Earnings Call: Q4 2015

Feb 26, 2016

Gentlemen, welcome to the presentation of the Q4 and Full Year Results of 2015 for SORBI. I will now hand over to Jeffrey McDonnell, CEO. Please go ahead. Thank you, Mullen, and welcome everybody to the review for Sobeys Q4 and full year results from 2015. I'm Jeff McDonough, CEO of Sobeys, and I'm joined today as usual by Alan Raffensperger, our Chief Operating Officer and Matsuhullah Palhin, our Chief Financial Officer. We're quite excited to spend some time with you today and 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, but most importantly, in the activities that will characterize 2016. Last year was an incredibly important year for Sobeys. It was a year of solid operating results, which we'll review in the first half of the presentation and 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 Orphan 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. So 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, so just keep that in mind. So from a business perspective, I think the key events in 2015 from Q4 perspective, of course, were dominated by the approval of Elocta in November. But in addition, as part of the ASH conference, we started to see significant new data coming forward on both eloxa and Alprolix based on a significant outcome study, which has started to generate now up to 3 years of total treatment data on these products. They show that low bleeding rates and the maintenance of longer inter injection times or periods has been maintained and even extended over the longer term, and we'll touch on some of that data here on this call. And as I said, we began this donation program, which we're enormously excited about on a global basis. We also have the approval of VIApex for dual course in Dupuytren's Contractor. And we're very pleased to mark a significant milestone on our journey towards creating a global quality organization in the company with the addition of Lars Draujou to our executive leadership team. After the quarter continued to be eventful again, highlighted by the beginning of sales with Eloxa in Europe, and 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. And we're in a place now where we can feel quite secure about the patent state for the oral suspension for Orifidan with patent life into the early 2030s. We also earlier this week announced both the new patent estate for KINARET as well as 2 new late stage trials that we will initiate to expand the indications for KINARET into acute gout and Till'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 with a growth of 15%, 9% at constant exchange rates. Product revenues grew to almost SEK 700,000,000, a growth of 21 percent 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 twenty fifteen being much higher than the back half was for refacto deliveries due to phasing. Gross margin in the quarter was 64 percent, EBITDA was $90,000,000 and cash flow from operations were CHF 13,000,000 So perhaps more relevant on a full year basis, total revenues came in at just over CHF 3,200,000,000 representing a growth of 24% or 14% at constant exchange rates with product revenues of CHF 2,500,000,000 with a growth of almost 30% year on year. RERFACTO 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 5 years. Gross margin on the full year was 62% and EBITDA came in at 433,000,000 dollars with cash flow from operations at $507,000,000 on a full year basis. So I think when we look at the totality of those results across our portfolio, we see a very nice balance between our 4 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. And 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. And 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 tailing off in the back half of the year due to the scheduling of deliveries. The revenue from manufacturing was about $90,000,000 in the quarter and royalty revenue at 27,000,000 dollars with full year again coming in around $660,000,000 So again, very strong and steady part of the business, which if anything is showing greater strength in the year behind us than it has in prior years. So with that, I'll turn the call over to Alan Raffensperger. Thank you very much, Jeff. Kinard sales in the 4th quarter reached DKK 220,000,000, which is an increase of 36% over Q4 of 2014. On a full year basis, revenue reached $825,000,000 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 Orkadin. 2015 Q4 revenue reached DKK 227,000,000, which is an increase of 35%. And looking at the full year revenue, we reached DKK796,000,000, which resulted 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 HT1 patients. We can also confirm that we have launched orbiting liquid suspension. Looking at our partner products portfolio, our Q4 revenue landed on DKK178 1,000,000 which is a decrease of 10%. It discontinued products accounting for the quarter to quarter variation. Full year revenue increased 7% to DKK CHF 727,000,000 Growth drivers included ZIAPEX, COMETRIQ and WASTE. I would also like to emphasize that we will turn our focus more on 2016 to adding new partner deals. The recent addition of 3 more products from pharma Swiss is a good example of that. Moving to hemophilia, revenues in the 4th quarter reached DKK 32,000,000, which is a combination of DKK 30,000,000 in royalty revenues and DKK 2,000,000 initial main patient revenues from the Middle East. On a full year basis, revenue reached $96,000,000 Of course, the big highlight of the quarter was the approval of VELACTA on the 19th November. Biogen revenue is important as a reference for our royalty stream. And I would like the opportunity to highlight that Alprolix revenue reached $71,000,000 in Q4 last year and Aloctave revenue reached $101,000,000 in Q4. This is important because the run rate now is reaching US700 $1,000,000 for the combined portfolio at Biogen. Now I have the pleasure of handing over earnings call to our CFO, Nasse Waltherin. Thank you very much, Alan. Looking into the profit and loss statement, we can see that revenues for the quarter ended up with SEK 840,000,000, which is an increase of 15% versus