Organon & Company (OGN) — Q2 2023 Earnings Call Transcript

Thank you, Audra. Good morning, everyone. Thank you for joining Organon's second quarter 2023 earnings call. With me today are Kevin Ali, Organon's 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, Organon's Head of R&D, will also be joining us for the Q&A portion of this call. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the Events and Presentations section of our Organon Investor Relations website at www.organon.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call 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 company's filings with the Securities and Exchange Commission, including our 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 turn the call over to our CEO, Kevin Ali.

Good morning, everyone and thank you, Jen. 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, our women's health and biosimilars franchise grew double digit, while our Established Brands franchise achieved flat performance again demonstrating its continued stability. Adjusted EBITDA 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 $6.15 billion to $6.45 billion to now $6.25 billion 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. Now, let's 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 Nexplanon. Performance of Nexplanon in the US was particularly strong this quarter, with revenue growth of 19%. This reflects the 5% increase in US 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, Nexplanon is up 6% 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 35,000 healthcare professionals currently prescribing Nexplanon. We also expect increasing demand outside the US, especially in Latin America and countries like Brazil and Argentina as well as in Asia and countries like Thailand and the Philippines. We continue to believe that Nexplanon will achieve $1 billion in revenue by 2025 and we expect Nexplanon to be a significant contributor to growth for the coming years. Continuing our discussion on women's health, fertility was up 17% at constant currency. As we have discussed, China and the US are large fertility markets and 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 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 US, the fertility market is growing and remains an attractive business for Organon. We're seeing increasing demand from our existing customer base, but also since then, we've worked to improve the consistency and reliability of 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 US 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 expectations for 2023. Wrapping up on women's health is the JADA system, our device for postpartum hemorrhage. Year-to-date, revenue from JADA has more than doubled, albeit off a small base, and it's fast approaching a threshold where we'll 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 US and more than 28,000 mothers have been treated with JADA since launch. The enthusiasm around JADA is palpable and ranges from a rising profile in scientific journals like the RUBY studies upcoming publication to healthcare professionals taking to 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 US launch of HADLIMA, our biosimilar for Humira. Since launch, all major wholesalers have placed orders for HADLIMA. We're encouraged by our early traction as Organon is emerging as one of the few players earning spots on formularies and winning orders. In approaching the launch of HADLIMA, we were very intentional in our market positioning and segmentation. Our pricing strategy focuses on simplicity. It was a deliberate choice and design so that the savings for the healthcare system would be more transparent. We've priced HADLIMA to enable access and to bring the economic benefits of biosimilars directly to the patient. 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, Optum RX and Express Scripts. You can see where Organon has already been able to secure access within both PBMs outside of their national formulary listings. In the case of Optum RX, we have secured more than half of the lives through United Healthcare. In the case of Express Scripts between Cigna and Prime Therapeutics, we've secured about a third of the lives. Prime Therapeutics is the fourth largest PBM. Health plans of 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've 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 savings of biosimilars to the patients and we're not done. The market is still evolving. Decisions from PBMs and insurers are still forthcoming. Product attributes will be key in continuing to unlock opportunities. We continue to believe HADLIMA 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 living with arthritis and other functional limitations. We also developed the HADLIMA For You Patient Support program that features comprehensive resources including a co-pay program and dedicated nurse coaches who engage with patients throughout their treatment journey. One of the most important differentiators for HADLIMA is the five years of real-world evidence covering tens of thousands of patients that we have collected from Samsung's launch 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 4 study had reached its primary endpoint, which puts us on track for a summer of 2024 approval. And finally, our product formulation is high concentration, citrate-free, aligned with the most prescribed formulation 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. healthcare 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 topline discussion, let's move on to Established Brands. Year-to-date, the Established Brands 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 a portfolio of off-patent brands can demonstrate that kind of continued stability. There are several reasons, and over the next few quarters, we will highlight a few of them in detail. Last quarter, we talked about manufacturing optimization for Nasonex and Atozet to meet increasing demand resulting from heightened promotional activity. Today, I'll focus on our strategic approach to pricing. In some lower-priced markets, lawmakers are backing policies that propose to raise originator and 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. Where this isn't the case, we have worked with policymakers to demonstrate how investments are important to ensure access to reliable and high-quality manufactured products. Further, we've been able to selectively increase our list price in many markets, subject to meeting certain conditions. An example is our LAMERA region, where currency devaluation and inflation provided a basis for a lot of price increases in a number of countries. Beyond increasing list price, we've also scrubbed the channel for commercial and trade discount improvements. As we continue to look at this portfolio, we're identifying opportunities that give 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. Importantly, we have grown our pipeline since launch and have added eight assets to our portfolio, which includes some very interesting molecules in the early stages of development. This investment is key so that over time, Organon evolves into a pharma company with a regular cadence of catalysts at an accelerating growth rate. In 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 of the second quarter in more detail.

