Orion Corp New B Shs

Good afternoon and greetings from sunny Helsinki. Welcome to Orion's half-year financial report January June 2026 conference call and webcast. My name is Tuukka Hirvonen and I'm the head of IR here at Orion. In a few moments, our CEO Liisa Hurme will go through the results and key events of the reported period after which you will have then the possibility to ask questions in the Q&A session from Liisa and also from CFO Rene Lindell. There's a possibility to ask questions through the conference call lines but also by typing them in through the chat function in the webcast. We will start with the conference call lines and then turn on to the webcast chat. For our Finnish viewers information that there will be a Finnish speaking interview of CEO Liisa Hurme available on Orion's internet page later this afternoon. and just before letting Liisa to take over a brief reminder about the forward-looking statements in the presentation and with these words it's my pleasure to hand over to Liisa.

Thank you Tuukka and good afternoon on my behalf as well. We have once again delivered a strong quarter. Our net sales growth accelerated and also profitability improved during Q2. This was driven by Nubeca royalties and product sales, and also our brandy products division had an excellent quarter. In research and development, we reached several key milestones, especially with ODM212, and I will discuss that molecule later on in more detail. In Q2, Our net sales increased by 25%, totaling 522 million. And operating profit increased by 69%, resulting in 34% operating profit margin and 177 million euros. and earnings per share was one euro. And of course, in our net sales development, innovative medicines was the main driver by 95 million euros. But also when we look at branded products and the size of the branded products division, 10.3 million is a significant growth rate. All the other businesses were more or less on par. And on operating profit, the volume increased our profit by 17. The volume growth increased our profit by 17.3 million. Again, royalties playing a key role here by close to 77 million. We have also finalized the liquidation of our Russian operations and the final cost of that liquidation, 3.3 million, is included now here in other expenses. And fixed cost, 15 million, is according to our plan as we widen and progress our research and development pipeline. accelerate our sales and part of it also in the sales and marketing cost include the increase of the royalties to Endo as the Nubeca sales perform well. And now I move to the first half of this year from January to June. A very much similar type of figures here. Growth or the increase by 22% totaling of 939 million euros during the first six months of net sales and almost 60% growth of operating profit up to 291 million euros and with operating profit margin of 31%. and earnings per share 1.64 euros. And innovative medicines, which clearly is the driver for the growth. Here we can see Q2 numbers on the left and then the first half in the middle. And it's really more than 60% growth both on the Q2 and during the first six months. Royalty is playing the biggest role and then smaller share of other services to our partners. And I think the most important message here is on the right side figure with the columns on different quarters where we can once again underline the dynamics of the Nubeca royalty growth for Orion or income growth to Orion. It's very, very back-end loaded. during one financial year. If you look at here the Q1 26 and compare it to this previous quarter Q2, a significant increase in royalties, but also in tablet deliveries to bear. I think we've also previously stated that the tablet deliveries may vary between the quarters and and this time there were a lot of deliveries from Orion to Bayer. Branded products, Q2 was strong, as I mentioned, almost 13% growth compared to the previous year's Q2. The biggest increase came in percentage, was in women's health, with our Divina product range, mainly Divi gel, which is an estradiol gel for hormone replacement therapy. Easyhaler franchise grew 7% and there the combination product budesonide formoterol contributed mainly to that growth. In CNS growth wasn't and Generics and Consumer Health. was on par compared to the previous year's Q2 and also to the first half of the previous year. The decline, a very slight decline here, comes from the generic prescription drugs as the consumer health products actually are growing with the healthy percentage. I can't resist to say here that if we would exclude Simdux and Dextor from this portfolio and look purely our generic portfolio and not include the legacy product, the generic business growth was 2%, a very healthy growth percentage for a generic business in Europe. And we've also made a license agreement for new biosimilar products. for European Rights of Nivolumab with Shilpa, a partner that we are already developing products, but now we have a new biosimilar and we are expecting to launch that in 2030s. Animal Health had a bit more tough quarter in Q2. But let's remember that the previous year's Q2 was, if not all-time high, but exceptionally high. So the comparison period was tough. And it's always a question of deliveries to our partners in this business. And when you look at then the first half of this year compared to the previous one, it's minus 2.4%. and we are expecting the growth to accelerate towards the latter part of the year. We've also received very, very good news, an approval by FDA for a new product called TESI. The molecule is tasipimidine. It's an oral solution for the anxiety and fear in dogs, especially if they go to the strange places or they need to And we expect our partner to start commercial sales in mid-27. And Fermion, external sales here, almost 20% growth in Q2 and 17% during the first half of the year. Here, the delivery timing is all. So these are