, grew at 7%, one of the highest increases we've had in ReFacto in the last five years. Gross margin on the full year was 62%, and EBITDA came in at SEK 433 million, with cash flow from operations at SEK 507 million on a full-year basis.
I think when we look at the totality of those results across our portfolio, we see a very nice balance between our four base business components with genetics and metabolism, inflammation, the partner portfolio, and ReFacto all turning in nice performances in terms of growth, but also relatively similar sizes in terms of their financial importance. I think that balance and diversity is a really enormous source of strength for our platform as we now seek to add hemophilia as an operating component of our business going forward. I think the highlight for me of 2015 is now the consistent growth for the total business, the consistent performance of the earnings line, and the free cash flow, which has allowed us to eliminate our net debt and to put the company on a solid footing going forward.
As usual, I'll briefly touch on ReFacto before turning the floor over to Alan to review the core businesses. ReFacto had, again, a very strong year overall, 7% growth with a tailing off in the back half of the year due to the scheduling of deliveries. The revenue for manufacturing was about SEK 90 million in the quarter, and royalty revenue at SEK 27 million with full year, again, coming in around SEK 660 million. Again, very strong and steady part of the business, which, if anything, is showing greater strength in the year behind us than it had in prior years. With that, I'll turn the call over to Alan Raffensperger.
Thank you very much, Jeff. Kineret sales in the fourth quarter was SEK 220 million, which is an increase of 36% over fourth quarter of 2014. On a full year basis, revenue reached SEK 825 million, which resulted in an increase of 32%. We are seeing continued growth in major markets, which is in line with ongoing development of the CAPS and NOMID indications. In addition, the shift in distribution in the U.S. is gaining traction, which is driving a combination of volume and value growth. Moving on to Orfadin, 2015 Q4 revenue reached SEK 227 million, which is an increase of 35%. Looking at the full year revenue, we've reached SEK 796 million, which result in an increase of 45%. Performance was across all major markets. Thanks to the relatively new distribution model in the U.S., we're also seeing improved compliance with HT-1 patients.
We can also confirm that we have launched Orfadin liquid suspension. Looking at our partner products portfolio, our Q4 revenue landed on SEK 178 million, which is a decrease of 10%, with discontinued products accounting for the quarter-to-quarter variation. Full year revenue increased 7%, SEK 727 million. Growth drivers included [audio distortion] . I would also like to emphasize that we will turn our focus more on 2016 to adding new partner deals. The recent addition of three more products from PharmaSwiss is a good example of that. Moving to hemophilia, revenues in the fourth quarter reached SEK 32 million, which is a combination of SEK 30 million in royalty revenues and SEK 2 million initial name patient revenues from the Middle East. On a full year basis, revenue reached SEK 96 million. Of course, the big highlight of the quarter was the approval of Elocta on the 19th of November.
Biogen revenue is important as a reference for our royalty stream. I would like to take the opportunity to highlight that Alprolix revenue reached $71 million in Q4 last year, and Elocta revenue reached $101 million in Q4. This is important because the run rate now is reaching $700 million for the combined portfolio at Biogen. I have the pleasure of handing over the earnings call to our CFO, Mats-Olof Wallin.
Thank you very much, Alan Raffensperger. Looking into the profit and loss statement, we can see that revenues for the quarter ended up with SEK 814 million, which is an increase of 15% versus the same period last year. For the full year, revenues came in at SEK 3,228 million, which is an increase of 24% versus 2014. Gross margin has improved in the quarter. For the fourth quarter, they came in at 64%, which is an increase from 60% the same quarter last year. For the full year, gross margin came in at 62%, which is an increase from 59% in 2014. Sales and administration expenses have increased substantially due to the buildup of the hemophilia organization to be prepared for the planned hemophilia launches. EBITDA came in at SEK 90 million for the quarter, and for the full year, SEK 433 million.
This is a substantial increase versus 2014. In 2014, however, it was impacted by one-time costs due to the write-offs of Kiobrina and for Multifero. Looking at the balance sheet, the balance sheet has now been impacted by the approval of Elocta in the fourth quarter 2015, which means that we take on intangible assets and also liabilities towards Biogen as a consequence of the Elocta approval. This is according to the contract. Accounts receivables have improved versus 2014, and even though we can say that we have had substantial revenues increase, we can see that the receivables have gone down. Cash is also SEK 904 million at the end of the year versus SEK 519 million the same period, December 31st, 2014.
Net cash now is at SEK 82 million, and looking at the graph, it may turn a bit upside down, but it's really positive that we have had such a good development of the cash situation. Looking over to the P&L impact of the Elocta launch. The agreement between Biogen and Sobi relating to cross royalties is that 12% is the base royalty going in both directions between Sobi and Biogen. So far, up to the end of 2015, the royalty received on Sobi's books is 2% of Biogen sales in their territories. The remaining 10%, up to 12%, is an accumulated credit, and this will not be booked until the first commercial sale on Sobi's behalf. That occurred in January 2016. In our books for the first quarter, we can record a one-time credit of approximately $38 million.
