Idorsia Ltd (OTC:IDSRF) Q3 2022 Results Conference Call October 25, 2022 8:00 AM ET
Company Participants
Andrew Weiss – IR
Jean-Paul Clozel – CEO
Simon Jose – Chief Commercial Officer
André Muller – CFO
Conference Call Participants
Manos Mastorakis – Deutsche Bank
James Gordon – JPMorgan
Rosie Turner – Jefferies
Peter Verdult – Citi
Thibault Boutherin – Morgan Stanley
Operator
Good day, and thank you for standing by. Welcome to Idorsia 9 Months Financial Results 2022 Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Andrew Weiss. Please go ahead.
Andrew Weiss
Thank you, Nadia. Good morning, good afternoon, everyone, and welcome to our financial update now newly being hosted on a quarterly basis. We posted our third quarter 9-month results this morning at 7:00 a.m. Central European Summer Time. On the call with me today to provide additional color with prepared remarks and thereafter in the Q&A session are our CEO, Jean-Paul Clozel; our CFO, André Muller; and our Chief Commercial Officer, Simon Jose.
Next slide, please. As you know, we will be making forward-looking statements in this call. Hence, with this disclaimer slide, you have been adequately warned about the benefits and risks of investing in Idorsia’s stock. Next slide. With that said, let’s kick it off.
Jean-Paul, the floor is yours.
Jean-Paul Clozel
Sorry, Andrew, the slides are not moving on my… So okay. Are we on the right slide?
Andrew Weiss
Yes, we are.
Jean-Paul Clozel
Okay. So thank you, Andrew. And today, it’s my pleasure to introduce you to the great progress that Idorsia is making to transform itself into a commercial company. Next slide. So many things have happened during the previous 9 months of this year .
Now first, and Simon will give you more precision about it. Daridorexant is becoming a global brand. In the U.S., it is soon going to become the first, the #1 branded product in the internal. And PIVLAZ in Japan is really progressing extremely well, seems about 20% of the patients already we see battery remote are treated with Cesena. André will present the financial figures, as you have seen, we have made a sale and leaseback agreement to raise cash.
And we are working on other non-dilutive measures to bridge the funding gap to the profitability level. And finally, the pipeline is progressing very well. Phase II data of cocetentan will be shown at the American Heart Association Congress. And the Phase IIb of scenario will be presented at the American Congress of rheumatology. But as you know, we are preparing for the readout of the REACT study for clazosentan in U.S. and Europe and many other projects are moving on. Next slide. Simon is the floor is yours, and you can explain the progress of QB and the other drug, of course.
Simon Jose
Thank you, Jean-Paul, and good morning and good afternoon, everybody. As Jean-Paul said, it’s a transformational time for Idorsia as we continue to gain momentum with our first 2 product launches and build our commercial organization. And I’m pleased to be able to share with you today the progress we’re making with both QUVIVIQ in the U.S. and PIVLAZ in Japan. And I’ll give you an update on our first launches of QUVIVIQ in Europe.
Next slide, please. So I’ll start with QUVIVIQ, which, as you know, we launched in the U.S. in May.
Next slide, please. And I’d like to begin by reminding everyone that our net sales do not reflect demand or prescriptions dispensed at this stage, as I highlighted in the half year earnings call to enable early patient access to QUVIVIQ, we’re offering a comprehensive co-pay program, including a free first 30-day prescription. We know this strategy is helping with early product uptake, and I’ll show this to you shortly. And this demonstration of demand is critical to support our ongoing negotiations with payers. Now in anticipation of questions later on, I will tell you that we are in continued discussions with all the main commercial plans.
And although we’re making progress, we have not yet aligned on a rebate level that we believe reflects the superior value of QUVIVIQ. But as demand grows through the fourth quarter, we expect to be in a much better position to finalize contracts as we move into 2023. Next slide, please. Turning then to demand and prescriptions dispensed. You can see here the growth in prescriptions since our launch in May and the positive change in trajectory in August and September, following the launch of the branded DTC campaign.
In September, we exceeded 10,000 prescriptions dispensed with more than 70% being written for the 50 milligram strength, which is the strength we believe will provide the best efficacy and likelihood of successful trial, which we know is really important in this category.
The graph on the right shows a breakdown of total QUVIVIQ prescriptions and the prescriptions coming through vitaCare and those being reported by IQVIA. As you know, and as we talked about last time, vitaCare is a specialty pharmacy services company that manages a key component of our patient support program, but IQVIA does not currently include vitaCare in its sample bank and therefore, its syndicated data under reports prescriptions for QUVIVIQ hence why we’re providing these data to you on a quarterly basis when we have these calls. Within these total prescriptions, we are seeing increased growth in refills and refills now represent approximately 1/3 of prescriptions.
Next slide, please. Our [ writer ] base shows a similar trajectory to our prescriptions with continued month-over-month growth. Again, we see an increase in growth of prescribers following the launch of the DTC campaign. In the chart on the right, you can see the split by specialty, with 63% of our writer base being in primary care and 22% in psychiatry. This reflects the efforts of our sales teams that are focused on these 2 key audiences.
