HLBBF (HLBBF) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Lundbeck financial statements for the first 3 months of 2026 conference call. My name is Yousuf, the Chorus Call operator. [Operator Instructions] This conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Charl van Zyl, President and CEO. Please go ahead.

[indiscernible] '26 business update and financial results. Of course, I'm very pleased with the report of today and that we are off to a great start in 2026. These results certainly present to us a clear proof point of our transformation in our Focused Innovator Strategy and that we are leaving nothing to chance in terms of purposeful execution. It's also great to see the impact of my fantastic leadership team in terms of delivering these results and transforming Lundbeck for the future. So if I could have the next slide, please. So of course, today is subject to forward-looking statements and, of course, subject to change. If we go to the next slide. So let me unpack a little bit the more specific points of our strong Q1 and how we're seeing progress across the company. So we're delivering very much on our 3 key areas of our Focused Innovator Strategy, which is: growth; innovation; and the funding. And let me talk first about growth. What is really pleasing to see in the first quarter and also the underlying performance is the investments and the actions we're taking against our strategic brands, which are growing at 21%. This is led by Vyepti at 47% and Rexulti at 22%. Very strong underlying growth of each of these assets. This speaks to our disciplined execution across all our key markets. As you will recall, also, we have transitioned to 27 commercial -- 27 markets into a commercial partnership model. And I have to say that, that transition has gone really well and off to a great start. And the early signs give us confidence that this is fitting within our strategic intent and allowing us to refocus and play to win in the markets where we operate directly. Let me talk to the second part of our Focused Innovator Strategy, which is innovation. Also here, very strong progress in terms of diversifying the pipeline and the pipeline accelerating and moving in the right direction. One of the key proof points here is, of course, the MASCOT trial, which has completed recruitment and randomization ahead of our plan, which also translates into an early launch, which we believe is now Q1 2029. We've also seen, since we last spoke, positive Phase IIb results of PROCEED study in Bocunebart, which now allows us to introduce in the future once we enter into Phase III a new mechanism in the space of severe preventative migraine. And thirdly, Bexicaserin in our late stage is moving ahead according to plan. Let me also make a few comments on the early and mid-stage parts and Johan will talk more about that in a second. But first of all, 3 points to make. First, our D1/D2 agonist is advancing very well in Parkinson's. We've also got Asedebart that has completed enrollment in congenital adrenal hyperplasia. And we're advancing well in Cushing's disease. And there is also a new chapter we will unveil a bit today, which is our orexin 2 agonist platform, which we believe is a new generation platform with broad application in the space of neuroscience. Then, the third pillar of our strategy is funding. And I have to say here, we've continued to be very disciplined around the allocation of capital to either growth or innovation. But we also see the strong cash flow that we generate has allowed us to reduce our net debt to EBITDA by 50% since last year. So again, funding that journey of the future and funding our growth and innovation very effectively. So that brings me to guidance. And as you will know and have followed us, Lundbeck is going through a transformation, which is very dynamic, where we're investing in a very dynamic way also into our strategic brands and our key markets. And despite some of the tailwinds that we see that are once-off items in the Q1 results, we see the underlying business really fundamentally driving the growth. And that is allowing us to upgrade our full year outlook and raising the guidance to 7% to 9% on the top line and 8% to 14% on adjusted EBITDA. So with that, I would like to go to the next slide, please. And just give you a bit of an insight also into our artificial intelligence journey and announcements we've made recently around also strengthening our leadership in this space. We have been on this journey for over 2 years in building strong broad AI adoption inside the company, bringing literacy to many of our employees and allowing our employees to really, in a daily basis, use AI-enabled tools to ensure to perform on their business in a more impactful way. That's been a journey for over 2 years. But we're now also building a much more stronger leadership at the top to be really intentional. And we see AI, of course, as a key enabler and an accelerator of our Focused Innovator Strategy that will drive growth and value and speed and quality also in the pipeline. So very much embedded in our Focused Innovator Strategy and an important investment that we're making for the long-term success of Lundbeck. So if we can go to the next slide. Then, just again, I am, of course, today privileged to be joined by my leadership team, who will go deeper into the Q1 results and unpack a bit more for you on what is the underlying perspectives on our performance and our strong results. So with that, I hand over to Tom.