big quantities that we sell to our business to business customers. So we can clearly see that the first half of this year has been very busy in that front. And we had, and I'm sharing this since there has been also news in Finnish by the Finnish Broadcasting Company and here in Finland in news that there was a water damage at one of the fermium plants on Hanko site last week. During the summer maintenance period and we are fully recovering from that water damage and all the activities are implemented as we speak. And based on our current understanding, this will not have a material effect or impact to Orion or any disruption to continuity of our key products. And Our top 10 product list tells the same story as the therapy areas or the divisions, but product by product. I'm not going to go that through in detail, but I think the key message on this slide is clearly that now already in Q2, innovative medicines is the biggest division in Orion. Genetics being the second biggest and branded products the third biggest division. Our clinical development pipeline has stayed the same from the previous Q1 report. So no new projects included or no new stages entered. We already reported last time that we had started the combination study with our DEET inhibitor ODM212. and now most of the readouts for these studies are actually in 27 or 28, like for Nubeca studies and Opevesostat studies, but we are expecting level study by TENAX to be read out during the latter part of this year. And I already mentioned ODM212 and let's look at it in, let's look at that and a few more in a bit more detail. So ODM212 is a DEET inhibitor and we develop it for certain cancers. It has two different mechanisms that we can use for the benefit of cancer patients. The one has to do with the HIPPO pathway and some cancers are driven The tumor growth is driven by this HIPPO pathway. So with this TEET inhibitor, which binds to the TEET transcription factors, we can actually limit the growth of the tumor in these certain cancers. And currently we are studying mesothelioma and EHE. And these are very rare cancers where there is no specific treatment Exactly for these cancers. So if we can find a solution for patients, it would be really great. And based on our phase one results, we strongly believe so. The other part of the story for AT inhibitor is that it can also prevent the resistance for some current currently used cancer medication. because it also limits some of the mechanisms that cells can develop to circumvent, for example, immune checkpoint inhibitors, chemotherapy, or KRAS, KRAS inhibitors. And here we talk about different cancer types like pancreatic cancer, non-small cell lung cancer, and also on mesothelioma. So there are two ways to use TID inhibitor specifically for a certain cancer that is driven by this HIPAA pathway or trying to prevent the resistance for currently used cancer medication. So this far we have carried out phase one study as a monotherapy using only ODM212. and we've seen very promising results on the efficacy. Of course, those are very early signals in mesothelioma and EHE and also we've seen a very good side effect profile. We know that in oncology sometimes even a bit rougher side effect profile is approved, but here we really can see that it's very well Based on these results, which we actually announced in ASCO this year, we started a phase two study for mesothelioma and EHE. And this study is currently ongoing and expected to read out in late 27. Based on this monotherapy study with ODM212, we also initiated a combination study with some of the usually used drugs as the ones that I already mentioned for pancreatic cancer, non-small cell lung cancer and mesothelioma. And as we think that we have a potentially best-in-class TID inhibitor in our hands, we also believe that if this study is successful, we can solve many problems that are related to the resistance of current medication and this could become a drug of choice to be combined with those medications. We've also received orphan drug designation in US and Europe for mesothelioma and that of course validates our belief that this is a very, very important study and important drug for patients. and the combination study results and the study is a phase 1b slash 2 study as we are also trying to find a suitable dosing for these combination studies before we go seamlessly to the phase 2. So this study's readout is in 29. Now to a very, very different topic, sustainability. Orion was listed I think for fifth or sixth time now as one of Europe's climate leaders by financial time this year and I think this graph speaks for itself as you can see how our emissions have decreased year by year. We started the program early on many many years ago and in 2019 we We changed and switched fully to clean electricity, carbon-free electricity. And then we've also done many, many different activities to reach our goal. We have changed from crude oil in our steam production first to gas, then electricity. We have local heat stations in our campuses where we use the energy or heat coming from our Manufacturing facilities for the whole campus. And we are also carrying out many different type of renovations to be as carbon neutral as possible. We also understand that there is a way to go. And finally, I think the last piece of the emissions will then be compensated in the end. And today we specified our outlook for this year. This is another quarter, another strong quarter. So we thought that this is the place to do it. So we actually hiked up the lower range in our outlook by 50 million. So now the range for net sales is from 2 billion to 2.1 billion and the range for our EBIT operating profit is from 650 million to 750 million. And here you can see our upcoming events. Next time we will be reporting in late October and then the full year report of 26 will be in the middle of February. I thank you for your attention.