And the split is consistent with how the overall in so many markets is structured. Next slide, please. Now this is an important chart, and I showed it to you last time. It shows the traction we have gained in just 5 months from launch in new patient acquisitions. As I highlighted in the earnings call last time, we passed AVGO after only 6 weeks from launch.
A few months on, and we’re closing in on Belsomra and expect to surpass it soon to become the leading branded insomnia medication in the U.S. in new-to-brand prescriptions. This is an important milestone at this stage in our launch, not because the DORA market is important as a source of business. It isn’t. It’s obviously too small, but rather because it’s a clear demonstration of physician receptivity to the profile of QUVIVIQ.
So we’ve got this far in 5 months when the other 2 products have been on the market 7 years and 2 years, respectively, I think, speaks volumes to the perception of the product by physicians. But this, of course, is only the beginning, and the potential for QUVIVIQ is, of course, much greater, but this will require us to grow the DORA market as well as being the leading product within it.
Next slide, please. We are doing just that. QUVIVIQ is driving growth in the DORA market. This chart shows NBRxs for the total DORA market in 2021 and 2022 year-to-date. As you can see, the market was actually in decline until the launch of QUVIVIQ in May 2022, after which we have seen marked growth of the total market driven by QUVIVIQ, though we’re not simply just taking share from within the DORA market.
Next slide, please. Our goal is to become the leading product to treat insomnia in the U.S. Becoming the leading DORA is simply the first step on this journey. But clearly, in order to do this and to expand the DORA class, we need to source our business from either new patients or patients on other classes of medication that dominate the U.S. market.
As you can see here, the IQVIA data shows 42% of patients receiving QUVIVIQ since launch on new patients and 58% are switched from another therapy.
And then the pie chart on the right shows you where we’re getting these switches from. 33% are coming from Z-drugs, 27% are coming from benzos and 26% from antidepressants, including, of course, Trazadone. And so we’re very encouraged by this profile of our source of business. Next slide, please. The acceleration we’re seeing in both prescriptions and prescribers of QUVIVIQ is tied to our DTC campaign.
We launched this in mid-August with World scene Champion Lindsey Vonn and our second commercial featuring Actor Taye Diggs just a few weeks ago as patient ambassadors, Lindsay and Taye are both currently taking QUVIVIQ and having positive experiences with the product.
These TV commercials as well as surround sound messaging via organic paid and social media resulted in an immediate increase in patient requests for QUVIVIQ and in new prescriptions, NBRxs. Just to give you a few highlights, we’ve seen a 79% increase in traffic to our branded website. By the way, we have about 1 million people who have visited that website now. 173% increase in the unique co-pay registration, so people on the website that are actually looking to download a co-pay card.
And an estimated 38% increase in new patient acquisitions, which essentially is taking our NBRx trend and then looking what the delta is post the DTC launch. Obviously, we expect that the impact of our DTC campaign will continue to build over time. And as I mentioned before, this increase in demand also provides a good basis to support our ongoing negotiations with payers to secure access to QUVIVIQ for patients at a rebate level that reflects the value of the product. Next slide, please. Now looking beyond the U.S., QUVIVIQ is on track to become a leading global brand.
Following EU approval in April, we are ready for our first European launches in Germany and Italy next month, and I’ll speak about that more in a moment. We have also completed our Phase III study in Japan and released the positive top line results a few weeks ago. We’re now preparing the marketing authorization application and are looking forward to bringing QUVIVIQ to patients in Japan with our local partner, Mochida. And in contrast to the U.S., the DORA market in Japan with suvorexant and lemborexant represents approximately 20% of the insomnia market volume already and continues to grow. Next slide, please.
Turning to Europe now. We see a significant opportunity for QUVIVIQ as the first and only DORA available to the millions of patients suffering from chronic insomnia. In this chart, you’ll see the insomnia market volume in the top 5 European markets where we’ve included an estimate of the off-label use of antidepressants and antihistamines to treat insomnia. It may be surprising to some to see that the volume market in the top 5 European markets is actually larger than the U.S. both in terms of standard units and on a per capita basis.
It’s also striking to see how different the product usage pattern is by market and the high usage of benzos in Italy, France and Spain. This despite the concerns about the safety of the long-term use of these sedating products. You will also notice the relatively low volume in Germany and the U.K. This is due to these countries having greater controls in place to restrict the use of the sedating GABA Agents, not because there’s a lower incidence of insomnia. We believe QUVIVIQ can help address the significant unmet need for safe and effective treatment options for chronic insomnia patients in all of these markets.
Next slide, please. Physicians and patients in Europe are genuinely excited about the prospect of QUVIVIQ. In market research we have conducted last year across the big 5 European markets, 91% of health care professionals indicated they were likely to prescribe QUVIVIQ and 85% of patients said that they were likely to ask their doctor about QUVIVIQ with 37% being extremely likely. These results are well above benchmarks or market research of this type of new products prior to launch. We are actually hearing similar positive responses to the profile of QUVIVIQ from key opinion leaders and doctors as we start to engage with them in our prelaunch activities.
