Orion Corp New B Shs

Good evening and welcome to the webcast of Orion. Today's topic is the half-year review of Orion. My name is Tuukka Hirvonen and I will answer the investor relations. Director Liisa Hurme will start the event by telling us about the results of the survey and the most important events during and after it. After that, you have the opportunity to ask questions to both Liisa and our current CEO René Lindell. The official language of this event is English, but questions can be sent to us in Finnish through the phone conference as well as via the text field under the webcast. In addition, later this afternoon, Liisa Hurme's Finnish interview will be available on Orion's website. Good afternoon, ladies and gentlemen, and welcome to follow Orion's webcast and listen to teleconference, where today we have the topic of our half year financial report for 2024, which we just a couple of hours ago published. My name is Tuukka Hirvonen. I'm the head of IR here at Orion. In a few moments, our CEO, Liisa Hurme, will go through the key events and main topics of the reported period, after which you will have the possibility to ask questions either from her or from our CFO, Mr. René Lindell. We will be first taking questions through the conference call lines, after which then we will turn to the webcast where you have the possibility to type in your questions using the chat box function in the webcast. And those who are presenting the questions through the teleconference lines, we kindly ask you to state your name and the organization you are representing before asking your question. And as usually, I'd like to draw your attention to this disclaimer regarding forward-looking statements. And with that, I will conclude and hand over to Liisa.

