Q2 2023 Organon & Co Earnings Call
Okay.
[music].
Yeah.
Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the arc organ on second quarter 2023 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star Keith.
By the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
As a reminder, this call is being recorded.
I would now like to turn the call over to Jennifer <unk>, Vice President Investor Relations. Please begin your conference.
Thank you Audra and good morning, everyone. Thank you for joining Oregon on second quarter 2023 earnings call with me today are Kevin Ali organized Chief Executive Officer, who will cover strategy and operational highlights and Matt Walsh, Our Chief Financial Officer, who will review performance and guidance Dr. Sandra Milligan.
And our head of R&D will also be joining us for the Q&A portion of this call.
Today, we'll be referencing a presentation that will be visible during this call for those of you on our webcast. The presentation will also be available. Following this call on the events and presentations section of our working on Investor Relations Web site at Www Dot Org and on Dot com.
Before we begin I would like to caution listeners that certain information discussed by management today. During this conference will include forward looking statements actual results could differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the Companys filings with the Securities and Exchange Commission, including our <unk>.
10-K, and subsequent periodic filings.
In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP.
A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation, I'd now like to turn the call over to our CEO Kevin Ali.
Good morning, everyone and thank you John welcome to today's call, where we'll talk about our second quarter 2023 results.
Our revenue for the second quarter was $1 $6 billion up 4% at constant currency compared with the prior year period.
In the second quarter of women's health and Biosimilar franchises grew double digit while our established brands franchise achieved flat performance again, demonstrating its continued stability adjusted EBITA was 530 million, representing a 33% margin.
Turning to the full year, given our current view of foreign currency exchange rates, we narrowed our guidance range on revenue from 615 to 645 billion to now six to five to $6 45 billion, which raises the midpoint of the revenue range by $50 million.
We also raised the lower end of our adjusted EBITDA guidance based on our latest visibility into potential milestone payments. The new range of the full year is 31, 5% to 33% a quarter of a percentage point higher at the midpoint compared with prior guidance lets review the.
Quarter in greater detail, beginning with women's health Women's health grew 10% on a constant currency basis, primarily driven by 12% growth in export log performance.
Performance of next one on in the U S was particularly strong this quarter with revenue growth of 19%. This reflects a 5% increase in the U S physician demand and increase in distributor inventory as well as the benefit of our pricing action in the third quarter of 2022 year to date <unk> is up six.
Percent outpacing the large market, which grew 3% over the same period, we expect continued demand growth in the United States, especially with the more than 35000 health care professionals. Currently prescribing <unk>. We also expect increasing demand outside the U S, especially in Latin American countries, like Brazil and Argentina.
As well as in Asia, and countries like Thailand, and the Philippines. We continue to believe that next dawn will achieve $1 billion in revenue by 2025, and we expect next one on to be a significant contributor to growth for the coming years.
Continuing our discussion of women's health and fertility was up 17% at constant currency as we have discussed China and the U S are large fertility market that together represent more than half of our current fertility business. During the second quarter, we saw significant growth in China, where there was a post COVID-19 rebound.
As patients returned to clinics for treatment, we have a very positive outlook for the fertility business in China for the remainder of the year in the U S utility market is growing and remains an attractive business for Oregon on we're seeing increasing demand from our existing customer base, but also since spin we've worked to improve the consistency and reliability.
We have our supply chain, which has allowed us to win incremental business from existing customers and to expand into new accounts in the reimbursed market demand is very strong in the U S market and we believe volume will continue to offset a competitive pricing environment over the intermediate term, we believe our global fertility business can grow in the high.
Single digit to low double digit range in line with our expectation for 2023.
Wrapping up on women's health as the Jada system, our device for postpartum hemorrhage year to date revenue from data has more than doubled, albeit off a small base and is fast approaching a threshold, where it will start to disclose its revenue in our product table.
During the second quarter, we added more than 300, new accounts. We are now in over 100 of the 150 largest birthing hospitals in the U S and more than 28000 mothers had been treated with data since launch the enthusiasm around data is palpable and ranges from a rising profile and scientific journals.
