Orion Corp New B Shs

Good afternoon and welcome to Orion's earnings conference call and webcast for the financial period of January-September 2025. My name is Tuukka Hirmonen. I'm the head of investor relations here at Orion. In a few moments, we will start with the presentation by our CEO and president, Mrs. Liisa Hurme. After which then we will have Q&A session where you can pose questions both to Liisa and also to our CFO René Lindell. We will be first taking questions from the conference call lines and after that we will turn to the webcast questions so you can type in your questions using the chat box in the webcast view in the bottom. And just before I let Liisa to take the stage, I'd like to draw your attention to this disclaimer regarding forward-looking statements. But with that, it's my pleasure to hand over to Liisa. Liisa.

Thank you, Tuukka. And welcome to Orion Q3 webcast on my behalf as well. Here are some highlights from Q3 2025. Nubeca received approval from the European Commission for use of darolutamide and ADT, androgen deprivation therapy, in patients with metastatic hormone sensitive prostate cancer. Nubeca also reached all-time high royalties and product deliveries to Bayer during Q3. Generics and consumer health business had a strong quarter, supported by good availability of products in our major markets and very successful new launches. Unfortunately, ODI 105, Tasipimidine, phase 2 trial for insomnia didn't reach its efficacy target. And we decided to discontinue the development of that program. And Q3 financials are here. And before I go here deeper into the financials, it is good to remember that the comparative period Q3 2024 was an exceptional quarter. We received 130 million worth of milestones last year's Q3. There was a 70 million sales milestone from Bayer related to Nubeka and 60 million milestone related to the MSD agreement on Opebesestad. So these are quite difficult to compare to each other. And now as I go along, I will talk about the base business. So the business without the milestones. The base business growth was 24% from quarter three, 24 to this year's quarter three, totaling to 423 million. The operating profit growth was even stronger, 68%, up to 121 million euros. And our cash flow grew 15% and was being very solid. Of course, during last year's Q3, the milestones were booked, but yet net growth yet not paid, so they were not yet cash in our bank. And when we look closer, the net sales bridge, we can see the kind of a net effect of the difference between the quarters here regarding the milestones in innovative medicines column, which is 59 million. But underlying net sales increased by 71 million. So I think the growth, as I earlier said, of Nubeka product sales and royalties was very strong, but it didn't fully compensate the previous year's milestones. We can also see here that all other divisions developed positively. Strongest being generics and consumer health, but also branded products and animal health showed positive development. And fermion was more or less on par. And here on the operating profit bridge, we can see the full kind of a full effect of the last year's milestones, 130 million euros, but also the positives on the change in sales volume and change in prices and cost of goods and product mix of almost 20 million. And then the royalties of 50 million. We can also see that our fixed cost increased as well, but this is all planned. It's mainly R&D and sales and marketing costs here. Now let's take a view for the first nine months from January to September. Again, a very nice 22% growth during the first nine months and 7.8% growth, even though we would compare to the previous year's quarter three, including the milestones. And the first three months ended up with 1.2 billion of net sales. Regarding operating profit, 57% growth and slight decrease if we compare to the numbers, including milestones in previous year. And again, a very positive development on cash flow during the first nine months. Now to innovative medicines. This is a bit different picture than you used to see. There is the shaded area, which tries to tell you the comparison between the quarters, including everything else but the milestones from the previous year. And 71% of growth is very healthy for innovative medicines, and also almost 75% growth during the first nine months. And on the right side here, you can see this all time high royalties plus product deliveries ending up to 166 million. And I always remind looking at this picture, the very, how would I say, year is very late ended, loaded, back ended, loaded. back-end loaded for Nubeka, as you can see here, when you look at the 24 from the first quarter to the last quarter, but here as well. But I would like to remind that in comparison to 24, we already reached the higher royalty rate in the previous quarter with Nubeka. So we are not going to see a similar shift and change in the royalty rate as we saw last year between the Q3 and Q4. Branded products growth during Q3 was somewhat slow, it was 3%, and this slowness in the growth is mainly due to timing of deliveries to our Stalivo partners. And that will be fixed during the rest of the year. So it's kind of a temporary change here. And the growth for the first nine months is a healthy 9%. And in Easy Halo portfolio, Budesonite Formoterol combination product was the clear driver for the growth. And then on the CNS portfolio, Stalivo Japan contributed to growth in branded products. And as I say, generics and consumer health quarter three was very, very strong. 