However, it has no cash effect, but it is a deduction towards the liability towards Biogen. As Sobi now has launched Elocta in January, the royalty to Sobi is now 12%, which will hit our profit and loss statement as a revenue. 7% is cash and 5% will be a deduction of the liability towards Biogen. When Sobi now has started to make commercial sale of Elocta, Sobi will, in their turn, pay royalty towards Biogen. The base is 12%, which will go as a cost of goods sold, but the cash portion is an incremental 5%. The incremental 5% will be a deduction also towards the liability towards Biogen. When Sobi will be a MAH holder, which will occur in the first quarter, Sobi will incur 50% of the ongoing development costs at Biogen, and that will be cross-charged towards Sobi.
The estimated repayment obligation as of January 1st is $216 million towards Biogen. That, as I said, will be deducted momentarily after SOBI's first commercial sale of around $38 million. Looking into the outlook for 2015, the outlook that we gave has been exceeded. The revenues came in at SEK 3.228 billion, which is higher than the guidance, which was between SEK 3.3 billion and SEK 3.2 billion. Gross margin came in for the full year, 62%, versus a guidance of 59%-61%. EBITA came in at SEK 433 million, versus the guidance of SEK 350 million-SEK 400 million. By that, I turn hand over to Mr. Geoffrey McDonough.
Thanks, Mats-Olof. First, to pick up on the point about the outlook, let's briefly review the guidance for 2016. We expect our total revenues for the full year to be in the range of SEK 4.3 billion-SEK 4.5 billion, excluding the impact of an eventual approval and launch of Alprolix in 2016. Gross margin with the same exclusion is expected to be in the range of 66%-68%, and EBITA, also with that exclusion, is expected to be in the range of SEK 700 million-SEK 800 million. Importantly, this guidance includes the impact of a one-time credit to be received for Elocta, estimated to be in the range of SEK 300 million-SEK 325 million. As Mats-Olof just reviewed, this one-time credit, equal to $38 million will be reported in the profit and loss statement but will not impact cash. This is a one-time item in the year.
In addition, the OpEx that it contributes to the EBITA guidance includes SOBI's share of ongoing costs for Elocta, estimated to be in the range of SEK 200 million-SEK 250 million. Some have asked if this guidance is conservative. It is conservative in the sense that it excludes the impact of an Alprolix approval at launch. As you know, we are on the agenda for the CHMP meeting, which is occurring this week. An eventual positive opinion or negative opinion could be forthcoming quite shortly. I think it's worth giving some feeling for what might occur when Alprolix is eventually approved and launched. There will be three inputs on the revenue line that come as a consequence of an approval and launch for Alprolix.
First, like for Elocta, we will receive a one-time credit equal to the accumulated 10% of total sales on behalf of Biogen for Alprolix. Second, we will have the benefit of our own in-market product sales. Thirdly, we will see the benefit of the incremental change of the royalty received from Biogen from 2%-12%. In total, these top-line items could be expected to be in the range of about SEK 500 million. On the cost side, like for Elocta, we will also inherit 50% of the ongoing shared costs for Alprolix. That gives you a flavor of how Alprolix, if approved, might impact our guidance. Of course, we will formally update guidance if and when Alprolix is approved sometime during the course of the year in 2016.
With that said, I'd like to make a few comments about their hemophilia portfolio in general, but in particular, I'd like to emphasize a few points from the early experience with the launch of Elocta across our territories that are highlighted in orange on the map here, some 55 countries across Europe, North Africa, Middle East, and Russia. This is a total market with an opportunity in the range of $3.3 billion. As we've talked about before, we're undertaking a sequential launch across this very broad territory, which we expect to take 18 to 24 months to fully penetrate in terms of making Elocta and eventually Alprolix fully available in every one of these countries. We're off to a good start. We have commercial availability in countries including Germany, Netherlands, the U.K., Denmark, and Ireland. Thank you.
For a terrible moment, I thought that was Italy. I thought, "I think it's a little early for Italy," but the Irish are on the ball there very early. These are the first five markets where we've begun to see uptake of Elocta. The markets that I've mentioned are also joined by the Middle East, where we've seen the equivalent of NPU sales. There is the possibility for local medical centers in the Middle East to apply for commercial application for the use of both Elocta and for Alprolix. As Mats-Olof said, we recorded, and Alan said we've recorded those sales already in Q4.