the same period last year. For the full year, revenues came in at SEK 3,228,000,000, which is an increase of 24% versus the same versus 2014. Gross margin has improved in the quarter. For the Q4, they came in at 64%, which is an increase from 60% the same quarter last year. And 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 90,000,000 for the quarter and for the full year SEK 433,000,000. And this is a substantial increase versus 2014. In 2014, however, it was impacted by onetime costs due to the write offs of Kia Brina and for Multiferro. Looking at the balance sheet. The balance sheet has now been impacted by the approval of eloxa in the 4th quarter 2015, which means that we take on intangible assets and also liabilities towards Biogen as a consequence of the Elocta approval, and 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 $904,000,000 at the end of the year versus $519,000,000 the same period December 31, 2014, which means that net cash now is at 82,000,000 dollars 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 and L impact of the Elocta launch. The agreement between Barjan and Sobe relating to cross royalties is that 12% is the base royalty going in both directions between SOVI and Barjan. So far up to the end of 2015, the royalty received on Sobei'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 1st commercial sale on Sobeys' behalf. And that occurred in January 2016. So in our books for the Q1, we can record a onetime credit of $38,000,000 approximately $38,000,000 However, it has no cash effect, but it is a deduction towards the liability towards Baizen. As Sobe now has launched Enokta in January, the royalty to Sobe 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 Faiza. When Sobi now has started to make commercial sale of Elocta, Sobe will, in their turn, pay royalty towards Faiza. 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 to Ospija. When SOVI will be a MAH holder, which will occur in the Q1, SOVI will incur 50% of the ongoing development costs at Magyar and that will be cross charged towards Sobeet. And the estimated repayment obligation as of January 1 is $216,000,000 towards Baia. And that, as I said, will be Looking into the outlook for 2015. The outlook that we gave has been exceeded. The revenues came in at EUR 3,228,000,000 which is higher than the guidance, which was between EUR 3 point $3,000,000,000 $3,200,000,000 Gross margin came in for the full year 62% versus the guidance of $59,000,000 to $61,000,000 And EBITDA came in at $433,000,000 dollars versus the guidance of $350,000,000 to $400,000,000 By that, I hand over to Mr. Jeff McDonald. Thanks, Vasyla. So first, to pick up on the points 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 $4,300,000,000 to $4,500,000,000 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% to 68% and EBITDA also with that exclusion is expected to be in the range of SEK 700,000,000 to SEK 800,000,000 Importantly, this guidance includes the impact of a one time credit to be received for Elocta estimated to be in the range of CHF 300,000,000 to CHF 325,000,000. As much as we'll have just reviewed, this one time credit equal to US38 $1,000,000 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 contributes to the EBITDA guidance includes Sobeys' share of ongoing costs for Elocta estimated to be in the range of SEK 200,000,000 to SEK 250,000,000. Some have asked if this guidance is conservative and it is conservative in the sense that it excludes the impact of an Alprolix approval and launch. And as you know, we are on the agenda for the CHMP meeting, which is occurring this week. So an eventual positive opinion or negative opinion could be forthcoming quite shortly. So I think it's worth giving some feeling for what might occur when Alprolix is eventually approved and launched. So there will be 3 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. 2nd, we will have the benefit of our own end market product sales. And thirdly, we will see the benefit of the incremental change of the royalty received from Biogen from 2% to 12%. In total, these top line items could be expected to be in the range of about SEK 500,000,000. On the cost side, like Furlacta, we will also inherit 50% of the ongoing share costs for Alprolix. That gives you a flavor of how Alprolix, if approved, might impact our guidance. But of course, we will formally update guidance if and when Alprolix is approved sometime during the course of the year in 20 16. So 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. As we had talked about, this is a significant market opportunity 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 US3.3 billion dollars And 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 UK, Denmark and Ireland. Thank you for a terrible moment. I thought that was Italy. I thought it's a little early for Italy, but the Irish are on the ball there. Very early. So these are the first five markets where we've begun to see uptake of Elocta. The markets that I've mentioned 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. And as Matsoula said, we recorded and Alan said, we've recorded those sales already in Q4. The importance of and the potential to improve 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 and 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 3 to 5 days per kilo. That gives a very easy straightforward way to think about initiating patients, but 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. And finally, the label takes account of the data we developed in children where for ELASA, as with all finding 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. L. O. N. Trial. And I think there's a very simple set of 3 messages that come from both the 12 month pre study period as well as the 6 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 Velocta that patients received during the trial itself. So we have similar weekly consumption for this product. Secondly, this product has the potential to offer increased protection where the pretrial ABRs in our study were in the range of 6 