Earnings Call: Q3 2015

Oct 29, 2015

Ladies and gentlemen, welcome to the presentation of the Q3 results 2015 for SORBBI. I will now hand over to Geoffrey McDonough, CEO. Please go ahead. Thank you, Malin. Welcome to everyone to our review of the Q3 earnings for Sobe And thank you for taking time to join this review. As usual today, I'm joined by Alan Raffensperger, our Chief Operating Officer and by Matt Ola Feline, our Chief Financial Officer. As we'll discuss the results from the 3rd quarter really support the themes from our first half with ongoing strong operating momentum across the core and base businesses. In addition, the quarter has seen the achievement of some significant milestones in our pipeline, including importantly, the upcoming launches in our hemophilia franchise. In this call, as usual, we'll review the highlights from the quarter. Alan will review the base business and the hemophilia franchise and Matsulof will run through the financials. And I will take a few minutes at the end to review some of the early elements of our pipeline. From a business perspective in the Q3, the positive opinion from the CHMP for Elocto is of course the highlight coming at the end of September. We also prior to that exercise are opt in right for Alprolix and are well down the road towards the EC decision there coming next year. In addition, we received Australian regulatory approval for KINARET for the use in systemic juvenile idiopathic arthritis continuing this march down the path towards more pediatric rare disease indications for KINARET. We also have a designation in a similar category of diseases for KineRad by the FDA and we will develop that pathway further later this year. Lastly, we're able to submit and have validated the suspension filing with the FDA for Orfidence. So we expect the PDUFA to come in the Q2 of next year. From a financial perspective, total revenues came in at C786,000,000, a growth of 8 percent at constant exchange rates. Most of the exchange rate tailwinds are coming from U. S. Currency, of course. Products grew 10% to $645,000,000 and Refacto had a relatively good quarter. As expected, the second half was lower than the first, but nevertheless quarter on quarter growth was 5% up. Gross margin came in at 62%, EBITDA at 90 $7,000,000 and cash flow from operations continues to be positive this quarter at 245,000,000 dollars If we look at the growth of our franchises year to date, Morphacto is up 6% year on year, partner product 7, genetics and metabolism 31% and the kinaretinflammation therapeutic area is up 14% with an increase in contribution coming on the top line from the inbound revenues from our partner Biogen on their launches of Eloctate and Alprolix. The refacto business, as I said, was up 5% quarter on quarter. I think we gave some highlights about the phasing this year with a much stronger first half compared to the second half. I think you can see that in the graph rather clearly. Year to date, we're up 12% over last year and the balance between revenue and royalty is in line with our past experience. So at this point, I'm going to turn the call over to Alan to review the commercial business. Alan? Thank you very much, Jeff. I am pleased to report on our commercial results for the Q3 starting with KINARET. Sales of KINARET continue to grow reaching SEK215 1,000,000, which is an increase of 23% over Q3 last year. In addition, our year to date performance reflects a growth of 31%. The overall positive sales growth was driven primarily by volume expansion in Europe in combination with value and volume increases in the United States and Canada. Moving on to Orpidem, our revenue reached DKK 200,000,000 in the quarter, which is an increase of 22% over the Q3 of 2014. Our year to date performance reflects 50% growth over the same period last year. However, it's important to emphasize here that some of this high growth is attributed to the change in distribution model in the U. S. Impacting Q1 2014 performance. Overall sales growth reflects solid performance in all markets. On the regulatory front, the FDA validated our filing forfeiting oral suspension with a Q2 2016 PDUFA date. And during the quarter, we also submitted the MAA to the FDA for the 20 milligram capsule formulation. Taking a look at our partner products business, we generated revenue of SEK 173,000,000, which reflects an 8% increase over 2014. Year to date, we achieved sales growth of 14%. The increase in sales were attributed primarily to Commetric and XIAPEX. As mentioned in our Q2 earnings call, we have been preparing for the launch of XIPEX for the Peyronie's disease indication and that launch is now underway. We've slowed the pace of new deals on purpose in 2015 in order to focus fully on the Elocta launch preparations in Europe, the Middle East, Russia and North Africa. We will continue to continue on a more active assessment of new products and partners during 20 16. Moving to our hemophilia franchise business, we reached revenue of DKK 29,000,000, which was primarily based on the 2% royalty sales for Eloctate and Alprolix in the Biogen territory. The Q3 also includes a $4,000,000 true up from sales in the 2nd quarter. During the quarter, we also exercised our opt in right for Oprolex, which triggered a payment of $10,000,000 to Biogen. Of course, the big news in the Q3 was the positive opinion from CHMP for Locte with an approval anticipated before the end of the year. I also wanted to