Great. Thank you, Charl. Overall, we're pleased with our commercial performance during Q1 2026. And this performance was headlined by the global performance of Vyepti. Vyepti delivered strong market-leading growth during Q1 2026 and we expect this to continue throughout the year. This performance has been powered by continued robust underlying demand in both the U.S. and our Europe and international markets. Global revenue reached DKK 1.364 billion in Q1 2026, growing 47% at constant exchange rates. In the U.S., demand grew 42.1%, nearly tripling the market growth of 15.2% during the first quarter of 2026, representing clear and sustained outperformance. This performance reflects precision execution across the marketing mix, including the impact of our sales force and DTC investments, which are increasingly guided by internally developed AI tools and advanced analytics. Our weekly market share reached 12.1% in March, driven by continued growth in new patient starts, a high written-to-infusion conversion ratio and category-leading patient persistency. We will continue to allocate resources in a disciplined and data-driven manner as we move through the year to continue to fuel growth. In Europe and international operations, Vyepti grew an impressive 55% at constant exchange rates, with strong uptake across key markets and also outpacing anti-CGRP market growth. Market share in these prioritized markets has increased approximately 3 percentage points year-over-year. We're also making good progress toward expanding Vyepti into Asia. As a reminder, we completed regulatory filings in China, Japan and Korea in 2025. And if approved, we see this as meaningful additional growth opportunity over time. Importantly, we also continue to invest in data generation to enhance the clinical and economic value proposition of Vyepti. The INFUSE and THRIVE studies are designed to support earlier use of Vyepti in the treatment pathway and established Vyepti as a market leader in severe migraine. Next slide, please. Turning to Rexulti, which continues to deliver strong double-digit growth. In Q1 2026, global revenue reached DKK 1.612 billion, an increase of 22% at constant exchange rates versus the same period last year. In the U.S., TRx grew 21% on a rolling 3-month basis. AADAD is the main growth driver with TRx up 43%, while MDD remains a solid contributor, growing 18%, which is demonstrating strong underlying brand fundamentals. Rexulti AADAD volume is becoming increasingly important to the overall Rexulti brand growth and we expect this to continue through 2026 and beyond. The 65+ segment now contributes approximately 36% or more than one out of every 3 of Rexulti TRx claims based upon the most recently available claims data. In our latest awareness, trial and usage market research survey, Rexulti was the #1 preferred brand for the treatment of AADAD. And this remains an important driver for the future growth of the brand. We are pleased with the momentum of Rexulti. And demand is tracking to plan despite an increasingly competitive market and evolving policy landscape. Precision execution across the marketing mix, including our expanded sales team in primary care,8 is expected to continue to drive long-term growth and help address the increased competition. In Europe and international operations, Rexulti delivered very strong growth at 36% at constant exchange rates, and this reflects continued momentum across key markets. Next slide, please. And over to you, Michala.

Thank you, Tom. If we turn to the Abilify franchise, then you'll see that we have also delivered strong performance in Q1 here for the franchise and this is driven by the strong growth that we've seen with Asimtufii or Abilify 960 as it's called in Europe. At the franchise level, global revenue grew at 8% at constant exchange rates in Q1 versus last year. And this reflects the solid momentum that we've seen with the impressive Asimtufii growth of 111% in constant exchange rates. You'll note that Abilify Maintena 1 monthly declined 3% in constant exchange rate versus last year. I want to draw your attention to the fact that Q1 last year was extraordinarily impacted by a provision reversal. And when we adjust for these effects, Abilify Maintena 1 monthly grew 1% in the first quarter. In the U.S., we see encouraging TRx volume up to 32.2%, contributing to 1.1 share points to overall franchise gains. Conversion is progressing well, as you can see on the right side, with NBRx at around 23%. And importantly, we continue to see that around 58% of patients are new to brand, which further supports that we have a sustainable growth profile of Asimtufii in the future. In Europe and International Operations, we also had strong momentum. The franchise grew 8%, driven by the rollout of the 960-milligram formulation, which is now available in 27 countries. We continue to see very strong conversion rates. And we currently also see here about 1/3 of the patients that are being switched directly to the 2 monthly version from all treatments, which supports further the continued sustainable growth profile of the brand. Looking ahead, the conversion maximization remains a key priority for us. And we now expect generic entry for Abilify Maintena 1 monthly to be further delayed with limited impact expected this year, which provides us with additional runway to continue to drive value within the franchise. Next slide, please. There are some important dynamics in the underlying -- there are important underlying dynamics within the reported Q1 revenue that I'd like to unpack for you a little bit more because the impact of our transition to a partner-led model is important to clarify. As you can see here, at the group level, revenue grew 21% at constant exchange rates. While this represents exceptional performance, it also includes 3 effects that have been related to our partner model, which should be calibrated against to understand the underlying growth of 13% in constant exchange rate. The first is the planned one-off inventory build that we also mentioned to you in our last earnings call, where we as part of the transition to our new partner model, have been building up safety stock with the partners in their markets where they have taken over distribution of our products. This has contributed to a one-off effect in Q1 of approximately DKK 500 million in revenue in Q1. Secondly, also compared to last year, we're now paying a commission fee to the partners. Partner commissions are recognized as a gross to net deduction. And this means that we need to adjust the revenue base to have a like-for-like comparison. The third effect we have with the partner model is the shipment phasing that we see in the partner model where we ship to them. As partners are establishing their ordering patterns, we do expect to see some quarterly variability, where we expect that the effect would be -- or the variability would be stronger in Q1 and Q3 and softer inventory -- sorry, stronger shipments in Q2, softer shipments in Q2 and Q4. And this is driven by timing effects of the model rather than underlying demand in the market. Altogether, when we adjust for these effects, the underlying revenue growth in Q1 is approximately 13% at constant exchange rates. With this, I conclude for the performance section and hand over to my colleague, Johan, for a portfolio update.

