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-March 2025. My name is Tuukka Hirvonen. I'm the head of IR here at Orion. In a few moments, as you know, we will start this event with CEO Liisa Hurme's presentation, after which you will have the possibility to ask questions from her and also from our CFO, Mr. René Lindell. We will be first taking questions through the conference call lines, and then you also have the possibility to send in your questions through the webcast question form. We kindly ask you to present the company or organization you are representing before asking your question. And just before Letting Liisa step in. Just a reminder about the disclaimer regarding forward-looking statements. And with this, it's my pleasure to hand over to Liisa.

Thank you, Tuukka. And good afternoon on my behalf as well. And welcome to Orion Q1 2025 webcast. I'll start with some highlights from our first quarter. I'm happy to tell that all our four businesses created growth, and the fifth one, Fermion, didn't grow, but I will explain a bit about that later on. Also, our geographic expansion and R&D capabilities program is progressing, and we have opened an R&D site in Cambridge. in purpose of strengthening our pharmaceutical development for biologics. Also, there is a new key project in our clinical pipeline. This phase three is on levosimendone for a pulmonary hypertension in certain specific patient segments. And this phase three is carried out by TENAX Therapeutics in United States. On financials, the quarter one was excellent. Net sales grew 15% and our operating profit grew 39%. And also operating profit margin improved from last year's quarter one. Cash flow decreased to some extent, mainly due to timing of royalty payments and some milestone payments between borders. Our net sales bridge looks a bit different than previously. If you remember earlier, we had net sales based on some of our biggest products, and now we have divided our net sales picture based on our divisions. Now it's easier to follow up how each division is doing and which divisions are creating growth. and more or less growth since all four human divisions and animal health is creating all three human divisions and animal health is creating growth. So innovative medicines, 40.4 million in quarter one, brandy products 6.8 and generics 1 million and animal health 3.3 million euros of growth. Firmium, as I already said, was not developing positively, but let's remember that this is only external sales. And then there are some internal translations between other operations in Orion, which are very marginal here, 400 million. But all this ended up 354.6 million of net sales in quarter one. Operating profit bridge is pretty much the same as earlier, but we've made it a bit clearer with our texts. So the first column here, 13.7 million, points to the change in volumes. So this is the euros that the volume increase has created this much growth. Then the second one includes the change that comes from changes of prices, course and product mix. So slight decrease there by 5.6 million. And then the third one is the effect of exchange rate on our gross margin. Fourth one royalties, clearly the biggest contributor here. And the fifth one milestones compared to the last year's first quarter, a bit of minus there. And then other operating income and expenses. And then number seven here on the column seven, you can see the fixed course, which is mainly sales and marketing costs in quarter one. And all this ended up to close to 78 million in operating profit during first quarter. Now I turn to innovative medicines. 70.4 percent growth here which is almost created almost 100 million sales in first quarter so we didn't yet break that 100 million per quarter and here in the right hand side you can see a clear this phenomenon of back-end loaded financial year in innovative medicines. You can see how the year ended in quarter four, 24 with 152 million actually. And now we started with 92 on the first quarter. But you can clearly see that there is a huge growth compared to the quarter one. So no worries if there is a change downwards from the last quarter of the previous year. We've explained this earlier that the royalty rate really gets higher and higher during the year as certain sales in euros are exceeded. Also, you can see here that the tablets that we delivered to Bayer reached at all time high number, 38 million euros. branded products, almost 10% of growth. And here you can also see a different type of a split here. We talk about CNS, not specific products. And we can see that respiratory business is clearly the biggest one here. And CNS business back on a growth track represents 30% of the branded products. And Easyhaler, the whole portfolio grew 8% and the combination of Budesonide and Formotelor continued strong growth with almost 15%. And after a long time, Entacapone, you will see that on the top 10 list, but CNS sales grew 5.7% partly and mainly because of Entacapone sales in Japan, but also because of some minor new products that are in that portfolio. Generics and consumer health, almost 1% of growth, a wonderful achievement in that portfolio. And here, the split geographically is so that Finland is the biggest single geography for generics and consumer health, Scandinavia the second biggest, and then Eastern Europe. And to reach this almost 1% growth, one of the main drivers was actually Scandinavia this time. We were able to supply products that other companies were not able to supply in certain Scandinavian markets, which again shows and proves the excellent service level that we have in our generics business. Animal health, strong, plus 10% of growth. It was a bit lower sales, although slower than last year, but still on a very good level in general in animal health business. And then fermion, as I already mentioned, declined. But let's remember, this is only external sales, and a majority of the capacity is now bound to our internal own products. Top 10 products. There are pluses and minuses. plus 85% for Nubeca, Easyhaler 8%, as I already said, Entacapone products plus 6%, Japan contributing to this growth as should be after repatriation from Novartis. The minus on Dexdometor-Domitor animal health sedatives