Standing by. Welcome to the Idorsia Nine Months Financial Reporting 2023 Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star and one, one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Andrew Weiss. Please go ahead.
Thank you, Nadia. Good afternoon, good morning, to you all. My name is Andrew Weiss, and I want to welcome everyone to our webcast today to discuss the nine-month 2023 financial results. Presenting today, we have our CEO, Jean-Paul Clozel, and our Chief Financial Officer, André Muller. Then joining for the Q&A session, we will also have our new General Manager and President of Idorsia U.S., Tosh Butt, and our President of Idorsia U.K. region, Jean-Yves Chatelain. Next slide, please. Before handing over the microphone, I need to remind everybody that we will be making forward-looking statements. You have therefore been appropriately warned about the risks and opportunities of investing in Idorsia shares. With that, I hand over to Jean-Paul for his introductory remarks. Next slide.
Good morning, good afternoon, everyone. The third quarter was a very active time for us as we implemented numerous measures to adapt the company. Today, I'd like to run through these measures and then describe the current performance of QUVIVIQ around the globe. Then André will take you through our financial results. Next slide. In just the past few months, we sold our Asia Pacific business, not including China, for CHF 400 million. We reduced the workforce at headquarters by around 50%, and we reduced the number of research projects. We changed the leadership of our US commercial operation. We started by taking the reins in September. Tosh has hit the ground running and is already joining us on the call to answer questions on the performance of QUVIVIQ in the U.S. And very importantly, we reacquired the worldwide rights to aprocitentan.
Next slide. I am very happy that we came to the agreement with Janssen for the return of aprocitentan to Idorsia. Recently, the WHO has characterized hypertension as a key public health issue. Aprocitentan is the first antihypertensive drugs, which works via a new mechanism of action in 30 years and has been shown to be effective in patients with resistant hypertension. With this deal, Johnson & Johnson, which remains a significant shareholder of Idorsia, continues to have a vested interest in the success of aprocitentan and Idorsia. The review process with the US FDA is progressing, is progressing well. Following the provision of additional REMS materials to support the streamlined REMS, designed specifically for aprocitentan, the company is working towards the PDUFA date of March 19, 2024. We are laser focused on gaining approval and getting ready to provide aprocitentan to patients as soon as possible.
Next slide. Let's move to the performance of QUVIVIQ in the U.S. Since the launch of QUVIVIQ in the U.S., more than 275,000 prescriptions of QUVIVIQ have been dispensed. As explained previously, our approach at launch was to drive demand for QUVIVIQ for both early product adoption and payer negotiation. In January, ASI added QUVIVIQ to their national preferred formulary. This was followed by CVS National coverage in July to begin within Tier 3, but in September, we were added to Tier 2 formulary of CVS Caremark, putting us at parity with the other two DORAs available in the U.S. Additionally, through the quarter, QUVIVIQ has been added to several employers' plans. We also expect the first Medicare Part D coverage to begin in January 2024, which will open an entire new channel to the team.
With the improved access, we decided to move our specialty pharmacy partner from VitaCare to KnippeRx, which is better positioned to pull through paid prescription as they can dispense both commercial, payer paid, and consigned Idorsia paid prescriptions. VitaCare could only dispense consigned prescriptions and rely on partner pharmacies to dispense commercially. Next slide. As you can see here, prescriptions volume were flat, quarter-on-quarter, so a temporary product volume volatility was experienced during this transition period, which is to be expected from a major business model adjustment in addition to the seasonality impact.... Already QUVIVIQ prescription volume is returning to growth, which is expected to accelerate from this new prescription volume baseline.
I can tell you that in the last couple of weeks, we have seen weekly growth of 8% in total prescription, so I'm confident that the impact of the decision to transition to this new model is now behind us. Next slide. Despite the negative impact for a few weeks, we start to see the benefit of this transition from VitaCare to KnippeRx. In the third quarter, we were at 18% paid prescription, an increase of 11 percentage points from the previous quarter. As you see here on this slide, a year ago, we were only at 24% payer paid prescription. Actually, in September, we were at 57% paid prescription, so we are clearly seeing the results of the increased coverage and the switch of the specialty partner. And as our access continues to grow, so will our percentage of paid prescriptions.
