Questions & Answers

Dear Orexo shareholder,

We have via our Investor Dialogue (InvestorDialogue@orexo.com) received a number of questions over the last few weeks. Thank you all for you questions and your continued interest in Orexo.

You will find below a summary of the questions we received together with the answers.

Best regards,
Martin Nicklasson, Chairman of the Board
Anders Lundström, CEO
_____________________________________________________________________

Commercialization plan for USA (Abstral and Zubsolv)

Will you be able to present the commercialization plan before the end of the year?
That is our plan.

Zubsolv

Can the FDA’s review of Zubsolv be delayed or will notice be given at the beginning of July 2013?
The estimated date for approval is July 6.

How is Zubsolv affected by the fact that Reckitt Benckiser is withdrawing its product Subotex in Sweden?
It has no direct effect on Zubsolv. We plan to launch in the USA in September 2013. The Suboxone data has exclusivity in Europe up until 2016, which means that a launch in Europe will come after the US launch.

What is the next step after the results from the acceptance studies for Zubsolv?
We are initiating a comprehensive clinical program to investigate and document Zubsolv’s therapeutic potential. Amongst other things we will study treatment initiation, treatment adherence and patient experience during treatment with Zubsolv.

How will your R&D costs be affected by the further development of Zubsolv?
We do not give any forecasts for R&D costs. The necessary investments will be carried out to make Zubsolv a competitive and successful product.

How is the commercialization of Zubsolv going?
As we have advised earlier, we will give information about the plan for commercialization in the USA before the end of the year.

Will you have time to build up a sales and marketing organization in time for the launch of Zubsolv?
Yes, absolutely. We are working hard on the planning of Zubsolv’s commercialization in the USA. More information will be provided before the end of the year.

What form will the coming studies for Zubsolv take?
We plan both clinical studies for induction, that is the initial treatment of opioid dependence, and a study to investigate patients’ preference with regard to Zubsolv compared with Suboxone.

When will Zubsolv be launched?
We plan to launch Zubsolv during the third quarter of 2013.

Abstral

You will soon be taking over the product rights in the USA – what is the situation on the market for Abstral?
The American market is stable. We will come back with more information when we update our commercialization plans.

KW-2246 (Abstral) in Japan
What payments do you expect for KW-2246 (Abstral) in Japan?
We will receive single digit royalties for sales in Japan and a milestone payment of MUSD 2.25 upon approval.

Is there a risk that the New Drug Application will be withdrawn again?
The clinical studies that were performed for the Japanese market confirm the efficacy and safety of the product and we see no risk of the application being withdrawn.

OX27

Is the lower priority for OX27 due to a problem in the project?
No, we have decided to temporarily give the project lower priority in order to focus our resources on Zubsolv and its further development.

OX51

What is the next step in the development of OX51?
After we have received the results from the ongoing dose-finding study, where approximately 200 patients are undergoing prostate biopsies, we will decide on the best possible development strategy for phase III. We will communicate this during the first half of 2013.

What is the status of the OX51 project?
The project is proceeding according to plan and during the fourth quarter we initiated an international dose-finding study in patients undergoing prostate biopsies. The study will comprise approximately 200 patients and it is estimated that the results will be available during the first half of 2013.

OX-MPI

What is the status of the OX-MPI project?
The collaboration with Boehringer Ingelheim is continuing. We have run into a number of challenges with regard to scaling up and formulation and these have now been solved. The project is proceeding in the preclinical phase, with the evaluation of potential clinical strategies. Boehringer Ingelheim has sole responsibility for all research and development and commercialization of future products.

OX17

How is the OX17 project developing?
We refer to our partner, Novartis, who are responsible for all development, production and marketing of future products.

Withdrawal of the Suboxone® tablet

How is the stopping of the manufacturing of Suboxone® tablets going to affect the market for opioid dependence? Is it expected that there will now be a more rapid transfer to use of their film?
It is our assessment that the market for drugs for opioid dependence should not be affected by this decision. We expect that patients could be transferred to Suboxone® film within 6 months, which is what it will take for Reckitt Benckiser to phase out the tablets.

Can the stopping of Suboxone® tablets affect the price picture for products for opioid dependence? If so, how?
It is too early to comment on any long-term effect on the price picture. At the moment the price of Suboxone® film is lower than the price of the Suboxone® tablets.

Do you see that Reckitt Benckiser’s stopping of tablet manufacturing will have an effect on Orexo and Zubsolv™ in any way? If so, is it positive or negative?
Our assessment is that Reckitt Benckiser’s decision to stop tablet manufacturing has no effect on our application for the approval of Zubsolv™ by the FDA. It does, on the other hand, change the market, as the approximately 35 percent of the market that the tablets represent today, will be transferred to Suboxone® film. For manufacturers of generic drugs whose business model is based on the replacement of the drug at the pharmacy it will be considerably more difficult to get into the market. Furthermore, it will be important to have child resistant packages, as we will have for Zubsolv™, just as we have for Abstral® in the American market.

Is it your assessment that the press release from Reckitt Benckiser will have any effect at all on the FDA’s view of Zubsolv™ or perhaps affect the launch in some way?
It is our assessment that Reckitt Benckiser’s press release on the withdrawal of the Suboxone® tablet does not have any effect on our application for approval of Zubsolv™ by the FDA. We consulted with the FDA concerning this in 2011 and based on their feedback and the answers to our questions to the FDA last summer we have submitted an application which we consider meets their documentation requirements.

What does the news about Suboxone® mean for Orexo’s application to the FDA and the tablet as a formulation form? Do there have to be Suboxone® tablets on the market?
There do not have to be Suboxone® tablets on the market for Zubsolv™ to be approved and launched in the USA. Our assessment is that the news from Reckitt Benckiser does not affect our application, as the reason for the withdrawal of the tablet is not linked to the active substance.