The importance of and the potential to improve protection with these products has been widely recognized by the community, and there's that sense that these are products that allow patients to live more naturally in terms of achieving a more natural level of activity, but also to benefit from the natural components and aspects of our production and technology platform here. The label for Elocta is very much in line with what we learned in the clinical trial. It is a broad indication for treatment and prophylaxis of bleeding episodes in patients with hemophilia. It does allow for the use of Elocta in all age groups, reflecting the fact that we submitted our pediatric data at the same time as our adult data. The initial dosing recommendation is very straightforward, with the recommendation of 50 units every three to five days per kilo.
That gives a very easy, straightforward way to think about initiating patients. Also, crucially, the label includes the flexibility that hemophilia treaters have come to expect and demand of treatments, allowing for dosing to be adjusted in the range of 25 to 65 units per kilo per dose. Finally, the label takes account of the data we developed in children where, for Elocta, as with all clotting factors, the metabolism is slightly more rapid in pediatric patients. The label will be complemented by reference to the clinical data section and to the published literature from the A-LONG trial. I think there's a very simple set of three messages that come from both the 12-month pre-study period as well as the six-month study period for Elocta. The first is that the weekly consumption is the same.
The dose per kilo per week on conventional therapy prior to entering the trial was comparable to the dose of Elocta that patients received during the trial itself. We have similar weekly consumption for this product. Secondly, this product has the potential to offer increased protection where the pre-trial ABRs in our study were in the range of six bleeds per year, compared to a median value of 0 in the trial, or an ABR level of 1.6 as reported in the individualized prophylaxis arm. That potential for increased protection deriving from increased circulating plasma factor levels associated with the extended half-life is quite important here. This baseline level of ABR has been triangulated by in-market outcome studies, which established that prophylaxis patients, at least under standard care here in Europe, experience between four and five ABRs per year as well.
Finally, and importantly, as well as a side benefit, we are able to reduce the dosing frequency from three times per week to two times per week, in essence, removing one injection per week from the weekly lives of patients with hemophilia. Many have asked how significant this benefit is, and I think if we imagine what a three-times per week regimen would look like for a patient, you can see an annual calendar here where each day that implies an injection is circled in orange. You can see that this makes hemophilia treatment an enormous part of the daily lives of patients living with hemophilia. You can imagine the burden here on all patients, but in particular young patients.
If you compare that to a twice per week dosing regimen, as we saw for Elocta in the clinical trials, you get a flavor for the impact on day-to-day living that would derive from an every three and a half day infusion regimen. These are the kinds of benefits that we believe both the label and the published literature can allow the treatment community to assess in their treatment decisions regarding this launch. We had a very important medical meeting occur earlier in February. By great good fortune, it happened to be located in Malmö, Sweden, which is really the cradle of where prophylaxis or modern prophylaxis treatment was initiated.
Here in Sweden, there were 1,600 attendees from across Europe and other geographies, roughly half of whom attended our launch symposium for Elocta, where we had the ability to report on some longer-term outcome data, which is really an unusual circumstance for And it derives from the fact that the initial clinical developments included the pivotal trial with A-LONG and Kids A-LONG, but also included a long-term follow-up outcome study called ASPIRE.
We are now able to publish significant long-term data outcomes coming from the ASPIRE study summarized on the following slide, where you can see we take about 126 weeks of follow-up data in the ASPIRE period and up to 158 weeks including the treatment period of A-LONG, almost three years of data showing that the initial outcomes reported in A-LONG with ABRs of about 1.6 are sustained and may be trending to an even lower level at 0.7 at one year and 0.8 at two years, giving a sense of confidence and reassurance that the outcomes observed in the clinical trial are being recapitulated in a longer-term experience, which is closer to real-world use. Similarly, the twice-a-week infusion median regimen has been maintained for about 94% of patients at the same injection frequency or at longer injection frequencies.
That sense of being able to lower the burden of therapy is also being confirmed in this closer-to-real-world long-term follow-up, as is the same median weekly consumption. These three components of our story, I think, are in an unusual situation of being confirmed by long-term data even at the time of our launch here. The inhibitor frequency in these two studies continues to zero. Finally, and importantly for balance, we are able to report that the safety experience continues to be in line with what we saw in the clinical trial with adverse events typical of the hemophilia population and without adverse events that appear to be related to the drug. In addition to the ongoing launch for Elocta, which in its early phases I think is proceeding well, but again, too early to really predict or to have a sense of yet.
I also want to touch on Alprolix, which is under consideration today at the CHMP for an opinion. If a positive opinion is received, we would eventually be eligible for an EC decision in the first half, which could enable a launch for Alprolix around the mid-year point. That's all I want to say about hemophilia for the moment. Before we turn to Q&A, I'd just like to give a little bit of color around what we're planning to do with Kineret in the next phase related to the press release that we sent out earlier this week.