Thank you very much, Michala, and thank you, Tom. Building on the strong commercial performance, let us now turn to R&D and the progress we are making across the pipeline. Next slide, please. Overall, we remained on track to build a rich and diversified pipeline with several breakthrough therapy opportunities. Q1 has been a quarter of solid progression across the portfolio, supported by external recognition of our efforts. Starting with late-stage development programs, both our current Phase III programs are progressing well. For Bexicaserin in Developmental and Epileptic Encephalopathies, we continue to advance the patient enrollment activities according to plan in the DEEp SEA and the DEEp OCEAN trials, 2 pivotal trials in that program. As you've already heard from Charl, in the Amlenetug program in multiple system atrophy, we completed patient enrollment in the pivotal Phase III MASCOT trial substantially ahead of schedule in Q1. This reflects a strong patient and investigator interest and also a match with a very global strong execution. We are looking forward to headline results already in Q3 2027. The recent publication in Lancet Neurology of the Amlenetug Phase II AMULET trial is a nice validation of the pioneering and innovative nature of this program. Regarding Eptinezumab, the Phase IV RESOLUTION trial results were published in neurology this quarter. The trial demonstrated rapid sustained efficacy for chronic migraine with medication overuse. Additionally, as you heard, enrollment is now complete for the Phase IV THRIVE trial, focusing on patients with inadequate responses to prior CGRP treatments. During Q1, we advanced Asedebart, our first-in-class anti-ACTH monoclonal antibody, by completing enrollment in our Phase II congenital adrenal hyperplasia study, while the Phase II Cushing's disease study gained strong momentum. Both studies have generated encouraging data. The CAH results have already been presented at conferences, while the first Cushing's data are to be showcased at the ENDO 2026 meeting in June. At ENDO, we will also present new data from our CD40 binding program 515 in thyroid eye disease for which I showed some initial supportive data in the Q3 '25 investor call. Let me now discuss in detail 2 more programs. Next slide, please. In the Bocunebart program, we aim to establish a new mechanism of action, anti-PACAP as a differentiated treatment option in migraine prevention. There remains a significant unmet need for patients most severely affected by migraine. About 40% to 50% of patients do not achieve sufficient benefit from established prevention therapies. A new biologically broader mechanism of action offers additional opportunities for a targeted therapy. Indeed, based on the data from the Bocunebart program, we have clearly established its potential to reduce migraine and headaches in patients not responding to prior treatments. In the Phase IIb PROCEED trial, the primary endpoint was met with a significant reduction in monthly migraine days versus placebo over weeks 1 to 12 in patients with 2 to 4 prior prevention treatment failures. Additionally, we have paved the way for the program by showing that Bocunebart was well tolerated with concomitant use of migraine medications such as triptans and gepants. We are now initiating regulatory interactions while Phase III trial start preparations are underway. Next milestone for the program will be the PROCEED high-level trial data to be presented at the American Headache Society meeting in June. Same day as the presentation, Maria and I will also host an investor call. Next slide, please. Let me now turn to LU-996, our oral D1/D2 agonist program in advanced Parkinson's disease. At the AD/PD conference in March, we presented new Phase Ib open-label data, providing further insights into the impact of 996 on key motor function parameters. The data demonstrated a marked improvement at week 6 following treatment with 996. Patients experienced approximately 3.5 hours increased good time alongside a reduction of around 2.3 hours in off time versus placebo -- versus baseline. These are very encouraging results given the significant unmet need in patients with advanced disease where motor fluctuations are major challenge despite existing therapies. The underserved patient population is large with millions of patients experiencing motor complications. Moreover, the oral route administration of 996 provides a highly attractive treatment opportunity compared with more invasive approaches. We plan to present the full data set at MDS later this year, while preparations for a comprehensive Phase II proof-of-concept trial, placebo-controlled trial are well underway with expected start mid this year. Next slide, please. Let me close with an overview on how our development pipeline continues to evolve. We have now multiple assets that are progressing through mid and late-stage clinical development. Among our Phase III programs, Amlenetug holds both a first-in-class and first-in-indication potential for disease-modifying mechanism in MSA. Bexicaserin also in Phase III has a strong potential for best-in-class and pioneering treatment for the broad DEE indication. As just described, we are progressing the first-in-class migraine prevention candidate, Bocunebart, into Phase III as well. There are also very encouraging data generated in several highly differentiated mid-stage assets. In particular, I'd like to highlight Asedebart, a first-in-class program with several orphan drug designations already assigned across several geographies. This program is now in pivotal program enabling activities for 2 neuroendocrinology indications. The mid-stage Phase II pipeline is also building up. I just described the promising LU-996, a potential first oral D1/D2 agonist treatment in Parkinson's. Also, our lead program in neuroimmunology, the CD40 ligand binder LU-515, is also expected to progress into Phase II by end of this year. Importantly, we're also expanding our early development pipeline by progressing new research programs. One such effort is the progression of a comprehensive orexin 2 agonist program. This is advancing with a couple of candidates in Phase I and Phase Ib patient studies with additional follow-up preclinical candidates. The orexin biology represents a highly validated sleep wake mechanism. The orexin agonist approach requires high-end molecules but the right drug candidates may have potential in multitude of Daytime Hypersomnolence, high medical need indications. Given the competitive nature of this target class, we have meticulously been aiming for best-in-class compounds. Over time, we believe this program could become an important contributor to our long-term growth where we can build on our existing solid neuroscience R&D and commercial competence. So overall, we have a rapidly expanding diversified pipeline that is increasingly maturing with several assets that have already shown strong scientific and clinical validation. We're looking at the prospect of having enabled 4 to 5 programs to be at pivotal stage by beginning next year. Our transformed pipeline, therefore, combines several near-term catalysts matched with longer term innovation with multiple major value inflection points coming up in the coming 1, 2 years. With that, I'd like to hand over to Joerg.