We feel we now have an effective model in place to grow both QUVIVIQ revenue and volume. Next slide. We have seen also some great milestones for QUVIVIQ in Europe this quarter. Remember that QUVIVIQ is the first and only dual orexin receptor antagonist in Europe. We have now made it available in five European countries, Germany and Italy last November, Switzerland at the end of the last quarter, and most recently in Spain and the U.K. Pricing and reimbursement processes are progressing well in key European markets. In the U.K., the recently published final guidance from NICE means that patients in England and Wales will have broad, unrestricted access to QUVIVIQ on the NHS. In Germany, the G-BA review of the four-week prescription, prescription limitation, so-called, resulted in the limitation being lifted, and we anticipate the official publication in the coming weeks.
This makes QUVIVIQ the only sleep medication in Germany that can be prescribed for long-term treatment. In addition, we can now plan the submission of a second AMNOG dossier for the treatment of chronic insomnia disorder beyond four weeks, reflecting the indication in chronic insomnia disorder granted by the EMA in 2022. We aim to make this submission in February 2024. This great progress enables European patients with chronic insomnia to fully benefit from a treatment that has robust clinical data, demonstrating improvements in sleep quality and quantity, as well as daytime functioning. Next slide. As you would expect, we see a sustained sales growth momentum in this quarter in Europe. Despite the insomnia market seasonality usually impacting the third quarter, QUVIVIQ absolute volume increased significantly from Q2- Q3 in every market.
QUVIVIQ market share also increased in every country, despite entrenched conventional hypnotics. In total, already 55,000 months of treatment of QUVIVIQ have been prescribed to patients with chronic insomnia in Europe. Next slide. I am fully aware that Idorsia needs additional funding in the coming months. As you can see from this slide, we have a rich portfolio, which give us strategic flexibility and multiple avenues to explore potential fundraising through partnerships of one or a combination of products. That bring me to the end of my prepared remarks, and I will now hand over to André for the financial results. Please, André, next slide.
Thank you, Jean-Paul. Good afternoon or good morning to everyone. As Jean-Paul, as you can imagine, my primary focus is on the near-term funding to extend the cash runway beyond mid February 2023. Next slide, Nadia, please. Here you can see the net sales as are reported, so including PIVLAZ, Q1, Q2, you've seen CHF 18.5 million, CHF 13.5 million, CHF 18.9 million, and the CHF 1.3 million for Q3 is actually the first 19 days until we close the transaction with Sosei.
And this will be the final number for the full year regarding PIVLAZ, because as Jean-Paul mentioned, we have sold the Japanese business to Sosei. Now, coming to the scope we operate, you see QUVIVIQ growing 4.3, 7.4, 8.4 in Q1, Q2, and now Q3, leading to a total net sales of CHF 20.2 million. And as Jean-Paul explained, and Tosh will also give you more detail, we had a hiccup with the transitioning between VitaCare and KnippeRx, which explain the modest increase in Q3. Next slide, Nadia, please.
On this one that you see, you see the impact of the Sosei deal, which, of course, has a huge impact on the reported numbers in Q3, so for the nine months. Of course, it will also be valid for the full year. So, we have already received CHF 396 million cash. CHF 10 million in June, yeah, CHF 386 million mid-July, and we expect ± CHF 4 million in October. Later October or early November, we see a true-up with your closing balance sheet at the date of the closing.
The impact on the P&L is a total of CHF 363 million. You get an impact of CHF 68 million on the contract revenue. You get a gain on the sale of a disposal, which comes as a reduction of the OpEx for CHF 302 million, and an impairment of intangible assets. This was relating to a clazosentan, specifically with your license to Roche, which has been assigned actually to Sosei of CHF 7 million. Next slide, please, Slide 15. So here you see the non-GAAP operating results as reported in blue and pro forma in green. So revenue 131, but actually CHF 29 million.
The CHF 20 million sales you saw a few slides ago in net sales and CHF 9 million of contract revenue. Cost of sales is also lower because we no longer account for the rights fees are paid on clazosentan to Roche because this is now assigned to Sosei. Research is as you know group research efforts we did not have any research activity in Japan so CHF 74 million. SG&A development local specific development activities in Japan which explains the difference between group reported 138 and pro forma 130 excluding Japan.