Are you going to make comparisons with the Suboxone film in a similar way to what you did with the Suboxone tablet?
We are planning preference studies to compare with the film, in the same way as we did with the tablet that is measuring the dissolution speed, the preferred taste, the general mouth feel and total preference with regard to Zubsolv compared with the film.

What does your strategy look like for the pricing of the Zubsolv tablet?
We will be compelled to launch Zubsolv at a lower price than the film. This must be the case as long as we do not have any clinical advantage over the film. If we carry out and manage to have induction treatment approved, we can in fact have a higher price than the film, as we will have a clinical advantage (in a situation where the film does not have induction treatment approved).

Abstral/OX219 - US sales

Is there any experience within Orexo of setting up and conducting sales in the USA?
Yes, there is. Even though not many of our employees have commercial experience, senior management and the Board have great and broad experience in this respect.

How much do you assess that an in-house sales organization will cost before we reach break-even?
We have not given any cost forecasts, except for if we could hire all the employees from Quintiles, for example. If you reckon on approximately 50 people in a sales organization plus everything else that is necessary, it is common in the pharmaceutical industry to anticipate that it will cost approximately USD 25 million per year. We anticipate that a pharmaceutical sales person will cost approximately USD 200-250 thousand per year.

How long do you assess that it will take to build up such an organization?
You can build up an organization quickly if you employ managers and other key people and hire a sales force, for example. Then you can have it in place within 3 months.

If you intend to sell via a partly owned company or via a new partner, is it not high time that you entered into an agreement about this? The longer you wait, the worse your position will be at the negotiation table, as you have pressure on you to reach an agreement that will come into effect fairly soon.
Our top priority is to develop the commercial plan for the USA, and we will present this plan before the end of the year. The scenario we prefer is to find a partner that has the commercial infrastructure that we need. We can do the research and development ourselves and we aim to add the commercial competence.

In what year do you expect to reach peak sales in the US market for both Abstral and OX219?
We have not yet presented a sales forecast for Abstral in the US. At the moment we are analyzing the market situation in the US and preparing an action plan. For OX219 we have stated potential annual sales of up to MUSD 500.

Zubsolv™ (OX219) - Commercialization in the US

How great is the risk that Zubsolv™ will be classed as a generic upon approval by the FDA?
Zubsolv™ cannot be classified as a generic of Suboxone®, as it has a different dose of the active substances (buprenorphine and naloxone) compared to Suboxone®. Generics must always be identical to the original product. We have developed a product which it is true has the same active substances and the same effect as the original product, but our sublingual (under the tongue) tablet provides a better uptake of the drug than Suboxone® and we can therefore use less active substance than the original.

Does the positive news about the advanced submission of the US file for OX219 mean that the commercial plan for the US will be presented earlier than has been communicated or can we still expect that it will come during Q4?
The commercial plan will be presented during Q4 2012, as has been previously communicated.

How are things going with the recruitment of personnel and the setting up of the company in the US? Will you manage to have everything in place regarding the company’s own sales organization before January 1, 2013, when sales of Abstral begin?
We will get back to this in Q4 2012 when the commercial plan will be presented. We are already working together with a number of consultants today to prepare for the American market.

What does it mean in terms of competitiveness for OX219 that Reckitt Benckiser has had two dosages of Suboxone approved by the FDA? Is it just a new dosage or is it a considerable improvement that affects the competitiveness of OX219?
It is probably an advantage for us that the Suboxone film is launching new strengths. If generics should appear in this market, it is likely that only the Suboxone tablet will be affected. New strengths for the film should mean more patients for the film, and thereby a larger market that cannot be subjected to competition by generics. 

Abstral

What is the plan for the continued launching of Abstral (Canada, Russia, Israel, Turkey..)?
Abstral has been launched in Canada so far. Given the new agreement with ProStrakan, they are the ones deciding the rate at which it will be launched.

What is the size of the market in Europe, Japan and US?
The European market for rapid acting fentanyl (RAF) products (like Abstral) is worth about 150 MEUR.
In Japan, there is no RAF product on the market yet, and Abstral has the possibility to be the first one approved. In the US, the market is worth about 400 MUSD.

What is Orexo market share objective in respective market?
After we closed the recent deal with ProStrakan, is it ProStrakan that completely controls the EU market. Abstral has today about 25% market share and is the leading product. We have not yet communicated a market share objective for the US market. We are currently analyzing the US RAF market to be prepared to take full control over Abstral in 2013.

How big is the profit margin in % of sales?
We do not publish the profit margin for a single product.

When do the patents expire?
In 2019.

OX219

If OX219 gets approved, what is the market share objective?
We have not yet stated a market share objective for OX219. We estimate yearly sales to reach between 300-500 MUSD. The US market for opioid dependence is today worth about 1.3 BUSD.

I wonder if you plan to submit a registration application for OX219 in EU? What is the timing for the EU submission?
In Europe, Suboxone has market exclusivity until 2016. With the documentation we have today, we have to wait until 2016 before we can submit a registration application.

Share buy-back Program

Is your share buy-back program an one off initiative directly related to your new Abstral agreement, or is your future plan to continuously buy back shares?
This share buy-back program is directly linked to the new Abstral agreement, where we receive approximately 610 MSEK. The share buy-back program is a way to optimize our capital structure of the company. The mandate for the current program is valid until the next Annual General Meeting.

How is the share buy-back program managed?
We have chosen a structure where we have hired a bank to buy back shares according to the share buy-back rules and regulations (for more details, read the material from our July 13 Extra General Meeting).
Each Friday is a weekly summary report delivered to Stockholm OMX, and on the following Monday you can see the amount of shares bought back at the OMX website. We started the share buy-back program July 16.