Next slide, please. The launch preparations in our early launch markets are well on track, and the local teams are actively engaging with medical experts and other key stakeholders to introduce Idorsia and QUVIVIQ. In Germany, we will launch next month November with 1 year of free pricing. In the German market, there is a 4-week prescription limitation for hypnotic and sedating agents known as AnlageDry. This is what I was referring to earlier about the sort of things people are putting in place to restrict the use of existing agents.
So all these drugs have a 4-week restriction on reimbursement due to the safety concerns.
Now earlier this month, the GBA issued a draft resolution that, if approved, would exempt QUVIVIQ from this limitation and allow prescribing beyond 4 weeks in line with the EMA label. If this resolution is approved, QUVIVIQ would be the only sleep medicine that would be reimbursed for adults in Germany for longer than 4 weeks. In Italy, we are also launching next month and some new products in Italy are not reimbursed, so we will launch into the private market. At the time of launch, prescribing of QUVIVIQ will be limited to specialists, which is actually something that is not uncommon for first-in-class CNS medicines.
Next slide, please. So turning to PIVLAZ in Japan before I finish and hand to Andre. We launched PIVLAZ or Clazosentan as you know, in April to prevent vasospasm following an aneurysmal subarachnoid hemorrhage, a life-threatening condition, which has a 2 to threefold incidents in Japan, more major than the Western markets. Next slide, please. I’m delighted with the positive trajectory we are seeing for PIVLAZ since launch.
We have generated net sales of CHF 25.1 million since the launch in April. In terms of demand generation, over 80% of our target hospital accounts have ordered Clazosentan and medical experts and neurosurgeons are supporting the inclusion of PIVLAZ in treatment protocols.
We continue to see increased adoption, as Jean-Paul said, with approximately 20% of ASH patients receiving PIVLAZ in September. This, of course, based on the estimate of the incidence of ASH in Japan. We have also filed clazosentan in South Korea based on the positive data from the Japanese clinical program and established a local affiliate there to prepare for the launch. So in summary, we are making strong progress in transforming Idorsia into a commercial company. Determined patients will get to benefit from our innovation by making QUVIVIQ a leading insomnia medication on a global basis.
The growth in demand of QUVIVIQ the U.S. means that we are close to becoming the leading branded insomnia medication in new-to-brand prescriptions after only 5 months on the market. We are also just weeks away from the launch of QUVIVIQ in Germany and Italy, which will mark the availability of the first and only DORA in Europe. And of course, in the meantime, PIVLAZ is performing strongly in Japan. I’m confident this positive momentum we are building will continue to grow.
And with that, I will hand over to André.
André Muller
Thank you, Simon. So next slide, please. Yes. Good afternoon, good morning to everyone. Thanks for your continued interest in Idorsia.
Let’s move to Slide 21, please. Starting we see net results, I would say, especially at least on the operating expense. Q3 is relatively uneventful. As you can see here, we had net revenue of CHF 43 million. This consists mainly in the contract revenue of CHF 16 million, of which CHF 2 million is cash and CHF 14 million are deferred and CHF 27 million of net sales, as Simon indicated, CHF 25 million coming from Japan and [Technical Difficulty].
Operator
Dear participant please accept our apologies for the delay. So we’ll resume shortly. Thank you.
Andrew Weiss
Okay. Andre, can you recommence your comments? We seem to have lost the line.
André Muller
Yes, I don’t know exactly when we were disconnected. But I was just explaining the U.S. GAAP net results to minus CHF 610 million in U.S. GAAP EBIT and CHF 25 million, of which CHF 20 million for financial and CHF 5 million for tax below EBIT and of the CHF 20 million in financial mainly relating to the convertible bond financial expense, CHF 13 million. Let’s move to the next slide, please. So going a little more in detail, we see a non-GAAP operating expenses. As you can see, we are almost flat in R&D.
And country to research where most of the CHF 86 million spent for CF 9 months is really a fixed cost base. We have some CAR studies for approximately CHF 6 million to CHF 7 million. For development out of this number of CHF 133 million. The lion’s share is relating to study costs and supply of drug substance or drug product around CHF 94 million versus CHF 79 million for the fixed cost base in development. If we go slightly further down, you will realize that the late-stage assets represent the majority of the study cost.
We select around CHF 25 million, including the development of the auto-injector. Cenerimod, CHF 18 million.
We see a Phase IIb care and the preparation for the initiation of the Phase III. Daridorexant is still high with CHF 17 million, but Japan, which accounted for CHF 8 million. And as you’ve seen, we published top line results in Japan that are really positive. And we have an unusual amount of — for lucerastat with drug substance of CHF 10 million in order to support the open label expansion. [ Clazo ], we still have CHF 10 million, mainly relating to the reactor trials that should read out early 2023.
And you see that only with the 5 late-stage assets, we have covered more than 90% or, close to 90% of these study costs. Marketing and selling and G&A, of course, are a big driver for the increase with CHF 358 million.
So marketing and selling is slightly below CHF 290 and G&A is slightly below CHF 70 million. FX rate does not help, especially with the OpEx in the U.S. As Simon said, with the selling and the with net contract sales organization, DTC and the commercial operating costs with U.S. affiliates. The rest is split between Japan, [ U.K.] for the load preparation, as mentioned by Simon and at the central level.