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 arms. So that's potential for increased protection deriving from increased circulating plasma factor levels associated with the extended half life is quite important here. And 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 4 5 ABRs per year as well. And finally, and importantly as well as a side benefit, we are able to reduce the dosing frequency from on average 2 times per from 3 times per week to 2 times per week in essence, removing 1 injection per week from the daily and weekly lives of patients with hemophilia. And many have asked how significant this benefit is. And I think if we imagine what a 3 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. And 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 eloctate of flasalocta in the clinical trials, you get a flavor for the impact on day to day living that would derive from an every 3.5 day infusion regimen. So 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 that happened to be located in Malmo, Sweden, which is really the cradle of where prophylaxis or modern prophylaxis treatment was initiated. Here in Sweden, there were 1600 attendees from across Europe and other geographies, roughly half of whom attended our launch symposium for Alokta, where we had the ability to report on some longer term outcome data, which is really an unusual circumstance for a product that's launching. And it derives from the fact that the initial clinical developments included the pivotal trial with ALONG and Kidz Aelong, but also included a long term follow-up outcome study called ASPIRE. And we are able and 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 outcomes reported in a long with AVRs of about 1.6 are sustained and may be trending to an even lower level at 0.7@oneyear@2yearsgiving 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 views. 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. So that sense of being able to lower the burden of therapy is also being confirmed in this closer to real or long term follow-up as is the same median weekly consumption. So 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. And the inhibitor frequency in these 2 studies continued to 0. 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 easy decision in the first half, which could enable a launch for Alprolix around the midyear point. So that's all I want to say about hemophilia for the moment. And before we turn to Q and A, I'd just like to give a little bit of color around what we're planning to do with KINARET in the next phase related to the press release that we sent out earlier this week. And KINARET, as you know, is a balanced inhibitor of the IL-one receptor that allows it to have an equal blockade of IL-one 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 KINRAV, we now have a much broader list and understanding of diseases in which IL-one is operative or driving disease, which has led to a wide set of applications for KINRAVET in the clinic, many of which we've been working on catching up with in our own clinical development. So whereas KINARET started life and rheumatoid arthritis, we have been increasingly pursuing and catching up with the use end market in key indication like NOMID in the U. S, in Europe and importantly recently in systemic juvenile inflammatory arthritis with an approval in Australia based fundamentally on the medical literature. This trajectory has led us to select 2 additional indications for formal development. The first is in field disease and the second is in the treatment of acute Gauzy flares. And 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 latter most, 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, but this is about handling the acute inflammation that results from joint inflammation. And 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. So this is a population that's relatively large. So 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 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 field disease and also as systemic juvenile inflammatory arthritis in the pediatric spectrum and we will study both populations in our Phase 3 trial. There are no approved treatments for the disease and we're looking for patients who are eligible for treatment with an IL-one blocking agent. Here the treatment duration is significantly longer and for the patients 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 2,032 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. So thank you for your patience and 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. 1st, based on the strong operating base of performance, which I think 2015 has relatively demonstrated. Secondly, to bring these breakthrough 1st 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. And finally, to set our sights on building the company over the longer term through further partnerships, acquisitions and development activities. So with that, Mullen, I'll stop talking and let's open the floor for any questions. Thank you. The first question comes from Richard Parkes at Deutsche Bank. Please go ahead. Hi, congratulations on our 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 Alocta sales or the breakout between Alocta sales in Europe and the performance of your base business, that would be very helpful. And then you've taken on share of the development costs of Eloctate, 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 kind of mid- to longer term. And 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 20 16. So that's business development outside of the Partnered Products business more pipeline focused. Yes, makes sense, Richard. Thanks for the question. So 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 4 or 5 quarters to get a real sense or handle on how the shape will look. But 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. So you can get a flavor of the fact that we have modest expectations for the first year in terms of overall sales from Elocta. But of course, you'll be able to get a sense for that more directly because of course we will break