take a moment not only to reflect on the Biogen sales in the U. S, which is a basis for our royalty revenue, but also to draw a comparison between the consistent and stepwise market penetration reflected in 1 main country being primarily the U. S. Here versus our territory. For a while, we expect a similar launch penetration to the United States and individual EU markets. We do need to plan for coordinated and structured launch approach where we will proceed country by country. In Europe, as the time to reimbursement does vary by country, the free access markets will be leading launch markets with structured reimbursement markets and tender based markets to follow. In backing up this approach, I would like to reinforce that payer engagement has been well underway since 2013, So we are well prepared in regards to payers. In addition, I am very pleased to confirm that reimbursement dossiers have been submitted in all eligible markets, in some cases, on the same day of the CHMP positive opinion. We hear back more and more from the market about the enormous opportunity we have with Aloktona Prolix to improve prophylaxis therapy as there do remain serious gaps in the overall standard of care. The simple fact is that patients on current prophylaxis therapy still bleed. Based on real market data real time data, sorry, of all ages with severe hemophilia, patients experienced a median of 4, even 5 breakthrough bleeds per year. I'd also like to reinforce the fact that in our A LONG trial, we saw actually 6 annual bleeds per year on conventional therapy prior to starting on Alofta. In addition, prophylaxis is not yet globally available. With only about 25% of patients receiving at least minimally adequate treatment. And on top of that, 47% of all countries have less than half the hemophilia patients under 18 years of prophylaxis. This is one of the reasons we have been very active with our commitment to close this treatment gap and improve the standard of care for countries and patients in need. This is being done in coordination with Biogen and the World Federation of Hemophilia via the active donation of Olocta and Alprolix to countries in serious need. As reported earlier this month, the first shipments of Elocta and Alprolix have been made with Senegal leading the way. By helping to address the global treatment gap and supporting the World's Federation mission of treatment for all, we hope to enable meaningful change for people with hemophilia. I would now like to hand over our Q3 earnings call to our Chief Financial Officer, Mats Olotoli. Thank you, Alan. Turning over to the profit and loss statement. As Jeff said initially, revenues grow with 18% in the quarter to SEK 7 86,000,000. At constant exchange rate, the increase was 8%. EBITDA increased to $97,000,000 versus $343,000,000 for the 1st 9 months. We can see in the profit and loss statement that gross margin now is at 62% due to improved product mix and also to favorable impact of currency. Sales and marketing expenses and medical expenses have increased, primarily due to the buildup to be ready for the hemophilia launch to come. Moving over to the balance sheet. What has impacted the Q3 is primarily two things. Opt in of Alprolix of $10,000,000 has been paid out in the quarter, which impacts the intangible assets. Also, inventories now include, by the end of the quarter, a launch inventory for a lock down, which now is in place. And turning over to the cash and the debt situation. Sobe has for a number of quarters been in a net debt situation. Now for the first time, Sobe is in a net cash situation, and the cash was at the end of the quarter, dollars 940,000,000 and the net cash position is now $92,000,000 Then I would like to turn over to the cross royalty agreement between Sobe and Baizya and explain a little bit on the impact of the profit and loss statement and the impact what will happen when Olakta and later Alprolix will be launched. The agreement as such has a base cross royalty between Sobei and Biogen at 12%. However, currently, Sobei receives 2% royalty on Biogen sales in their respective territories. And the remaining 10% up to 12% is accumulated as a credit, but will not hit the Sobe P and L at this point of time until the first commercial sale is delivered by Sobe. And on the first commercial sale, Sobe will get a onetime credit equal to 10 percent of the accumulated revenues from Biogen that Biogen has sold in its respective territories. And that will be booked as a revenue and will be deducted against the long term debt that will occur on Sobei books, but it will have no cash impact. The royalty revenue will then change for Sobe. So Sobe will receive a royalty revenue of 12% that will be recorded on Sobeys books. 