5.4% growth is extremely good for any generic business, but especially here when we remember that Simdax and Dextor are included in this business and they are constantly sliding down facing the generic competition. So we are able to compensate that decrease. and at the same time, increase and grow our sales. And the reason for good quarter is really the good availability of the products in our Nordic countries. The service level is the thing in the generic business. You need to have the products at the time of the tender where they should be, and you would need to be able to deliver also for all the different countries in the specific timings of tenders or pricing processes. And also we had a good launch, for example, for Apaxiban in Finland. Animal health continued the good growth trend, although here we see a bit of a similar slowdown as with branded products. And that partly has to do with deliveries as well. But when we look at the first nine months, it's a very strong two digit number growth. And our top 10 product list is, as it has been, Nubeca, there as a flagship with 83 or 84% growth. Easyheiler product portfolio growth was close to 8% and Entacapone products grew close to 5%, mainly due to the Japan sales. And our HRT product Divina performed very well here on the row five, growing almost 23%, continuing the strong growth from earlier this year. And some oldies like Trexan even 10%, close to 10% growth, and Ketiapiin products 10% growth. And currently, our business divisions are very healthy. The balance between business divisions is very healthy. Approximately 30% for innovative medicines and generics and close to 20% for branded products. Now, Orion's key clinical development pipeline has clearly been become oncology-focused, as we decided to discontinue the ODM105 project for treatment of insomnia. We have also removed Aranote from this list, as it's approved both in US and EU. So we now have the DASL-HICAP study on this list. And then the two Omaha studies with Opevesostat that MSD is responsible for. It's good to mention here for these two Opevesostat studies that their design or primary endpoints have changed since we last presented this so that for the Omaha 3, which is for the later line patients, the primary endpoint is now overall survival. So the progression-free survival has been demoted and overall survival is the primary endpoint. Also, there are changes for the frontline patients study 004, so that the progression-free survival is now a primary endpoint for this study. And these are changes that our partner MSD has done, and it looks in all possible ways very illogical. Then we have TEN-AXIS-Levosimendan study for pulmonary hypertension proceeding in phase 3. They are planning to start also another phase 3 study by the end of this year, another global study for this indication. And then we have another study for opevesostat, for metastatic cast-strain-resistant prostate cancer, and three studies ongoing, phase two studies ongoing for several or three different hormonal cancers, women's hormonal cancers, breast, endometrial, and ovarian cancer. And still, we continued the SUPIDES, which was the phase two study that formed the basis for those two, Opevesastat 3 and 4 studies for prostate cancer. And our TID inhibitor, ODM212 for solid tumors is proceeding well in phase one, and we are preparing to start the phase two program on the first half of next year. Then a few words on the sustainability, this time about decarbonisation targets. We have set an ambitious target to reduce absolute scope one and two greenhouse gas emissions by 70% by the year 2030. And also have 78% of our suppliers, meaning scope three emissions, covered by our targets. Then how do we do this? I think for the scope one and two, we have very concrete actions ongoing. The steam production is one of the most energy consuming phase in the chemical industry, especially in the API industry. And we are changing the energy source for steam production in all of our manufacturing facilities. In Turku, we are electrifying the steam production. In Oulu, we are changing to biofuels from the fossil fuels. And also, we will start an electrifying project in Espoo. So very, very concrete examples here. And we have even done a lot of concrete actions and projects before this, for example, in our Hanko plant. And in the supplier management, we are targeting to our highest emitting suppliers who are not yet aligned with SBT. And here we try to offer support and practices and technical expertise with our suppliers. And we have specified our outlook today. Our outlook for operating profit, we have narrowed from 410 to 490 million euros. So nothing drastic. We've been able to narrow it as the year has 10 months have already passed. There are two months left and we have much clearer view on how the year will pan out. And for the net sales, our outlook is from 1.640 million to 1.720 million euros. And here you can see the upcoming events for next year. And I thank you on my behalf and welcome René here with me to answer your questions.