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. LOE was negligible in the second quarter, as it was in the first quarter, and the small amount that we have realized year-to-date was related to generic competition for NuvaRing in the U.S. In the second quarter, we had about a $25 million impact from VBP in China related to last year's implementation of round seven that included our cardiovascular product, Ezetrol, which is sold in Zetia in some markets outside of China. Year-to-date impact from VBP is about $50 million, which is tracking to our expectations for the year. Moving across to 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 in 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 gain 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 $115 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 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 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 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.K. region grew 6%, primarily related to growth in Atozet 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're steadily rebuilding supply chain inventories to our desired stocking levels. The U.S. grew 6% in the quarter as a result of the strong performance across most of our key growth platforms, NEXPLANON, RENFLEXIS, JADA and, to a lesser extent, fertility. 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 VBP, 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 LAMIRA 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 UCAN 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. We'll start with women's health on Slide 11. A key volume driver in both NEXPLANON as well as our fertility portfolio results from expanded access, moving from traditionally out-of-pocket markets into the reimbursed segments. For example, in the United States, the Docs' decision has driven an increase in demand from patients obtaining NEXPLANON through providers under the 340B program, which is a more highly discounted channel. And in fertility, while volume demand is strong, we are trying to expand access into the reimbursed segments, which requires competitive pricing. Ex U.S., we've seen strong performance from fertility in LAMIRA and also in China as patients return to the clinics post-COVID. Turning to biosimilars on Slide 12. Kevin covered the U.S. HADLIMA launch, which began on July 1, 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. RENFLEXIS grew 20% in the quarter and is on track for its sixth consecutive year of annual revenue growth in the U.S. ONTRUZANT 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 company-wide basis, about a percentage point of revenue headwind from the market action on injectable steroids, Diprospan, and Celestone, and we expect established brands to be flat for the full year on a constant currency basis. Now let's start 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 spin-off, which can be seen on Table 4 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 a result of $97 million of IP R&D and milestones in the second quarter of last year, where no such costs were incurred in the second quarter this year. With regard 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 I&D acceptance for ebopiprant. Last quarter, we said that the I&D for ebopiprant could be filed as early as the second quarter of 2023. Since then, additional development work has been required to inform a clinical program for this asset. As a result, we currently do not have an updated date for filing the I&D and we'll 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 a 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 EBITDA calculation as well as a debt figure that trues 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 is 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. That includes certain accruals, which, for instance, include 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 a planned first-half inventory build to support the growth of the biosimilars business, including the HADLIMA launch and to achieve target fill rates across the portfolio. In addition, as inventory turns, the replenishment cycles reflect the impact of both inflation and foreign exchange on our purchased raw material and labor inputs. And if you're tracking our trade days of sales outstanding or DSO, you probably noted that metric ticked up by about five days this quarter. 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. So there are some very logical levers that will unwind a fair bit of this first half use of working capital in the back half, and that will drive us towards that approximately $1 billion of free cash flow before onetime costs on an annual basis for 2023. Onetime cash costs related to the spinoff transaction are trending in line with our expectation of about $350 million for the full year 2023, in the single biggest component of separation costs related to the implementation of stand-alone IT systems and the largest of which is our stand-alone SAP global single-instance 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 headwind of about 80 basis points to 160 basis points to an approximate $0 to $50 million impact, representing an 80 basis point headwind on the high end based on where spot FX rates are today. Accordingly, we're adjusting our guidance range for full year 2023 revenue from $6.15 billion to $6.45 billion to $6.25 billion to $6.45 billion, consistent with the movements we've seen in foreign exchange. LOE 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 million to $75 million impact related to the continuing erosion of NuvaRing, generic competition for Atozet in Japan following recent LOE in that market, as well as a possible generic entrant for DULERA in the U.S. by year-end. We now expect the annual impact from VBP to be in the range of $100 million to $125 million, an improvement from the bridge we showed last quarter. The VBP impact in 2023 will be driven mostly by EZETROL's inclusion in the implementation of Round 7 in November 2022, as well as the recent Round 8 implementation in July, which will include for Organon, our REMERON and HYZAAR 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, this is less about established brands, but rather tied to my earlier comment around expanding access for NEXPLANON 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 continue to expect adjusted gross margin to be in 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 is primarily due to product mix, the biosimilars franchise operates as a profit share model, so growth in that franchise from the U.S. launch of HADLIMA will be unfavorable to the gross margin line. 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, but I 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 in the remainder of the year, we are raising the bottom end of our adjusted EBITDA guidance by 0.5 percentage point so the new range is 31.5% to 33%. We also expect to have some net favorability below the EBITDA line. Given the favorability on the 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 estimate of 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 HADLIMA's launch in the U.S. as well as the upcoming U.S. launch of XACIATO. 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 our relatively stronger performance in local currencies. With that, let's now turn the call over to questions and answers.