7% will be recorded as cash and 5% will be recorded as additional revenue. In addition, Sobe will pay royalty cost on its deliveries, on its sales. So we will pay 12% royalty to Bardyan on its sales in Soviet territories. In addition, an incremental 5% will also be recorded as a deduction of the long term debt to Brydian. And finally, at MAH transfer, Sobe will then assume 50% of the development activity and costs that will occur, and that will take effect in 2016. And that is estimated to occur approximately 3 to 6 months after the first commercial sale. By then, I would hand over to our Chief Executive Officer, Jeff Mastano. Thank you, Matti. So with respect to the outlook, as usual, we'll check-in there. And as we announced this morning, we've just trimmed the lower end of the EBITDA guidance, now reflecting a range of $350,000,000 to $400,000,000 in line. So is a unfortunately mistake on this slide, but the guidance is $350,000,000 to $400,000,000 So no big news, just better resolution where we are in the year. There's no mistake on this slide. There's a mistake in my brain or eyesight or both. Thank you. Next slide. We've showed this slide a few times now reflecting our 3 phases of focus in the company and they are incremental phases. We don't replace one with the other. So the first is the focus on our diverse and growing business, where we've had a really strong commitment to improving profitability and cash flow based on our operations in Europe and North America. This increase in leverage has in turn allowed us to fund the launch ready infrastructure for EloctateElocta and Alprolix in our territories. And now we increasingly turn our attention to the organic and non organic growth that will drive our future as a rare disease company going forward. As we talked about, our pipeline is biased towards early stage programs. We've had several questions about how we're spending our time and priorities here. And I'd like to take the opportunity today to focus on the first two programs in this list, our C5 driven disease platform and also our efforts in the program we've previously referred to as SOVIO-three, which we now can be more specific about as being focused on MPS IIIA. So I'll just make a couple of comments to give some early insights to what we're doing with these programs. First, with respect to C5, you'll recall that we had SOVI002 in development for the treatment of complement C5 related disorders. It was an antibody ABD fusion, which had a significant half life and the potential to be dosed subcutaneously in a liquid formulation. Due to some AEs that we experienced in our Phase I, we withdrew Servio II from clinical development and went back to the preclinical phase to a backup compound. That backup compound is also an antibody molecule, but in this case fused to an Fc fusion. And this is very similar in some respects to the Fc fusion that we're working with in the hemophilia space, except this is a traditional dimeric Fc fusion. The properties of the Z domain have also been further optimized based on learnings from SOVIO-two and you can see here at the 72 hour mark, which is in the same places on the prior slide that the relative half life for complete blockade of C5 is even longer than it was for SOPIO-two. Quite early in this program, we're in the late preclinical development phase. We expect to have a pre CD selection in early 2016 Moving on now to our SOVI-three program. This program is Moving on now to our SOVIO-three program. This program is aimed at trying to make a positive impact on patients with mucopolysaccharidosis type 3A also known as ANFELIPO A syndrome. This is quite a rare lysosomal storage disease. These characteristics and impacts are mainly in CNS where progressive neurodevelopmental and cognitive delay and decline begin in early childhood and result in death in the 2nd decade in many cases. This is a deficiency of sulfamidase, which is the cause of the disease. There is no current specific treatment. The systemic enzyme does not impact the brain. And today, it is not possible to modify or ameliorate the neuro consequences of the disease. There is a quite a good mouse model available, which mimics or recapitulates the disease. This mouse model has been quite well studied and characterized over the years. It's not in any way proprietary to us, but it provides a reasonable platform to inform our investigations in our early work. Not surprisingly in this mouse, if you infuse the native sulfavidase enzyme, the levels of substrate in the liver are eliminated. You can see the untreated mouse, the disease mouse with high levels of substrate on the left and when they're treated with the native enzyme, they achieve wild type levels of substrate in the liver. However, that same mouse, if you look at the levels of the treated mouse in the brain, they are on changed and this is not surprising given the fact that the native enzyme does not impact or penetrate the mouse model brain. So our concept in this program is to produce a modified version of the native self amyloidase enzyme with the goal of enabling penetration into the CNS with systemic IV treatment. So this would be a traditionally infused, peripherally infused enzyme, which we would hope through its characteristics would provide penetration to the brain and amelioration of the substrate accumulation there. We have several patent applications surrounding the technology for this platform and they are in a pending condition today. When we look at the similar analog of the mouse model, not surprisingly, when we deliver our modified enzyme, we see the same normalization brain, we get about a 40% reduction in substrate accumulation in the brain of these mice, suggesting in a very preliminary way that we're able to impact the burden of disease in the central nervous system with peripheral administration of the enzyme. When we look further for evidence of the presence of the enzyme, we can see that following an infusion 6 hours later with vehicle, there was no staining the CNF tissue. It was a stain that's specific for sulfamidase, whereas 6 hours following injection or infusion of SOVIO-three, you can see relatively pardon