is mainly due to to timing of shipments to our partners. So no worries there. There's been a lot of fluctuation between the quarters lately. And Divina series, meaning mainly our estradiol gel product, 30% growth. I think that's the, after Nubeka, that's actually our fastest growing product currently. Burana more or less at par with the previous year's first quarter. This is very normal. It's plus or minus 1-2% depending on the Finnish sales. And SIMDAX and DEX portfolios are sliding down due to generic competition. Trexan again, shipments from one quarter to another one. And then a new entrant to this list is really Ketiapiin products from our generic portfolio. It has climbed up to our top 10, mainly because the DEX is going down. And I guess we'll see some of the biggest generics actually entering to this list as Dextor and Simdex are sliding down. But we do sell Ketiapiin in all the Nordic countries. And innovative medicines, almost 30% of the revenues. Branded products, 22%. And generics, 37%. And clinical pipeline. We have here two phase three projects ongoing with Nubeka. very familiar to this audience, Aranaut, which is already in registration phase globally. Arastep in phase three. Then two projects ongoing with Opebesostat, Omaha-1 and Omaha-2, for a different segment or phase of prostate cancer. And then one phase two study ongoing with Opeveso STAT, which is a continuation from the phase two study that we used to design the two phase three studies that we have here about the CYPIDES study. And ODM212, a new mechanism for cancer treatment for solid tumors in phase one. And as I last time told, we are expanding that phase one this year so that we have enough data to choose the right doses for the phase two study. In the TASIPI Medin study, our program, we continue with the Phase 2 this year. We started with the very small Phase 2a and now we are expanding to the full blown Phase 2. Then the new entrant, which we could call TNX-103, as Tenax calls it. This is an oral levosimendan. So the molecule is the same as in the Symdax product, but that's an IV product. This is an oral one, and it's used to the pulmonary hypertension. with patients with heart failure and ejection-rejection fraction of certain magnitude, which in this case means that a normal fraction. But these patients suffer of pulmonary hypertension. And this is rather a long story, why this popped up in our clinical pipeline. And maybe you do have questions regarding to this, but I may shortly and briefly summarize the story. Already more than 10 years ago, we made a deal with a company called Fuchsius at that time, an American company. They wanted to develop oral levocimendan for low cardiac output syndrome. Unfortunately, that study failed. We still continued collaboration with the same people now in the company called Tenax. And they managed and succeeded in getting finance for this program with Levosimendan for the syndication. And this came public in March this year. So this was the right time to bring it also public here in our pipeline, as this is our molecule and partner agreement like we have partner agreements with other companies like Bayer, Merck and also smaller companies. Then to a very different subject, sustainability and highlights from 2024. As many companies in Europe, we reported or had our first CSR&D report, and that was published in March as part of report by the board of directors. This was a huge job and I thank the team for this. I think all the companies have been working a lot to fulfill these European requirements. Pharmaceutical industry is all about patient safety and quality. And in 2024, we conducted 258 audits. Imagine, that means that every week there are approximately five audits. And if you count out, you know, Christmas and Easter and all the other holidays and bank holidays, it means that every week there are many groups of people from Orion visiting other companies, you know, checking how those factories are from the quality perspective. And I think this also tells a lot about our external suppliers, how many of those suppliers we have. Then, of course, environment is another very important aspect. And here we've been able to reduce scope one and scope two emissions by 21% during this 2024. And we have a very ambitious target that is explained in our report. until year 2030. Safety of our colleagues is also very, very important, both in our operations, but in general for all of our colleagues, whether they are working in sales, R&D, operations. And to that purpose, we conduct safety discussions, safety sessions, where we discuss topics in every other management meeting or team meeting. And you can see here that 72% of our line managers held this kind of a safety session with their team every month. Of course, there might be teams that hold those more often and maybe teams that hold them a bit more seldom. Our code of conduct was renewed last year, and here you can see that 94% of Oregonese have had the code of conduct training last year. And of course, our target is 100%. And in most of the functions, it is 100%. But anybody understands that in a big organization, big people are coming in, new people and going out. So there is, of course, some limitations to reach full 100%. But that's definitely our aim, because that's implemented in our starting pack whenever When anybody starts in Orion, they need to do the code of conduct training from here on. Our outlook remains the same for this year, as we've stated in February. So it's from 1,550,000,000 to 1,650,000,000 euros regarding net sales. and 350 million to 450 million regarding operating profit. We will hold Capital Markets Day in Helsinki on 22nd of May. So I warmly welcome all of you to attend our Capital Markets Day. We will share more light and more wider and deeper information on each of our divisions, their product portfolios, current portfolios, their visions and also operations, current operations. And here you can see other upcoming events for the rest of this year. The half-year financial report in mid-July and then finally October first nine months. And at this point, I thank you for your attention and I think it's time for questions. So I welcome our CFO René Lindell on stage and Tuukka will join us as well.