Like the Ruby studies upcoming publication to health care professionals, taking the social media to talk about the product overall, we are feeling very good about the future prospects for Jada.
Moving now to our Biosimilars business, where today I'll focus my discussion around the U S launch of <unk>, our Biosimilar for Humira.
Since launch all major wholesalers have placed orders for head Lima.
We are encouraged by our early traction is Oregon on is emerging as one of the few players earning spots on formulary then winning orders.
In approaching the launch of had Lima, we were very intentional in our market positioning and segmentation our pricing strategy focuses on simplicity. It was a deliberate choice and designed so that the savings to the health care system would be more transparent we price had lima to enable access and to bring the.
<unk> benefits of Biosimilars directly to the patients. We believe this is where we can offer the highest utility to patients.
For example, here, we're showing the two pbms, who have so far announced their formulary listings off Tomorrow and express scripts you can see we're organon has already been able to secure access within both pbms outside of the National formulary listings in the case of Optum Rx, we have secured more than half of our lives we unite.
Good health care in the case of express scripts between Sigma and Prime Therapeutics, we secured about a third of our lives crime.
Prime therapeutics as the fourth largest pbms and health plans are prime include some of the largest blue Cross Blue Shield plans in the nation. Many of these health plans are the dominant player in their respective states and for both Optum Rx and express scripts, we remain active in discussions for the custom health plan business.
While we're very encouraged by the access we have secured so far access alone does not guarantee success and access doesn't necessarily mean, the patients will get the product. This is why our strategy is expressly focused on customers that are not dependent on rebates, but rather the providers in the market who are focused on bringing the saving.
The biosimilars to the patients.
And we're not done the market is still evolving decisions from Pbms and insurers are still forthcoming.
Attributes will be a key and continuing to unlock opportunities. We continue to believe had Lima is positively positioned when it comes to its product attributes for example, our pen design received an arthritis foundation designation, which recognizes products that make life easier for those suffering with arthritis and other functional limitations.
We also develop the had Lima for you patient support program that features comprehensive resources, including our co pay program and dedicated nurse coaches, who engage with patients throughout their treatment journey.
One of the most important differentiators for head Lima is the five years of real world evidence covering tens of thousands of patients that we have collected from Samsung launched in Europe and from our own launches in Canada, and Australia. This data should give great confidence and comfort to prescribers and patients alike.
And we continue to move forward with our collaborator Samsung on the Interchangeability designation, we recently announced that the phase four study had reached its primary endpoints, which puts us on track for summer of 2020 for approval and finally, our product formulation is high concentration citric III aligned with the most prescribed.
<unk> of the originator a product that can create a frictionless experience for a patient is the best way to drive pull through that is what gives patients a better comfort level and will influence physician prescriptions.
The U S health care system needs biosimilars to be successful they fill a significant gap in more affordable options for some of the most chronic diseases people face, we're proud of our market positioning and pricing.
We're very pleased and encouraged by the signals we are getting so far and we believe we'll be able to secure further access as this market continues to develop.
Rounding out the top line discussion, let's move on to established brands year to date. The established branch franchise has grown 1% ex exchange as 2% volume growth has offset a 1% decline in price across the portfolio since launch we've encountered skepticism around how portfolio of off patent brands can demonstrate.
Great that kind of continued stability.
There are several reasons then over the next few quarters, we will highlight a few of them in detail last quarter, we talked about manufacturing optimization for Nathan asked and out of that to meet increasing demand, resulting from heightened promotional activity today I'll focus on our strategic approach to pricing.
And some lower priced markets lawmakers are backing policies that proposed to raise originator in generic prices, hoping to draw manufacturers back into the market and cure ongoing supply issues. This is true in select EU markets, such as Germany, France, and Sweden, as well as some APAC markets like India and Australia.
This isn't the case, we have work with policymakers to demonstrate how investments are important to ensure access to reliable and high quality manufactured products.
Whether we have been able to selectively increase our list price in many markets subject to meeting certain conditions.