So, with this, you see that first 9 months, we have CHF 621 million non-GAAP operating expenses in, of course, much higher due to the launches across the globe, U.S., Japan, also preparing for launch in Europe. Next slide, please.
Cash flow, if we are reconciled with the liquidity. So we started the year slightly below CHF 1.2 billion, and we ended with slightly below CHF 700 million. The non-GAAP OpEx, we just went through it, plus CapEx and working capital requirements of, respectively, CHF 23 million and CHF 33 million. As you see here, and we announced it a few weeks ago, the sale and leaseback transaction of CHF 164 million growth. So net of transfer cost, 162 million, plus other items of 21 that bridge us to the CHF 695 million liquidity.
Next slide, please. Here, you see a breakdown of the liquidity. And as you can see, our policy is really because we are a Swiss operating company, also Swiss franc is our reporting currency.
So we have out of the 695 million, almost CHF 600 million and 77 in U.S. dollar. So remaining are in various currency Japanese yen and Europe. Next slide. Finishing we see a guidance as you see that we confirm the guidance that we gave from the beginning of the year with a non-GAAP operating loss of around CHF 785 million and which would lead, including DNA and SBC to CHF 840 million on the U.S.
GAAP net operating loss. Next slide. Again, as we said, we see a sales scope, i.e., what we know now, Daridorexant in the U.S., in Europe, U.K., Canada and Switzerland, Clazosentan in Japan. So not speculating on the upcoming results, notably for REACT. We believe that we will reach more than CHF 1 billion sales in 2025, I would like it to be 2024, but for time being, it’s 2025.
We see the level of sales, we would become sustainable. We will reach a sustainable profitability. With this, I hand over for conclusive remarks to Jean- Paul.
Jean-Paul Clozel
Next slide, next slide. Okay. So thank you very much, Simon, and André. I hope you have understood the progress we are making. And the year is not finished.
Many things will happen this year, and we are working very hard. And I think we are going to see the continued increase of the demand for QUVIVIQ in the U.S. We are going to launch QUVIVIQ in Germany and Italy and as we said, many patients are really waiting for QUVIVIQ in Europe.
We will initiate the Phase III program we said earlier and we want, after the presentation of the results at the American application, but we want to finish to and file the NDA for aprocitentan this year with the FDA. And finally, we are actively preparing for the readout of the REACT Phase III final study with clazosentan, which will happen, the result will happen first quarter 2022. Thank you very much. I hand over to André for handing the questions.
André Muller
Thank you very much, Paul. So we have come to the end of our prepared remarks and also to the past the bottom half of the hour and are ready to take your questions. For those listening over the Internet or webcast, you may also ask your questions via the chat box on the website. Operator, we are ready for the questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from the line of [Harry Sefton] from Credit Suisse.
Unidentified Analyst
I have a few to start with QUVIVIQ. I recognize that it’s still early in the launch, but what have you seen in terms of retention rates for treatment? Given that lower retention seems to be the issue for Belsomra after its strong initial launch. Then you mentioned that you’ve not managed to agree an effective rebate for QUVIVIQ. But can you help us as to how the payers think of this?
Is there an [ Ice-type ] of view that would give us an independent view of the value of such a brand over the very cheap generic? And can you maybe also help us in terms of the level of rebates that we might expect versus what we can see for Belsomra, which seems to be at about 60% rebate. Then on the European launch, we understand that DORA is getting launched in Europe, partly based on pricing. What are your views on a reasonable price in Europe? And what increasing costs should we expect for the European launch? Thank you.
Andrew Weiss
Thank you Harry. Simon, I think it will go on to you. Sure.
Simon Jose
I wasn’t expecting a question on QUVIVIQ. So Harry, taking them in order, on retention rates, I mean, as I said in the opening remarks, we’re seeing about 1/3 of our strip volume now in refills. The longitudinal data is harder for us to pin down right now because with the vitaCare-IQVIA mix, if a patient starts to invite care, but then they flip to the retail channel, then what is actually a refill patient gets canceled as a new patient. So we’re trying to clean all that up with IQVIA.
But we think we’ve got sort of compliance rate, if you will, in the sort of 40%, 50% range, which is common and sort of in line with chronic medications in primary care. But I can’t give you a lot more than that. But we’re pleased that we’re seeing growth in refills. And as I say, we’re about 1/3 of our volume is now in refills. And the refills are growing month over month, which is important, clearly, as you say.
On the rebate, I’m not obviously going to give you levels and percents, but maybe to your point about the thinking of payers. So this is sort of how it goes. They’ve got 2 existing DORAs, and they’ve got rebates on those. We’ve had many meetings with them. We’ve talked about the clinical profile, and they see the benefit of the clinical profile.
They want to see that play out in clinical practice and in demand. And if we’re to want to have a sort of net premium price, if you will, which we believe we should have for all the brand. So really, we need to put daylight between us and the other 2 DORAs in order for us to truly be able to demonstrate to them that this clinical profile that we presented to them that comes from our Phase III program is truly going to play out in practice. Because if it doesn’t, they’re going to end up with a third DORA and then they just divide their existing DORA market into 3 and pay more — less rebate, if you will, which sort of doesn’t make sense. I think once the demand grows, and we put, as I say, clear daylight between us and the other 2, then I think we’ll be able to demonstrate clearly to them that the product is different, physicians and patients see it as being different and then that sort of changes the dynamic.
