Orion Corp New B Shs

Good evening, and welcome to the ORION press conference from January 2023. My name is Tuukka Hirvonen, and I will be answering the investor relations at ORION. For a moment, CEO Liisa Hurme will present the results of the press conference. After that, you have the opportunity to ask questions to both her and Jari Karlsson. The official language of this event is English, but you can also ask questions in Finnish. Good afternoon ladies and gentlemen and welcome to Orion's earnings conference call and webcast for the financial period of January-September 2023. My name is Tuukka Hirmonen and I'm the head of IR here at Orion. We just roughly one and a half hours ago published our interim report for the period and soon CEO Liisa Hurme will go through the main points of the report after which you will have the possibility to ask questions from her or from our CFO Jari Karlsson. We will be first taking questions from the conference call lines, after which then we will turn to the webcast questions. So you all have the possibility to type in questions using the chat box function in the webcast view. Kindly state your name and the organization you are representing before asking your question. And just before I hand over to Liisa, I'd like to draw your attention to this disclaimer regarding forward-looking statements today. But with these words, it's my pleasure to hand over to Liisa.

Thank you, Tuukka. And good afternoon on my behalf as well. And welcome to Orion's Q3 webcast. Let's look at our key matters from the latest quarter. First, maybe a notion when I go through this, because I'm not going to say it after each sentence. We had an exceptional third quarter in 2023, which of course has an effect when we compare the first nine months to the previous nine months. And of course, when we compare the Q3 2023. than the previous one because of the significant signing fee that MSD paid to us in July 2022. I will remember, probably mention it at some point, but do keep that in your mind when we go through the presentation. Well, our development was positive both in terms of net sales and operating profit when we exclude the significant upfront payment from the comparative period. Nubeka continued its very strong growth and related to that, we have recorded a 30 million euros sales milestone from Bayer in Q3. Easy Halo portfolio also developed very nicely with 9% growth. And when we look at the generics and consumer health division burdened by our withdrawal from the Russian market and also Simdaks and Dextro generalization, it performed very well. It's a very resilient business in the Nordics and Eastern Europe. And good news from our development pipeline. We have initiated a new clinical study, phase one for a ODM212 for solid tumors. And then the latest news on our geographic expansion, not on a commercial expansion in this case, but rather on an R&D side, we have also established a new office to form a basis for future possible U.S. operations for medical affairs, regulatory and market access capabilities to build these capabilities in the markets of United States. Then to the numbers. Underlying business performed well and mostly as expected, with minor surprises that were there already in Q2. Net sales decreased 17%, but this is when we look at the numbers including the signing fee from the July 2022. Same goes with the operating profit, minus 54.4, but the comparison period includes the signing fee. Operating profit margin, a similar story there. Cash flow reflects mainly the increased working capital due to the Nubeka. We are manufacturing and we have large inventories, all the different phases of Nubeka value chain. So that is clearly reflected in our working capital. And also a good news is that many of the factors that have had an impact on Orion operating profit during the first half of this year are easing out in the form of that it's easier to compare now towards the end of the year, the latter half of the years. And this net sales bridge describes in more detail what I just said. Still decline in dexmedetomidine and Simdac, but it is getting smaller every quarter. And of course, next year, hopefully, as the base numbers are smaller as well, we won't see even this type of numbers. Nubeka, 67.6 million euros of product sales and royalty, a very nice first nine months. And here is the surprise from this year, which is Entacapone products. I think all the other things we were able to predict, but this was kind of a surprise and mainly caused by the delivery timing to our customers and partners and partly due to the lower pricing in some of the territories on the globe. It's difficult to say how much is derived from which factor, but these are at least the two main things having an effect on intercapone. Russia, as last time described, almost 28 million. Good news, as already stated, the other production services are also growing nicely. Animal health on a positive side together with fermion and milestones in this figure or picture implies to the net impact of milestones. So we have all milestones from last year and this year so this is the the net one and then the exchange rates are mainly derived from the Russian rubble of course there are some other currencies that also have had an effect like Swedish crown and the US dollar but the biggest effect comes from the Russian rubble And then on the operating profit, a pretty similar story. When I want to pay your attention, especially on the number two here, column number two, product sales margin and product mix without exchange rate effect. Here, the biggest chunk of this 62.9 is coming from the prices actually. and some are part of the costs, but the prices play a big role here. And then again that the growth with local currencies was 10.5 million. And here the exchange rate on the column three and again a positive development on the royalties by 60 million and Milestones, again, a net impact on our first nine months. And other operating income and fixed costs, some increase there as well. All in all, a very positive first nine months and especially the third quarter compared to the previous one. An interesting thing on this slide is