Kineret, as you know, is a balanced inhibitor of the IL-1 receptor that allows it to have an equal blockade of IL-1 alpha and beta, and it has a series of characteristics that make it particularly suited to certain diseases, including a very rapid onset of action and a relatively short half-life, and a very well-understood and relatively benign safety profile. In parallel with our deeper understanding of Kineret, we now have a much broader list and understanding of diseases in which IL-1 is operative or driving disease, which has led to a wide set of applications for Kineret in the clinic, many of which we've been working on catching up with in our own clinical development.
Whereas Kineret started life in rheumatoid arthritis, we have been increasingly pursuing and catching up with the use in market and key indications like NOMID in the U.S., CAPS in Europe, and importantly recently in systemic juvenile idiopathic arthritis with an approval in Australia based fundamentally on the medical literature. This trajectory has led us to select two additional indications for formal development. The first is in Still's disease, and the second is in the treatment of acute gout flares. With those in mind, I just wanted to say a couple of words about each of those fields so you have a sense for what we're considering here. First, I'll take the lattermost, which is the application in acute gout. Importantly, this is about leveraging the rapid onset and short duration of action for Kineret in the setting of an acute gout flare.
This is not about controlling gout in the chronic setting for which many products have been developed, this is about handling the acute inflammation that results from joint inflammation. In this case, we're looking at a precision medicine approach. We're really looking at patients who are not eligible for the standard line therapies such as colchicine and NSAIDs due to their comorbidities. This is a population that's relatively large. Whereas the treatment use is relatively short-term, the population is relatively large with about 100,000 eligible patients every year in the U.S. market, as an example. Still's disease is a more traditional rare disease, an orphan indication in line with our existing infrastructure. It is a spectrum disease which involves adults.
This disease is also known as adult-onset Still's disease and also as systemic juvenile idiopathic arthritis in the pediatric spectrum, we will study both populations in our phase III trial. There are no approved treatments for the disease, we're looking for patients who are eligible for treatment with an IL-1 blocking agent. Here, the treatment duration is significantly longer, for the patient population that would be eligible would be relatively much smaller at about 2,300 patients, again, in the U.S. example. Finally, as it relates to Kineret, just a couple of words about the citrate-free formulation. This is a need that has been expressed among the patient and treatment community for several years. There is a sense that a citrate component to the formulation may contribute to injection site pain, although we have no direct data for that.
Nevertheless, the patent gives us an opportunity to make this improvement to the formulation and also gives us some additional runway through 2032 for such a formulation as a result of the patents, which so far have been granted in the U.S. and other territories and where we have significant territories where the patent has been allowed but not yet formally granted. Thank you for your patience in taking a little more time than we usually do to review some of the things that are ongoing in the company. Although a lot is happening, nothing has changed with respect to our overarching commitment to building the company for the future. First, based on the strong operating base of performance, which I think 2015 has relatively demonstrated.
Secondly, to bring these breakthrough first-in-class medicines with extended half-life to the hemophilia community in our territories, which is now underway for Elocta and hopefully will shortly be so for Alprolix. Finally, to set our sights on building the company over the longer term through further partnerships, acquisitions, and development activities. With that, Malin, I'll stop talking and let's open the floor for any questions. Thank you.
Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad. It's 01 to ask a question. The first question comes from Richard Parkes at Deutsche Bank. Please go ahead.
Hi. Congratulations on a good set of results. Thanks for letting me have a few questions. Firstly, I wondered if you could give us an indication of what the guidance assumes in terms of Elocta sales or the breakout between Elocta sales in Europe and the performance of your base business. That would be very helpful. Then, you've taken on share of the development cost of Elocta, and I know you've guided that you'll then take on the share of Alprolix. I'm assuming a sort of similar quantum for Alprolix. Just wondering what we should assume for that number in terms of share of development activities, mid to longer term. Then third question, you've said in the past that business development for both the partnered products business and in terms of looking to bolster the pipeline would be a focus in 2016.
I'm just wondering if the pullback in the biotech markets is making that process any easier or more difficult to achieve and what your expectations are for delivery in 2016. That's business development outside of the partnered products business, more pipeline focused.
Makes sense, Richard. Thanks for the question. We're not going to guide on specific expectations for Elocta or Alprolix top line this year. Our view is it's going to take us four or five quarters to get a real sense or handle on how the shape will look. I do think it's key to get a flavor for how we expect the base business to perform so you can come to some view on how we see it. We do expect that the base business in total will continue to grow in double digits next year. You can get a flavor of the fact that we have modest expectations for the first year in terms of overall sales from Elocta.
Of course, you'll be able to get a sense for that more directly because, of course, we will break out Elocta performance every quarter as we report going forward. Secondly, on your point for the Alprolix costs for this year, we expect them to be in the neighborhood of SEK 50 million in that range. When I gave a sense of sort of SEK 500 on the top, we would expect 95% to drop to the bottom if Alprolix is approved. Of course, on a run rate basis, you're completely right that the quantum for Alprolix costs will be somewhere in the neighborhood of the Elocta cost. We're just unable to confirm yet what that number will be until we get an audited view of it closer to the approval. Finally, with respect to the biotech markets, it's a dynamic moment that's for sure.