So it’s a little bit of a cat and mouse or at the moment as we go into those conversations. I think as I said last time, we could have a deal now. I mean, it’s not that we’re not talking numbers with these plans. It’s just that we don’t want to pay what they want now because we haven’t pulled away from the other 2 products. In Europe, the other 2 DORAs, as you rightly say, didn’t launch.
We can’t fully speculate on why that was. I think perhaps pricing was something or just the sort of that fear of entering a generic market in Europe. I also think there may be something in the clinical profile of the product.
The European regulators are more biased towards subjective end-points — and if you look at also, particularly the subjective data on Belsomra isn’t great. So whether it was a combination of the regulatory pathway and the payer pathway is our suspicion. Either way, I think we feel very good about the opportunity in Europe, and we feel good about where we are with the discussions with payers. And I think the evidence we’ve just seen from Germany where the GBA are now recommending that QUVIVIQ is exempted from the 4-week prescription limit also demonstrates that payers are looking at this as a different product from the Z and the benzos, which are limited to short-term use. And that separation helps a lot with our pricing discussion.
Andrew Weiss
Thank you, Simon. Operator next question please.
Operator
And the question is from Manos Mastorakis from Deutsche Bank.
Manos Mastorakis
Yes. So first of all, I just wanted to ask what is the timing for a first or renegotiation of commercial contracts with major PBMs. Secondly, what are the approximate peak sales opportunity according to the REACT data? What do you think it could represent?
Andrew Weiss
Simon, I think you’ll take the first one. And then on the REACT data, Jean-Paul, do you want to tackle Clazosentan as to what that represents?
Jean-Paul Clozel
I can answer but I won’t give details.
Simon Jose
And on the first question on the timing of the first contract, I can’t tell you, to be honest. I think that this is going to depend on, as I said before, it will depend on the shape of the demand curve as we move through the fourth quarter. We’re trying to triangulate time with the demand and the rebate level that we believe is fair. And you need to put all 3 of those things into the equation, and then you say, right, yes, we’ve hit the sweet spot. I can’t predict that when that’s going to be exactly.
I would hope that we’ll start to see us in a position with the demand curve as we exit the end of the year that we’ll be in a position to have much more robust conversations as we move into 2023, but I can’t give you an exact time.
Andrew Weiss
Paul, on where you think patients benefit most on REACT and how many could that be?
Jean-Paul Clozel
I think that the Japanese market is a big market, but I would say that we see Europe and the U.S. and also at least in terms of number of patients as big as the Japanese market. So you see the numbers already in Japan for the first few months of launch, I think that there is no competition. So I think it’s going to be a very large market. But I would not give numbers now.
It’s certainly many hundred millions. And can it be a blockbuster. I think it’s a question, Mark. I would not commit. It will also depend on the REACT results because we have optimized, we have now in the REACT study, the patient selection has been optimized in order to really have the highest benefit and the benefit will also condition the price of this drive because by giving clazosentan, we present a lot of interventions, a lot of [ derotations ].
So the extent of the FX, will also condition the price and certainly the sales potential.
Andrew Weiss
Thank you, Manos. Operator, next question, please.
Operator
And the next question comes from the line of James Gordon from JPMorgan.
James Gordon
It’s James Gordon, JPMorgan. A few questions, please. First question, QUVIVIQ in the U.S. So I heard about a better position to finalize reimbursement contracts in Q4. But under what time lines do you now think you might have broad commercial payer coverage?
And what the facts are going to be? Are they’re going to get payers to change their mind? Because if I heard right that you needed more data? Is there specific data that you’re collecting that you think you’re going to need to give payers and say what time lines could you have broad coverage. Second question was the reiteration of the 2025 profitability target.
So clearly, QUVIVIQ reimbursement is going a bit more slowly than initially hoped for. So is there an offset? Is it PIVLAZ better? Or are you going to spend less? Or is it you still think you’re going to be in the same place for QUVIVIQ in 2025.
It’s just it’s going to have a different shape. Then third question, this [indiscernible] we haven’t had yet on divestment of any of the royalties there. Is there a gating factor to get that done by the year-end? Or is that not Plan A, Plan A is that you do something else that is a nonequity dilutive funding action?
Andrew Weiss
Thank you, James. All right. Simon, do you want to have another kick at the QUVIVIQ reimbursement, and then we can give it to André for some funding.
Simon Jose
Yes. I don’t think I’ve got an awful lot to add to what I’ve already said. I think, James, in terms of the data that we need, fundamentally, it’s prescription demand. So we are very focused now on driving prescription demand, particularly where we can through the 20% of the market where we have open access. And as that demand grows, that’s what’s going to sort of, if you like, tip the balance in our conversations with payers.
So that’s the sort of data that we need — and the time lines, as I said, I think that we’ll likely be looking to hopefully contract as we go through into 2023, but it will take us some months before we get to a significant proportion of that coverage, as you’d expect.
Andrew Weiss
Andre, do you want to take the profitability in 2025 and the [ APRO ] funding and whether there’s a gating factor there?