Thank you, Tuukka. And very good afternoon to all of you, or very good morning, wherever you find yourselves. And welcome to Orion half-year webcast. Let's start with Q2. Our Q2 was very strong, both on net sales and operating profit. Our net sales grew 13% or 13.4% to be exact, and our operating profit grew 41.5%. The net sales growth was driven mainly by Nubeka royalties and product sales, and also good performance of our animal health portfolio. Also, our operating margin increased from 16.1 to 20.1. And a few words about the operating profit still. Of course, Nubeka was there, the biggest driver with the royalties and product sales. And of course, it's great to present such a good improvement on operating profit. It is exactly according to our financial objectives. As we've stated, we are increasing our R&D investments, and that's what we've done. And we can still show growth in our operating profit. Now let's move to the half year figures and events. Similar trend here, net sales 12.2%, Nubeka, Easyhaler and Animal Health main drivers. Operating profit plus 19.5% and here Nubeka again as the main driver. And same here with the half year numbers that with the higher R&D investment, we still can show a very good profitability and increase in our operating profit. cash flow clearly improved from the previous year. And this is due to the Orion Pension Fund B transfer and also the Nubeca sales milestone of 30 million that were actually in our cash only this year, even though they were booked to the previous year. And Nubeca royalties and product sales, of course, have a positive impact on cash flow as well. When we look closer to the net sales, it's Nubeka here in the column two with 38.1 million euros during the first half year. But when you calculate together All the other products, easy hailer, the other portfolio, including generics and also animal health and fermion, those together are almost or are as high as Nubeca alone, which means that all the divisions are contributing to Orion's growth. On the negative side, the usual suspects, Dextor and Simdax prices are declining and to somewhat also volumes. And also Entacapone sales are declining due to price erosion. Volumes are still growing. On the operating profit, we can see the positive product sales without the sales margin or product mix in the first column here, 32.6 million. And then the effect of the product mix and the margin. And this column then includes, for example, Simdax and Dextor, Entacapo price erosion. Then royalties, 29.2 million. And the last column here, fixed cost, tells the story of increased R&D investment. Of course, this 24.2 million also includes other costs on R&D. Another big item being IM costs and our ERP program that we are right now doing. Now I move to the divisions and I start with innovative medicines, a very healthy growth driven by Nubeqa. Nubeqa sales were 121.1 million and the remainder of the division's revenues is product sales for research purposes, different type of products, of course also Nubeqa. And we are still going through pricing and reimbursement negotiations regarding STALMI in the major European countries. Brandy products here also very nice growth figure of 11.3%. And Easyhaler, the biggest product, driving the growth. Demand is very strong at the market, partly due to the green wave that we can answer, but also partly due to the general increase although slow increase, but increase on the market. Entacapone, I already mentioned, decreasing to some degree, but a very nice growth for women's health, although it's a smaller business. We have also other products in branded division. There are some smaller CNS products and also some products for the asthma and COPD, and those are also growing. This supports our strategy and I hope we'll see bigger figures as we go along during the next years, because we are building the Parkinson's disease product portfolio around Entacapone products. On that note, we have signed a license agreement with Navamedic, a Norwegian company, on a dispersible water-soluble micro-tablets of levodopa and carpidopa for treatment of Parkinson's disease in later stages. So this is just an example of one product that we as an example of increasing the number of Parkinson's disease drugs in our portfolio. Now, generics and consumer health, almost on par with last year, minus 1.2%. Of course, here, as I often say, if you exclude Dextor and Simdax, especially Russia, last year we sold remaining inventories in Russia. So that of course creates some difference in comparison to this half year of generics and consumer health. So basic generic portfolio is experiencing and showing very healthy growth with single digit percentages. And here we can see that Finland is the single biggest market for our generic and consumer health products. Animal health, very nice growth, and also fermion's external cells are growing, although fermion's capacity is very much tied to manufacturing of increasing volumes of darolutamide for Nubeka. Here is our top 10 list. Same stories here. We have the Nubeca with 46.9% growth. Easyhaler product folio with 19% growth compared to the previous year's first half. Entacapone products, a slight decline due to the price erosion in different countries around the globe. And here I also want to underline that the use of Staliivo and Komtan Komtes is actually increasing by volume. Our sedative portfolio plus 46.7%, also Divina Series, almost 17% growth. Burana more or less on par with the previous year, Simdax, Dextro we already discussed. The last two products are mainly partner sales, so they may change actually quite a lot between different quarters and between different years, depending on the deliveries to our partners. We have had a busy summer with some news and I'll go through those now in my next session or section of this presentation. We have reported that we and MSD have exercised option regarding Opevesastat for treatment of prostate cancer, so that the co-development and co-commercialization agreement with MSD was converted into a license agreement. which means that Merck has now rights for Opevesostat globally. And this license agreement then provides Orion with a nice milestone package of 1,630,000,000 euros. The package is divided into three segments. There are the development milestone payments, approval and regulatory milestone payments, and then sales milestone payments. In addition to milestones, Orion is entitled to low double digit to low teens of royalties. Of course, in a similar way as with Nubeka, to reach the highest level, I mean, in this case, the low 20s of royalties, the product would need to reach several billion of market sales. That's good to keep in mind. And Orion continues to supply the product to Merck as earlier. And in the context of converting this co-development and co-commercialization agreement to an exclusive license agreement to Merck, we also released a 60 million item from our balance sheet. And this will create a positive impact on our quarter three operating profit. And due to this, we upgraded our outlook for the year 2024. So this ongoing year on 1st of July. To that outlook, of course, there were some other reasons, and I'll get back to that in the end of the presentation when we discuss the outlook. The other event after the first or the second quarter was the reporting of phase three Aranaut study of Nubeka. The study showed or met the primary endpoint of progression or the radiological progression free survival. That was the primary endpoint. we compared this Nubeqa with androgen deprivation therapy to placebo and androgen deprivation therapy. This phase three study also confirmed or reconfirmed again the safety and tolerability of Nubeqa. We've seen the same safety and tolerability profile in the earlier studies of Aramis and Aracens. Bayer plans to present this pivotal data in the forthcoming scientific congresses. And also Bayer plans and prepares to file or submit to the health authorities globally an expansion to the current indications based on these results of Aronaut. Otherwise, our pipeline remains the same. Regarding ODM111, we have completed phase one studies and we are in the process of preparing to start phase two program. including acute pain and two different types of chronic pain. The program is a global one and has several indications, and we aim to start this by the end of 24, early 25. Now to a very different subject, and this is sustainability. Orion has 6000 suppliers in 60 different countries around the globe. for many different, for drugs, for medicines, for APIs, for raw materials, for different parts of our manufacturing lines, you name it. And of course, having such a wide network of suppliers is something that you need to manage carefully. And we've worked consistently over decades to create an extremely solid, visible and transparent process of managing our suppliers. This has to do with the sustainability. We demand, of course, the code of conduct of our suppliers. We have included the scope three carbon emissions into these collaborations. And most of all, it requires good collaboration with your suppliers. And many of our suppliers are our partners for a long time and very crucial ones for a mid-sized European company operating in many different segments like generics, innovative medicines and branded products. And most of all, we've been recognized, as you can see on this slide, by many operators in the sustainability field that our work in the sustainability regarding managing the supply chains is on an excellent level. Now to outlook of this year. This was updated on 1st of July, as already mentioned, and the update was mainly due to the 60 million item that we released from the balance sheet. But that was not the only reason. Also, the beginning of the year has been better than we expected or estimated when we started out this year. So that's clearly another reason for this update. And of course, reporting these half-year results show that as well. So now our target for the outlook for 2024 is 1 billion 440 euros to 1 billion 480 billion euros. And then for the operating profit is 350 to 380 million euros. You can see the upcoming events here listed. We will report next time on 29th of October. And then we report the third quarter and first nine months of this year. And the financial statement of the ongoing year will be on 25th of February. I thank you for your attendance.