An example is our luminary region, where currency devaluation and inflation provided a basis for allowed price increases in a number of countries beyond increasing list price. We've also scrubbed the channel for commercial and trade discounts improvements.
As we continue to look at this portfolio we are.
Enterprise opportunities that gives us greater confidence that the five year CAGR for this franchise will be relatively flat on a constant currency basis.
This June we entered into our third year as a Standalone company. Thanks to the hard work of our people around the world and their commitment to our vision and business each of our franchises are performing as good as or better than we thought they would.
Accordingly, we have grown our pipeline since launch in Nevada data assets to our portfolio, which includes some very interesting molecules in the early stages of development. This investment is key so that overtime, Oregon on evolve into a pharma company with a regular cadence of catalysts and an accelerating growth rate.
And our first two years as a company we continue to build a track record of good operational results, while also laying the groundwork for a successful future.
I'll turn it over to Matt now to talk more about the solid results for the second quarter in more detail.
Yeah.
Thank you Kevin beginning on slide nine let's walk through the drivers of our 4% constant currency revenue growth in the quarter.
Starting with the impact of loss of exclusivity.
Louis was negligible in the second quarter as it was in the first quarter and a small amount that we have realized year to date was it related to generic competition for nuvaring in the U S.
In the second quarter, we had about a $25 million impact from GBP in China related to last year's implementation around seven that included our cardiovascular products <unk>, which is sold as Eddie in some markets outside of China.
Year to date impact from BBB is about $50 million, which is tracking to our expectations for the year.
Moving across the price, we saw approximately $30 million of price erosion in the quarter as Kevin mentioned through various initiatives, we have been able to do a bit better on stemming price erosion and established brands, but given the nature of Biosimilars, we will see pricing pressure in that franchise. Additionally, in the United States, we're attempting to do.
Gained share in fertility, especially in reimbursed markets. So we have to price our products competitively in that channel.
We continue to see strong volume increases across all of our franchises about $116 million in the second quarter.
About 60% of the volume growth came from our growth pillars, Biosimilars nexplanon fertility, Jada and China retail.
The remainder came from volume growth within established brands.
The bar for supply other primarily represents revenue to Merck with the plus $5 million from this quarter, bringing us to a level with our expectations six months year to date.
As we have advised in the past. This revenue stream is essentially a series of lower margin contract manufacturing agreements that have been declining since the spin off and we'll continue to do well.
We will continue to decline going forward.
And finally, you can see the financial reporting headwind, we had in foreign exchange translation about 250 basis points for the second quarter, which is a function of more than 75% of our revenue being generated outside of the United States.
Now this has moderated from the first quarter. When we saw a 450 basis point headwind and we expect the impact of FX translation to continue to moderate through the end of 2023.
Now, let's turn to slide 10, where we take a look at revenue by geography the U.
Okay region grew 6% primarily related to growth and how does that and particularly in France as well as growth in Biosimilars in Canada, where multiple provinces are executing a mandatory transition from originator drugs to biosimilars.
Partial offsets in the quarter were mandatory price declines typical in Europe , as well as supply constraints related to the market action on injectable steroids as we are steadily rebuilding supply chain inventories to our desired stocking levels.
The us grew 6% in the quarter as a result of the strong performance across most of our key growth platforms, Nexplanon rent flexes, jada and to a lesser extent facility.
Asia Pacific, Japan declined 5% in constant currency in the second quarter, driven mainly by an unfavorable comparison to the very strong performance in the second quarter of last year when certain competitors in Japan were out of the market because they didn't receive GMP or good manufacturing practice certification.
Despite BBT, China grew 2% in the second quarter on a constant currency basis, driven by the Covid recovery in fertility and modest growth in the retail channel.
Constant currency growth in the <unk> region of 11% was mainly driven by solid contributions in women's health across contraception, and fertility coupled with robust growth from our established brands products primarily in cardiovascular.
This was partially offset by supply constraints related to the first quarter market action for injectable steroids as we just mentioned in the UK region.
The next few slides lay out our performance by franchise.