André Muller
Yes. Regarding the first one is the outlook for 2025. Yes, we have a delay in the uptake of QUVIVIQ in the U.S., no doubt. Many reasons for it. Simon alluded to it, but we fundamentally believe that it’s only a delay, it does not impair the potential of QUVIVIQ in the U.S.
And in Europe from the initial interactions that we have with the main countries, we believe not only because we are the only dollar that we have also a nice business case in Europe, plus Japan with PIVLAZ, where the uptake since the launch late April here is really in line with what we expected.
We are only handicapped by the FX rate set unfortunately affects the sales number in the 9 months financial statement. So even if we have some delay, we believe that the CHF 1 billion mark can be achieved in 2025. and this would bring us to profitability. Regarding the OpEx, you’ve seen already a trend in R&D. It’s fixed.
I gave you also some indication on where we spend in clinical development and study costs. We’re moving forward, it’s mainly Selatogrel and Cenerimod that will drive the study cost for the next few years. We also hope that we’ll have other clinical compounds that will be advanced to see a next stage. But nothing meaningful here. So it’s really a question of — At the end of the day, it’s really how commercial will deliver and contribute to cover what I could consider between R&D and H2 G&A, the HQ cost base, if you want.
But still planning to or aiming for profitability in 2025. Your second question regarding funding and seeing a potential royalty monetization deal. Yes. First, all investors have access under a CDA to see data generated, we see a PRECISION trial, all correspondence with the FDA. Due diligence and [indiscernible] valid for even our licensing deal, if you ask me, I believe it takes too much time, but that’s what investors are doing, especially in the current environment.
So I’m pretty confident that based on the discussion we have with a few potential partners that we can ink a deal before year-end. It’s a form of royalty monetization.
Is it strictly a royalty monetization or sort of a bond with a royalty reimbursement or royalty sweep in it or structured debt with collateral or security on some assets, including a portion of the royalty entitlement from Janssen on aprocitentan? This remains to be seen. For the time being, we have not yet to be a very clear binding term sheet, but — because then we would definitely go from exclusive discussions, but I still hope to be able to close such a transaction before year-end.
Andrew Weiss
Thank you André. Operator next question please.
Operator
The next question comes from the line of Peter Verdult from Citi.
Andrew Weiss
We can’t hear you Pete. Okay, operator, then we’ll take the next question. Maybe if he comes back in.
Operator
Now we are going to take the next question. And it comes through the line of Rosie Turner from Jefferies.
Rosie Turner
So I’ll just do 3, if I may. Just going back to the comments made around this kind of nondilutive royalty sale. I think at the beginning in the opening remarks, it was said that this was going to take you through to profitability, i.e., that would mean kind of funding gap closed until 2025. Whereas I think on the previous call, it was meant to cover 12 months. So can you just clarify kind of what period we’re going to cover in terms of funding gap?
Then on PIVLAZ in Japan, you said you’ve reached 80% of [ kind ] of hospitals. Does that mean there was an element of stocking in the numbers this quarter? And then finally, just thinking about Germany, so it’s free pricing. Do you expect that to last for the full 12 months? Or is there a potential for getting that kind of added therapeutic benefit payment added any sooner?
Andrew Weiss
Do you want to take the timing option of funding?
André Muller
Yes. I’m not sure it’s not a misunderstanding because — and I don’t know which slide you’re alluding to but the transaction that we hope to close before year-end would not bring us to profitability. So, we will need in due course down the road to raise additional cash.
Simon Jose
And should I pick up the other 2 Yes. No, I wouldn’t say there’s any material change in stocking in the third quarter. Obviously, that was really in 2Q as we talked about then. But I would say there’s no material change. There’s no material stocking change in Q3.
And on Germany, no, I don’t think so. And I think the way the system works, essentially, we have the 12 months for free price, during that 12 months, we will negotiate the price that will become, if you like, the price at the end of 12 months. That will be based on, obviously, the added benefit that we get when we go through in that assessment. So I think we expect to have it for 12 months and then we’ll have a negotiated price at the end of that based on our negotiation in that year.
Andrew Weiss
Thank you, Simon. Thank you, Rosie. Operator? Do we have Peter Verdult back in the line?
Operator
Yes, we do. The next question comes from the line of Peter Verdult from Citi.
Peter Verdult
It’s Peter Verdult here from Citi. Hopefully, you can hear me this time. Andrew, can hear me?
Andrew Weiss
Yes, we can.
Peter Verdult
Yes. So, I’ve got a few questions. One for Jean-Paul, on for André, one for Simon. Jean-Paul, you’ll probably say be patient and wait a couple of weeks before we see the PRECISION data AHA. But could we at least just kick the tires and I’d like to get your view on Syncora data in treatment reuse hypertension, 20 millimeters systemic [ bores ] reduction, 11 millimeters placebo corrected.
Is this a benchmark that you think aprocitentan can meet or exceed when we see the data? I realize you can’t talk the actual numbers, but I would like to get some benchmark from you. Secondly, André, just a couple of high-level questions on OpEx for this year and next.