Thank you Liisa for the presentation and now it's time to open up the floor for questions. As I mentioned in the beginning we will start with the conference call lines but please do remember that you can also type in your questions by using the webcast chat function. But with this I would like to hand over to the operator for the first questions please.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Sean Hama from Jefferies. Please go ahead.

Hi there, thank you for taking my questions. Just two from me please. Firstly, could you provide some colour to the big increase in tablet sales for Nabeca? Is it a good proxy for the remainder of the year? And then secondly, are you able to disclose at which point during the quarter you reached the highest royalty tier and what the rate or at least the range of the rate is? Thank you very much.

Thank you very much. I'll start and I'll let Rene to continue then on the royalty rate. So your question was on the tablet deliveries. And there is nothing kind of, no secrecy or nothing strange there. It's really, as we've stated, we deliver tablets as based, of course, to Bayer's forecasts. Sometimes the deliveries and manufacturing campaigns just are timed in our manufacturing so that there is a bigger bunch of tablets sent out during one quarter. But then if it's a one day miss, you know, then the deliveries and big numbers are seen on the next quarter. So, of course, the trend overall will be growing. The tablet deliveries will be growing, but there will still be maybe variation between So I think that's not a very good, how would I say, key indicator for the future growth, to look at it from one quarter to another quarter, if you want to estimate the growth of the Nubeka at the marketplace. And maybe, Rene, if you want to say something about the royalty rate.

Yeah, and to continue the tablet sales, of course, we always have the maintenance break in our factories during the summertime. And of course, before that, we try to also build in a little bit more of shipments. And those went out now nicely at the end of quarter. So you saw this big jump in tablet sales. But as Liisa said, it's not necessarily always going as a very continuous step, but there can be step changes in either direction, depending on how the big shipments go out. and then on the royalties, unfortunately we can't disclose anything more further on that when it comes to the timing. We said that it was reached during Q2, the maximum tier. We haven't also disclosed what the maximum percentage are, but I'm sure you can be able to get to a reasonable range when you compare the numbers.

Thanks so much.

The next question comes from Iris the Man from DNB Carnegie. Please go ahead.

Hello, this is Iris the Man from DNB Carnegie. I have several questions and I'll take them one by one. So basically the first one, what was the reason behind your guidance upgrade and was it driven mainly by your Q2 performance or have you also upgraded your estimators or H2?

Yeah, thanks Iris for the question. Of course, I mean, when we look at the first half of the year, we are having a good momentum and especially with New Becca. And we think that that momentum will continue in the H2. And for that reason, you know, we of course look at the whole full year situation and that led us to to upgrade the lower boundary of the range higher. And as we saw that that lower boundary, of course, the probability to landing there started to be very low in our scenarios. Exactly.

Okay. And then secondly, sales of Divina increased a lot. Were there any difficulties with peer supplies that increased demand?

Thank you, Iris, for the question. If I heard right, you are asking about the other companies' supply. Did I get it right? Yes. Well, I... Yeah, yeah. Exactly. Thanks. Yes, we've seen and heard that there are actually some products, some patches, you know, that there is a stock out in the Nordic countries and and what we've seen actually during this year and even last year is on average 40% growth of DiviGel or Divina product portfolio, maybe even above 40%. You could speculate that the additional maybe slightly under 10% could be a result of stockouts of some other hormone replacement therapies because patients really have to go to see a doctor to get a new This prescription for another product, so you can't really do the change at the pharmacy, so it really needs to go via a doctor, but clearly it is a treatment that needs to be continued. So I could imagine that we see some of our growth, some of that stock out can be seen in our growth.

Okay, and is that going to be still an issue in Q3?

Well, that's a very difficult question. I don't really know about the other companies' production capabilities. But as I said, we've seen a constant growth of around 40% for DiviJail, even without this competitor stockout. So I would estimate that the growth will continue even in the second half of this year. at that rate at least.

Good. And thirdly, what is your current plan for ODM 2.1.2? Do you plan to develop it yourself or are you looking for a partner before phase 3 study?

A very good question. Currently, we are not looking for a partner. We are running our studies, the phase two, by ourselves, and our plan is to run the phase three also by ourselves, especially for the monotherapy, but also hopefully for the combination therapy. So there are no plans currently to look for a partner.

