Orion Corp New B Shs

Oikein hyvää iltapäivää ja tervetuloa seuraamaan Orionin tulosjulkistustilaisuutta katsauskaudelta tammi-maaliskuu 2024. Alkuun pieni pahoittelu pienestä viivästyksestä, meillä oli hieman teknisiä ongelmia tuossa, mutta ne on nyt selätetty. Ja minun nimeni on Tuukka Hirvonen, vastaan meillä Orionilla sijoittajasuhteista. Liisa Hurme will go through the results of the survey. After that, you have the opportunity to ask questions to her as well as to Jari Karlsson. First, we will take questions from the teleconference lines. After that, we will take questions via the webcast chat function. You can send questions via the chat function. 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-March 2024. First, I would like to apologize for the slight delay. We were facing some minor technical problems, which are now over, and we can proceed on here. My name is Tuukka Hirvonen, and I'm the head of investor relations here at Orion. In a few moments, our CEO, Liisa Hurme, she will present the results of the review period, after which you will have the possibility to ask questions from her and also from our CFO, Jari Karlsson. We will be first taking questions from the conference call lines, and then also after that, we will take questions you can type in through the webcast chat function to us. Those who are Presenting the questions through the conference call lines, we kindly ask you to state your name and the organization you are representing before asking your question. And just before I let Liisa to step in today, we have actually quite a special day today, because this interim report is actually the last one that Mr. Jari Karlsson will be delivering to you as the CFO of Orion Group. Jari has been the CFO of Orion Group ever since 1st of September 2002, so more than 20 years. And today is actually his 87th interim report or financial report he will be delivering. So while I let that sink in to you guys, I'll draw your attention also to the traditional disclaimer about forward-looking statements, and then hand over to Liisa. Liisa, please, your turn.

