Orexo AB ADR (OTC:ORXOY)'s Q3 highlighted a strong financial quarter. Zubsolv US revenue declines of 15% vs Q316 (Q316 benefited from significant one-time wholesaler stocking of Zubsolv) were offset by tight cost control, which resulted in positive EBITDA and operating cash flow generation for an eighth consecutive quarter. For 2018, US commercial and public formulary coverage has improved, which will have a positive impact on US Zubsolv sales from 1 January vs 2017 sales. However, a continued skew towards the public market segment in the US opioid dependency market class in general has led to downward revisions to our US Zubsolv peak sales forecasts. Also, the EMA has approved Zubsolv for Europe and partner Mundipharma should launch in H118. Our revised valuation is SEK2.7bn.
US Zubsolv remains key in the near term
Market access is the main driver of market growth and thus market share for Zubsolv in the US. Orexo is optimising its investment strategy to focus on growth in the public and commercial segments. Zubsolv’s position in both these segments from 1 January will be its strongest to date; Zubsolv has gained preferred position on CVS 2018 formulary plus some exclusive preferred positions within Medicare Part D; this should have a positive impact on US Zubsolv 2018 sales vs 2017 sales.
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