Thank you, Liisa. for the presentation, and it's my pleasure to invite also René to the podium, and we'll turn to the Q&A session. And as mentioned, we will start with the conference call line. So at this stage, I will hand over to the teleconference operator, please.

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 Victor Sundberg from Nordea. Please go ahead.

Hi, Victor Sundberg from Nordia, and thanks for taking my questions. I have two, if I may. First, on the royalty revenue dynamics. As we can see here, Nubeka really accelerated its trajectory in the US and globally. So I was wondering, from a modeling perspective, how this impacts your product sales versus what I would call maybe the pure royalty rate that you're getting from a buyer. Have you already supplied ahead of this increased uptake of the data or should we expect increased product sales initially if the data gets more patients here from the aeronaut setting or just in general? Thanks.

Well, let me start, then Tuukka and René can continue. Clearly, Nubeca is accelerating on its curve and trajectory. I think the line was a bit hard. I think you mentioned Aranaut as well, but we are not expecting Aranaut to contribute to this trajectory, at least this year. You know, Obeyer is only now going to file application for the indication expansion. But you also mentioned product sales. Maybe René or Tuukka, you picked up the rest of the question.

Yeah, it might be referring to the tablet sales, basically, now that the growth of Nubeca is going well. And so, of course, we expect as well that we will get additional requests for tablet deliveries. So, of course, those should also increase with the total sales. But those come a bit unpredictably. So it really depends on how we get in the orders from buyer. And then we provide those. So there will be some fluctuations for sure.

There is always fluctuation, and I think we've discussed this before, but when you look at the slides, you can clearly see that the quarter two was second almost all-time high product deliveries of Nubeka to Bayer, which of course can indicate only the growing trajectory of the product.

Thank you. And a second question, just on OEM 111 also. Where are you in that preparation and how could that potentially impact your guidance? I mean, are the costs to start the study material, in your opinion, so that it turns out to be that you start this study on the other side of the year. Could that mean that you end up above your guidance, for example, due to costs not taking place this year? And also, if I can squeeze in maybe just a comment also on your expectation on the pricing environment of this kind of product with the FDA here set to approve Vertex drug at the end of January next year. Thank you.

The question was regarding ODM111 and preparations for the Phase 2 program. Of course, preparing for such a big global program with several indications takes time, and you have your negotiations with all the different types of regulatory authorities and as soon as all the preparations are ready and all the consultation is done we will be able to start hopefully by the end of this year but since these are lengthy processes and complicated it may also be in the beginning of 2025. If I understood or heard correctly, you also were discussing about whether this has an effect on our numbers, whether it happens in 24 or 25. I don't think it's a big effect, you know, on those numbers. All the preparations are still ongoing. Of course, the biggest lump sums is of course always paying for the CROs to start the studies, but it's difficult to estimate right now where those how payments will be timed towards the end of the year. I think the one question was regarding pricing of this type of a product. I think it's a very good question. Maybe a bit too early to ask that now. I think we need to proceed with our studies to see how the efficacy of the molecule and the safety of the molecule of course we have a there is another company ahead of us and i think uh or the whole um we as well as everybody else following this segment will see then you know how how that type of a product or this type of a product will be priced and reimbursed okay thanks thank you very much that's all for me thanks

The next question comes from Anssi Rausi from SEB. Please go ahead.

Thank you, and hi all, and thank you, Liisa and René, Tuukka, for the presentation. If I may continue on Viktor's questions a bit about Mubeka and your guidance. Like, did you see that Mubeka is already selling maybe better than expected? due to your higher product deliveries, or how do you see the situation when you upgraded your guidance early July?

Maybe I can take this one. So, of course, it's a totality of the business, and we have to look at the actual figures that we had in H1, and those were, you know, as a basis of that. And, of course, always making the best possible prediction of where this year is going. But there is a lot of uncertainty. You can see that in the range as well when you provide outlook. So, there is a broad range. of scenarios and of course the deliveries themselves they might indicate of course there's a good pull for the product but also it's about inventory management so we don't know how much that is being done then on buyer side again so those that necessarily always correlate with actual sales because you might also deliver tablets to ensure that you have inventory for different scenarios going down the line and even next year.

Thanks, that's clear. Then about your ODM208 possible royalty rates, just to clarify that, was it so that your royalty rate is the net royalty rate and product deliveries will be booked as, you know, zero margin sales separately?