Kevin covered the highlights very well in his opening comments and the details are provided in the supporting earnings materials. So I'll focus on topics that may be relevant to your modeling as we think about the remainder of 2023.
I will start with women's health on slide 11.
Our key volume driver in both <unk> as well as our fertility portfolio results from expanded access moving from traditionally out of pocket markets into the reimburse segments. For example in the United States. The Dobbs decision has driven an increase in demand from patients obtaining nexplanon through providers.
Under the 340, <unk> program, which is a more highly discounted channel.
And in fertility, while volume demand is strong we are trying to expand access into the reimburse segments, which requires competitive pricing.
Ex U S. We've seen strong performance from fertility in La Mirror and also in China as patients return to the clinics post COVID-19.
Turning to Biosimilars on slide 12, Kevin covered the U S had Lima launched which began on July one, but I would also highlight that the second quarter was a very solid quarter for Biosimilars, which grew 15% ex FX in the quarter and has grown 18% ex FX year to date.
<unk> grew 20% in the quarter and is on track for its sixth consecutive year of annual revenue growth in the U S.
<unk> is weathering competitive headwinds in Europe , and more recently in the U S. But in the U S. The team has been able to substantially grow volumes to offset competitive pricing dynamics.
Turning to established brands on slide 13, as Kevin mentioned that franchise continues to demonstrate its durability. The team has been able to cover what was on a companywide basis about a percentage point of revenue headwind from the market action on injectable steroids different span and sell a stone and.
And we expect established brands to be flat for the full year on a constant currency basis.
Now, let's turn to key P&L line items on slide 14.
For gross profit we are excluding from cost of goods sold purchase accounting amortization and one time items related to the spinoff, which can be seen on table four in our appendix slides.
non-GAAP adjusted gross margin was 62, 9% compared with 66, 1% in the prior year period.
The year over year decline in gross margins is primarily due to product mix and FX translation as well as inflationary cost pressures that impacted distribution and employee related costs.
Our adjusted EBITDA margin was 33% in the second quarter compared to 32, 3% in the second quarter of last year.
The increase in adjusted EBITDA margin was primarily result of $97 million of IP R&D and milestones in the second quarter of last year were no such costs were incurred in the second quarter. This year.
With regards to IP R&D. These milestones are subject to a great deal of uncertainty and are difficult to forecast.
Based on our current view into the rest of the year, we do not anticipate any additional IP R&D payments in 2023 tied to current assets in the portfolio.
That includes $25 million tied to the IND acceptance for <unk>.
Last quarter, we said that the IND for <unk> could be filed as early as the second quarter of 2023.
Since then.
Additional development work Thats required to inform our clinical program for this asset.
As a result, we currently do not have an updated date for filing the IND.
And we will plan to evaluate future development of this program as new data is available.
non-GAAP adjusted net income was $336 million or $1 31 per diluted share compared with $319 million or $1 25 per diluted share in 2022.
The year over year increase in net income was a result of higher adjusted EBITDA compared with the second quarter of 2022 as well as the tax benefit in the second quarter related to foreign earnings.
This was partially offset by an increase in interest expense related to our variable rate debt.
Turning to our net leverage ratio on slide 15.
Reiterating comments I made on our last two earnings calls I said that we would see upward pressure on our net leverage ratio through the third quarter ultimately ending 2023 close to where it was at the start of the year.
This is both a function of investments we've made to support our business development strategy that have an impact on our trailing 12 month EBIT calculation as well as the debt figure that shows up immediately when the dollar weakens because it increases the translated value of our euro denominated debt on the balance sheet.
Turning to slide 16, we provide a closer look at our cash flow.
As a reminder, in 2022, we generated just over 75% of our annual cash flow in the second half of the year and we expect this year to follow that same pattern.
The biggest use of cash in the first half as working capital. There are a few items in working capital that are timing related and we expect to be absorbing cash in the first half of the year and then releasing it in the back half and that includes certain accruals, which for instance.
<unk> annual incentives among others that represented about $110 million of that $440 million working capital use.