Thank you, Johan. Q1 represents a very strong start to the year with reported growth above expectations. Beyond the top-line, what is encouraging is that we continue to see improving operating leverage supported by disciplined cost management and ongoing capital reallocation, while at the same time, increasing investments in the pipeline. So overall, we're seeing a business that is both growing and strengthening commercially, operationally and financially. Based on this performance and our continued confidence in the underlying trajectory, we have raised our full year guidance. At the same time, we remain mindful of the phasing effects in Q1 and the more competitive environment as the year progresses. With that framing in mind, let me now walk you through the financials. Next slide, please. Revenue reached DKK 7.1 billion, growing 21%, representing a true underlying growth of 13%. This was driven predominantly by the inventory build and phasing dynamics in partner markets, while Vyepti delivered strong growth and Rexulti performed according to plan. The adjusted gross margin was 87%, slightly impacted by an unfavorable product mix. Sales and distribution costs increased by 5%. The savings from the new commercial model have been reinvested to support strategic brand growth, especially Vyepti and Rexulti in the U.S. and to support the global rollout of Vyepti. Administrative expenses reached DKK 355 million, corresponding to a slight increase of 3% at constant exchange rates, in line with expectations. R&D costs increased according to plan by 15%, reaching DKK 1.4 billion and is driven by the progression of our Phase III programs for Bexicaserin and Amlenetug and a maturing mid-stage pipeline. Other operating expenses reached DKK 152 million, primarily reflecting a one-off restructuring provision. Adjusted EBITDA grew by 31% at constant exchange rates, reaching a margin of 39.1%, mainly driven by the strong performance of our strategic brands and the gross profit impact from the onetime initial inventory build supporting the transition to a new commercial model. Next slide, please. EBIT increased 30% to DKK 2.2 billion, reflecting improved gross profit from stronger sales and lower S&D ratio, partially offset by higher R&D investments. Net financials were an expense of DKK 29 million, benefiting from favorable currency movements and lower interest costs. Our effective tax rate was 22%, in line with full year expectation. Net profit increased 48% and adjusted net profit grew 41% to DKK 2.1 billion. This translates into adjusted EPS growth of 41%, consistent with the underlying performance of the business. Overall, profitability development reflects both strong execution and a disciplined financial framework. Next slide, please. Cash flow from operating activities was in line with EBIT performance, reaching DKK 599 million, mainly reflecting the higher receivables and inventory, partially offset by higher tax payments. Cash flow from investing activities was an outflow of DKK 116 million, reflecting investments in property, plant and equipment. Cash flow from financing activities was an outflow of DKK 2 billion, reflecting loan repayments related to the revolving credit facility and a higher dividend payment. As a result, net debt reduced to DKK 9.1 billion, reflecting strong cash generation and continued progress on deleveraging following the Longboard acquisition. Overall, our financial position remains solid, providing flexibility to continue investing in both growth and innovation. Next slide, please. Q1 was a strong start to the year and this is reflected in our updated guidance. We're raising our revenue guidance to 7% to 9% growth at constant exchange rates and our adjusted EBITDA guidance to 8% to 14%. The upgrade is driven by 3 factors. First, Vyepti volumes in the U.S. are tracking stronger than originally anticipated. Second, the delay of Abilify Maintena generic entry removes the headwind we have factored into the previous guidance back in February. And third, the newly established partner markets is off to a stronger start than expected. Together, this gives us the confidence to raise the full year outlook. Cost-wise, we continue to invest in our pipeline, now expecting R&D costs in the range of DKK 5.6 billion to DKK 5.9 billion for the full year, all of which lead to an updated adjusted EBITDA growth of 8% to 14%. We have also updated other parts of our guidance for modeling considerations. We now expect net financials to be an expense of around DKK 300 million due to FX tailwinds and a lower interest cost and the effective tax rate to be in the range of 20% to 24% compared to previously 22% to 23%, primarily due to the transfer of IP from U.S. to Denmark. One point specific on phasing, as expected, Q1 was the strongest quarter and the quarterly profile will normalize over the remainder of the year. Overall, we enter the remainder of '26 with strong momentum, good visibility and increased confidence in the trajectory of the business. And with that, I would like to hand over back to Charl.