The budget at the start of the year implied over CHF 900 million of spend we know revenues are coming in lower than expected. FX headwinds are stronger, but guidance has been unchanged, and it’s obvious that you’re very comfortable meeting expectations. I just wanted to get a handle on whether this is due to just simply R&D phasing or marketing spend coming in much lower than expected. And then, again, I realize this is not the forum for guidance for next year, but just conceptually, OpEx for next year, should that be flat in absolute terms? Or do you fully expect it to grow further, given the pipeline and commercialization efforts around the globe?
And then lastly, Simon, just I’m sorry to come out to QB given that situation on revenue and access. But just a couple of clarifications. In terms of pushing you on those preprepared comments with regards to commercial access in 2023. Is that something that is probably going to be later in the year? Or is there any sort of nuggets you can give us about commercial access opening up sooner?
And can you confirm that Part D access is unlikely to come through until 2024. So sorry, a lot of questions there, but hopefully, there’s some interesting answers.
Jean-Paul Clozel
So maybe I take the first one about.
Andrew Weiss
Yes. Go ahead, Jean-Paul.
Jean-Paul Clozel
Yes. I think people always make a big mistake when they evaluate cardiovascular drugs because you have to look at a few things and this will be interesting to see what we have done in PRECISION. First of all, which patients do we treat. We have really in PRECISION taken real resistant Hypertension, which means taken with 3 drugs and I would say, more than 50% F4 anti-patent treatment. In many of — In the previous study, sometimes there are only 2 drugs.
So it’s not really resistant but actually, it’s basically an add-on therapy, simple advanced therapy without the definition of resistant hypertension. Then number 2 is how many percentage of these patients have renal failure, have diabetes, have heart failure? Did we exclude these type of patients in the protocol? And finally, there is the efficacy. Is the efficacy limited to a subgroup of patients disease in every patient?
And finally, of course, the safety, especially renal failure and you know that, for example, with pironolactone, with aldosterone inhibitors, the risk of renal failure on top of existing therapy is very high. So this is the whole picture that you have to look at when you really evaluate a cardiovascular drug. And then let’s go to the chart to see the results.
Andrew Weiss
Okay. Andre.
André Muller
Yes. Peter, to your question for 2022 guidance, yes, you’re right, we see initial plan, which was gross profit generated from net sales and contract revenue, north of CHF 100 million in OpEx around CHF 900 million. Sales will be below what we initially planned, notably in the U.S. and also because the FX rate in Japan will definitely not help.
Contract revenue should be higher because I’m also confident that we will announce the out-licensing of QUVIVIQ for China before year-end. We’ve done good progress, we see selected partner. But the revenue will be slightly lower than initially planned and in order to stick to see a guidance we had a few task ascribed to various departments in R&D, in commercial, in G&A just to make sure and will be reflected in lower OpEx in order to meet the guidance. So that’s for 2022. For 2023, I’m sure you anticipate already my answer.
You need to be patient and wait for full year results early February 2023. But what you need also to understand here is that with respect to the net sales, we need fewer assumptions and we need more data points. And notably, with volumes in the U.S. Of course, when we could get payer coverage in the commercial space, mainly with 3 main PBMs. And this will drive the guidance for net sales.
With respect to the OpEx, yes, that’s why I also wanted to give you some color on the R&D Some of the huge spending in study costs will progressively go down Daridorexant including Japan. With the open label extension and this year was really relating to the supply in drug substance and drug product to support the open label. Clazosentan once REACT is finished.
So moving forward, you will mainly see a study costs will be mainly relating to Selatogrel, still a long way to go, where with the enrollment of patients, which is gathering speed and the initiation of scenario. So I would say R&D, yes, place is going up, we see a fixed cost base and but on the study cost, we should be able to stabilize it, if not going slightly down. So it will be really in the commercial organization where we definitely need to put some marketing and selling in order to launch in Europe where we will definitely have an increase. But that’s again the bigger picture. We need to refine it based on more data points, mainly in the U.S. before coming with the guidance for 2023.
Simon Jose
Hello Pete. Let me take the second part first because it’s a bit more straightforward. I mean we’re essentially now in the process of bidding for the 2024 Part D formulary. So we would try to get something earlier in ’23, but absolutely I wouldn’t bank on it. I think that our base case assumption is that Part D will come in 2024.
In terms of commercial plans, I would be — I don’t know, as I’ve said already to other questions, we don’t know the exact timing, and it will also depend on, obviously, that demand and rebate and timing matrix. I would be disappointed if it is later in the year as you sort of pose your question conversely. I wouldn’t have any expectation that all of it is going to arrive on January 1. I just think you need to see how it plays out. But if I would be disappointed if we start seeing this arrive later in the year.
Andrew Weiss
Operator, next question please.
Operator
And the next question comes from the line of Thibault Boutherin from Morgan Stanley.
Thibault Boutherin
Just the first one. Thank you for the color and the clarification on OpEx. Just wanted to spend a little bit more time on the composition of marketing and spending going forward. If we look at the spending this year, part of it was DTC campaign. Part of it was a big push on the sales force for QUVIVIQ.
So, just when we try to think about how you’re going to support QUVIVIQ going forward in the U.S.? Should we expect more of the DTC? Is it going to be more of a traditional commercial effort from there?