Thank you, Liisa, for the presentation. As we said in the beginning, we will first take questions from the conference call lines and then we will turn to the questions you can type in through the chat function in the webcast. But at this point, I would like to hand over to the operator with the conference call.

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 Sami Sakamis from Danske Bank Markets. Please go ahead.

Hi, I have four questions. We'll take this one by one. Firstly, starting from the guidance, can you elaborate on what is driving the small revisions to the lower and upper ends of the guidance ranges? Is this about third quarter actuals or have you also updated your forecasts for the fourth quarter?

Well, of course, the first thing is, as I mentioned, that we know now how the first, say, 10 months have passed and there are only two months left. But there are, of course, uncertainties for the latter part of the year. Nubeca is a big moving factor in this, also R&D costs. And their tariffs are not that big of a matter here. We do think that they wouldn't have any effect to this year 25. But there are still uncertainties for the rest of the year. So... still we have this range, but there are less uncertainties and that's why we were able to narrow the range.

Okay, then moving on to growth momentum at branded products and animal health. Third quarter growth rates are clearly weaker than we saw in the second quarter. How would you explain that and what is your expectation regarding Q4?

Well, yes, you are very correct that the branded products and animal health showed a slower growth than previously this year. And it's mainly due to some delays in our deliveries to partners. We have both animal health, animal health is actually working closely with, we have some very big partners that we are working with, so there might be a one day or two day delay for the deliveries and it has an effect clearly even on the quarter if there are big deliveries. going on. Same goes with branded products. We deliver still to our Stalivo partners across the world and it's the same thing. I think we've experienced this earlier years as well that sometimes it just happens that we are not able to ship during the quarter that we had planned. But we should be able to sort this out by the end of the year, during the Q4.

Okay, thanks. Then moving on, the third question is on ODM208. You mentioned that Merck has been changing primary endpoints for the Omaha studies. When was this change made?

This change became public, I think, a month ago, three weeks ago, maybe?

It was a few weeks ago. In early October, they changed the protocols. It was visible in the clinicaltrials.gov. So nothing material because we didn't come out at that point. But of course, you know, something that is very interesting for all of you. So we wanted to highlight it here.

Okay. And then finally, regarding the R&D pipeline, Thinking of next year, can you give a bit more color on when you're expecting a phase one readout for ODM212 and when would you expect to initiate the first phase two study for that molecule? And then secondly, at CMD you talked about three biological preclinical programs moving into phase one during next year. I just wanted to check if these projects are still alive as you are currently guiding for at least one new program during next year.

Yes, I'll start with ODM212. The phase one is almost completed. We are looking at the results and we are basing our phase two planning on those results. And of course, we will report the results in some forthcoming scientific meeting. Those are usually on embargo until we release them for the scientific audience. And regarding the phase two program, It's currently under plans. We have filed IND for that and hope to be starting by hopefully mid-26. And then there was one more question.

About the biologics.

Biologics, indeed, yes. We told that we have three biologics close to advancing to clinical pipeline, and we think that we will be able to proceed with at least one of them to the phase one next year.

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

Thanks. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Sean Hammer from Jefferies. Please go ahead.

Thank you for taking my questions. Three from me, also happy to take them one by one. So firstly, could you perhaps give us some, I guess, guide as to the impact on your OPEX from the ODM 105 failure? I mean, I know you weren't planning to take it to late stage development yourselves, so I assume it's not significant, but perhaps any guidance on the provisions set aside there would be helpful.

Yeah, maybe I can take that one. So, of course, Odeon 105, it was, you know, we got the results and in such a way you could say the project was completed. So, for this year's perspective, not a big impact in terms of how we expected this year's R&D expenses to be going as it was in our plans and it was completed. Then, of course, for next year, you can obviously think that there is a change in how the budget is allocated. 105, of course, is not moving forward. There are some tail costs for next year that we'll be taking in this year. But overall, we see it as being quite neutral for this year in compared to whatever we save and whatever provisions we take for costs that would have occurred next year.

Got it. Thank you. And secondly, I mean, you're able to specify your guidance on this increasing visibility on the performance of the businesses. I assume the visibility on the milestone should also be better. Could you perhaps speak a bit on your expectations for this and whether that visibility has shifted slightly from last quarter?

Well, as we have stated, we think that we will receive the milestone next year, 26, but it is possible that we receive that milestone already 25. But it's still not possible to state that as a fact, you know, that we get it this year. So we remain where we have been to this date that It's possible this year, but in our plans, it's next year.

Understood. Thank you. And finally, given the delay that you mentioned in the deliveries in branded products and animal health, is it fair to expect a slight boost to 4Q, assuming those deliveries are made as well as the normal business expected in 4Q, or is it more of a pull-through dynamic?

Now, I didn't quite get the question. Is it...

It's about the timing of shipments in branded products and animal health. Since we now saw some headwinds, will there be a boost in Q4?

No, I think it's just, you know, it's according to plan that we get them out here. So it's not boosting the Q4.

Understood. Thank you so much for taking my questions.

Thank you.

The next question comes from Matti Kaurola from OP Corporate Bank. Please go ahead.

Hi, this is Matti Kaurola. I'd like to ask two Nupaka-related questions. First, regarding the US situation and the pricing, I know you are not willing to say a lot about it, but maybe could you a little bit say about the political atmosphere? Do you or your partner get the pressure to lower the price or what's your kind of look right now if you look on the other side of that, Antti?

Well, I think that's a good question regarding the U.S. business environment. However, I think a question whether our partner gets pressured or needs to change price, I think it's a fair to say that that needs to be asked from Bayer. It's not my place to comment that matter. But in general, there are a lot of things happening in U.S. regarding the pricing, the most favored nation initiative, and also, of course, the tariffs. So we follow the situation carefully.