Thank you. I have a question about the capital structure. You've mentioned before that you're aiming to reduce some of the variable rate debt. I would like more details on your plans regarding this, what it means for 2024, and your thoughts on interest expenses. I realize it's a bit early, but please provide us with your current perspective. Additionally, concerning the capital structure, how do you reconcile the goals of reducing debt and acquiring assets? What are you prioritizing? I understand it may not be a straightforward choice, but please share your latest thoughts.

I'll begin by addressing the debt aspect. In the first quarter, the company voluntarily paid down $250 million of our variable rate debt due to recent increases by the Federal Reserve, making this the most expensive debt we have. As we plan future voluntary debt repayments, this will be a significant consideration. With 75% of our free cash flow expected to be generated in the latter half of the year, this will influence our capital allocation and deployment decisions, including further reductions in that variable rate debt. The second part of your question is crucial because since the spin-off, we've aimed to balance growth through business development and mergers and acquisitions with the immediate benefits of debt reduction. We've achieved a balance thus far, deploying similar amounts of capital to growth across the eight deals we've completed as well as around $450 million in voluntary debt repayments. We intend to maintain this strategy. Additionally, the changes in the interest rate environment have necessitated a more cautious approach to capital deployment in our business development program, prompting us to focus on opportunities that provide more immediate visibility into revenue and EBITDA growth. With these points, I believe we've addressed your question.

Hi guys. Thanks for taking my question. I'm still trying to make up my mind on reading all the details of the quarter. Clearly tracked ahead, but I know there are some one-timers in there as well. So could you lay those out? First, also, first, perhaps on the cholesterol franchise ex U.S. tracking ahead, relative to whether the trade receivables build was specifically focused on those cholesterol meds. And secondly, also, what exactly drove such a big tax lowering?

So I'll start with the second part of that, Umer. We have a global tax structure that has a significant amount of exposure in Europe, particularly in Switzerland, which contributed to that benefit. Regarding the first part of your question, June was a strong month overall for the company, with cardiovascular products playing a role in that, linked to the relatively strong global demand we see in the Atozet franchise.

Did that answer your questions, Umer?

I see that your cholesterol medication sales from Atozet and ZETIA are around $200 million each quarter. This quarter, they were about 25% higher, so there must be some unusual factor contributing to that, right?

Yes. So we had 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 ezetimibe franchise, and Atozet is just doing exceptionally well in Europe. France, for example, is doing exceptionally well, double-digit growth with Atozet in France, it's creating a lot of uplift in terms of overall volume, and we don't really face a lot of price erosion on Atozet right now. So I think it's just very, very strong, robust quarter with regards to a couple of issues. One is opportunity with ZETIA because of the slowdown of implementation of Round 7 and Atozet growth in Europe. Does that answer it?

That's very helpful. Thank you so much.

Sure.

Hello. Hey guys. Thanks for taking my question. I wanted to just ask about the interchangeability commentary on Humira. It seemed like in the past, you guys maybe downplayed that as important to the commercial. And I'm wondering if there's like any kind of revised view just given how AbbVie's contracting practices have made it difficult for biosimilar adoption? And maybe now interchangeability is important. And then along those lines, then, did this become a race with Teva to be the first one to get this interchangeability designation? Thanks.