While valuations are lower, anxiety is higher. It's a matter of finding that point where people believe that the market has equalized and represents a sustainable and a predictable level of pricing. In one way, since we're looking for partnerships or acquisitions that really drive business logic, they tend to be a little bit less about opportunistic valuation. I guess I would say our discussions haven't stumbled due to this, it does add a layer of some complexity.
Okay, great. Thanks very much. I'll drop back in the queue.
Okay. Thanks, Richard.
Next question comes from Eun Yang at Jefferies. Please go ahead.
Thank you. Good morning. Maybe it is too early to gauge, but at least from your discussions with the European hematologist, do you think the physicians are planning to utilize Elocta in order to provide lesser frequent dosing or aiming to get better protection from spontaneous bleeding at the same dosing frequency as the short-acting product?
Hey, Eun, let me apologize while you're on the phone for this unusually early time for the earnings call. The only time we'll do this to you on a Friday, I apologize for that. We are absolutely consistently encountering a desire to engage with Elocta first and foremost to increase protection. Every physician and patient shares more than anything else is to avoid bleeding, particularly at both target and the traumatic joint bleeding. Bleeding in general, I think, remains the number one concern for physicians. I think it's crucial that we're able to establish that at the same weekly consumption, we can increase circulating plasma factor levels, leading to an expectation of lower bleeding. As a side benefit, there's the option to remove an injection a week for almost every patient.
I think that for us is a very clinically consistent conversation that we can have and that we are having with physicians across the territory. Of course, the nice thing about this extended half-life is that it can be used as currency to super optimize coverage or to super optimize the extension or time between doses. Every patient-physician combination will choose a set point on that spectrum according to the patient needs and the physician's judgment.
Okay.
Did I answer your-
Yes. Question on this emerging data on potential effectiveness of Eloctate or Eloctate inducing immune tolerance in patients who develop the factor VIII inhibitors. Are you planning to explore this opportunity further in terms of monetizing or utilizing Eloctate in this about 30% of patients developing inhibitors?
Yeah, thanks for raising that, Eun. I think this is an incredibly important area to the field. It's probably one of the greatest areas of unmet need in hemophilia treatment today. The fact that it takes a median time of 11 months and a mean time of 20 months at an average cost of SEK 1.5 million to successfully achieve immune tolerance with 30% of previously untreated patients developing inhibitors and some significant fraction of those needing ITI, it's easy to see why this is such an important issue. At least theoretically, with pretty decent preclinical basis now of evidence, the IgG1 Fc region seems to be tolerogenic, and in that sense, there's that basis to hope that a clotting factor that's fused to an IgG1 Fc as our products are, could potentially have a benefit in ITI.
Today, I don't think we have enough evidence to point to that as fact, but there are four case reports published so far that do seem to suggest a relatively rapid induction of tolerance where Eloctate, in this case, has been used. To answer your question, I think we are really eager to understand better, both pre-clinically from further in vivo immunology work, from a rigorous understanding of clinical application in the market through case reports and collaboration with investigators, and maybe ultimately through clinical trials to establish the role of Fc in ITI. That was a long way of saying, yes, we're really excited about it and we're focused on it.
Okay. The last question is, now that you are splitting development costs on hemophilia products with Biogen, does that include EXTEND program?
Yeah. Can I say yes and no, and then I'll explain why? Yes, EXTEND costs are included in our guidance, and they should be included in your thinking about our evolution as a business. No, in the sense that those costs will not impact our P&L. The arrangement between the companies for the development of EXTEND is exactly analogous to the arrangement we have for Elocta and for Alprolix. We do not bear any P&L exposure to the development costs for the program until or unless the program is submitted for filing in our territories and we opt into it. It is slightly different from the arrangement for Elocta and Alprolix in the sense that we will have an obligation to share milestone payments from Biogen to Alnylam, but those will be balance sheet cash payments for us. They will not impact our P&L either.
Okay, congrats on a positive opinion from CHMP on Alprolix, we just heard the tape.
Eun, you are unbelievably well-informed. I think that press release literally just went out.
Congrats.
I guess you're on New York time. Yeah. Thank you. We're really pleased about that as well. Thanks, Eun.
Next question comes from Eleanor Sung at Goldman Sachs. Please go ahead.
Hi. Congrats as well on the Alprolix launch. Three questions, please, if I may. Firstly, just appreciate any thoughts on the SIPPET study that was presented at ASH in December showing plasma-derived factor VIII had a lower risk of inhibitors versus recombinant in previously untreated patients. Secondly, with the new chairman coming on board, wondering if you could comment if this signals a shift in the midterm strategy of the company. Finally, just curious on your thoughts on your appetite for a large deal, mergers of equals or a U.S. listing in the next six to nine months versus a consideration of these options once Elocta is fully launched in most European countries. Thanks.