And SG&A, because in order to launch clazosentan in Japan and also prepare for the registration of clazosentan in South Korea, you see a CHF 22 million difference between group as reported and pro forma, excluding Japan and South Korea. So the main difference, as we saw, is the impact in revenue, which which explain that the non-GAAP operating results as reported are 387, but on a pro forma basis, so the scope of a business we currently operate is CHF 456 million. Next slide, Nadia, please. So on slide 16, you see we start again from the reported and pro forma non-GAAP operating results.
You see a little difference between reported and pro forma, except of course, in the reported the deal, the impact of CHF 295 million, which is the addition of the, again, on sale of CHF 302 million, and the impairment of the intangible asset. Again, this is offset into your OpEx, in U.S. GAAP numbers. Yes, the U.S. GAAP operating results are shown at CHF 145 million, but on a pro forma basis, we are at CHF 507 million. Next slide, please. Here you have a comparison. We'll not spend too much time on this one.
Again, on the pro forma numbers, but comparing 2023, the first nine months of 2023, the first nine months of 2022. As you can see, we have curb on the OpEx. Research is going down CHF 74 million versus CHF 86 million. Development is going down CHF 130 million versus CHF 148 million. SG&A, mainly marketing and selling is significantly going down to CHF 77 million versus CHF 333 million. And our revenue are growing mainly through net sales with the launch of QUVIVIQ, because now we speak in the pro forma numbers only of QUVIVIQ.
As a result, you see that we almost saved compared to the comparative nine months, 2022, almost saved CHF 100 million, leading to a pro forma non-GAAP operating results of -CHF 456 million. Next slide, please. Same here with the U.S. GAAP operating results. The impact we saw on non-GAAP operating results almost no difference with the R&D and stock-based compensation. We booked a restructuring cost at the headquarters following the cost reduction initiative launch in July, which is almost complete of CHF 11 million, leading to a pro forma CHF 507 million. Next slide.
So now the cash flow. Here, the cash flow again, trying to give you a view of how the liquidity beginning of the year, CHF 466 million, how we went to CHF 255 million by the end of September. You've seen the pro forma revenue, CHF 29 million, again, excluding the impact of CHF 68 million of the license of QUVIVIQ to Sosei. Non-GAAP OpEx, we discuss it at length, CHF 486 million. The cash so far from the Sosei deal, CHF 396 million. CHF 3 million-CHF 4 million more expected in the coming weeks.
Working capital changes of 85 and 65, which I put as other in order to reconcile these numbers with this waterfall with the pro forma revenue. So, CHF 255 million cash by the end of September. Next slide, please. I was on the road with Andrew over the last few weeks and I wanted to add this slide for the sake of all investors in Idorsia. The indebtedness, as reported, is CHF 1,293 million.
It's mainly with the two bonds, the bonds that will mature in July 2024. That's the CHF 200 million convertible bond, which is accrued for CHF 199. You have CHF 597 of the 2028 convertible bond, nominal value, CHF 600 million. And that's really because the strike now, both bonds are really out of the money with a strike price of north of CHF 30. So this is, I would say, not a U.S. GAAP, as you can see, but this is these are really the convertible bonds that we would have to pay should we not be able to reach the strike price.
The J&J convertible loan of CHF 335 million will mature at the latest in June 2027. J&J can convert this loan at any time into a new share, up to 29.1 million shares. The only reason why it's a debt, according to US GAAP, is that there is one single reimbursement of this convertible loan, one single feature, which would be a change of control of Idorsia. If not, this loan will eventually, at the latest, in June 2027, be reimbursed in additional share, 21.1 million, as said.
The other one is the sale and leaseback because of some features where we have an option to buy back the buildings sold last year for CHF 162 million. The roughly CHF 1.3 billion debt, as you can see, has different nature with fundamentally CHF 800 million in nominal value of convertible bonds. 2024 and 2028, CHF 200 million and CHF 600 million, respectively. This does not include the conditional consideration for the reacquisition of the aprocitentan rights. Let's go to the next slide. As you have seen, in the press release published early September, we reacquired the worldwide rights to aprocitentan from Janssen. Jean-Paul mentioned it.