Thanks, Anssi, for the question. So probably you are asking this question because with Bayer we have this kind of arrangement that the royalty is the only income Orion gets and we need to then cover the cost of goods sold with that amount. But the agreement with MSD or Merck is a bit different. So like you said, royalty will be pure royalty and when we are delivering tablets to Merck that will be invoiced separately so it's a different kind of agreement than we have with Bayer.

Thanks and maybe finally about Ganax alone so do you have any updated timetable for this one and maybe about the future as well so if Marinus Pharmaceuticals is successful with other indications like do you have to go through the same process in Europe for every future indication.

Indeed. Unfortunately, I cannot comment any more specific timetable for the first indication, CDD, where we are now negotiating with the pricing authorities. Let's hope something happens soon. For the second indication, TSC, we are expecting phase three results towards the end of the year. And yes, you are right. For all indications, we need to go through the same, or through a new pricing and reimbursement negotiations with the health authorities.

Thanks. I know that you haven't commented anything on Canaxiom's potential officially, and you have highlighted that this is a small indication, the first one, Can you give us any update regarding the potential of this first indication yet?

Well, I can only reiterate the word small. The patient number in Europe, these children who are suffering of this hereditary epilepsy, it's hundreds. It's hundreds of patients, so it's not even thousands of patients. So maybe that already tells that when I say small, it's small, you know. And of course, because it's such a small population, it is important to have the pricing and reimbursement in the right level.

Okay, thank you. That's all from me.

The next question comes from Sami Saakames from Danske Bank. Please go ahead.

Hi, I have a couple of questions, starting from two topics that have already been discussed and then moving on to other topics. First, Rebecca, I think you're not really willing to provide any forward-looking information, If we look at the number you reported for the second quarter as Rebecca sales, was that your estimate or was that based on the actual number reported by buyer this week? And if it was your estimate, when did you make the estimate?

So basically we lag behind always with buyer, you know, when we get the reports and when they report as well. So most of that quarter is based on reports. But of course, you know, the end of the quarter is based still on estimate. But one could say, you know, two thirds is basically based on actual reports. So that kind of reduces the uncertainty. But of course, there's always a chance for flow overs depending on what happens then in the next quarter and the next reports.

Okay, so you're sort of getting monthly sales reporting from buyer, I guess.

That's correct, yes.

Okay, then moving on to ODM 111, I think it seems a bit delayed. Can you maybe discuss on why it is taking longer for you to get it going? And then also, did I understand correctly that you're actually planning... three separate phase two studies, that there will be one for acute pain and two for chronic pain.

Indeed, you got it right. There will be three different indications for acute post-surgical pain or post-operative pain on the baniectomy and also on the soft tissue surgery. And then there will be two chronic indications, this much I can tell you, for the osteoarthritis and neuropathic pain. why this is taking time. I think this is a very, how would I say, this is how it is in the pharmaceutical industry. These are complicated studies. And of course, when you do global studies, you have so many continents, you have three different indications. You can multiply, you know, the complexity around it and different discussions that you have. So I think it's safe to have also an assumption that it may start in early 2025.

Okay. Then moving on to Entacapone, you're still expecting flattish sales for the full year, even though sales were down 8% in the first half of the year. I think you're working on taking back distribution in Japan. Does this explain the more positive second half view and any color on timing for that arrangement, please?

Yes, that partly explains the positive improvements towards the end of the year. And yes, we are transferring the rights back from Novartis in Japan. The license agreement will end towards the end of the year. So nothing very exciting there. This is also a very routine thing in pharmaceutical industry when you license out your products to another company. And then when the time comes and agreements end, both companies discuss and then decide whether the rights are returned to the originator. We have proceeded in Japan already. So Stalivo or Entacapone products are not the only products that we are repatriating. We will also repatriate Divichelt. in Japan and in which order these repatriations will happen is of course difficult to say but we definitely hope that all the repatriations will happen towards the end by the end of this year and regarding Entakapon and of course Japan as a big single market will have a positive effect on Entacapone this year. However, even though it's been sliding down now on the first half of the year, it's due to the price erosion, but we strongly believe that working actively again in Europe in the selected countries will increase our volumes so that we will get back on the same level as last year.

Okay, then moving on to Easyhaler where growth slowed down to the single-digit level in the second quarter. I understand that you are running against higher comparables from last year, but is this high single-digit growth rate a good assumption of your growth going forward?

Well, it's difficult always to assume, you know, how the full year will go, but it will be, I think, around low single-digit numbers, somewhere around 10% plus something, minus something, depends on the month and quarter. If in good case, as you look at the first half year numbers now, it was 19% growth. So I think it's very healthy growth for a brand. Let's remember, this is a brand that is 30 years old. So it has really experienced or it's been revived, you know, for several reasons. And of course, we have more resources behind the brand now.