Thanks for the questions, Eleanor. Let me just step through them in order. With respect to the SIPPET study, which I think is probably what you're referring to, it is one of the largest series that has been published now looking at the rates of inhibitors in previously untreated patients. I think line level, they are concluding that plasma-derived products appear to have a lower incidence. I think the first thing I would say is it's not the first large study to present early data that seems to be pointing to a difference. As in the past, the field will understand much better over time, once the full data set is understood, what it really means and how to apply it.
The second thing I would say is that extended half-life products and specifically Elocta and Alprolix were not included in that experience. Since they are very different products in the way that they're composed, we will have to learn about their immune profile over time as an individual matter for investigation. I think that's important for us to consider. In other words, to stay focused on understanding our own immune profile. Lastly, the implications of this study will be most immediate for previously untreated patient therapy as opposed to currently treated patients. I think it'll just take time to really understand what the place of the study is in the field and what it will mean.
Secondly, to your point about the chairman, I think the introduction of Håkan Björklund to our story is a very natural evolution, I think, of where the company is and where it's headed. Håkan, as you may know, sat on the board of Biovitrum for a significant part of its early years and early history. He has a strong background in the Nordic markets and a very significant commercial set of credentials and experiences. I think that kind of transactional acumen and way of thinking about strategic positioning is a very nice match for our midterm strategy. It's less that our midterm strategy has changed, and more that I think we have a nice fit in this evolutionary shift between the new chairman and that strategy. I think it's very much in line with where the company is headed.
Lastly, to your point about our appetite for a big merger of equals deal or something in that range, I would say it's low. We have a lot on our plate operationally. We feel very good about our momentum and equally importantly about our strategic positioning. We'd like to focus on building from that platform. Of course, we don't count it out, but it's not our first priority. As for U.S. listing, to me, that's a bit more opportunistic. If there were a deal where a U.S. listing would facilitate it and offer value for our shareholders and other shareholders, we would consider it. As an end in itself, it's again, not top of our priority list just at the moment.
Great. Thanks very much.
Yeah. Thank you.
Next question comes from Johan Unnerus at Swedbank. Please go ahead.
Hey. Yes, good day. Thank you for taking my questions. Johan Unnerus, Swedbank. Just to clarify again with the guide then. The SEK 38 million one-line credit, that will be booked as revenues in Q1, as I understand it then. Then the SEK 200 million-SEK 250 million added shared cost on your part then mainly R&D for Elocta, that will sort of fade out somewhat eventually. It would be great to get the feeling for what that level would be for Alprolix. Also second, lastly on the obligations then on the $ 216 million that you've taken on now on the book for Elocta, what would be the equivalent for Alprolix? Thank you.
Johan, I'll try on two out of three, then I will resort to Mats-Olof Wallin to give some counsel on the third. The SEK 38 million that you referred to will be recorded as revenue, will be recorded as gross profit, and will be recorded as EBITDA in the P&L for Q1. It will not contribute to cash, but instead will be deducted from the $216 million obligation that we have on the books for Elocta. Far so good. Mats-Olof Wallin is nodding. That's good. The second point around the costs, the SEK 200 million-SEK 250 million that we estimate our cost to be for Elocta in the year. Of course, we will revise that estimate once and when we bring Alprolix into the portfolio.
I think the incremental cost for Alprolix this year will be relatively modest, probably in the range of SEK 50 million. Of course, on a run rate basis next year, it will be more. We just don't quite know what that number will be yet. We will know that by the time we come to a formal approval and assumption of sales for the product. Mats, can I turn to you to comment on what we estimate the balance sheet item to be for the Alprolix program?
Sure. Thank you, Jeff. Yes, the Alprolix opt-in number is not finalized yet, but we estimate right now to be in the range of $180 million-$190 million.
Thank you. That's useful. I think that was all for me. Thank you.
Okay. Thanks, Johan.
Next question comes from Lars Hevreng at Danske Bank. Please go ahead.
Thanks. Can you just please elaborate a bit more on Kineret then Orfadin? You said you mentioned double-digit growth for these products in 2016, if I heard you correctly. Some background for the growth re-acceleration again in 2015, and what you would expect for 2016 on the contribution from new indications?
Thank you very much, Lars. Alan here. Thank you for the question. I mentioned low double-digit growth, which is, I think I mentioned 10. Anyway, low double digits. For Orfadin, we made the transition with a new distribution model the end of the first quarter of 2014, and that has actually, we've seen, resulted in an improved compliance for the patients and also picking up a few new patients as well, which has played into those results. I'd expect, though, with a high compliance rate of 95%, is what we have today, that we will increase our sales next year in the low double digits, but you're not going to experience the same increase, you're not going to see the same increase as you've been seeing at these growth rates.