There's about $130 million use of cash related to our planned first half inventory build to support the growth of the biosimilars business, including the head Lima launch and to achieve targets fill rates across the portfolio in.
In addition, as inventory turns the replenishment cycles reflect the impact of both inflation and foreign exchange on our purchased raw material and labor input.
And if you are tracking our trade days sales outstanding or DSO, you'll probably notice that metric ticked up by about five days this quarter and.
And that was largely driven by strong sales in the month of June we believe we will revert back to our norm of about 65 days trade DSO during the second half of the year, which alone should improve working capital by about $100 million in the second half.
There are some very logical levers that will unwind a fair bit of this first half use of working capital use in the back half and that will drive us towards that approximately $1 billion of free cash flow before onetime cost on an annual basis for 2023.
One time cash costs related to the spinoff transaction are trending in line with our expectation of about $350 million for the full year 2023, and the single biggest component of separation costs relates to the implementation of stand alone It systems and the largest of which is our stand alone S. AP global single <unk>.
Since ERP system, which is scheduled for completion in the second quarter of 2024.
Looking ahead capex for PP&E of 3% to 4% of revenue remains a good range for forecasting purposes, as we continue to deploy that capital into our internal manufacturing and packaging capabilities as well as our technology infrastructure to help drive cost efficiency and productivity.
Turning to revenue guidance now on slide 17 here, we bridge our expected revenue change year on year compared with our last guidance update the biggest difference on this slide is the FX translation impact and that dynamic is improving we're moving from an approximate $50 million to $100 million impact or a hedge.
Wind of about 80 to 160 basis points to an approximate zero to $50 million impact representing an 80 basis point headwind on the high end based on where spot FX rates are today.
Accordingly, we are adjusting our guidance range for full year 2023 revenue from six five to $6 $4 5 billion.
$6 25 to $6 $4 5 billion <unk>.
Consistent with the movements, we've seen in foreign exchange.
Low impact has been minimal so far in 2023 and is primarily related to the continued impact of generics for nuvaring in the United States.
In the second half of the year, we still expect an approximate 50% to $75 million impact related to the continuing erosion of nuvaring generic competition for <unk> in Japan. Following recent low in that market as well as a possible generic entrant for delay era in the U S by year end.
We now expect the annual impact from <unk> to be in the range of $100 million to $125 million an improvement from the bridge we showed last quarter.
Pvp impact in 2023 will be driven mostly by as Charles inclusion and the implementation of round seven in November of 2022 as well as the recent round eight implementation in July which will include for organ on our Remeron and high as our products.
We're raising our estimate of potential exposure to price erosion to $100 million to $150 million.
Which is about $25 million higher than our previous estimate and this is less about established brands, but rather is tied to my earlier comment around expanding access for next Milan and commercial strategies in fertility and U S. Biosimilars.
We continue to expect approximately $500 million to $600 million of volume growth in 2023 unchanged from prior guidance with that growth coming from our multiple growth pillars, biosimilars fertility, China retail jada and nexplanon as well as contributions from established brands.
Moving to the other components of guidance on slide 18, we.
We continue to expect adjusted gross margin to begin the low to mid 60% range and in fact, the back half of 2023 gross margins should look much like what we saw in the second quarter.
This was primarily due to product mix. The Biosimilar franchise operated as a profit share model so growth in that franchise from the U S launch of head Lima will be unfavorable as the gross margin line <unk>.
Additionally, the inflationary cost pressures, we saw in the second quarter will persist through the remainder of 2023.
On operating expenses, our ranges for SG&A and R&D as a percentage of sales are consistent with what we laid out last quarter for our expectations for the full year and reflect continued investment in the business as we position it for future growth.
Would add that typically our second half opex spending tends to trend a bit higher than the first half of the year.
Operationally all of these ranges are largely in line with the financial guidance, we laid out back at the beginning of the year.
Consistent with our view that we no longer expect about $30 million of IP R&D and the remainder of the year. We are raising the bottom end of our adjusted EBITDA guidance by half a percentage point, so the new range is $31, 5% to 33%.