Thank you, Tuukka. And good afternoon on my behalf as well, and welcome to Orion Q1 Results webcast. Q1 for this year started very well with a strong top line growth of 11%. We reached 308.5 million euros of sales during the first quarter and 56 million euros of operating profit with 1% of growth. resulting in 18.2 profit margin. Cash flow was clearly better than in Q1 2023. To that, transfer of pension fund was one contributor, and then a 30 million milestone that we received from BEIER was eventually paid in first quarter of 2023. And of course, good sales of Nubeka can be also seen here with royalties and product sales. And regarding the operating profit growth of 1% or even being flattish compared to the revenues, we have, as planned and as communicated, invested more to R&D and also our sales and marketing. And results of that can, of course, be seen on a top line growth. And here, when we look at in a bit more detail, very good news regarding Nubeka, almost well million of growth. Also Easyhaler, if you look at here at the column four, almost as high growth, both in percentage and in absolute value with Easyhaler product portfolio. Also the whole other portfolio, excluding animal health and fermion grew with 7.3% and animal health and fermion were also growing nicely. We see a slight decline with Entacapone product portfolio, but clearly the decline is slowing down compared to the previous year and hopefully will clear out as we go along this year. The usual suspects are on the column one, Simdocs and Dexmedetomidine, continued generic competition taking sales down here. On the operating profit, volumes are clearly growing, but margins are declining due to the previous slide's explanations on Simdax and Dextro decline. Very profitable products and the new ones replacing those are not exactly as profitable. royalties here you can see the effect on the operating profit and then fixed cost have grown 12.3% and that's in line with our previous estimate for the R&D cost sales and marketing costs and here we can also say that Our IM course have increased somewhat. We have a big program ongoing with the SAP renewal and some of our programs and data needs to be running parallel systems during that. Now, innovative medicines plus 37.4% growth, a wonderful number. And let's remember here that we start every year from the beginning with the royalty rate. So it's really a cumulative royalty rate from the beginning of every year. So both the royalty rate and the sales will grow as the year proceeds. And we've seen all-time high product deliveries to Bayer during the last quarter of last year and actually a second highest ever during this first quarter. So the prognosis is from that aspect very good. And of course, as I said, other income is mainly from the research purposes and we are really investing more. And I will talk more about that when I get to the R&D pipeline. And we are continuing with Sdalmi to get the pricing and reimbursement in place in Europe. Another business on a very good shape, even though with a slight decline of 2.2%. If we deduct here the effect of Dextor and Simdex and Russia from previous year, we still had some sales in Russia in 23, especially in the beginning of 23. the basic portfolio in generics grew plus 5%. That's very healthy growth. It's assumed currently that generic sales in Europe grow between 4% to 6%, so we are exactly in that space with our generic business. And in Finland, which is the biggest part of the generics, we were able to beat the competitors, especially in the reference priced market. And we're doing also well in the OTC, healthcare and consumer health markets. I think that I probably, unfortunately, skipped one slide here in between. Branded products, another division growing with two-digit numbers, almost 18% growth compared to the Q1-23. EasyHaler being a clear lead indicator and the growth product here with more than 30% growth. It is driven by the green wave in Europe, especially in UK, but currently we are also seeing same kind of a demand in Germany. And with Easy Halo product, we can answer to this demand at the market. Intercapone, I already discussed almost at par with previous year. And Divina series, which for us is mainly hormonal gel with estradiol, is also growing compared to the previous year. All in all, a very good start for branded products, as well as for the innovatives and for the generics, which shows that all of our businesses are contributing to the growth of the group, Orion Group. And then a bit smaller businesses, Animal health not being shy at all compared to the other divisions, healthy growth there as well. And fermion keeping up with the external sales to other pharma companies. And animal health sales grew also both on companion animal side with sedatives, also launch of Boncat in Europe, and then also on the livestock business. Clinical pipeline. The change here to the previous one is that we have now completed ODM 111 phase one successfully. We are expecting and preparing to report the results at some point next year in suitable scientific congresses. Otherwise, the portfolio is as it has been this far. Sustainability continues to be a very strong item for Orion. Of course, we are preparing as any other company for the CSRD reporting. And here you can see some of the major themes that are important for us. It's patient safety. We look at it from the supply perspective, of course, from the wider scope of pharmacovigilance and product quality as well. But in these days, it's not self-evident that the pharmaceuticals are and the medicines are available in pharmacies when you need it. And our service level is on an exceptional level. Environment, we continue work on that front. We are already ahead of our 2030 carbon neutral target for scope 1 and 2 in Orion and are now expanding to scope 3. We've also put a lot of emphasis on social responsibility, building a roadmap in the company and including our stakeholders and groups that we work with. And also, of course, the safety, putting focus on safety of our employees. Now that you saw the quarter one result, which we are very proud of, our quarter one was better than we were planning. And based on that, we are specifying our outlook for 2024. and specifying so that we raise the lower limit from 270 million to 280 million. So we have a more specified narrow scope for this year from 280 million to 310 million euros of operating profit. The outlook for net sales remains the same as it was in the beginning of this year. And to this outlook and our understanding of the year that has started, It's important to understand that really all our businesses, Nobeka is a wonderful growth driver, but as you saw, Easyhaler is as important with the fast growth and all our divisions are growing in a healthy way if we deduct or decline the effect of Thimdox and Dextor. So all businesses are contributing to the growth of our profit. Here you can see on a slide the basis for the outlook, which I already discussed. So Easyhaler Nubeka growth, Entacapone product family more as a flattish, Easyhaler or animal health definitely growing and generics based portfolio as well growing. What is challenging is really to predict the timing of Nubeka royalties and product sales and some of the milestones. This year, it's the 70 million euros sales milestone. So, thus, we have a certain, how would I say, room for our outlook, given these facts. And R&D expenses are anticipated to increase significantly and significantly means that it's on a different level than we are used to. It is understandable as we are going to start a phase two program for our pain molecule with several phase two studies. And we have still several phase threes ongoing with our partners. And also we have molecules in our research pipeline which actually demand much more or consume much more of our budget since those are biologics. And there we need to do the CMC work hard. work front ended. So clearly more emphasis on R&D and also on sales and marketing, which has resulted in growth in all divisions. And this kind of puts together what I already said that this, how would I say, makes it concrete and gives a framework for our strategy. We clearly have growing revenues and all divisions play an important role there. And that allows us and enables us to spend more on R&D. We want to build the company future beyond the 2030s and also invest in other ways, like sales and marketing, secure that we have enough production capacity and have enough production capacity I'm sorry, we still have a bit of a technical challenge here. I was actually in this slide. Thanks, Tukka. So also we want to invest to the production capacity as we are doing currently, increasing easy hailer capacity, increasing our dividend capacity and also our Nubeca capacity at Firmion. So all these growing revenues enable increasing the investments, growing EBIT and also growing our dividend. A clear package. And we really work in this framework. And now I'm jumping one slide over to remind you our financial objectives, which relate to the previous slide of our strategy. Now they move. totally independently. Anyway, when I say that the revenues will grow, it's growth beyond 8% on CAGR, also that we are able to grow faster with our operating profit, keeping the equity ratio at least on 50% and return of equity on at least 25%. So this gives a very strict, nice framework for all our investments and growth initiatives. and then the dividend payout of between 50 and 100%. Now I go back, let's see how this works. It works well. And we come to the capital allocation focus, telling the same story, a very, very good story here. Internal pipeline as a first priority, dividends, maintaining and increasing the capacity where it's needed, then in licensing or acquiring commercial or R&D assets, whatever is then suitable at which time, and then acquisitions, if they really fulfill a criteria to produce growth in a way we want in, for example, such geographies where we are not yet operating or if they provide some kind of a competence or capabilities that we need to fulfill our strategic targets. Now. I think it's time to close on my half and invite Jari Karlsson here with me to answer to your questions before we close the session please feel free to ask any questions to the operators so operator please it's time for the questions from the teleconference lines

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Ansi Rousey from SEB. Please go ahead.