All right, thank you. Then the second one, you received the latest permits in the US during the summer and also in Europe regarding the latest indication. Have you seen significant volume change or any change about the sales during the Q3 if we speak about the adoption rates or any other sales indication? Is it visible after you got the final test permits?

Well, of course, we see that the volumes are increasing. That's a very positive thing. But we don't have a kind of a step change, if you're referring to that with the new indication. It's more of a linear growth. So it's very positive. I'm sure Aranaut has a positive effect as It can be used also without docetaxel, but to have a kind of a step change, so big growth there, such we don't see exactly.

All right. Thank you for taking my questions.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Anssi Rausi from SEB. Please go ahead.

Yes, hi all, and thank you for the presentation. One question from me, and it's just to double check something you said during the presentation about Nubeka royalties in Q4 compared to Q3. So understood that we shouldn't expect similar growth as we saw last year, but Anything else to add or comment on Q4 royalty rate? Maybe I didn't catch up everything you said in that comment.

Very good that you asked. I was trying to explain that last year, The royalty rate changed between Q3 and Q4.

During Q4.

Yeah, not exactly between, but during Q4. So it had an impact so that the Q4 was clearly higher in Nubeka sales or royalties to us. But this year we already reached that royalty rate during Q3. So even though the royalties will be, or the sales will be growing, so there would be a kind of a double effect of sales growing and royalties, royalty percentage increasing during quarter two. So that's the difference. I don't know if I explained it well or if my colleague wants to explain it even better.

Got it. And so if your royalty rate hit the cap during Q3, was it at the end of the quarter or was the average rate already capped and will be similar in Q4 or is it like the run rate at the end of Q3?

We reached the gap during Q3, not going to specifics at which point of time, but like Liisa said, kind of the message is that one should not expect similar step up as you saw last year between Q3 and Q4, because in Q4 last year we got the step up coming from the royalty rate increase, but now that won't be happening between Q3 and Q4. So that was kind of the message that we expect the growth to continue, but similar kind of step up as you saw last year, one should not expect.

Okay, got it. Thank you.

There are no more questions at this time.

All right. Thank you, operator. Then we turn on to the chat questions. We have a couple here. You still have time to type in more if you have anything on your mind. Let's start with one. This is actually already covered, but just to let you know that Aaro is asking, is it still realistic to think that the 180 million New Pekka milestone would come already this year? And actually, Julissa already addressed that question. So that's... That's covered. Then we are having one coming from Iris Teeman from DMP Carnegie. Regarding New Pekka, have you received any feedback from Bayer how Aranaut sales have developed? What are Bayer's comments?

I think not specific comments on Aranote. I think we are more or less following all sales development. And as I said, it's linearly growing. So we haven't really seen any step up due to Aranote. And let's remember that there might have been already off-label use already. with Nubeca for this patient segment. So it might not be that dramatic. And that's what we've been trying to tell all along while we've been waiting for the Aranote approval.

All right. Thank you, Liisa. We have no further questions in the chat, but I got a message. Well, actually now Iris has a follow up here. So why administration costs were lower year on year and what should we expect for Q4?

Yeah, there are typically quite many line items there, and some of those can be just shifting from quarter to quarter. There can be also some definition changes, what is considered admin and what is considered in other line items. There are quite minor changes in terms of the overall admin expenses. There's nothing big changing the normal inflation, which is across the board. But yeah, I wouldn't expect any drastic differences.

All right, thanks René. Then we have a follow-up from Sami Sarkamies from Danske. So following changed endpoints for ODM 208, so Ope Vesostaatti, Omaha trials, do you still foresee an interim readout in 26? Before you answer, of course, we need to point out that we have never estimated or foreseen that there will be a readout.

Or interim readout. No, no, no. But I think that's public, the readout for the full studies. Yeah, the full readout, yes.

But interim readout.

No, no, no, no. We are not going to comment that or we have never commented that. But the readout from both studies should be in 2028.

Yes, that's correct. Then we have a follow-up from Aaro Heikkilä. He says that Orion's R&D costs have been increasing clearly. At which point do you expect these increases to show us as a growth in terms of net sales? And to which development programs are you focusing the most after Nupega?

We are clearly focusing the development programs that are in our hands, and that's ODM 212 now, and of course the biologics that are following that. And when can we expect that program to turn into sales? I would say that would be early 2030s.

All right. Thank you, Liisa. Now we have exhausted all the questions from the chat. And also I got a message that there are no follow-ups in the conference call lines. So it's time for us to wrap up. Thank you for joining us today and have a great rest of the day and week.

Thank you.