We also expect to have some net favorability below the EBIT line.
Given the favorability on tax rate, we had in the second quarter, we are lowering our estimate of our non-GAAP tax rate by about 150 basis points, which represents about $20 million of net savings in 2023.
We increased our estimate of annual interest expense by $10 million due to the fed's. Most recent rate hikes, but that's offset by a $10 million decrease in our estimated depreciation for the year.
In summary, second quarter results represent solid execution against our expectations and guidance for the full year.
Our businesses continue to deliver constant currency performance aligned with our long range targets.
We're looking forward to the results from <unk> launch in the U S as well as the upcoming U S launch of <unk>.
Also important we're starting to see moderation in the strength of the U S dollar, which bodes well for near term reported results in terms of closer alignment between our reported results in U S dollars and a relatively stronger performance in local currencies.
With that let's now turn the call over to questions and answers.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We ask that you. Please limit yourself to one question and one follow up to allow everyone an opportunity to ask a question.
We will go first to David <unk> at Piper Sandler.
Yes.
Okay. Thanks.
No.
Got a question on the capital structure.
You said in the past that you are looking to clean up some of the variable rate. So I just wanted to get some more color on how youre thinking about that what that means for <unk>.
2020 for how Youre thinking about.
Interest expense I know, it's a little early but just help us.
Better understand your broader thinking.
And then.
Related to.
No the cap structure is.
In terms of BD M&A.
How do you.
Sort of square the two goals of deleveraging.
And.
Adding assets.
And how are your.
How are you thinking about what to prioritize.
Bearing in mind that it may not necessarily be an either or but just give us your latest thinking thank you.
Okay, So I'll start with that one.
I'll start with the the debt piece, so just a reminder.
<unk>.
To investors that in the first quarter. The company did make a $250 million voluntary debt pay down of our variable rate debt given recent fed increases the cost of that debt is now the most expensive debt in our debt stack. So as we look at future voluntary debt repayments will certainly be focused on that.
Matt.
And when we think about the 75% of our free.
Free cash flow will be generated in the back half of the year.
That'll be that'll be a decision that we'll be looking at in the second half in terms of capital allocation capital deployment further further reductions in that variable rate debt.
The second part of your question, David is really integral to it because since the spin we've been saying that we would be looking to bring a balance between.
Growth external growth sourced through business development, M&A type capital deployment and balancing that against the near term and if certain benefits from debt reduction and that's exactly what we've done.
To this point in time, we've deployed about equal amounts of capital to growth over the eight deals we've completed and about $450 million in total a voluntary debt repayments and we expect to continue to do.
We expect to continue that.
Matt.
That strategy.
The.
Okay.
In terms of how we think about capital deployment.
The BD program.
The change in the interest rate environment. We've said this before as well has raised the bar on capital deployment through BD and causes us to.
Think about.
On the opportunities that result in more near term visibility into revenue and EBITDA accrue.
Accretion.
So with those comments, Dave I think we've addressed that.
That question.
Thank you.
Okay.
We'll move next to tumor Rafa at Evercore.
Hi, guys. Thanks for taking my question I'm I'm still trying to make up my mind on reading all of the details of the quarter. I mean, clearly tracked ahead, but I know there are some one timers in there as well so could you laid those out first also first perhaps on the cholesterol franchise ex U S tracking ahead relative to whether the trade receivable.
<unk> build with specific quickly focused on those cholesterol meds and secondly, also what exactly drove such a big tax lowering.
Okay.
Okay.
So I'll start with the second part of that.
<unk>, so we have a global global tax structure.
Sure.
That has a significant amount of exposure.
In Europe .
Where we have.
Our presence, especially in Switzerland. So.
It was really a result of.
The Ah right the international tax planning structure that we have in Europe that generated that benefit.
And as opposed to <unk>.
To address the first part of your question.
June was June was a strong month across the board for the company.
Cardiovascular played played a role in that and I think it really relates to the relatively strong global demand that we see in the <unk> franchise.