JNJ is entitled to up to CHF 306 million. Only if the drug is approved in the U.S. for 90%, so more or less CHF 275 million, and 10%, or roughly CHF 31 million, if it's approved by EMA in Europe. Idorsia will pay to JNJ 30% on any out-licensing deal of aprocitentan, 10% on any other out-licensing deals, and low- to mid-single royalties on the annual net sales. So just to give you also, because we got this question, why CHF 306 million, quite an odd number? This was the conversion of $350 million.
This number of $350 million, that's more or less the amount which was invested by Janssen in the collaboration on aprocitentan, with $230 million opt-in fee back in December 2017, and 50% sharing of the development filing and CMC costs, since the opt-in until September 2023. Next slide, please. As Jean-Paul mentioned, we had a busy third quarter, reacquiring the aprocitentan rights, going through the cost reduction initiative at the headquarter, closing the Sosei deal.
What is reflected in this newer guidance, CHF 600 million operating loss and CHF 670 million US GAAP operating loss, is reflecting the efforts made by the company in order to also prioritize the pipeline portfolio and reduce the spend. So next slide, please. So as you can see, we are adapting the company to create a sustainable value. And with this, I hand over to Andrew.
Thank you, André. Thank you all for your prepared remarks, and we now have time to address questions. As mentioned at the beginning, we are now joined by our President of Idorsia U.K. region, Jean-Yves Chatelain, who joined us already at the last call. We also have our new General Manager and President of Idorsia U.S., Tosh Butt. Prior to joining Idorsia, Tosh served as Executive Vice President and Chief Operating Officer of ChemoCentryx. Tosh has a rich expertise spanning complex operations and the commercialization of products across different disease areas and medical settings. Thank you for joining us today, Tosh. In terms of logistics, I will ask the analysts to ask one question and jump back into the queue. Operator, please open the lines.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by, we will compile the Q&A roster. This will take a few moments. Now we're going to take our first question, and it comes from Peter Verdult from Citigroup. Your line is open. Please ask your question.
Yeah. Thank you, Peter Verdult, Citi. One question, for Andre, on financing. Just in light of the liquidity position, can you give any comfort or color, on the QV, AppPro, and/or pipeline deals that you have publicly stated you're seeking to provide a cash runway to break even? I realize you can't go into big details, but anything you can say on level of interest, confidence on getting something done in Q4 will be appreciated. And just to tack on, Andre, this is a second part of the first question on financing. Just in light of the current share price, is it fair to assume that the backstop rights issue that you publicly talked about is now off the table, or is that still on the cards? Thank you.
Well, thanks, Peter, for your question. As you said, it's premature to give you too many details. We have a few balls in the air with different scopes. Nothing is excluded today regarding the scope of
... business assets that we could partner. Of course, we aim to find right terms for such outlicensing deals. I would say nothing is also excluded, even if an equity raise or an equity linked deal based on the current stock price is not our favorite option. But, as I said, it could be really a backstop option if need be, i.e., we would not be able to close a deal on a sizable deal with one of the assets that could be a partner.
Thank you. Very clear.
Thank you, Pete. Thank you, André. Operator, next question, please.
Yes, of course. Just give us a moment. Now we're going to take our next question, and it comes from Brian Balchin, from Jefferies. Your line is open, please ask your question.
Thanks. It's just on QUVIVIQ. Maybe it's one for Tosh, but can you just help us understand what gives you confidence in seeing inflection in Q4, just as we're not really seeing that pick up in IQVIA based on early October data? And then I see that you said you've got 57% paid scripts in September, so that's 11% up from Q3. But we saw an 11% increase in paid scripts from Q2 to Q3, which didn't translate into meaningful jump in sales. So what gives you confidence that Q4 is going to be different? Thank you.
Hi, Brian. You can hear me okay?
Yeah. Yeah.