me, relatively generalized standing within the CNS suggesting that the reduction in substrate levels that we saw in the prior slide is being proximately influenced by the penetration and presence of SOVIO-three in the brain for Enkema. So as I said, this is an early program. We are working on process development for the enzyme. It turns out this quite a challenging enzyme to make. Luckily, that's what we're good at, but it's still challenging. So it's an early phased program at this moment. We do intend to manufacture clinical material for our own purposes in our own facility here in Stockholm. That work is underway today to support GLP toxicity testing next year and that would enable 1st in human studies in 2018. We are intending to communicate some of this work in scientific fora in Q1 and Q2 in 2016. So just a short preview or a peek into what's happening in our early programs. And I think in summary for today's call, I would just reflect on the solid momentum of the base business. I think themes that we saw in the first half have played through in the Q3. And as hoped for, we now can say that the launch of eloxa is a matter of timing now that can be measured in a relatively short period. So we're extremely excited to get started, as Alan said, bringing what we think will be a significant step forward for patients in our territories. We haven't talked much about Alprolix. Its file is kicking over in the background and it's on course for a decision at some point in 2016. And finally, as I just mentioned, we're making good progress on admittedly some very early biologic programs, but one that really fit with our vision of further building our programs as a rare disease company going forward. So with that, Mohlen, I think we'll conclude our formal comments and open the phone for questions as we normally do. Thank you. The first question comes from Yang Yang at Jefferies. Please go ahead. Thank you. Congratulations on a good quarter. Questions on Eloctate and Alprolix in the U. S. So from Biogen experience in the U. S, has there been patients I mean, do you know if patients have been a patient tried to eloctate in our ProLX, but later have gone back to Sholatin product? Yes, I'm aware of those cases. I think in every biologic launch, there are cases that switch and switch back for a variety of reasons. So I know there have been such cases, Ian. Do you know what percent of patients who tried to have come back to Cholectin product? I don't know what the specific number is, Eun, but the review of that as a phenomenon has been within what we would expect. There doesn't seem to be anything strange or outlying in the experience so far. Okay. And then our second question is on Sanfilippo A product. So compared to other companies developing ERTs, is it your advantage on IV formulation versus Intrifecal injection? Yes, I think so, Eun. I mean, if it's possible to achieve significant francomol enzyme replacement with a simple IV administration, then I think from an administration and from a sustainability perspective for patients that would be strongly preferred over an intrathecal approach, which involves a lumbar puncture on a repeated basis. Certainly, it would be better than injection to the brain, which is also being investigated. But of course, that all depends on whether it works in humans. I think we can be relatively positive about our ability to help mice so far. But if we can help people, then I think an IV infusion would be a really great step forward. Okay. Thank you. Yes. Thanks, Ian. We have a question from Richard Parks at Deutsche Bank. Please go ahead. Hi. Firstly, I just wondered if you could help us understand, I mean Biogen made some quite positive comments around the proportion of prophylaxis patients that have switched to Eloctate in the U. S. Just wondering if you can help us understand a little bit more about how they define that. Are they including patients that are on plasma derived products in the U. S? Just trying to understand that a little bit more. And can you remind us how much of recombinant Factor VIII volume and sales are from the prophylaxis setting? I think I remember it being something like 40% of patients in the U. S. But 75% of the volume. So that's the first question and I'll come back after you after that. Okay. I'm glad you paused Richard. I was getting a little overwhelmed. So tell me if I missed anything you've asked about. So on the question with respect to Eloctate PROPHIE, I think the rates as they were described by Biogen were intended to capture the segment of the population that has severe disease and who is treated with PROPHIE. The sources of those switches, I think are coming blandly from the kinds of proportions of patients who are on recombinant or plasma. There's not a particular distribution skew as I'm aware of between the 2. And we would certainly expect to draw from both currently treated recombinant patients and currently treated plasma patients when we launch Elocta in our territories. If I understood the second part of your question right, my understanding today is that on a broad basis, roughly 35 percent of patients in the U. S. Are on prophylaxis today as compared to broadly speaking about 50% of patients in our territories who are on prophylaxis today, recognizing that the variability around our 50% is rather extreme. We have countries that are as high as 80% or 85% and countries that are as low as 15%. Okay. And can you remind me, I