Thank you, Liisa, for the presentation. And as stated in the beginning of the event, that we will first take questions through the conference call line. So at this point, I'd like to hand over to the 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 Anssi Rausi from SEB. Please go ahead.

Yes, thank you. And thank you for the presentation. I have a few questions and I go one by one. First one is on Nubeka and its product sales, which were especially strong in Q1. So have you had any discussions with Bayer or do you have a view on this if it was a bit of a you know pre-buying to prepare for the possible tariffs or if it was just purely to meet strong underlying demand year-over-year growth was like 113 percent or something like that in product sales

All right. A very good question in this current situation, that whether this is related to tariffs. To my understanding, this is not related to tariffs, but really to underlying demand from the markets and patients.

Okay, clear. Thanks. And the second one on your operational expenses, you mentioned in your report that these were lower than you anticipated so which items you are referring to and what explains lower expenses and also do you expect that these let's call them savings are coming back later this year how do you see this

René, would you like to add this?

I think overall our operating expenses grew year on year if you compare to last year and that is as planned. We've added more projects to our R&D early pipeline. We had the biologics there. So of course the costs have increased and also sales and marketing. We have increased sales force to drive drive our business, especially in Europe. And of course, there's also inflation otherwise across the board. But I think what we refer to is it's a bit lower than we had anticipated overall. Sometimes this is typical in the beginning of the year, not everything starts as you have planned. And some of those costs are probably coming during the year. So some catch up is most likely to happen and are happening at the end of the year. But let's see. I mean, it's a typical start, I think, in Q1, but we expect some catch up on the expenses as well.

Thanks, Kadi. And maybe finally on Levo Simendan. So do you have any estimate when Xenax could complete its phase three studies with Levo Simendan?

I think they have commented this publicly.