Thank you, Joerg. And if we can go to the concluding slide, the next slide, please. So before we open for questions, let me just give you a few takeaways from today's conversation. First of all, on the growth, we're seeing very strong underlying performance of Vyepti, Rexulti, that is really driven by purposeful execution. We do have some tailwind impact of generics. But the fundamentals of our commercial model are very strong, which is driving the strategic brand growth. Pipeline is moving in the right direction, in fact, accelerating with also the MASCOT trial in Amlenetug. And we have a few very exciting prospects that are emerging in the early to mid-stage. So that thesis of 5 to 6 mid to late-stage assets in our pipeline, of course, remains a key goal for the long-term success and growth of Lundbeck. And with the backdrop of that, it gives us, of course, strong confidence to be able to raise the guidance based on the underlying fundamentals that we see inside the company in our transformation. So with that, I will pause and we can go to questions.

[Operator Instructions] Our first question comes from Kirsty Ross-Stewart from BNP Paribas.

Maybe just a really quick one to Joerg. Can you elaborate on the kind of relative contributions of Vyepti, the partner market performance and generic delays to the guidance upgrade relative to one another? And on Vyepti, are you able to separate -- maybe this one is for Thomas, to separate the kind of Vyepti growth between new patient starts and improved persistency and kind of where the DTC campaign is really driving growth? Is it through new patient and prescriber acquisition? Or is it also kind of reinforcing that adherence among existing patients? And if I might be able to put a little R&D one in there as well on the AMULET program, which is fully enrolled now. Just given the big difference in the less impaired and the more impaired patients you saw in Phase II. Having seen the baseline population from MASCOT, are you able to provide a bit of color on whether you've been able to successfully recruit earlier-stage patients into the Phase III trial? And how would you characterize your confidence in generating an improved Phase III response in Phase III trial versus Phase II trials having seen the population?

Thank you, Kirsty. Why don't we go to Joerg for the first part?

I would say it's pretty much 50-50. I would attribute 50% to Vyepti and 50% to the delayed generic entry.

Tom, do you want to expand on the new patient starts?

Yes. So overall, we see very strong underlying fundamentals for Vyepti. The investments that we make with DTC and our sales force is really primarily driving new patient starts and that's where we're seeing the most underlying growth. I think it is important to note that the continuing patients continue to exceed our expectations. And we think that's attributable to the patient-centric model that we have in order to engage patients, but also the clinical value proposition and the benefits that patients are getting from the medication.

Johan, do you want to comment on...?

Yes. Thanks for the [indiscernible] question. Yes. So obviously, between the AMULET and the MASCOT trial, we have tried very hard to have very similar populations coming in. And as you understood from the trial execution, we had a very, very strong enrollment and a lot of people came in. We had a cut for more severe patients because they should also be able to participate. So practically, we have a cut for more severe patients, but we've been really aiming for the same population. And looking at the baseline data, we know we have very similar populations coming in. That means that the PRS or the probability that this works out should be translatable from the 2 different trials. Obviously, one challenge generally with the disease is the late diagnostic rate. So the earlier, the better, but we've done as much as we can with the earlier patients coming in.