We will grow in the rest of the world, however, and continue to grow in the Middle East and North Africa, as well as Europe. In regards to Kineret, we recently changed the distribution model in a very similar way to what we've done with Orfadin, where this is much more patient-centric distribution model, which has resulted in what we're starting to see is improved compliance rates for Kineret as well. I'm happy to report that we're also starting to see, because of this change, an increase in volume as well as value in the U.S., which is a really good sign. Here again, I would also caution high growth rates, because we still have to see the full effect of the model, but I'm confident that will be anywhere in the low double digits next year. For 2015.
Sorry, the contributions they had from your new indications, you mentioned a couple of trials that you're going to start. Could you say anything about how contributive they could be long term?
Yeah, Lars, it's Jeff here. I think the purpose of giving you a flavor for the syringe usage and also the eligible patient population was so you could just have a flavor for the market opportunity that we see for the product in the 2019 and 2020 timeframe for each of these indications. To give you some working sort of understanding of our thinking, there is a relatively significant number of patients who have Still's disease for whom Kineret is already prescribed in the U.S. and elsewhere. We see that as a significant incremental opportunity, but not a transformational one. It might relatively double the U.S. business from the point of view of Kineret.
The acute gout opportunity is potentially different, we have to understand better what the profile looks like in our clinical trial testing, that could be a slightly more significant incremental addition for the Kineret portfolio. I think importantly, too, we'll understand those and guide better on those things as we move along in the program. I think the other piece that's important to know is that we have a very positive sense for a few important indications where Kineret's profile is really ideally suited. We do expect to undertake at least one more and maybe two more indications in this train of exploring and following the places where Kineret can really be life-saving or have a significant incremental benefit. More to follow on that later this year and early next year.
Okay. Thank you.
Yeah. Thanks, Lars.
Next question comes from Sameer Devaney at RX Securities. Please go ahead.
Thanks for taking my questions. Three, if I may. Can you firstly just give us some sort of qualitative descriptions of how Elocta uptake is going in the EU markets that you've launched in? Mainly, we're interested in knowing acute versus prophylaxis use, the sort of ratios you're seeing there versus what is happening in the U.S. If you can also detail to us the pricing across the territories that you've launched in.
Sure. Are those your only two questions in there? Sorry-
Just, sorry. No, the last one was really just a clarification on ReFacto, the royalty. I remember that that's due to expire in 2017, but if you could just remind me exactly when in 2017 that royalty will cease. Thanks.
Okay. Thanks, Sameer. Let's take them in turn. Alan and I can trade on the first two, Mats can weigh in on the third. Maybe I'll start with pricing, then Alan can give some flavor for the early experience in the markets. Obviously, we've had a couple of choices here. One, to take a very significant premium pricing approach to reflect the very significant benefit we see from the product, the other, to try to take a more modest premium approach to better accommodate a more mainstream use. We've been engaging with payers now for several years to ask them for their views of how they see the product, we've been doing that in combination with discussing the same questions with physicians and patients.
The number 1 point of feedback that we've received is that these products are next generation products that, in their full potential, should become mainstream products to be used in virtually all clinical situations where their benefits can be applied. The fear was that if we took a very high premium approach, this would become a sideline kind of niche product and not achieve its full potential. We've elected to take a pricing approach for that purpose of providing a mainstream therapy to really elevate the standard of care in hemophilia towards a more modest premium that allows for the product to have a per unit price that makes it very competitive and easy to select alongside both existing and future products. We're really a mainstream focused approach in our pricing.
Having said that, I think one of the first reactions that we've had in the market reflects that decision. Physicians, payers, patients, the feedback around our approach to pricing has been universally positive and really welcome. Of course, it's way too early to understand how that will translate into uptake. Maybe, Alan, you can share your views of the early experience.
Far as Jeff mentioned in his presentation, that we've launched already in Germany, Netherlands, Denmark, U.K., and Ireland. The initial response has been very positive, with a lot of clinic interest. Just to point out, though, that as with all new drugs, unless they've been involved directly with the trial, they would, of course, like to experience Elocta first with a handful of patients before moving to more patients. We're seeing that already. High clinic interest, the interest to try out Elocta on initially a small group of patients and hopefully with positive results, move to more patients or more conversions at each clinic. Overall, encouraging signs.
Sameer, if I can, I'd just like Mattias to comment on the ReFacto royalty question.
Regarding the ReFacto royalty agreement with Pfizer, it will end for markets outside U.S. mid-2016, it will end for U.S. in mid-2017.
The income from royalty for ReFacto comprises about 10% of the total income in that franchise, or it did up until the end of 2014. We'll have to see where we land it now at the end of 2015.
That's great. Thanks very much.
Sure.
Next question comes from Peter Sehested at Handelsbanken. Please go ahead.