out Elocta performance 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 50,000,000 in that range. So when I gave a sense of sort of SEK 500,000,000 on the top, we would expect 95% to drop to the bottom if Alprolix is approved. But 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, but we were just unable to confirm yet what that number will be until we get an audited view of it closer to the approval. And finally, with respect to the biotech markets, it's a dynamic moment, that's for sure. And while valuations are lower, anxiety is higher. So it's a matter of finding that point where people believe that the market is equalized and represents a sustainable and predictable level of pricing. In one way, since we're looking for partnerships or acquisitions that really drive business logic. It tends to be a little bit less about opportunistic valuation. So I guess I would say our discussions haven't stumbled due to this, but 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. So maybe it's too early to gauge, but at least from your discussions with the European hematologist, do you think that the physicians are planning to utilize Locte in order to provide less frequent dosing or aiming to get better protection from spontaneous bleeding at the same same dosing frequency as a short acting product? Yes. Hey, Eun. And let me apologize while you're the phone for this unusually early time for the earnings call. We've just the only time we'll do this to you on a Friday, so I apologize for that. We are absolutely consistently encountering a desire to engage with the Alocta first and foremost to increase protection. The goal that every physician and patient shares more than anything else is to avoid bleeding, particularly at both target and the traumatic joint bleeding. But bleeding in general, I think it remains the number one concern for physicians. So 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. And as a side benefit, there's the option to remove an injection a week for almost every patient. And I think that that for us is a very sort of 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 and every patient physician combination will choose a set point on that spectrum according to the patient needs and the physician's judgment. Okay. And then yes. And then question on this emerging data on potentially effective in use of eloctate or eloctate inducing intolerance in patients who developed the Factor VIII inhibitors. Is there a plan are you planning to explore this opportunity further in terms of monetizing or utilizing Locate in this about 30% of our patients developing inhibitors? Yes. Thanks for raising that, Eunha. 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 $1,500,000 to successfully achieve immune tolerance with 30% of previously untreated patients developing inhibitors and some significant fraction of those needing ICI, 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 is seems to be tolerogenic. And in that sense, there's that basis to hope that a clotting factor that's fused to an IgG1xC as our products are could potentially have a benefit in ITI. Now today, I don't think we have enough evidence to point to that as fact, but there are 4 case reports published so far that do seem to suggest a relatively rapid induction of tolerance where Eloctate in this case has been used. So to answer your question, I think we are really eager to understand better both preclinically from in vivo and 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 SC in ICI. So that was a long way of saying, yes, we're really excited about it and we're focused on it. Okay. And the last question is now that you are splitting development costs on hemophilia products with Biogen, does that include the Xtend program? Yes. So can I say yes and no, and then I'll explain why? Yes, Xtend costs are included in our guidance and they should be included in your thinking about our evolution at the business. But no, in the sense that those costs will not So we do not bear any P and 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 Olapka and Alprolix in the sense that we will have an obligation to share milestone payments from Biogen to Amunix, but those will be balance sheet cash payments for us. They will not impact our P and L either. Okay. And congrats on a positive opinion from CHMP on Pollux, you just need to take. Eun, you are unbelievably well informed. I think that press release literally just went out. Sounds great. I guess you're on New York Time, yes. Thank you. We're really pleased about that as well. Thank you. Next question comes from Eleanor Sung at Goldman Sachs. Please go ahead. Hi, congrats as well on the Alpalex launch. Three questions please, if I may. Firstly, just appreciate any thoughts on the CIPIT study that was presented at ASH in December showing plasma derived factor, it had a lower risk of inhibitors versus recombinant in previously untreated patients? Secondly, with the new thoughts on your appetite for a large deal mergers of equals or a U. S. Listing in the next 6 to 9 months versus a consideration of these options once eloxa is fully launched in most European countries? Thanks. Yes, sure. Thanks for the questions, Eleonore. So let me just step through them in order. So with respect to the CIPIT 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. And I think at a very top line level, they are concluding that plasma derived products appear to have a lower incidence. And so I think the first thing I would say is it's not the 1st large study to present early data that seems to be pointing to a difference. But 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. And 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. So I think that's important for us to consider, in other words, to stay focused on understanding our own immune profile. And lastly, the implications of this study will be most immediate for previously untreated patient therapy as opposed to currently treated patients. So 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 Holkon Bjorklund to our story is very natural