Orion Oyj (ORNBV) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, ladies and gentlemen, and welcome to Orion's Earnings Conference Call and Webcast for the Financial Period of January-September 2020. My name is Tuukka Hirvonen, and I'm the Head of IR here at Orion. In a few moments, our CEO, Timo Lappalainen, will give a brief presentation on our results, after which you will have the possibility to ask questions from him and also from our CFO, Mr. Jari Karlson. Due to the COVID-19 pandemic situation, we do not have a live audience here today, but you may post your questions either through the webcast tool by typing it on the below of the screen, or then if you are attending through the conference call lines, then you just need to ask the permission from the operator to impose your question. And kindly, please state your name and the organization you are representing before asking your question. And just as a reminder, before I let Timo step in, the disclaimer which we typically present in the beginning of these briefings. But now without any further delays, I would like to give the stage to Timo. Timo, please.

Thank you, Tuukka, and let me kick off the first 3 quarters of 2020, what we've done, what are the highlights and then the -- kick off, the discussion with our CFO, Jari Karlson. Orion has done a lot of work to prepare for the continuation of COVID-19 pandemic. We appreciate that in many countries, we are experiencing a second wave, and so far, things at Orion have been good as far as the health of our personnel goes. However of course, maintaining the health of all the Orionees, that's paramount, and that is required that we can continue to supply the products to those who need it. But we've also taken additional steps, including increasing our inventory where the -- which is visible also if you briefly scrutinize our balance sheet. You notice that the inventories have been increased, and this is by purpose. Now for the first 3 quarters, our net sales grew slightly due to the net sales growth, also the favorable product mix and the lower expenses as the activity level in certain functions has been lower than in the previous year. That meant that the net result is that the operating profit increased. Now the setback was, of course, for the ALS patients, their caregivers as well as the society and the company is that the -- our study 109, ODM-109, the big study of REFALS, aiming for the approval of the product for treating ALS patients, unfortunately, did not meet its endpoints. But we've also had successes. So we published new data on ARAMIS study, which is the legacy study, pivotal study for the approval of darolutamide in most markets called Nubeqa, and this data were published in the New England Journal of Medicine. We've also announced that we had cooperation negotiations regarding the renewal of our R&D organizations, and those negotiations have been recently then concluded. Now -- of course, now as we lost a product opportunity, 109, that means that we will put more emphasis on other product opportunities that are either already approved or are still in the clinical trials for and to grow the company to the goal of 1.5 billion. Of course, Easyhaler product line, that is there as of today, and we have additional Easyhaler products in the pipeline for treating COPD. Also, our darolutamide in most markets called Nubeqa, that product is being studied for further indications. And should those studies be successful, of course, that will increase then the product opportunity for this product. Our Animal Health business is -- continues to deliver also new product opportunities. Some of those are still waiting for data, but many of them are already close to hitting the market. And of course, we continue to also look for external opportunities, be that in licensing in across the board and also looking for product acquisitions, and of course we are also looking for company acquisitions that would fit in our business model. We've already announced and actually told the market that we have plans, and some of those are already realized especially in Southeast Asia, where we have initiated commercial operations of marketing and commercializing our own assets in Thailand, Singapore and Malaysia. But then there is the other side, which is, of course, there are risks that one should be aware of. And those relate, of course, to the patent expires, which is name of the game in our industry. And the most latest one for us is Simdax product, which we've announced also, continuously updated the market on the situation as far as we are aware of the generic situation. And we expect that there will be generic competition to this product. However, the impact of that will not be material this year. Of course, the pricing pressure that we all know, and as we move forward with the austerity measures as the pandemic eat into the various national economies, I think it is prudent to assume that this will not, at least, go away. And of course, the competition is there as in any industries. And then, which is in specific to our industries, of course, is a risk with all the R&D programs. Now in terms of the COVID-19, of course, as I said, the most important for us is to secure as far as the company can do that, the health of all the Orionees. Because only by doing that then we can secure the continued supply of the product to the market, take care of the patients in clinical trials. And as we've noted earlier, we had a spike in demand in March, April, and there was a hoarding effect also to that effect. But now that has more or less leveled off, and in some cases, we had a little bit in the summer months. We had slower months as those inventories were eaten up and depleted. Now when moving forward, we are happy to note that the disruptions in supply chains, be that logistics, be that operations across the planet, we seem to have much less risk for those operations, especially as far as it goes to the end of the