Our next question comes from Xian Deng, UBS.

So two, if I may. So the first one is just a very quick clarification following the previous question on the guidance raise because the press release and also your prepared remarks did cite a stronger-than-expected start in the newly established partner market. But in terms of the inventory, you booked DKK 450 million, which is -- sorry, DKK 70 million (sic) [ DKK 470 million ], which is pretty similar to what you've guided in Q1 [indiscernible] and it's fully included in guidance. So just wondering if you could help us reconcile this part, please? And then the second question is a general question on orexin program. So previously, you've tried to acquire Avadel in sleeping disorders, but that didn't follow through. So just wondering, now you have new programs entering this area. So just wondering, could you give us a overview what actually excites you here in this space? And why are you interested in this space, some sort of overall overview of unmet need, et cetera, that would be great.

Thank you, Xian. So let's go to the first question around your underlying thoughts on the commercial model.

Yes. Thanks for the question. I'm not entirely sure I understood it fully, but let me just answer what I think you asked. So to clarify, DKK 470 million was the build for the inventory, as I said, or DKK 500 million almost. So that was what was included in our original projection of the year. We then have the upsize that Joerg was alluding to with the guidance. And when we look at partner markets in the first quarter of the year, what we see is outside of the inventory build, we also see a stronger in-market performance than we had expected. And that's why we are cautiously optimistic about the start to the year with the partner markets based on the data we see from the markets. It's still early days. It's a new model for us. And as I said, the shipment patterns will vary greatly between quarters. And that's why it doesn't -- it's just to say we're cautiously optimistic about the start. I hope that answers the question.

Thank you, Michala. So Xian, just to make a few comments also related to our thoughts on the space of orexin, but also with Avadel. What we are strategically aiming to and what we believe is a high unmet need is in the space of rare sleep disorders. And our thinking is to cover the spectrum of both narcolepsy 1 and 2. And so our thinking here remains that this is a core area. It falls within our neuro specialty ambitions to build strong positions in areas of high unmet need. Now, Johan can comment more on maybe the vision of orexin. We see that maybe beyond that space. But for us, our strategic logic through that process last year was to continue to build a strong position in this sort of the space of rare sleep disorders or wakefulness and that remains an important part of our future focus.

Yes. Just to build a little further on that. So obviously, sodium oxybate, which is what was the Avadel key numerous drug has a potential to be very strong, of course, in narcolepsy. That kind of mechanism and its tolerability profile and the REMS program, et cetera, puts it right into a very specialist area with high, high medical need. Now, the orexin biology, as you may know, has the potential to travel much broader. First of all, it's a very well-understood mechanism, well characterized over many years. And it has the potential now through the demonstration that it works in cases where you don't have a loss of the orexin neurons, as in narcolepsy, to still work in patients. So this broadens up to a very rich opportunity where many players will be active and explore this biology, we like to be part of that journey. And the safety profiles of orexin drugs look very promising overall if you get the right chemical agents.

Our next question comes from Tobias Nissen, Danske Bank.

I have 2 questions, if I may. Just the first one on the partner markets. Can you help quantify the tailwind from the shipping order here into Q1 from Q2 from the partner markets? And how do you expect this dynamic to continue? You mentioned that it will be -- vary a lot between the quarters. Is this something only for this year? Or should we also expect this going forward? And then secondly, also on the partner markets, you are cautiously optimistic, but what is driving this? And what have you seen so far? And really, what are they doing differently from when you have your own teams in these markets? That's my 2 questions.

Perfect. Thank you, Tobias. I'm going to hand over to Michala on that. But just on the commercial model, I think overall, just to again state the strategic intent, it was there for us to build and remain with a strong presence and expand our ability to access patients in these markets. And that was the fundamental reason why we went into this partnered model to allow us to invest and remain invested in these markets that are important for us. So I think this is what is really playing out in -- at least in our early signals that we see in the start-up phase with us. But Michala, do you want to comment on this question of variability of shipping and quarterly phasing?

Yes. So thanks for the question. On the first question, of course, we need to see how this evolves. We're still early days in. It's the first quarter. We actively work with the partners. And of course, the inventory build that we've seen has been a one-off. So we're adjusting for that effect. Our expectation is that Q2 will be less. But again, because of the buildup, because you have different shipment patterns in different parts of the world. But this is what we need to learn. And as I said in my presentation, we expect that Q1 and Q2 -- Q3 will be stronger buildup or stronger shipments and Q2 and Q4 will be softer, but we need to see how it evolves. And then we expect this will be a continuous pattern because of the order patterns in the markets that the partners serve. In terms of your second question, I also just wanted to add to what Charl said that, of course, we are working with partners that have a broader presence in these markets than we did because they have a stronger business model there. This also means they have a broader distribution. They have a broader reach to, for example, pharmacies. And therefore, they just have a broader grasp of the market than we did and then we were able to accommodate to. And therefore, we also expect that there is an opportunity that this can become more of a growth driver than what we could deliver ourselves due to our limited ability to invest in these markets. That's why we're cautiously optimistic because we need to see how the model continues to evolve. But this is really what I think we're seeing is that they have a broader reach into the market.