And my final question is regarding tariffs. So what are your current expectations for this year regarding the impact from tariffs and what should we assume for next year?

Well, I think Rene could... Yeah, so the latest is that we assume that there will be tariffs for innovative pharma from Europe in the last quarter of this year or starting from beginning of October. And we have also In our forecast some impact for that, not a big one for this year, but of course next year with four full quarters, if that impact comes, then of course it's a larger one. In the end we have to see then how that is impacting us, but of course there is also some We have to see how it's calculated in the end. So I think that's also something which haven't been tested. But so far, I mean, this year impact is small, next year a bit bigger, and hopefully it will not be a significant one. But we'll have to see how it develops.

Okay, thank you. The next question comes from Sami Sarkamis from Dansky Bank Markets. Please go ahead.

Hi, I have a couple of questions. We'll also be taking this one by one, starting from Nubeka. Firstly, you said that deliveries were on the high side in the second quarter. Are you suggesting that we will see lower deliveries in the third and fourth quarters relative to the second quarter level?

I think that's a fair assumption in every year that in Q3 we do have the maintenance break. So there is at least one month. The maintenance break is usually even four to six weeks. So there is less manufacturing during the Q3. So that's usually less deliveries as well. But then again, in Q4, we are usually fully geared on. So then you might see this fluctuation again between the quarters.

Okay and then I'm wondering did you make any accounting catch-ups related to Nubeca sales that you estimated in the first quarter of the year?

I mean it's always always there is some some corrections that we do on a monthly basis but I mean we're not disclosing how much we how much we correct on a monthly basis.

Exactly.

But typically these are not very very big so we have a pretty Good understanding and estimates on a monthly basis.

Okay, so probably nothing material in the second quarter, but maybe on the positive side.

Well, I said nothing to comment on that side.

Okay, then I was wondering about the Fermion incident in Hanko. You're not estimating any material financial impacts, but just curious, could we see... changes to let's say normal seasonality, for example, that you would not be able to deliver full volumes in the third quarter yet. So could this have like timing impacts if we think about the rest of the year? Do you see a risk for additional costs? And when do you expect to restore the production volumes in full?

As we stated, we don't currently see any material effect of this damage to Orion or the supply of the product for the patients. Of course, it will take some time to get it prepared again to the full force, but as it is the maintenance break, it kind of goes as a part of that maintenance work now to get it fixed.

Okay, so I guess you're talking about weeks and not months.

Yes, rather weeks than months.

Okay, and then one final question regarding Thermion. We have seen quite good growth this year. In the past, you may have not been able to grow sort of the business because you've been using and most of the capacity yourself. So what in a way explains that you're able to service also other customers now when Nubeca is growing heavily and what is the outlook for the second half of the year on this front?

Well, let me start from a bit further. Of course, Fermion, first of all, has two sides, both Oulu and Hanko, and in both sides, In Hanko we have four plants and in Oulu we have nine modules. So we actually manufacture APIs in many different plants, so to speak, if we calculate modules also as plants. And thus darolutamide doesn't have effect to all of them. The fact that we've been able to deliver external products is, there might be, I don't know exactly the product mix, but there might be big deliveries from our Oulu factory as well to our CMO customers or from our other plants from Hanko than the plants that are also manufacturing darolutamide.

Okay, and are you expecting to sort of maintain this good level also during the second half of the year?

No, I think it will be leveling out during the rest part of the year, rest of the year.

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

The next question comes from Alex Moore from Bank of America. Please go ahead.

Hiya, I thought I could just ask a follow-up on the Nubeka royalties question. So the royalty growth looks super strong in the quarter. And as you stated, you reached the highest royalty level in 2Q. So how should we therefore think about sequential quarter-on-quarter growth in royalties for Q3 and Q4? Should we expect this to moderate a bit closer to underlying in-market sales growth for Nobeka? And then looking ahead, do you expect to see continued fast progression or faster progression through royalty tiers in 2027 compared to 2026?

Maybe I can take that one. So naturally, if you reach the maximum royalty tier already, it means that then the rest of the quarters of the year will be more driven by the market sales and not by reaching any new tiers. So that is of course something which happens. And for next year, of course, we will have to see when we guide that. But of course, we see overall in the big picture of Nubeka that there's still a lot of growth left there. So of course, we assume that there will be year-on-year growth for many years to come.

If I can add on to that, last year we reached the ceiling in terms of the royalty rate during Q3, so still in Q3 we will be enjoying partly the fact that now we are enjoying the highest royalty rate for the full quarter compared to last year, and on top of that, of course, the market sales increase.