We can. First of all, thank you for the question. It's a pleasure to be here. Yeah, look, first of all, look, we're given our new reduced TRX prescription volume baseline, following a flat third quarter, you know, we've had to have a reduction in promotional efforts. We're expecting that and with continued market access improvement, we expect to see some consistent volume growth now from our new baseline. In terms of inflection points, you're aware that on September 1, we got CVS Commercial access provided, and we're focused on pulling that through. We've also got a couple of regional plans that have given some additional access in the commercial space, and our account director team are working hard to pull that through.
For example, Blue Cross Blue Shield in Florida, which is the largest Blues plan, has added QUVIVIQ. Blue Cross Blue Shield in North Carolina, which is also a top five Blues plan, have added QUVIVIQ, too. Our team continues to work on those every day. And then looking forward, the next and bigger inflection point we would expect will be in January, where we win our first Part D access with the Optum United group. I stop there?
Thank you.
Thank you, Tosh.
Thank you.
Operator, next question, please.
Yes, of course. And the next question comes from the line of Rajan Sharma from Goldman Sachs. Your line is open, please ask the question.
Hello, thanks for taking my question. So just on aprocitentan and the new PDUFA. So firstly, could you just kind of help us understand, the streamlined REMS and the kind of additional color on that, and specifically, I guess, the rationale as to why that wasn't included in the initial filing? I guess if something changed since that initial filing versus now. Thanks.
Okay. So, as we have mentioned, the REMS will be addressing the risk of teratogenicity. And, we have provided the data concerning you know the risk in human beings because macitentan, and we could provide some data related to macitentan to the FDA. And we also provided some preclinical data, giving a rationale for the low risk, which we believe is the risk with aprocitentan. And, the FDA has really indicated us that first, the REMS will be only for teratogenicity. There is no liver REMS, that was we were informed about that.
The second thing is that we will try to make this REMS lighter, which means that it is, and, you know, this is still under discussion, but it should only be requiring the pharmacy and the doctors to register, so to be aware of the teratogenicity risk. But there will be no need for the patient to act in a way. This is just an information REMS. And because it is different from the other because of the other REMS with androgen receptor antagonist, it requires time for the FDA to put that in place with us.
Thank you, Jean-Paul. Thank you, Rajan. Operator, next question, please.
Yes, of course. Just a reminder for the participants, if they wish to ask a question, please press star one one on the telephone keypads. Now we're going to take the question from Sushila Hernandez, from Van Lanschot Kempen. Your line is open, please ask your question.
... Yes, thank you for taking my question. Could you elaborate on your pre-launch activities for aprocitentan, and in particular, your cash burn on that? And also, what kind of scenarios do you have in mind for potential commercialization activities? Thank you.
Jean-Paul, do you want to take that question, please?
Okay. So, this is really, we just got recently the rights back. So we are analyzing the situations, and we will take a few weeks in order to really decide the best way to create value with aprocitentan. It's, we got a lot of information from the work done by Janssen, and we are analyzing, and no decision has been taken. So for now, we are really more making a sort of analytical work, consulting with experts, and also starting to consult for with the payers. So, and we will take decision in a later stage.
Thank you, Jean-Paul. Operator, next question, please?
Just give us a moment, please. The speakers are now for the questions, and I would like now to hand the call over to Andrew Weiss for any closing remarks.
Operator, can you call for another question, please?
Yes, of course. So now we're going to take another question. Just give us a moment. Now we're going to take the question from Peter Verdult, from Citi. Please ask the question.
Yeah, thanks. Me again, just my last question. I mean, Jean-Paul, just a blunt question for you. Given the predicament faced and the timelines you're working to, how committed are you, or are you still very 100% committed to pursuing a standalone strategy for Idorsia, or have you set yourself a sort of a gating factor when other considerations might be on the table? Thank you.
Well, I think that, you know, we are not. I think we are evaluating many licensing, partnering, and the question of the sale of Idorsia, especially at this price, is not on the table.
Thank you.
I think that's clear. Thank you. Thank you, Jean-Paul. Operator, was there another question that came in?
There are no further questions at this time.
Thank you very much. So this concludes our call for today. Thank you for your ongoing interest in Idorsia, and we look forward to speaking to you again. Operator, please close down the lines.
Thank you. That concludes our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.