Yes, if you look at clinicaltrials.gov, the current level trial is expected to have a primary readout already in 26. However, they need to have another phase three trial, which is then the confirmatory. trial, which can lead to product registration. And this is all based on their statements. And they are planning to start the other phase three trial during this calendar year. So we will have to wait and see when they then expect that trial to read out.

OK, great. Thank you. That was all from me.

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

Hi, I have three questions. We'll take this one by one. Firstly, starting from US import duties, can you comment if the discussed tariffs could have a material impact on Orion's Nubeca franchise And if you have means to mitigate the impact through, for example, price increases or changes to your production setup?

Well, I think the situation in general with the import tariffs, whether it's pharmaceuticals or any other goods, is very unclear. and it changes from day to day. So it's very difficult to make any conclusions at this time to our products. It's not even yet known, you know, regarding pharmaceuticals, at which level of the value chain those would be impacted. But of course, if such tariffs would be set, that would have an impact also for Orion's income. But it's still very early and too early to say anything about it. Our biggest sales in U.S., biggest income in U.S., it comes from Nubeka. And I guess that was what you were referring to. And then we have nothing to do with the pricing of the product. And then that's really Bayer's question and should be discussed with Bayer. But any changes or any tariffs that would impact that product would naturally also be impacted on Orion to the certain magnitude that the agreements state that. We are not out of that scope by any means, but I think it's better to wait and see, you know, what will eventually happen with the tariffs.

Okay, thank you. Moving on, I have two questions regarding the pipeline. Firstly, starting from the Tenex project, can you please discuss the market potential for the chosen indication What would roughly be your royalty rate and how does the protection work as Simdax patents have already expired?

Well, let me start and I'll let Tuukka to continue with the market potential. I'm not sure what Tenax has really given out. To this one applies the same thing as with our licensed projects with Bayer and Merck, that the best one to comment this is really Tenax. But that much we can, of course, share that the agreement is such that the royalties are really low two-digit number for us when the product hits the market. And the market potential for such an indication, I think there are very many different, how would I say, discussions on that on different reports that they vary from maybe a billion to several billion. So I don't think there is any exact information. It's really... You can find it on public sources, this debate on what would be the market potential for this indication.

Okay, thank you. And then finally, you still didn't complete the phase one for ODM212. Are you still expecting to start phase two studies before the year end, or is next year a more realistic timeframe? If there is a delay into next year, do you think this could have an impact on R&D cost outlook for 2025?

Well, we communicated early this year in February that we will continue the phase one throughout the 25. So this is really the year when we complete the phase one study. There is a new guidance by FDA that you need to collect rather much data to be able to define the right dosing for oncology drugs. So based on that guidance, we continue. And I think 26 is a good estimation for the start of the phase two. And you asked about the costs. The costs for the phase one are included in our budget currently.

Okay, thanks. I don't have any further questions.

The next question comes from Sean Hammer from Jefferies. Please go ahead.

Hi there. Two questions from me. So firstly, if you're allowed to disclose, is your price for Nubeka with buyer fixed in the contract, which would imply that buyer would basically front all the impacts of potential tariffs? And then secondly, is there any appetite within the company to divest any of the lower growth businesses, such as the generics or consumer health businesses? Thank you so much.

Well, I start with the Nubeka. The price, of course, in the agreement between Bayer and Orion states the price with which we sell tablets to Bayer. And then again, as I think one of the previous persons asked, what would be the impact of tariffs to Orion? It really depends on what part of the value chain those tariffs would be hitting, you know. So whether it's really the price that the tablet is transferred from Europe to U.S. or whether it's the sales price in U.S. So it's really difficult to say anything about it. spot or segment of the value chain it is, it will have an impact to Orion's royalty income as well.

And the second question was... Is there any appetite to divest other businesses like generics or animal health?

Thank you for reminding me, Tuukka. No, there is no appetite right now to divest any of our divisions.

Thank you.

The next question comes from Graham from Paris. Please go ahead.

Hello, Graham. Are you there?