Good question, Jason. Regarding interchangeability, a few years ago, it wasn’t a priority for PBMs or others as we were developing alongside our partners at Samsung. This focus shifted recently when a competitor announced their interchangeability designation for a lower concentration product. The high concentration citrate-free business accounts for about 85% of our total U.S. business. Recently, our collaborator Samsung published our Phase IV trial results, which demonstrated a very positive outlook and met all the endpoints for the interchangeability study. We anticipate receiving the interchangeability indication by next summer. I can't comment on Teva or other competitors in this area, but in discussions with PBMs, they've indicated that contracting on price is critical, given the current market dynamics. Approximately 40% of lives in the PBM sector are linked to low WACC, low rebate strategies, which help ensure lower out-of-pocket expenses for patients utilizing biosimilars. In contrast, the high WACC, high rebate approach is what AbbVie employs as the originator. We’re pleased with our progress in this ongoing conversation. Most importantly, PBMs are looking for reliability in manufacturing and the pen design, and we recently received recognition from the Arthritis Foundation for our unique pen design. They also seek real-world evidence, which we've successfully gathered, having sold seven million units since 2019 across Europe, Canada, and Australia. These are key attributes for market differentiation, and obtaining the interchangeability indication will provide additional support. I believe most PBMs recognize that with ongoing studies and our Phase IV trial results showing that we met endpoints, this will simply be part of doing business.

A follow-up on HADLIMA. Just wanted to hear about your dialogue with PBMs and health plans on your low WACC and high discount strategy. And do you expected most market formation in 2024 and 2025? And will the high concentration will be a game changer? Just a bit of a follow-up on the previous question. And then can you also give us more information on the missing data on ebopiprant and the timing of the additional clinical work.

Yes, I can provide some information regarding the first part of your question, and then I'll let Sandy discuss ebopiprant. Currently, concerning the PBMs and HADLIMA, we are employing a dual strategy in our launches. Some companies, like AbbVie, are taking a high WAC and high rebate approach, while others are focusing on a value proposition that emphasizes savings for the healthcare system and, more importantly, for patients in terms of their out-of-pocket costs. It's important to note that patients' costs are generally tied to the WACC price. This has been our focus and strategy, and as I mentioned at the beginning of this hour, we're starting to see positive pull-through. I've indicated for the past couple of years that I believe 2023 and 2024 will be formative years for the market. Access to formularies will improve, leading to real revenue generation and market formation, expected to become more significant around late 2024 and 2025. At that point, a number of factors will align. For instance, I estimate that currently, 40% of lives covered fall into the low WACC, low rebate, and lower out-of-pocket expense category within the Humira biosimilar segment. We are very well positioned in this segment because of the various advantages we've mentioned previously. We've had early successes, such as with Prime, which covers one-third of the lives, and UnitedHealthcare, which covers half. Just this morning, we received notification from Centene, adding another five million lives covered. These areas and PBMs are focused on low net costs and passing savings onto patients, which gives us confidence in our current position and future trajectory with this product. We remain optimistic and believe we are on the right path. We also offer both high concentration citrate-free and low concentrations for our customers. Navann, did I answer your question, or do you need more clarity on HADLIMA?

Yes. Thank you for the color.

Okay. So I'll hand it over to Sandy now to address the ebopiprant question, Navann.

So Navann, to answer your question, as you know, we've been doing quite a bit of additional preclinical work to progress asset. And we've been able to take a look at that data as well as the clinical data that was obtained by ObsEva during their clinical studies and as well looking at the technical work that is necessary to get us to a clinical formulation. And it's clear that there's additional preclinical work that we need to do before we take this forward to the development phase in humans before we get to Phase I.

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 of late?

I can address that, Roger. We announced a deal last year with Henlius to bring in two assets in the biosimilar space. We're being very opportunistic about it. We anticipate the next significant opportunity will be in the IOs around 2028. We're actively working on things in that area and feel confident in our current portfolio, not only with Samsung but also with our Henlius partners. Regarding women's health, we've explored various companies and products with our exceptional business development team and see opportunities in women's health. Initially, we focused exclusively on women's health, but now we are broadening our scope to include conditions that disproportionately affect women, covering various indications and therapeutic areas that align well with our overall strategy. We have many prospects we are evaluating right now, including interesting assets that are ready to launch or recently launched, as well as those in mid-stage development. We are very committed to this area as well, Roger. I hope that answered your question.

Well, I will just say that I want to thank everybody for tuning in, and we'll talk to you soon. We're very proud of the results of the second quarter, and we'll be speaking to you soon. All the best.