Okay, and then my final question would be on animal health, where we had inventory issues last year. Just want to make sure that we are not getting surprised by those to the other direction. We have seen quite healthy growth during the first half of the year. Is this a sustainable recovery rate or do we see that current inventories are starting to get filled on this product?

Well, I surely hope that's not the case. We more see that this is back, we are getting back to normal after COVID and after the destocking. So I surely hope we are not going to see anything like that again.

Okay, thank you. I don't have any further questions.

The next question comes from Iris Tiemann from Carnegie. Please go ahead.

Hi, all, and thanks for taking my questions. I think I have two questions left. So basically, firstly, thinking about your H2, do you see more headwinds for H2 compared to H1 in terms of costs or sales or anything that could that would basically put pressure on your underlying results more than in H1. Yeah, I think... OK, yeah, please go ahead.

Yeah, if we see any headwinds basically on the cost side for H2, so I think there's nothing kind of major. I mean, we have already stated that we know the R&D costs will grow a bit because we have ODM111 there. But those are all within basically our outlook as well. So there are some scenarios there, mostly depending on, of course, R&D, and that can change basically where you are in that outlook area, but otherwise, no, nothing major.

But headwinds, no, I wouldn't say so. Of course, you never know what happens in the world, but as we see it now.

Nothing we see at this point of time.

Okay. And yeah, secondly, related to Japan. So how many sales people will you have and how much this will increase your costs? And then perhaps thinking about your long-term outlook in Japan, do you see that you have potential to grow sales?

Well, I'm not going to give out here any exact numbers on our sales force or our organization in Japan. Of course, we will have all the needed people, you know, for this portfolio, which is actually quite heterogeneous, if you think Divichel and then the Parkinson's disease products, but we've used that already in Europe. And long term, definitely we have plans for long term in Japan. We wouldn't otherwise enter that market. It's of course an investment to go into a new geography. And Japan is the third biggest single pharmaceutical market. So it's very important for us to be able to create growth. And it's good to mention here that It's of course branded products with Parkinson's disease products and women's health that is entering Japan. We can repatriate the products. But if we look on the longer term, and this is a very good question, We have ODM111 and we have hopefully other new products, other new NCEs coming in our pipeline. And this is also preparing ground for those clinical studies. We can carry out them by ourselves and hopefully one day launch our products in Japan.

Okay, thank you. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

All right, thank you to the conference call lines. We have a couple of questions here in the webcast. The first one is related to New Pekka, maybe already repeated, but I guess that, you know, it's good to repeat that so that the market understand the dynamics. So question comes from Vele. His question is, Bayer reported 78% New Pekka growth in first half of this year and Orion 46%. So does this mean additional revenues to be recognized in Q3? So meaning that transferred from H1.

Yeah, I can answer that. So you can't directly draw a conclusion from Bayer's growth figures and into our IMEDS net sales. And that's due to a couple of things. One is timing. And the second big thing is the tablet sales, which basically are deducted from the royalties. And depending on how those come in and also how the inventory buildup is done to meet future demand as well, it means that those are not directly linked and cannot be compared as such. Of course, there's some correlation. So if we look at our Q1, Q2, just the royalties growth, then we saw that in Q2, royalties grew faster than in Q1. So there is some correlation, but it's not like mathematically exact.

And of course, the royalties are increasingly growing towards the end of the year because the royalty rate increases along the year. So there are lots of variables impacting that. All right, then another question coming from Andreas Hofstad related to Precifit, so the licensing deal within branded products. Can you indicate what impact the new product will have in your Parkinson's portfolio and what are your expectations when it comes to market penetration and revenue contribution a couple of years from now?

Good question. Of course, we've estimated and forecasted how the product will do, but let me first say a few words on the product itself. So it would offer something for patients before the Parkinson's disease symptoms get so bad that you either can't treat them properly or then you move to Duodopa, which is an intestinal treatment, dopamine treatment. So it's a significant patient segment, but it's not the blockbuster, let's put it this way. So it's kind of a middle-sized product in Orion Parkinson's disease portfolio. So it will not be in the size of Entacapone, what Entacapone was at its peak, but it will be a significant product.

All right. Thanks, Lisa. That was all from the webcast. We can still once more turn to the conference call line, whether there are any follow ups there.

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. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

All right. Thank you. We don't have any more questions either on the webcast. So we can conclude this. Thank you for participating in this webcast today. And the next time we will be reporting results will be in the end of October 29th. So have a great summer until that.

Thank you.

Thank you.