So it's Graham Perry from Bank of America. So just wanted to understand the follow-up on tariffs again. In terms of the shipment of the product, is that actually shipped across the border in the U.S. by Orion, or is it shipped... across the border by buyer, so who actually owns the product at the point of shipment. So if we wanted to understand various different scenarios, if and when there's a tariff announcement, how that exposure sits. So if it was, for example, Orion shipping it across the border, would you have a full exposure to the tariff Or if it's buyer, would the buyer have exposure to the tariff, but then contractually they could pass some of that down to you? And secondly, on tariff, if buyer were to raise the price in the U.S. to pass on any impact of tariffs, presumably that would also benefit your royalty if that's based on in-market sales in the U.S. Thanks.

Yeah. This is exactly a very, very valid and good question. We sell the tablets to Bayer, and that happens in Europe, so they ship it to the US. And then, of course, if there is some kind of a tariff on that one, they are responsible for it. But, of course, there are many parts in the agreement that would Partly affect also us. As I said, any tariff on any part of the value chain will also have an effect on us. Similarly, if they would raise the price in US, that would have an effect on our royalties as well.

René will continue. So raising prices would have a mitigating impact.

Exactly.

So if there are tariffs, we would feel the impact proportionally. And if they can raise prices, then we also get benefit from that. Exactly.

So it goes both ways.

Yeah, that's super clear. So you effectively share the tariff regardless where it is and you benefit from any price increase in royalty. So you're effectively sharing it contractually. And then second question for me is just when should we expect the cost of the Cambridge R&D facility to start to appear in your R&D cost? Thanks.

Those costs are already included to that amount that we think they will occur to this year's R&D budget.

Sorry, just to be clear, so I understand that's in your guidance, but have they started to be incurred in Q1, or is this something which is going to be more back-end loaded into the cost for the year? Sorry, Graham.

Yeah, it will be more back-ended, clearly. Yes.

Yeah, thank you.

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

Yes, I have one question left actually, and it's on divina. So really strong growth in Q1, but was there something extraordinary or is it just picking up in the pace of growth?

It is picking up. It's been picking up actually for a few years now. If you look at the numbers, I think it started to pick up right after the COVID or the last year's first with the 10 percent, 5 percent growth, 10 percent growth, 15, 20. And it's actually accelerating all the time. So now it was 30 percent. And that's really a market demand of this type of treatment. This is an estradiol. Mainly the Divina series growth is mainly due to the estradiol gel that we manufacture and sell across Europe and in some other countries. So it's really the market demand for this type of a product.

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

Thank you. We have a few questions coming online, but before going there, we actually forgot to answer one of Sami's questions regarding the Levo Simendan protection.

Yes. Well, again, TENOX would be the right party to ask this about the protection. And you are correct, the molecule levosimendan is not protected anymore. In US, you can get data protection based on the data you produce in your clinical studies for certain indication. So I would assume that the protection, market protect, that's called actually data protection or market protection. So the business case is based on that one.

Thank you, Lisa. Then we can turn on to the webcast questions. We have first couple of ones from Onni Hautala from Nordea. So does Orion have other clinical trials being developed by partners that could enter Orion's pipeline in the future? And if so, can you mention what is in phase two in such cases? I guess Onni is referring to Levo Simendan case here.

I fully understand this came... It might seem that it came out of nowhere, but that's not really the case. We report key clinical projects, which for us means Phase 3 projects, so clearly we are not reporting Phase 2s except the CYPIDES, which is still ongoing. of there might be phase twos if we really think that they are key ones. And I'm trying to think really our partners that is there something that would be going on that would result in a similar type of a race to our clinical, you know, pipeline. But nothing comes to my mind currently.

Of course, regarding OpeVesostat, we have stated that we will include phase 3s, but if you take a deeper look at MSD or Merck, they have some phase 2s ongoing, for instance, with combinations targeting prostate cancer.