that Innovative Medicines is growing its share on the Orion net revenue. It's now 19%, close to 20%, and almost as big as the Brandy products. Let's see how the situation is by the end of the year. And respectively, the generics and consumer health share is diminishing as the innovative and especially Nubeka is growing. A lot of red on our top 10 product list. Very natural explanations for most of the products. But of course, first I want to pay attention on Nubeka, more than 100% of growth. Easyhaler, 8.5. A very strong performance there. Simdex. family story and the capone I already described. Then on the row six, dex domitor, domitor, domosedon, antisedon, our animal health sedative portfolio. was actually, I have to admit, another thing that we didn't predict in the beginning of the year, how our partners would behave by their orders. It clearly seems that they have filled in their stocks during the pandemic, and have kind of leveled out their ordering frequency. And we'll see how the next year goes. I personally think it will start to normalize as we start the new calendar year. Divina, this is solely due to the Russia. Divigel was a big product on the Russian market, so that's a hit taking on closing Russian operations. Trexan, a very old molecule, methotrexate, but going strong, a very good treatment for autoimmune diseases, a lot of cancers. And actually, even though there are more and more new biological treatments on both, how would I say, indications or areas, so methotrexate is mostly included and combined to those treatments. So there is a growing demand on these products as well. And biosimilar is a very binary business. Either you win or lose, sometimes even a whole country. And this year has not been that successful. But then some other years might look very, very different. And innovative medicine story continues strong. Nubeca sales more than doubled. Somebody might get a bit depressed on minus 42.5 on the whole division figure, but we all know that it was an exceptional comparison period with the signing fee in July 22. So let's just celebrate Nubeka growth at this stage. Marinus has received an approval in EU for Ganaxalon already in July. We are going through pricing and reimbursement discussions in all the biggest European countries, but it unfortunately takes time and we are planning to launch hopefully in Q1 next year in the first countries. Brandy products catching up clearly. Somebody might remember the percentages from the last quarter. This is accelerating and Easyhaler is the biggest factor here. We deliver all we can manufacture. Everything is going out. Intercapone hopefully catching up also towards the end of the year and Divina suffers due to the Russia. And generics and consumer health, a great story of resilience, I would say. We are able to deliver. We are price competitive in the areas and regions where we operate, both on self-care, which is mainly Finnish regions, and then also on the pure generics. and I discussed the syntax and dextrometamine already. Maybe a few words on Finland. We are at par, since we are the major company in Finland, we are at par on the whole pharmaceutical market, but especially on the reference priced prescription drugs, which is our strongest area. We grew with 8.3% when the whole market went down. A very good performance. Animal Health, new sales from the acquisition from Innovet, growing that business, and Fermion slightly behind, I mean, slightly growing from the previous year, which means that we are able to serve our customers even though we use a lot of capacity for Nubeca or darolutamide manufacturing. Regarding animal health, the sedative business suffers both on the softness on the companion animal market and, of course, the destocking of our partners, as I explained. Same is seen on the livestock market. The inflation really hits also farmers, and they need to think what they pay and how they do their business. It's actually both sides that are a bit soft right now. But of course, on the longer term, we all will eat and the livestock business definitely needs its medication and products. And I'm sure as the markets and inflation will get easier on consumers, the companion animal health market will bounce back. R&D pipeline as before, except that the new cancer molecule has started now recruitment in phase one. One slide and one theme on sustainability that we haven't discussed earlier is biodiversity. It's very important for pharmaceutical industry. We have, of course, impact on that, especially through wastewater, a possibility to have a nasty impact, but we take it very seriously along our supply chain. So we always audit our suppliers, whether for the finished goods or the APIs, that they treat their waste waters as they should be. And we have two different separate drainage systems, one for the manufacturing and one for the whole other water usage. and of course have many different ways to get rid of our wastewater depending on the compounds that we have there. And then the other thing is, of course, how do the drugs, how are expired drugs handled? How do we counsel pharmacies, our customers to take care of the medication that has expired or that they are not in need anymore, that they will have to take them back to the pharmacies so that they are then disposed adequately. And we are all the time still fully and further investigating what would be Orion's footprint here and impact on the biodiversity. We specified our outlook in July and that holds. Our net sales will grow slightly, will be slightly higher, and also our operating profit is estimated to be slightly higher. in 23 compared to the 22 and here it's good to remind about the numbers without the upfront payment from 2022 for the operating profits it's 233 million and for the net sales it's 1.113 billion euros. upcoming events. February is the next exciting moment when we will report the whole year 23. And then we'll have the AGM on March 20th. And of course the rest of the dates for next year you can see on this slide. I thank you on my behalf and it's now time for the questions. I welcome Jari Karlsson on the stage.

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