Okay, could I ask a follow-up on R&D?

Sure, please go ahead.

Cool, so just on R&D cadence, you previously indicated that you expect R&D costs to increase for the full year compared to last year, and we saw quite a big meaningful 29% increase in 2Q this year versus 1Q. Should we view the level of quarter-on-quarter growth in R&D spend as a reasonable run rate for the second half, or do you expect sequential R&D growth to flatten a lot in 3Q and 4Q?

It's a good question, and of course there's the quarter-and-quarter question. Thank you very much. Full year kind of comparisons. And on a single quarter, you could have a lot of fluctuations. And this year's Q1 maybe started out a bit slow. And then this year Q2, we stepped up in terms of the project in ODN 2.1.2. So now we maybe reached a different run rate than we didn't have yet in Q1. But I think it's careful not to assume that you would have similar type of growths each quarter.

Thanks. I don't have any further questions.

The next question comes from Madi Karola from Op Corporate Bank. Please go ahead.

Good afternoon on my behalf as well. I'd like to address the very strong cross margin that you had during this quarter. Of course I think there is the sales mix of the increase in Nubeca sales and the share of branded prices is driving the whole group wide course margin up but still it's a very strong growth show. Are there any kind of changes in your underlying business if we think about generics or branded products or any other that is boosting the profitability?

I think the main driver you already mentioned, it's really when you have a Nubeca royalties taking a bigger share and growing so fast, then that of course impacts the gross margin absolutely the most. The other businesses' gross margins are more stable from that perspective.

Okay. Then maybe one more question we got into Nubeca, but maybe a bit of a more longer-term view. Next year, you just mentioned that you might have a bit of a hand-wind from the tariffs, but what about, what are you expecting, like, if we speak of the market shares and that there is one competing product losing its exclusivity, so are you expecting, like, that kind of taking over some market shares or giving some price pressure?

Well, yes, indeed, we are aware of this, and As Bayer makes the market forecast, and it's better to ask from Bayer this question, but to our knowledge, based on discussions with Bayer, this has been absorbed in all the forecasts, the effect of the standard becoming generic. So we are expecting a strong growth going forward to next year and the years after that.

Okay, no further questions.

The next question comes from Anzi Rasi from SEB. Please go ahead.

Yes, hi all. It's Anzi from SEB. Thank you for the presentation, and I have only one question left regarding Mubeka and Araste study. So could you maybe remind us about the timing of this study? So is it early 2027 when this should be completed? And then how should we think about your R&D expenses? So I guess this study is requiring some expenses from that side.

Thanks, Anssi. Yeah, now we cannot recall exactly what was the time within 27. So it's 27, but we can come back to that later on if needed. And that's public info on the clinicaltrials.gov. So we are basing our assumptions on that info. Unfortunately, I cannot remember the month or quarter there exactly.

Yeah, so of course, I mean, we are participating most likely as well in this phase three course, so there will be incremental costs in R&D as well, but, you know, overall as part of our R&D budget at that point of time. I mean, nothing major, I mean, from that perspective. So it's again an incremental part of the budget.

Okay, thanks.

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

Thank you, operator. Now we are turning on to the webcast questions. We have actually one follow up here from Iris from DNP Carnegie. So can you provide an update on your U.S. expansion? What have you done so far and are you planning to accelerate your presence, for example, by hiring more people? I just wanted to understand that. How should we think about your U.S. expansion and cost development this and next year?

Yes. Thank you for that question. Indeed, we are expanding our team in the US, in Boston. We have a strong team in clinical regulatory biostatistics. and in R&D, that's how we started out. And now we also have a commercial head in US. We are hiring and extending the commercial group with medical affairs and market access. But these are single individuals, so we are not talking about Any kind of a significant change of the level of costs at this time. So this is all preparing for ODM212, planning the phase three studies and preparing the ground with the hospitals and key opinion leaders. So it's still single individuals. The cost hike, if that comes then, It comes very close to the launch when you start to recruit the sales reps for the launch. So, of course, our cost base in the US is very different than it used to be even last year, not to mention in 22 when we didn't have the US operation. But it's still nothing material or that way significant. So it's tens of people, not hundreds of people.

All right. Thank you, Liisa. We seem to have no further questions on the webcast. So at this point, thank you all for attending this webcast. So next time, as Liisa said, we will be reporting in late October. So meanwhile, we want to wish you all great summer.

Thank you.

Thank you.