know it's a higher proportion of the overall volume of factor VIII that's used for prophylaxis versus on demand use? So is it 35% of patients are on prophylaxis, but what proportion of sales come from that setting? Yes. So the rule of thumb is that a patient who's treated on demand will roughly use between 2 and 3 times more factor when they switch to prophy. So in general, if a third of patients are on prophylaxis, they will consume just slightly more than 2 thirds of drug. Yes. Okay, perfect. Then my second question was, I just wondered if you could talk us through a little bit more. I know you gave some kind of detail on the launch plans, but could you talk us through maybe country by country around the first launches and where which countries there are additional hurdles in? I know this might be different from a standard drug launch, but and the sort of additional hurdles in terms of reimbursement in France and Italy, etcetera? How long is that likely to take? And why is it that there's a lag in the tender markets? And can you just highlight the major tender markets for us? Sure. So maybe a couple of broad comments to put your questions in a context, Richard. I think the sense we have is that to fully penetrate Europe across all of the 30 EU countries, 27 EU countries plus the additional 15 or 18 countries that sit in our territory outside of Europe. The totality of that penetration is going to be about a 24 month process. We will lead in the traditional free access or free pricing markets such as Germany, which have the advantage also of being the largest markets. And in that respect, our launches will be very similar to any drug launch that occurs in Europe. And it will be similar also in that the reimbursement pool, the money that's put aside to treat patients with hemophilia is an existing pool in all of the markets that we're going to be working in. And that's quite a nice distinction from a more traditional rare disease launch where often the funds are not earmarked for treatment of a population that doesn't otherwise have access to treatment. Now having said that, there are many ways we're like other drug launches and we'll be proceeding through Europe like many other companies would do. To your point, there are some peculiarities and some of them are related to countries and not related to us and others are related to hemophilia. So the peculiarities that are just related countries and not related to us or to hemophilia are countries, as you pointed out, like France or Italy that have more structured reimbursement processes that involve a more lengthy engagement with their paying authorities based on an initial dossier submission. And then at different times, a discussion about either managed entry agreements or a view on how prices will be set. In some cases, there will be an assessment of the innovation value, etcetera. But those are relatively well structured, well understood and predictable processes that we're very well prepared to engage in and move through. I think the 3rd sort of category, things that are peculiar to hemophilia, there are certain markets that have restructured tender processes for hemophilia commissioning. Some of those are commissioning traditional products like the UK. We would not expect that kind of thing to lag. But there are markets that tender, for example, for only plasma products and we would not expect to try to compete in a pure price based tender where plasma is the dominant product with a new next generation product. And then that was the spirit I think of what Alan was saying about the sequencing. Okay, understood. And then I'm just going to push for one final one. Actually, Biogen set quite a high hurdle in terms of what can be achieved with strong launch. But as you've talked about European markets more fragmented, it's going to take longer to address those reimbursement discussions. So I wondered if you could help us with some kind of benchmark of a range of what you think a successful launch during the first 6 to 8 quarters might look like on a relative basis to what's been achieved by Biogen? Yes. Maybe just to reinforce one thing Alan said, we have absolutely the same or even a higher level of ambition than Biogen did for our launch in any given country. We have absolutely the same view of final penetration and our ability to really significantly impact the outcomes for patients in every market that we will enter. It's just that we want to be realistic about the fact that we will be integrating the impact in each of these markets over time as they come on in alignment with their own reimbursement timelines. So having said that, I think the relative final state of penetration and entry into our markets as a whole should be relatively similar to what I think Biogen has experienced. Albeit, we do expect to launch Eloctate for a much longer time without any competition and we expect to launch Alprolix in direct competition where Biogen has started without Alprolix without competition. So there will be those external factors that are different. So I think the idea is just that our slope is necessarily going to be a little lower and take a little longer to come to the same final place. Okay, perfect. Thank you. Yes. Thanks, Richard. Next question comes from Eleonore Fung at Goldman Sachs. Please go ahead. Hi. Thank you for taking my questions. Three questions, please, if I may. Firstly, just on Elekta, just wondering if you could provide