Okay.
Did that answer your question <unk>.
I guess, Kevin I, just look at it as your cholesterol meds between out of that and the idea is about $200 million a quarter and this quarter. It was about 25% ahead like there must be some one off in there now.
So we had a kind of a slow kind of volume based procurement implementation in China, which impacted one of the rounds, which kind of gave us more opportunity for the <unk> franchise and that is that it's just doing exceptionally well in Europe . France. For example is doing exceptionally well double digit growth.
And with that is that in France is creating a lot of uplift in terms of overall volume and we don't really face a lot of price.
Erosion on additive right now so I think it's.
Just very very strong robust.
A robust quarter with regards to a couple of issues one is opportunity with <unk> because of the slowdown of implementation of around 7% out of that growth in Europe .
Answer it.
That's very helpful. Thank you so much sure.
We'll move next to Jeff singer Barry at Bank of America.
Oh, Hey, guys. Thanks for taking my question.
Wanted to just ask about the interchange ability commentary on Humira. It seemed like in the past you guys, maybe downplayed that is important.
In the commercial and I'm wondering if there's any kind of revised view just given how abbvie contracting practices have made it difficult for biosimilar adoption and maybe now interchange ability is.
Important and then along those lines and just become a race with Teva to be the first ones to get this interchangeability designation.
Good question Jason.
In regards to the interchange ability was always something where a couple of years ago. When we were starting going down the path of developing along with our partners obviously Samsung.
This asset.
Wasn't something that was on the top of minds of Pbms or others.
It only came about recently because one of the competitors that Oh, we've got interchangeability designation for working on it for a lower.
Concentration business and obviously the high concentration citric three businesses about 85% of the overall business in the U S.
So you probably seen recently that our collaborator Samsung.
Published essentially are.
As for trial with the <unk>. So it's really kind of a very positive outlook for we met all of the endpoints for the interchange ability study. So we do expect the interchangeably indication by next summer I can't really comment on what's going on with Teva or anybody else in terms of that matter in terms of their race to get into Changeability, but what I will tell you is in our.
<unk> with the <unk> folks what they've told US is look what's most important to us because obviously, let's contract on price, let's see how competitive things are because they are just kind of a duality of the market right. Now there is about 40% of the lives covered in the <unk> World are kind of what I would consider low WAC low <unk>.
Based in order to be able to give.
And opportunity for patients to have a low out of pocket expense experience for for their Biosimilar asset and then there is the high WAC high rebates, which really essentially.
Is the is the game that Abbvie is planning in terms of being the originator and so what I will tell you is that obviously, that's an ongoing discussion and we feel very good about our.
Our success to date in terms of where we're going with that but most importantly, they look for reliability and manufacturing they want to look at the pen design, we just got the arthritis Foundation designation.
As really being a very unique pen design. They look for real world evidence. It's a very important thing and we have 7 million units sold.
2019.
In Europe , now in Canada, and Australia with excellent real World evidence and so those are the kind of attributes and when it looks for in order to be able to differentiate in the market. The indication will rather getting the interchangeability indications just gives us an extra added boost and I think that most pbms know that if the studies are ongoing and now with.
The phase four study of reporting out that we met endpoints, it's just going to be basically.
Cost of doing business.
Got it okay.
We will go next to an event <unk> BNP Paribas Exxon.
Hi, Good morning, Thanks My question.
A follow up on <unk>, just wanted to hear about your dialog with Pbms and health plans.
Yes.
Hi, discounting strategy and do you still expect most market formation in 2024.
25.
And will the high concentration.
It will be a game changer.
Thank you this question.
Then can you also give us more information on the missing data.
Print and the timing of the additional clinical work. Thank you.
Hello, Yes, I can give you some of the information on the first part of the question and then I'll hand, it over to Sandy.
To update on <unk>.
So in regards to what's happening right now with the Pbms and with had Lima as I mentioned, there's kind of a dual strategy of dual reality thats happening in the launches as we speak there are some.
Abbvie being one of them high high WAC high rebate.