That's very true, and I guess they've shared some information on those, and I hope actually that we could discuss more of those in our Capital Market Day.

Absolutely. All right, then moving on, another question from Onni and still regarding Tenax's Levo Simendan case. Can you further explain Orion's role here? What part of the intellectual rights are owned by Orion and what will be Orion's role in the future?

Our role is really such that we've licensed the rights to develop oral Levosimendan for this indication to TENACS. We also develop the pharmaceutical products itself, since we know Levosimendan very well. It's quite natural that we are responsible for the product development here. And of course, it remains to be seen whether we manufacture the product or not in future. Otherwise, I think that's in all its simplicity, our roles in this agreement.

Great. Thanks, Liisa. Then moving on, another question regarding R&D pipeline coming from Mr. Alap Das. This is actually referring to ODM 1.11. Can we expect the preclinical data on ODM 1.11 at any conference? Do we have any plans to publish the preclinical data? I'm sure that the clinical data probably will be published at some point.

I'm sure. But this is something that you will also hear more at our Capital Markets Day. So welcome to listen, Outi Vaarala, our head of R&D, since I can't say that whether we are going to publish that or not, and or when we are going to publish that.

Thanks, Liisa. Then moving on, we have one question regarding branded products and Entacapone. So this comes from Alexander Huitfeldt from Chinko. Beyond Entacapone sales in Japan, are there any other key initiatives or growth drivers within your CNS portfolio that you are currently developing or prioritizing? Are there any products or indications you're especially focused on going forward?

Excellent questions. Yes, we are focusing in CNS and in CNS definitely to Parkinson's disease. Orion is still very well known in that sphere. We've been approached by many companies that have this type of value-added products, which are maybe combinations of older molecules or new formulations of older molecules for Parkinson's disease or other neurogenerative diseases. So we are building a portfolio around Stalivo and Comtarm. and Comtes currently. And I think the first launch would be this year in Finland for this type of a very microscopic or small kind of a powder product of entacapone combined to some other drugs that would allow patients to titrate their dose in a better way than with entacapone. So the segment would be on a rather late state of the disease before very much more rougher treatments like intestinal... dopamine or other that type of treatment. So there will be new products. And again, I repeat myself, I'm sure Hao Pan, who leads the branded product division, will shed more light on this portfolio in the capital markets day.

Thanks, Liisa. Then we can continue on capital markets. There's a question from Christopher Arnemark from Åland Bank, and that, will you provide additional information regarding the capital allocation strategy during the CMD? The balance sheet is solid. It seems to be a number of M&A possibilities out there. Or is it still dividend focused?

Yeah, I'm sure we'll also discuss the capital allocation at that point.

But maybe it's good to remind that we haven't changed our financial objectives as they are today. Then moving on, we have one question from Matti Kaurula from OP. Regarding potential tariffs, could you please remind us the key advantages that Nubeca has versus competitors, and why US doctors would prefer Nubeca over other products despite the potential tariffs?

Well, we have discussed the benefits of Nubeca earlier. It's very much side effect profile it's as you would say it's a very kind drug you know to patient usually cancer drugs have this and that you know as a side effect but we do know from experience and and how doctors are what doctors are telling us that it the side effect profile is very nice and and they they like and of course patients like that type of a product Whether this plays a role when you talk about tariffs, I don't really know. It's very difficult to define any such criteria for any drug or any group of drugs that would make them more preferable than others if tariffs are set. Of course, pricing, I exclude pricing from this, pricing would definitely play a role there. But otherwise, I think it's really the known effects of Nubeca, both on the side effects and the efficacy of the drug.

Thank you, Liisa. Now it seems that we have exhausted the questions from online. Thank you at this point for the lively discussions and questions. So at this stage then it's time to conclude the event. Lisa, any final words?

Well, I thank you for your attention and of course all Orion colleagues for the good quarter one and we continue the year as we have promised within our outlook. Thank you.