year where the outlook is valid. We've also taken our own steps to secure the supply and one of those immediate effects have been the increase of our inventories. But there has been, of course, some delay in R&D programs, especially if that deals with patients who need to visit hospitals and Phase I trials or some more severe trial -- patient populations. Of course, that would be affected. But so far, as said, so good. Now a summary of the key numbers for the first 9 months. So as said, net sales increased by 6%, so EUR 823 million. Operating profit, EUR 246 million, with a substantial increase of 24%. And the operating margin surpassing our target which we announced at 25%. So with 30%, we are north of that. And also strong cash flow during the period of EUR 1.52 a share. The waterfall of the net sales for the -- as we look at the two -- 9 month periods. So the exchange rates, those actually aid into our sales by EUR 11 million during the period, which is a fairly substantial number. So Parkinson franchise, we had an uptake there as we discussed already in the first half results. As we've increased inventories, there have been some transition and transfers of inventories from one partner to another. And also, in some cases, of our own sales operation in Southeast Asia. So that has increased some of the inventories with our partners and subsequently, our supply. Easyhaler going strongly. And then we -- for the first time, we also put here Nubeqa as there have been a substantial number of questions relating to that. And this time, Nubeqa did not make the top 10 product, but we want to flag the product sales and the royalties. So the Nubeqa sales that we report here is essentially is royalties plus then the supply of the product for commercial use for Bayer. But as the math goes that we actually, at the end of the day, it is the royalty where the supply of the product is attractive, and the net result is only royalties. There will be substantial variations to that number, especially when we are still in the launch phase. Now the reference price situation here in Finland has somewhat eased the pressure on that as we've experienced substantial decline on that pricing for several years. So now we are -- seem to be easing on that. But then we had a substantial additional sales on other specialty products and also in some other products as well. On royalties and milestones, and those are, of course, an important number as those flow directly to the bottom line, we had a negative effect there of EUR 8 million compared to last year. So then when we turn the side to the operating profit, so the product sales and the margin of the product mix, those were certainly the major contributors for the increased profit. Exchange rate, as said, fairly substantial number, EUR 1 million a month. And then also the milestone royalties, substantial number there as well. And the fixed cost, we had some improvement there, and this was slowing down the activity level, as I think all the organizations have experienced that especially in terms of the travel. So the geographical breakdown. No major change there. Seems like Finland is a little bit lower number than it has been over the years, and the other regions have grown and then when we look at this chart, on the right-hand side here, the only region experienced a decline is North America, and this is mainly due to the substantial milestone that we received last year, but all the rest of the regions recorded very nice growth. And then when we look at the portfolio, from the product perspective, so the specialty products, which is our generics, had a nice run as well as proprietary products. Animal health, substantial growth over the period. Also Fermion and contract manufacturing experienced growth over the period. And then the league table of the products. So Easyhaler continues to plow ahead and being our largest franchise; followed by Parkinson franchise; Stalevo, Comtan, experiencing strong growth. As we said, that is now partly that is inventory buildup with our partners. Simdax at about par, and then when we look at a little bit more on the Dexdor, it is declining. There were a substantial peak on that, but now we are pretty much following the trajectory that we, in the beginning of the year, also estimated. Animal Health recording nice growth. And there we see, at spot number 9, the biosimilars, substantial decline there as we lost some of the tenders for that. But as we've indicated earlier, the profitability of that business is below company average and has a lower meaning for our profitability. So now I move over to the proprietary products. And there, we see the numbers for -- that we looked at and the -- especially growth numbers for Easyhaler, which is naturally, for us, is an important part. And also, we have to remember that Parkinson's franchise continue to be a very important part of our business despite the fact that it's been off-patent for many years already. So here, the Easyhaler product, and of course there, the major growth driver in that franchise continues to be budesonide-formoterol Easyhaler combination product with 24% growth over the period but also the other portfolio continued to grow with 6% which is a nice growth in a mature market. In Parkinson's disease, product -- the deliveries to partners, so that is mainly, as said, stockpiling. And the own sales growth, that is we've taken over the business from our long-standing partner of Novartis here in Europe, and that still has an impact for this period. And also now not yet shown in the -- really in the numbers but in -- as we move forward also the business in Southeast Asian 3 countries. And then the Dexdor, on the left-hand side chart here, we see the spike of -- in that demand for the first and second quarter of this year. And even if we split the first quarter in 2 parts, we'd see even a more dramatic number there. So it was really in the second half of the first quarter. But also the second