Orion Corp New B Shs

Good afternoon ladies and gentlemen and welcome to Orion's earnings conference call and webcast for the financial period of January-September 2024. My name is Tuukka Hirvonen and I'm the head of IR here at Orion. In a few moments we will kick off with the presentation by our CFO René Lindell. Our CEO Liisa Hurme, she is recovering from a foot operation which restricts her mobility at the moment and thus she couldn't join us here today. But we have a good team here led by Rene and also for the Q&A session we have today here Mrs. Olti Vaarala, who is heading our R&D and Innovative Medicines Business Division. After the presentation, you will have the possibility to ask questions from the management. And we will first take questions from the conference call line. And after that, then we will turn to the webcast chat questions. So you are able to fill in your questions through the webcast chat function if you wish to do so. Kindly state your name and the organization you are representing before asking your question. And just before I let René to take over the stage, I'd like to draw your attention to this traditional disclaimer about forward-looking statements. But with these words, I'm happy to hand over to René.

Thank you Tuukka and hello and welcome to this interim presentation from my behalf as well. The quarter was eventful and also after the quarter's ending we had a few news that we will also discuss today in the presentation and I'm sure more also during the Q&A. The third quarter was strong. It had a strong underlying business growth, but boosted by milestone payments. In total, milestone payments were 130 million euros. 70 million euros of this was from Nubeka sales milestone and 60 million euros was related to the MSD agreement, which in July was transferred from a collaboration agreement to a license agreement. And with that change, the 60 million euros item that was reserved on the balance sheet was released to the P&L, both to the net sales and operating profit. The 60 million euros was reserved for potential costs related to collaboration agreement. But with this agreement change, then those costs didn't materialize. And consequently, the item was released to the P&L. During this quarter, Nubeka, Easyhaler, Animal Health were main drivers for growth, similarly as earlier this year. But in this quarter, also Generics and Consumer Health saw a very healthy growth of 5%. Our operating expenses increased according to plan. And if we exclude the major milestones, 130 million euros in Q3 this year and 30 million euros in the comparable period, the underlying business growth was 25.9%. And the net operating profit increased by 22 million euros. If you look at the year to date, the story is very similar. Two milestone payments increased a lot the net sales and profit, but even without these, if you look at the net sales growth, it was 16.6% and operating profit increased by 42 million. And over the year, the cash flow of operating activities has been strong as expected. Looking at some key components of the net sales through the net sales bridge, we can see here Nubeka standing out with close to 100 million euros growth from last year, and then Milestones net impact of another 100 million euros. But if you look at the other business divisions here, calculate them together, they contributed with 55 million euros of growth. And the largest negative contributors were, as before, Simdax and DEX, Medetomedin and Entacapone. On the operating profit side, main positive contributors were the sales growth and royalties and milestones. And then some negatives from product mix changes and price changes that impacted the margin. And also a negative contribution, as said earlier, from the planned rise in operating expenses, which in together was about 50 million euros, mainly from R&D and sales and marketing. Next, let's look at the performance of each business division. Net sales of innovative medicines show strong growth and includes the two major milestones as mentioned earlier. But even with excluding the milestones, the underlying sales increased by 73.5%. It's good to, at this point of time, to discuss about the remaining milestone for Nubeka. It's in total 180 million euros, and it is actually one milestone which could, according to our current estimates, be recorded in 2026. After the reporting period on last week's Thursday, Marinus reported the results of the Ganexalon Phase 3 study for the TSC indication, which unfortunately was negative. It didn't meet its primary endpoint and Marinus also was announcing that they discontinue the further Ganaxalone clinical development. Now, this means also that Orion is currently assessing its situation with Ganaxalone. We have the CDD indication. It's a rare disease indication, but with a much smaller business potential than we had expected for the TSC, if that would have been successful. Moving on to branded products, a healthy growth of 10.3% year to date, with Easyhaler leading that growth at 18.3%. Sales volume of Entacapone products did increase volume-wise, but due to declining prices, we see that the total net sales is lower than in a competitive period. In the women's health segment, the Divina series grew by 13.7%, also a very healthy number. You can also see here in the bar chart, in the other numbers, some expansion of the branded products portfolio building on the Easyhaler, on the Entacapone and the Divina series. So there is approximately five million euros of growth year to date there. Generics and consumer health, our largest business division. had a very good quarter. It grew around 5% in Q3 and also reached cumulatively growth for the year of just below 1%. And this is really a good result in a very competitive market. And it was achieved thanks to good portfolio management and service level. And as you remember, Generic's business also has its headwinds from Simdocs, Dex Metal Dean, and the fact that we exited the Russia business last year. So the result would have been, of course, much bigger even without these effects. Animal Health has continued its good performance in Q3 and its recovery from last year's dip. And the year-to-date sales is now 20.9%. It came from various sources, but animal sedatives being the single largest contributor. Fermion is slightly lower year on year, but this is mainly due to the fact that even more of Fermion's capacity is being diverted to supporting Orion's internal API production. And actually Nubeca is taking a larger share of the capacity. So it is capacity constraint for this external sales. Looking at our top products, Nubeca has grown by 80% year to date, Easyhaler product portfolio by almost 20% and animal sedatives over 40%. And the negatives are the ones that we have seen earlier this year, Simdac's dexmedetomidine for human use, around 30% decline. So similar as earlier. Trexan's decline year to days is partly explained by large shipments that happened last year during this time. On the clinical pipeline, We have Aranaut Indarolutamide, which had positive results in phase three during the quarter, and thus registrations are now ongoing for expanding Nubeca indication by Bayer. And Arastep is ongoing in phase three. For Opevesostat or ODM208, phase three programs, Omaha-1 and Omaha-2, are ongoing in phase three by a partner MSD. Regarding our own pipeline, last week we announced unfortunately that we had to cancel the ODM111 project within the pain area. It's our now 1.8 blocker. Due to findings in preclinical toxicology studies, that showed that the molecule did not support long-term use. What this also means is that the therapeutic window for the molecule became too narrow to continue the project. It should be noted that in phase one clinical studies, there was no significant safety concerns. Due to the decision to cancel ODM111, Orion will write down 17.5 million euros of assets related to the molecule. There are some savings this year that partly compensate for this, savings in external R&D, but they don't fully compensate for this. We're talking about a few millions and we are still looking at how much that in the end will be. On the other Orion pipeline project, Odeon 105, targeted for insomnia, is ongoing and proceeding in phase two. And ODM 2.1.2 for solid tumors is also proceeding in phase one. And during the Q&A session, as Tuukka said, head of our research and development, Outi Vaarala, will also be here with us answering any questions related to ODM 1.11 or the research pipeline. A few words about our progress in sustainability. We have received validation from the Science Based Target Initiative, who confirm our near-term emission reduction targets are in line with latest climate science. Our commitments in this area are that Orion commits to reduce absolute scope one and two greenhouse gas emissions by 70% by the year 2030 from the base year of 23. Additionally, we commit that 78% of our suppliers also have science-based targets by the year 2029. Finally, our outlook for 2024, which we updated during the quarter of 11 September, remains the same. So our net sales is estimated between 1.47 and 1.41 billion euros and operating profit between 370 and 400 million euros. And with this, I will invite Outi and Tuukka here with me and we'll be ready for your questions.

Thank you for the presentation, Rene. And as said earlier, we will first turn to the conference call line. So at this point, I would like to hand over to the operator with the teleconference. So please, it's time for the questions.