evolution, I think, of where the company is and where it's headed. Ken, as you may know, sat on the Board of ViaVitram for a significant part of its early years and early history. It's a strong kind of transactional acumen and way of thinking about strategic positioning is a very nice match for our midterm strategy. So it's less than 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. So I think it's very much in line with where the company is headed. And 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. Platform. Of course, we don't count it out, but it's not our first priority. And 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. But as an end in itself, it's again not top of our priority list just at the moment. Great. Thanks very much. Yes. Thank you. Next question comes from Johan Enelis at Swedbank. Please go ahead. Yes. Good day. Thank you for taking my questions. Johan Enelis, Swedbank. Just to clarify again with the guide then. So the $38,000,000 one line credit that will be booked as revenues in Q1 as I understand it then. And then the €200,000,000 to €250,000,000 added shared cost on your part and mainly R and 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. And also second, lastly, on the obligations then on the EUR216,000,000 that you've taken on the book for Elocta, what would be the equivalent for Alprolix? Thank you. You. And I'll try on 2 out of 3 and then I will resort to Mattoulas to give some counsel on the 3rd. So the $38,000,000 that you referred to will be recorded as revenue, will be recorded as gross profit and will be recorded as EBITDA in the P and L for Q1. It will not contribute to cash, but instead will be deducted from the $216,000,000 obligation that we have on the books for Elocta. So far so good. Myself is nodding. That's good. So the second point around the costs, the $200,000,000 to $250,000,000 that we estimate our cost to be for Elocta in the year, Of course, we will revise that estimate once we 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 50,000,000 or so. But of course, on a run rate basis next year, it will be more. And we just don't quite know what that number will be yet. And we will know that by the time we come to a formal approval and assumption of sales for the product. Mas, can I turn to you to comment on what we estimate the balance sheet items 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 $180,000,000 to $190,000,000 Thank you. That's useful. I think that was all for me. Thank you. Okay. Thanks, Jan. Next question comes from Lars Evrening at Danske. Please go ahead. Thanks. Can you just please elaborate a bit more on Kienaert and Orford? And you said you mentioned double digit growth for these products in 2016, if I heard you correctly. But some background for the growth reacceleration again in 2015. What's you would expect for 16 and the contribution from new indications? Yes. 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, but anyway low double digit. For orphaning, we made the transition with a new distribution model the end of Q1 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 that 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, Kineret we changed recently changed the distribution model in a very similar way to what we've done with Orpidem where this is much more patient centric distribution model, which has resulted in what we're starting to see is improved compliance rates for Kinered as well. And 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. So here again, I would also caution high growth rates, but because we still have to see the full effect in the model, but I'm confident that will be anyway in the low double digits next year for 2015. I'm sorry, but the contributions I had from your new indications, you mentioned the capital trials that you're going to start. Could you say anything about how contributive they could be long term? Yes, Lars, it's Jeff here. So I think the purpose of giving you a flavor for the syringe usage and also the eligible patient population. So you could just have a flavor for the market opportunity that we see for the product in the 2019 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 Stills disease for whom CARET is already prescribed in the U. S. And elsewhere. So 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 KINRA. The acute gout opportunity is potentially different and we have to understand better what the profile looks like in our clinical trial testing, but that could be a slightly more significant incremental addition for the KINARET portfolio. I think importantly too that these and then by the way, 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. So we do expect to undertake at least one more and maybe 2 more indications in this train of exploring and following the places where TYNARET can really be life saving or have a significant incremental benefit. So some more to follow on that later this year and early next year. Okay. Thank you. Yes. Thanks, Carlos. Next question comes from Samir Devani at Rx Securities. Please go ahead. Thanks for taking my questions. 3, if I may. Can you firstly just give us some sort of qualitative descriptions of how Alocta 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? And then if you can also detail to us the pricing across the territories that you've launched in? Sure. Are those generally two questions here? And the last one is really just a clarification on refacto, the royalty. I remember that you're 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. So let's take them in turn. Alan and I can trade on the first two and Matsulos can weigh in on the 3rd. So maybe I'll start with pricing and then Alan can give some flavor for the early experience in the markets. So obviously, we have a couple we've had a couple of choices here. 1, to take a very significant premium pricing approach to reflect the very significant benefit we see from the product and the other to try to take a more modest premium approach to better accommodate a more mainstream use. And we've been engaging with payers now for