Yeah. Hi, it's Peter from Handelsbanken. Thank you for taking my questions. With respect to your just beating around the bush on this M&A and use of cash discussion. If we say, that there'll be competition in the market in, let's say, 14 to 18 months, and you've got the ACE910 lurking around the corner, perhaps the turn of the decade. I mean, depending how you model, you could sort of argue that your growth would peter out in three to four years, perhaps five years, whatever. You have a sort of company which has a high top line, perhaps difficult to grow. Could you just provide us a bit of light on how you are sort of looking at this issue?
In terms of strategic options, how should we think about the way that you look at this strategic situation for the company, let's say, in the more medium to longer term? Thank you.
Yeah. Thank you, Peter. I think the first point I would make is that the timeline. I don't know, Peter, if you could perhaps go on mute, just because we've got a lot of background noise.
I'll do so. Just a split second here.
Yeah. Thank you. Feel free to come back on if I don't get your question right. I think the timing here around other competitors coming into this space, you mentioned specifically ACE910, but of course, it's a dynamic field and there could be others as well. First, importantly, while I think it's true that toward the end of the decade, if ACE910 is successful as a bypass agent, it could be present in our market. We don't believe it could be present within the decade for use in prophylaxis. I think that will come somewhat later. I think your five-year timeframe is perhaps a little bit too short in that sense. We think it's more like seven or eight years.
Secondly, I think the point you make in general is correct, that in a generic way, every company that undergoes a growth curve like this will eventually have the challenge you describe if they don't continue to focus on generating additional growth drivers and growth engines to take them into the next phase. That's something we're focused on, irrespective of what you might believe about the specific competitive issues in hemophilia. We are very focused on identifying both pipeline assets as well as assets that are in the market that can help us to diversify and to build growth platforms specifically that can enter the business in a commercial sense in 2018, 2019, and 2020. Some of the candidates in our own early pipeline are eligible to do that. Some of the candidates in our late-stage pipeline for Kineret can contribute in that timeframe.
Obviously we need to focus on additional partnerships and acquisitions outside the company to drive those strategic options that you mentioned earlier. We just are trying to be deliberate and very disciplined about picking things that really give us a strong cash-on-cash return profile over a relevant timeframe. We're not particularly focused on pure EPS returns or accretion. We really want to have a good understanding of ROIC around the options that we look at.
Okay. Could I just follow up, perhaps? Are you in any way able to sort of give us some kind of view on how you look on your return on assets/return on capital or return on equity over, let's say, the next three to four years? Perhaps even a sort of steady state as we sort of approach perhaps a steady state mode by the end of the decade. Thank you.
I think the floor or the base way to answer the question is that anything that's in excess of your WACC from an IRR perspective at the one-year level is going to be a good thing to do and Your ROIC should exceed your WACC significantly at a three-year timeframe. I think those are base levels of expectation for us as we think about returns. Of course, the way we think about the specific timeframes and the thresholds for return also depend on the risk profile of the asset and where it is in its development. I think in general, the way you ask the question is the way we think about deals, which is around their ability to return capital against capital invested in excess of our cost of capital.
Those are the kinds of metrics you should expect us to be thinking about and talking about in any deals that you see us do that require significant capital outlay.
Okay, thank you. I'll jump back in the queue.
Okay. Thanks, Peter. Malin, I'm conscious of time. We're actually over time for the earnings hour. Perhaps we could take one more question, and then we'll obviously be available to take questions offline after the hour as well.
The last question comes from Johan Unnerus at Swedbank. Please go ahead.
Thank you. Just one question on your positive opinion received during the call, actually. Last time on the Elocta, I think it took about 2 months from the opinion to the approval. Is that a good proxy for this time, or any reason why it should be different?
Yeah. Thanks, Johan. First of all, the opinion today is something we're really thrilled about because, as you probably know, we filed significantly after the filing for the CSL compound. We've been working very hard to try to make up this gap in timing. Now, as you say, we turn our attention to the next major milestone, which would be the EC opinion. It turns out to be a slightly statistical question of how long those opinions take, and I just can't tell whether that has anything to do with the product or much more to do with scheduling and meeting timeframes for the EC. But it's generally somewhere 70 days or less. It's in that range.
Your estimate of 2 months is exactly right, and that's kind of what we're working with as a planning timeframe for the EC decision, which would really set us up for a launch around mid-year.
Okay. Thank you.
Thank you. Okay, Malin, I'm sorry to curtail things. I don't know how many questions are in the queue, but for those of you who did not get a question in or a follow-up on, please do follow up with me or Oskar or Juergen or any of us directly. We're delighted to continue the conversation. Again, apologies that our time didn't quite allow for all questions to come in today. Thank you for taking time to share these results from full year and Q4 2015, and look forward to our next chance to review our Q1 earnings in the coming months. Thank you.