sort of any early commentary on how you're thinking about pricing sort of relative to the other short acting factors? Secondly, Jeff, on your comment on non organic growth, just wondering if you could comment on how you're thinking about potential M and A either for the pipeline or marketed products to add to your platform, specifically curious on what therapy areas are on your wish list, how big are the deals that you're thinking about? And then thirdly, just on gross margin, if you could provide any early commentary on the gross margin evolution into 20 sixteen-twenty 17 as your product portfolio shifts to include higher margin Elocta sales? Thank you. Sure. So I think that I'll try to take swing at all 3, Eleonore. So the pricing question, it's a great one. When we get our label at the time of the EC decision, we'll make a final decision about our pricing. Obviously, what we're trying to balance here is the very substantial innovation value that we feel we're bringing to the market. That we don't want to abandon that. At the same time, we understand that we have a window to work in. We'd like this product to be as accessible as possible for as many patients as possible. And the number one item of feedback that we get from the market when we discuss this product from physicians, from payers, from patients is a plea to keep the pricing model accessible so that it can become really a next generation mainstream product. So again, we've been thinking a lot about this and we will come to a decision shortly after the EC approval. With respect to non organic growth, it's very plain today that non organic growth is going to play a key role in 2 parts of the portfolio. So first, as Alan said earlier, we've consciously tempered the rate of deal making in our partner product portfolio in order to allow ourselves to build to a point of real readiness for the hemophilia launch. We are now ready and we are absolutely expecting to reinitiate the flow of deals on that partner platform and we'd like to be quite brisk in doing so and thoughtful about looking for both high value products and products that reinforce the areas where we're working that platform today. Secondly, as I said earlier, our pipeline is absolutely biased towards early stage rare disease biologics and to refill our late stage pipeline, M and A partnerships, licensing deals are going to be the key source for that. So we've been looking to provide therapeutic area overlaps in genetics and inflammation and in hemophilia and benign hematology. These are the three areas where we have very strong existing infrastructure. And of course, we'd be open to other areas where we have expertise like neonatology, but those are not places where we have existing infrastructure. And lastly, with respect to size, I think we're really open to lots of ways of thinking about deal making, although it would be more consistent with our past business practice and philosophy to see a string of pearls approach rather than a giant bet the company type of transaction. But of course, you never know how these things will go until you get down the road a little bit. And then lastly, with respect to your point on gross margin, we haven't guided on that. And I'm honestly not sure whether we will guide on margin next year. But I think you can quickly kind of grasp that as we start to sell into the Elocta and eventually into the Alprolix space, it will have a transformational effect on our gross margin and eventually on our operating margins as well. Did I lose you, Eleanor? Thank you very much. Sure. Next question comes from Erik Hultgaard at Carnegie. I have 2 on hemophilia, but I'll start with a question on Orfadin. I would like to hear some thing, if you could share some details about the launch so far of the solution and specifically details regarding how much how large share of your Orphan European sales come from the solution right now? And what type of feedback has have you received so far? Secondly, on hemophilia, the organization that you have in place right now of around 100 people, could you give us some color on how this will change over the coming 24 months process of getting access, will that expand meaningfully? Or are you happy with the organization that you have in place? And finally, penetration on in the on demand segment of hemophilia A, can you give us some color on how that has developed in the U. S. Following the Biogen launch? Thank you. Okay. Yes. Thanks, Eric. On the Orphan and Liquid, I think we would anticipate converting somewhere around 30% of the overall population who's treated today with Orphan to the suspension with the idea that patients in most markets below 12 years of age would switch. And in some particularly Southern European markets, we might be switching up to even a 14, 16 or 18 years of age. So we're not sure where it will land, but that's our working hypothesis at the moment. The rollout of the suspension is actually just getting underway. So today the proportion of sales is near 0, but we will see through the course of the Q4 and through the year next year, the impact of the rollout of the suspension. So we'll be able to update on that as we get a better flavor for it. To your point about the hemophilia organization at 100, we're close to 90% plus where we would like to be with the organization. We certainly will incrementally expand as their territories expand, but just incrementally, we don't anticipate having an organization