several years to ask them for their views of how to see the product and we've been doing that in combination with discussing the same questions with physicians and patients. And the number one 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. So 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. So 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. So we're really pursuing a much more mainstream focused approach in our pricing. So having said that, I think one of the first reactions that we've had in the market reflects that decision. So physicians, payers, patients, the feedback around our approach to pricing has been universally positive and really welcome. And of course, it's way too early to understand how that will translate into uptake. But maybe Alan, you can share your views of the early experience. Yes. So far as Jeff mentioned in his presentation that we've launched already in Germany, Netherlands, Denmark, UK and Ireland, the initial response has been very positive with a lot of clinic interest. And 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 Alokta first with a handful of patients before moving to more patients. And we're seeing that already. So 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. So overall, encouraging signs. Sameer, if I can, I'd just like Matt to list the comments on the Refacto royalty question. Yes. Regarding the refacto royalty agreement with Feitze, it will end for markets outside U. S. Mid-twenty 16 and it will end for U. S. In mid-twenty 17. And the income from royalty for a facto 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 landed now at the end of 2015. Great. Thanks very much. Sure. Next question comes from Peter Sejesd at Handelsbanken. Please go ahead. Hi, it's Peter from Handelsbanken. Thank you for taking my questions. With respect to your just speaking about the push on this M and A and use of cash discussion. If we say, I mean, that there will be competition in the market in, let's say, 12 to or 14 to 18 months and you've got the ACE 9, 10 looking around the corner, perhaps the center of the decade. Then I mean depending how you model, you could sort of argue that your growth would teeter out in 3 to 4 years, perhaps 5 years, whatever. And then you have a sort of company which has a high top line, perhaps difficult to grow. I mean, could you just provide us a bit of light on how you sort of looking at this issue? And in terms of strategic options, how should we sort of think about the way that you did you look at this strategic situation for the company, let's say, in the more medium to longer term? Thank you. Yes. Thank you, Pierre. So I think the first point I would make is that the time line 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 for a second here. Yes, thank you. Feel free to come back on it if I don't get your question right. So I think the timing here around other competitors coming into the space, You mentioned specifically ASY-ten, but of course, it's a dynamic field and there could be others as well. First importantly, while I think it's true that towards the end of the decade, if baseline ten 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. So I think your 5 year timeframe is perhaps a little bit too short in that sense. We think it's more like 7 or 8 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 described if they don't continue to focus on generating additional growth drivers and growth engines to take them into the next phase. So that's something we're focused on irrespective of what you might believe about the specific competitive issues in hemophilia. So 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 2020. So some of the candidates in our own early pipeline are eligible to do that. Some of the candidates in our late stage pipeline for Kinaret can contribute in that timeframe. But obviously, we need to focus on additional partnerships and acquisitions outside the company to drive those strategic options that you mentioned earlier. So we just are trying to be deliberate and very disciplined about picking things that really give us a strong cash on cash return profile of where 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, I mean, are you in any way able to sort of give us some kind of view on how you look on your return on assetsreturn on capital or return on equity over, let's say, the next 3 to 4 years or perhaps even a sort of steady state as we sort of approach perhaps to approach a steady state mode by the end of the decade? Thank you. Yes. I mean I think the floor or the base way to answer the question is that exceed your WACC significantly at a 3 year timeframe. And exceed your WACC significantly at a 3 year timeframe. And I think those are kind of base levels of expectation for us as we think about returns. Of course, the way we think about the specific time frames and the thresholds for return also depend on the risk profile of the asset and where it is in its development. But 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. So 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. Thanks, Peter. Mullen, 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. So the last question comes from Johan Lenerus at Swedbank. Please go ahead. Thank you. Just one question on your positive opinion received during the call actually. Last time on the LOCKTA, I think you 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? Yes. Thanks. Thanks, Jan. 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. So we've been working very hard to try to make up this gap in timing. So now we 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 time frames for the EC. But it's generally somewhere 70 days or less, it's in that range. So 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. So 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 Oscar or Jurgen or any of us directly. We're delighted to continue the conversation. And 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 in Q4 2015 and look forward to our next chance to review our Q1 earnings in the coming months. Thank you.