And others that are kind of following that route and then there is the other group that is essentially following the route.
Basically staked out the claim because we've always believed that the value proposition of Biosimilars is to provide savings to the system and also more importantly savings to patients in terms of their out of pocket costs and keep in mind that most patients obviously their out of pocket costs are going to be related to what the WAC.
Prices and so that's been our formation thats been our focus and our strategy and so far as I've said in my script at the beginning of this hour we started to really see some.
Good pull through coming through and I've been I've been saying for the last couple of years that I think that 2023, and 24 will be a kind of a market forming years as you kind of get on access to formularies and ultimately then the real revenue generating in the really market formation as it pull through is really in the late <unk>.
Thousand 24, 2025 timeframe as you start to see the real uptake because I believe by then a number of things are going to happen. For example, my estimate right now is at 40% of the lives covered to date SM.
Essentially our what I would consider the low WAC low rebate low out of pocket expenses lower as.
Co pay in that segment in the Humira Biosimilar segment, we will we're very strongly positioned there because of all the attributes of listed out a number of times before and you've seen some of the early successes we've had whether it's prime in terms of the one third of the lives covered there, whether it's United Health care, whether it's a <unk>.
Half of the lives covered there now just this morning, we got notification of Centene, which is another 5 million lives covered these are all areas and pbms in areas that are focused on that.
Low net cost and ultimately passing on savings to patients. So we feel really good about where we are and where we're going with this product. We have always felt really good and.
And I think that's kind of the way I see it going forward.
We do of course have both concentrations high concentration citrus re as well as low concentrations available.
For for our customers and and we feel I think we're on the right track I'll hand, it over a number one did I answer that question or did you need some more clarity on heavily.
Thank you for the color.
Okay. So I'll hand, it over to Sandy now to address the <unk> question.
Question Noah.
Thank you Paul Navarre to answer your question as you know we've been doing quite a bit of additional preclinical work to progress the asset and we have been able to take a look at that data as well as the clinical data that was obtained by and see that during their clinical studies and as well looking at the technical work that is necessary to get it.
The clinical formulation.
And it's.
It's clear that there is additional preclinical work that we need to do before we take this forward to the development phase in the human so and before we get to phase one.
Thank you.
Okay.
And we'll go next to Chris <unk> at Goldman Sachs.
Hi, Thanks for taking our question. This is Roger on for Chris.
Just a quick question from us and maybe you touched a bit on this already in your earlier comments on BD, but how are you thinking about the relative scale of your Biosimilars and women's health businesses.
Have you been seeing any more opportunities in women's health as a way.
I can address that Roger.
So we made that we made we announced that deal last year with Henley us to bring in two assets in the Biosimilar space, we're being very opportunistic about it wherever we see opportunities. Obviously, the next kind of windfall will be the <unk> and thats in the 2028 timeframe that we see that happening. So there are some things.
We're working on in that space.
And so we feel good about the fact that the portfolio, we have today, not only with Samsung, but with our Henry as partners now.
And going forward, what do we see with women's health outlook, we've looked through a number of companies and products with our outstanding business development team, we do see opportunities in women's health.
But I will I will under underlying the following.
Where we started this journey we were focused on exclusively to women in terms of the women's health space and now we're kind of opening the aperture and looking at those conditions disproportionate to women, which can include a number of different indications a number of different therapeutic areas that we feel could be a really nice fit with.
With our overall structure and what we're trying to do so got a lot of things we're looking at right now we.
We're looking at some very interesting assets, both in the ready to launch or recently launched space as well as kind of the mid stage development cycle as well, so very committed to that as well Roger I hope that answered your question.
Okay.
Okay.
And that does conclude the question and answer session I would like to turn the call back over to Kevin Ali for closing remarks.
Well ill, just say that I want to thank everybody for tuning in and we'll talk to you soon we're very proud of the <unk>.
Of the second quarter, and we'll be speaking to you soon all the best.
And this concludes today's conference call. Thank you for your participation you may now disconnect.
The results of the second quarter, and we will be speaking to you.
Okay.