at any time larger than about 110 or 120 people and not anytime soon. I think on the good question around the penetration and on demand, I don't have access to specific figures. But if we look at the outcomes in the extension study to ALONG when patients were rolled over from the weekly treatment on demand group and also in the control group for on demand where they just received pure on demand treatment. The majority of those patients have elected to go over either to weekly treatment or to every 5 day treatments. And they've stayed on either weekly or on demand treatment in the post study observational phase of the ASPIRE trial. So I think at least based on our real world post trial experience, the experience of being on weekly treatment with a lot of data is something that patients seem to prefer and are willing to sustain. I think the end market feedback so far, which I admit in my view right now is quite anecdotal, suggests that that is kind of hanging together for patients who previously had severe breakthrough bleeding with on demand treatment regimen, it's attractive and possible to switch now in a way that it wasn't before. All right. Thank you. Sure. And we have a question from Nguyen Yang at Jefferies. Please go ahead. Thank you. Thank you for taking the follow-up question. I have a question on X10 Factor VIII. I thought that there was in the preclinical stage, but in this slide it shows exploratory stage. So can you give us some update on the product? So I'm not exactly sure how to make that distinction, Eun, because I'm not exactly sure how Biogen uses those terms. I know for sure that their ambition is to move the product into a formal development phase next year. And I don't know what they've said about when they expect clinical investigations to begin. But based on how I understand the program, it really remains quite relevant for us as a successor molecule in the timeframe of our commercial lifetime for Eloctate and Elocta. Okay. Recently, Biogenidec, my personal communication, they said it's likely 2016 entering clinic. For the 3, now that you have disclosed the indication that product is targeting, can you comment when they might go into clinic? Thank you. Sure. So assuming that we're able to solve some of the challenges around the production, We have today a timeline that allows us to enter the clinic in 2018. Obviously, we have a lot to learn about the field. We have a lot of engagement to conduct with patients and physicians and not least with the regulators. So we'll be updating as we get further down the line with the program. But 2018 is how we're thinking about it today. Thank you. Yes. Thanks, Ian. And we have a question from Richard Parkes at Deutsche Bank. Just a couple of financial ones. Firstly, just on cost phasing. You had, I think, a sort of bolus of costs in the Q4 last year. I'm just wondering whether we should expect a similar trend this year? Or is it going to be more evenly spread? Because I know some costs can be kind of heavy in the Q4. And then I also wanted, are you able to give any kind of guidance about what impact when you start to consolidate development costs associated with the hemophilia programs, have you got an idea of what the run rate that might add in terms of costs? Yes. So I think for us in general, this has I think been true in other companies where I've been, Q2 and Q4 are always our highest spend quarters from an OpEx perspective based on activities and sort of ambition level in the market. So I would expect that Q4 will have a higher cost base compared to other quarters. And in our case, it's also the time that we're really ramping into readiness for sales for Elocta. With respect to the costs that we will bring in with Biogen next year, they will be significant. This is a major brand that is running at over $300,000,000 on a run rate basis. And so the cost structure that we carry for the hemophilia franchise will be substantial that we bring in on a 50% shared basis. However, we don't see that it will be unmanageable or will change our commitment to profitability and growth as we've led people to think about. So as soon as we have granularity on where those numbers will really be with Biogen, we'll include that in our guidance when we have our full year earnings in February. Okay, great. Thank you. And then just one final one while I'm here. You were talking about the Orfadin liquid formulation. I'm just wondering whether any of your competitive intelligence is picking up any sign of generics at any stage? No. We know of a generic capsule application in Turkey from a local producer. That's not a producer that has any operations in any other territory. That application has not yet been approved. And so other than that, we have no indication of any generic activity either within Turkey or in any other territory. Okay, great. Thank you very much. Yes. Thanks, Richard. Okay, Mallin. While you're waiting, let me just say as usual, thanks very much for the engagement and the questions. If there are any questions that we have not fully answered or ones that you didn't get a chance to ask, please feel free to reach out to us for as always available to engage and try to clarify where we haven't been able to cover material in this call. Mon, are there any other questions waiting? There are no one in the line for questions. Okay. Well then let's wrap there and close the call. Just I think thanks again and thanks to you Malin for hosting.