If you could comment a little bit on your commercial strategy going forward? Second question on the start of the Phase III program for cenerimod. What is the kind of condition to start the study now that you have the full data from the Phase II? Is it possible that you could wait a little bit longer to make sure that QUVIVIQ is really taking off before engaging with the expense of the program start? And then last question on lucerastat.
You mentioned that your discussing with authorities in the first half of next year. Is the filing possible with the current data that you have in-house right now?
Andrew Weiss
Okay. Simon, do you want to take the first one on the structure of how you think the team is going to be spending next year? Yes, go ahead.
Simon Jose
Yes, I mean, you’re absolutely right. I mean the sales force and the DTC spend represents the bulk of the OpEx in the U.S., those are, if you like, the 2 big pillars of spend. Both of those were in the 2022 numbers to a large extent because, of course, the sales force came in probably sort of February time. And although our branded advertising started in August, we were doing some unbranded activity in the first half of the year. I don’t see that changing particularly.
I mean, I think we know that we need a sales force. We need to continue to educate doctors and make sure that they’re familiar with the product and the benefits. And we also know, and I think the reaction to the DTC campaign is bearing this out is that as we’ve always maintained, this is fundamentally a product that is going to respond well to consumer activation because of the nature of the disorder. We’re going to need to continue to invest in educating consumers and encouraging them to talk to their doctors about QUVIVIQ. So I think moving forward, we continue to expect the sales force and DTC as the 2 large pillars of our strategy and our [ vorapEx ].
Andrew Weiss
Okay. Thibault, I didn’t quite understand your second question there in between.
Thibault Boutherin
Yes, sorry. So it was about Cenerimod and basically, I think before you mentioned that you would start the Phase III program before the end of the year. I don’t know if this comment still stands or is there anything that could delay the start of the Phase III?
Andrew Weiss
Okay. I think I’ll refer to Jean-Paul for both those questions, Cenerimod and lucerastat.
Jean-Paul Clozel
I think that — Do you hear me? Do you hear me well. Okay. No, just for cenerimod, it doesn’t make sense to wait for cenerimod mode because we have spent this year already quite a large amount to prepare the Phase III, to recruit the centers. So now we have to start.
And I think that, of course, this is a competitive field, and we believe we can be one of the first or maybe the best overall product in lupus. And if we wait, we will have lost this opportunity.
So we have now discussed with the FDA, we have an agreement on the clinical plan. Now we have to move, and that’s what we are going to do. I think in terms of Lucerastat, we are really now looking at the results because many patients have 2 years of treatment under Lucerastat. We can evaluate the continued benefit. And I think that what we are starting is to discuss with different — We are going to discuss with different regulatory authorities their approach to this data and this is really what will happen in 2023.
This year, I have to say, we are focusing on filing aprocitentan with the FDA and soon after with European authorities, and that’s really the priority we will see for next year for Lucerastat.
Andrew Weiss
Thank you, Jean-Paul. Thank you, Thibault, for the questions. Operator, do we have questions left? We have already passed the top of the hour.
Operator
We have one more question left are you happy to take it?
Andrew Weiss
Yes, please.
Operator
And the question comes from the line of [Sushi Hernandez] from Kempen.
Unidentified Analyst
I just have a question on PIVLAZ. Looking at the number of patients treated in Japan doubling compared to June of this year. Do you expect this trend to continue? And what kind of efforts will support this?
Andrew Weiss
Simon, do you want to take projections on that?
Simon Jose
Yes. I mean I won’t provide numbers in terms of projections. The only thing I would say, I mean, clearly, you can’t expect this to be linear in every single quarter, we’re going to — we’re at 10% because it just won’t — we’ll just get to enormous market share in a matter of several quarters after launch. I think what we are seeing is a very, very nice uptake, which I think is also in part because obviously, we’ve got trial centers and trialists that are familiar with the drug and adopting it quickly.
We will also now obviously start to move into other physicians who we are talking to already and they are using. But that adoption probably is slightly slower than we’re seeing amongst trialists, which is quite understandable and quite natural. But we have a sales force that is regularly calling on these people. It’s a highly concentrated market. We have about 600 hospitals that account for most of the patients.
We are anticipating revisions to the treatment of [ ASH and baseband ] guidelines in the latter part of next year. I think all of which will be catalysts to continue the growth.
Jean-Paul Clozel
Maybe also what I would — It’s Jean-Paul. What I would add for Clazo is that what we see in Japan is a change of the way the patients are treated. Now people are using much less fluid. They are controlling broad pressure in a very different way than 10 years ago when we started to do these studies. This will be very important, I think, for REACT because I do believe that with the present treatment, the chances to see a larger beneficial effect of Clazo in the REACT study are there.
I think that, frankly, 10 years ago, the estate intensive care treatment of these patients were not as good as today. So I’m really looking forward to look at the REACT results.
Andrew Weiss
Thank you, Jean-Paul. Thank you, Sheila. All right. I’m double checking on the web for questions coming through the chat box. It seems that all of them have been addressed by questions being asked by the analysts.
So operator, I think I’ll be closing down the lines now. So thank you very much for having us on this call and your continued interest in Idorsia. Operator, please close down the lines.
Operator
Thank you. That concludes our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
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