Orexo AB’s Earnings Call: R&D Gains Amid Financial Hurdles

Orexo AB ((SE:ORX)) has held its Q3 earnings call. Read on for the main highlights of the call.

Orexo AB’s recent earnings call painted a mixed picture of the company’s current standing and future prospects. The sentiment was cautiously optimistic, highlighting significant strides in research and development and strategic partnerships, particularly with BARDA for the OX390 project. However, the call also underscored financial hurdles, such as a negative EBITDA and declining revenues in the U.S. commercial sector, coupled with market uncertainties for OX640. Despite these challenges, the company’s strategic initiatives and partnerships suggest a potential for future growth.

Significant R&D Progress

Orexo AB has made notable advancements in its research and development pipeline. The company reported promising in vivo data for its GLP-1 agonist project, OX472, marking a significant milestone. Additionally, the company secured BARDA funding for the OX390 project, which could potentially be worth up to $51 million, indicating strong support for its innovative endeavors.

Positive Movement in U.S. Commercial Segment

The U.S. commercial segment showed positive momentum, with the buprenorphine and naloxone market experiencing a 4% year-over-year growth. This segment has now overtaken Medicaid as the largest segment, reflecting a shift in market dynamics and potential for further expansion in the commercial sector.

BARDA Partnership for OX390

The partnership with BARDA for the OX390 project is a significant strategic development for Orexo. The initial funding of $8 million, with the potential to reach $51 million, aims to develop a nasal rescue medication for fentanyl and xylazine overdoses, showcasing Orexo’s commitment to addressing critical health issues.

Strong U.S. Commercial EBIT

Orexo’s U.S. business reported a robust EBIT of SEK 38 million for the quarter, up from SEK 25 million year-over-year. The EBIT margin also improved from 19% to 34%, highlighting the efficiency and profitability of the U.S. operations despite broader financial challenges.

Negative EBITDA

Despite the positive developments, Orexo reported a negative EBITDA of minus SEK 9.8 million for Q3. This was partly due to SEK 13 million in costs associated with long-term incentive programs, reflecting ongoing financial pressures that the company needs to address.

Revenue Decline in U.S. Commercial Business

The U.S. commercial business faced a revenue decline, with Zubsolv revenue dropping by 4.8% year-over-year in local currency. This decline was attributed to negative FX impacts and reduced demand from major clients like UnitedHealth Group and Humana.

Market Uncertainty for OX640

There is increased uncertainty in the U.S. market for OX640, with delays in partnering discussions due to slower-than-expected market development. This uncertainty poses a challenge for Orexo as it seeks to solidify its market presence.

Legal Challenges

Orexo is currently engaged in an ongoing legal process with the U.S. Department of Justice. There has been no significant movement during the quarter, but this remains a critical issue that could impact the company’s operations and reputation.

Forward-Looking Guidance

Looking ahead, Orexo remains optimistic about achieving positive EBITDA for the full year of 2025, supported by anticipated inventory build-up in Q4. The company is focused on leveraging its R&D progress, particularly with the BARDA-funded OX390 project, and exploring strategic opportunities for its pipeline products, including potential partnerships for OX640 and advancements in nasal powder delivery technology.

In summary, Orexo AB’s earnings call reflects a company at a crossroads, balancing significant R&D achievements and strategic partnerships against financial challenges and market uncertainties. The overall sentiment is one of cautious optimism, with a clear focus on leveraging strategic initiatives to drive future growth and profitability.