[Operator Instructions] Our next question comes from Charles Pitman, Barclays.

Firstly, on Bexicaserin, just noting the earlier-than-expected full enrollment of Amlenetug, I'm just wondering how progressed the Bexi recruitment is and whether a 1Q '27 readout is still on track as well as if you can give us any updates on your regulatory conversations with respect to potential label? And then just secondly, on M&A, noting that your leverage has come down, pharma valuations at near lows on macro headwinds. And I'm just wondering kind of how you're thinking on M&A has been evolving, noting also this orexin progression to Phase I? As Charl mentioned, you're trying to build out this rare sleep disorder space. I'm just wondering how you're kind of planning to further build that out inorganically? Any update would be welcome.

Thank you, Charles. So we go to Bexicaserin. Johan, please?

Thanks, Charles. Yes. So I mentioned the 2 programs, DEEp SEA and DEEp OCEAN are progressing well. We have not changed our projections for when we expect to finish the trials. In terms of regulatory interactions, some of them I don't like to be public about, quite frankly. We have a lot of good interactions because this is a breakthrough designation, so we can have more regular contact. And obviously, across the program, there are many questions. Can we finish the 2 trials simultaneously? Or will there be some differences in how we manage this? We are well advanced into the program and know very well how we're executing across these 2 programs. So I'm looking forward very confidently what we will have in terms of future regulatory interactions and communicate if that would lead to any substantial differences from what we're doing now, but we don't foresee that in any way.

Charles, just on your question on business development. So as you know, and I think you've come to learn from us, this is very much part of our Focused Innovator Strategy. It is -- as we've seen, successful companies are using both internal innovation as well as leveraging external innovation to build compelling pipeline. So we are doing this on a continuous basis. We will continue in this way. We have always approached from a string of pearls of opportunities that we could further strengthen, shore up more of the pipeline and there are examples of -- Longboard is just one of them. So we will continue to remain active in the space. We're also open to explore a range of activities such as partnerships. But also if there are transformational opportunities, we will be willing to look at them. We believe we are in a very strong position as we go into the future. But we can strengthen it even further if needed with business development M&A. So thanks for that question.

So just to confirm, there's been no change as a result of orexin or change in valuations?

With related to orexin, no, I think orexin, of course, is part of our early pipeline. We will continue to see how we can accelerate that towards the ambitions we have also in rare sleep disorders. So I think that remains a core program internally, which we will invest in once we learn more about our assets. And Johan, I don't know if you want to build on that?

Just we have known this field for a long, long time. And we have been working on this for quite some time. And we know really that we need to have an umbrella of compounds and really go for strong, strong chemistry. So we're building up a pretty comprehensive program, as I said. So we're going to have several molecules to play with. And here is the best molecule we win for the right indication.

Our next question comes from Alex Moore, Bank of America.

I've got 2, please. So on PACAP Phase IIb data coming at just in a few weeks, we know the study hits its primary endpoint. But could you just remind us on what level of efficacy you think qualifies as differentiated within the migraine prevention space? And specifically, should we be thinking about profile that's broadly in line with Phase IIa HOPE data? Or is ambitions closer to what we see with the anti-CGRP class? And then secondly on Rexulti, we recently saw a competitor approval within the AADAD space with the competitors talking to a differentiated label on safety profile. I thought -- I was wondering if you could just frame what you think the key points of differentiation you foresee in AADAD? And given that you frame this segment as the main growth driver for the brand, how should we think about new competition as a drag to overall franchise growth this year?

Thank you, Alex. Johan, do you want to comment on?

Yes. Thanks for that question. Obviously, looking for a highly differentiated therapy here, but it's still within the space of migraine prevention. So we are looking. We're comparing against the CGRP class. But I'd like to remind you that the HOPE and PROCEED trials, we're putting the molecule at a stronger test. We tested already people that have failed 2 to 4 prior prevention treatment. So we interact with people that are not responding well. And we're looking at clinical meaningful effects here, which is in the ball range of 2 or more migraine days per month in effect, which is, by the way, the CGRP class effects that you see in severe migraine.

Thank you, Johan. Tom, do you want to comment on our views on Rexulti competition?

Yes. So as I've said before, new competitors to the marketplace can be viewed as friends or foe. I think it's important to remind everybody in AADAD, only about 1/3 of patients are accurately diagnosed and treated. And this unmet need in AADAD is massive. So an increase in resources to educate HCPs and caregivers on the disease burden of AADAD to accelerate diagnosis and treatment is truly welcome. I think it's also important to note that over the past 2.5 years, Lundbeck and Otsuka have really firmly established Rexulti as the preferred treatment for AADAD. As I said in my remarks, in our latest awareness trial and usage market research survey, nearly half of HCPs in the target universe identified Rexulti as the preferred treatment option and this is nearly twice that of the nearest competitor. In the same survey, 75% of respondents expected to increase prescribing of Rexulti for AADAD and 70% of HCPs are very satisfied with the results that they've seen with Rexulti and that compares to 24% for antidepressants. And as you noted, although there are some benefits from Auvelity's label, including no black box warning, we continue to believe the clinical profile for Rexulti offers meaningful advantages that are very important to the AADAD population. That includes an extensive efficacy and safety clinical database, low rates of sedation, which are particularly important as you think about falls in the elderly and also convenient once-daily dosing.

Our next question comes from Shan Hama, Equity Research.

Two questions from me, please. So firstly, how should we think about the balance between sort of continued operating leverage versus investing in R&D and commercial infrastructure over the midterm, particularly given that you have quite a lot of assets now in the sort of mid-stage development? And then secondly, on the orexin program in Phase Ib, which endpoints will determine whether you advance? Is it more objective wakefulness measures? Or is it patient-reported outcome, given that historically sort of sleep disorder studies can be quite tricky with respect to sort of demonstrating efficacy?

So Shan, let me make a few comments and I can add if Joerg wants. But I think, first of all, from a financial discipline perspective, we've always maintained that we would stay in the upper end of the sort of 25% R&D investment against revenue. That remains for us the guiding principle at this point. And of course, also our adjusted EBITDA of 30% is what we believe is where we are traveling towards. But we will, of course, at the right time, discuss that with the markets if we believe we will go outside of that corridor. I don't know, Joerg, do you want to add anything more?

Not on the midterm, but of course, just for the remainder of the year, you've seen we've been a bit more specific in terms of where we see the range. So we had in Q1 the highest R&D spend ever. And we will see continued strong R&D spend also for the next quarters to come.

Yes. Thank you, Joerg. Johan, do you want to talk about orexin endpoint?

Yes. Thanks for the interest. We are in early-stage development. So I have to emphasize, we do what I often call it the molecule speak. Obviously, this is a well-established biology. So we really know what we're looking for here. So in terms of the endpoints you're asking for, it's really indication dependent. We are now testing the molecule in situations where we have orexin loss. But we also tested out in situations with intact orexin system. And it's very indication dependent what you're going for in terms of readout. Yes, there will be patient-reported outcomes. But there are also very objective measures that you have in this [indiscernible] field. And it depends very much on the indication you're pursuing. Of course, in Phase III programs, it will be much the chronic diaries, et cetera. But in Phase I studies, you can do very hard call objective measures. We will look at narcolepsy patients. We will look at other patients. And we hope to be progressing with the front molecule next year into a Phase II study that will evaluate the right indication for our molecules.

Our next and last question for today's call comes from Elisa Laris, Leerink.

This is Elisa on for Mark Goodman. On Bocunebart, could you provide more detail on the data you plan to present at AHS? Specifically, should we expect to see the monthly migraine day reduction over the full 12-week treatment period? And will the presentation include any analysis of migraine severity or related measures? And separately, how are you thinking about the timing and next steps for the Phase III?

Thank you, Elisa. Johan, do you want to comment on that?

Yes. First of all, this is the first presentation we have and this is late-breaking abstract. So we're just working on this format. It may be an oral, it may be a poster. We're still figuring that out. So it may be a little limited in space and time, as always, with late-breaking presentations. But we obviously are going to present the reduction in monthly migraine days. That was the primary readout and that we will present. Yes, in terms of the populations and this is a severe migraine patients we're studying, we're also going to show a little bit how the effect pans out in the more severe migraines versus the less severe migraines. So you will get a good flavor for this. We will not reveal anything how the Phase III will look like. We're still in the kitchen cooking that and we need regulatory feedback. So this will take a while until we open the lid on how our Phase III program will look like.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Charl van Zyl, President and CEO, for any closing remarks.

So again, thank you for joining our call today. I'll leave you with a few key points. Again, strong growth from the underlying strategic brands. We see the pipeline advancing well and moving in the right direction. And we are off to a very strong start in 2026 that is giving us confidence to raise our guidance at this point. So thanks again for joining today and wishing you good rest of the week.