quarter, we saw an uptake on that, but now we are back to normal. And it seems like the market has stockpiled the product. Our competition is back online. So we are a little bit -- we are following the trajectory that we initially thought for this year. Simdax, somewhat a seasonal variation, but we have to remember that the Simdax products will face now competition as we move forward. However, the impact of that for this year is not expected to be material. Then moving along to specialty products, so this is the product sales of our generic prescription products, also our nonprescription products. So self-care pharmaceuticals and nonpharmaceuticals as well as the small part of biosimilars. And if we look at the pie on the right-hand side, we note that the generic prescription products, I mean, those are the bulk of the business. The business, by far, the largest country market, that's Finland. However, Scandinavia is an important market. And the number here on the left-hand side panel here where it shows negative growth for Scandinavia is mainly due to the loss of biosimilar tenders. So the underlying business continues to perform strongly there. And Finland also went ahead this period as well as the Eastern Europe and Russia, which is just a little bit smaller business. So in Finland, the reference price market is the important market, and that market leveled off during the first 9 months. So we saw there the holding effect, but that has now leveled off. We were able to grow in that period a little bit faster than the market, but basically, we are pretty much at par there. And then we look at this nice chart. What is the overall situation in the market here in Finland, and we, as earlier, we've broken down for your convenience, our sales to self-care, reference price and others, and also show you the market share? So we continue to hold good market share in reference priced products, so about 1/4. And then in same in the self-care products, and overall market share continues to be at that 11%. So then moving to research and development, and here, you see the table of our key clinical programs. So the tiotropium for Easyhaler is moving along. Darolutamide, that will be the ARASENS study. That as well is fully recruited, we earlier informed that we expect to see the headline results next year. And then we have a couple other next oncology assets that we already told the market that we do not expect to continue the development of these assets by ourselves but are looking for a partner for these, and the 207, which is a BET protein inhibitor that has completed the Phase I trial. 208, our SIP inhibitors, and 209 simultaneously, we have a strong interest in continuing the development on those and hope to announce their next steps. So when we started out this year, we told that -- how we are following ourselves, are we making progress towards our targets. And of course, one of those key targets is the sales number, EUR 1.5 billion. And the commercialization of darolutamide is there in the center. The ARASENS trial, of course, is fully recruited, and we expect that to report next year. We've seen the first commercial sales, both in Japan as well as in the European Union. Now the REFALS study for ALS patients, the product opportunity, ODM-109, unfortunately, did not meet its endpoints. Subsequently, we do not have plans currently to set up our own commercial footprint in the U.S. Now the situation in Finland is, of course, very important for the company. We are a clear market leader here and have been able to either maintain or expand our market share. And Easyhaler franchise continues to plow ahead, strong growth there. And then looking for new opportunities that would then break the ceiling for our press release or stock exchange release. We do that all the time, but any single deals that would be maybe worth mentioning, those -- that work continues. Of course, the sustainability continues to be on everybody's lips. And then only by caring for our people, maintaining the safety and our people healthy can we then also continue to supply the market, can continue to take care of the patients who are enrolled in clinical trials. And we've taken, of course, a number of measures to that effect, be that segregation, be that protective measures in the company, in the commute to the company or be that when we hold internal meetings or, of course, also then, remote work. And also, we are running virtual audits. So of course, today, traveling is somewhat complicated, so we see also that taken care of. And we are prepared, should the need arise, we are prepared to step on the plate. And then as we did in the springtime, we actually had to prioritize certain production; and should that be needed, of course, we will act accordingly. We updated our outlook this -- earlier this week. And now the updated outlook for the ongoing year says that we expect our net sales to be at a similar level or slightly higher than 2019. And in terms of the operating profit, to be either higher or clearly higher than 2019. And then in terms of Orion diary, the full year financial statements, are -- will be released on February, this 9th, and then the AGM has been planned to take place on March 25. At this time, we will open the web lines to questions, comments you may have. And I invite also our CFO, Jari Karlson, to join me here to the podium to take any questions you may have. Please.

[Operator Instructions] The first one is from the line of Jo Walton at Crédit Suisse.

I've got a few, please. Just to clarify on Nubeqa, in the 9 months, you had EUR 11 million of income, of which royalties and milestones were EUR 8 million. Could you remind us what milestones you would have had this year? And do we then just do the simple arithmetic and assume that EUR 3 million or so was your product supply to Bayer? My first question. My second question is looking at costs going forward for next year. In the slides, you talk about EUR 6 million of reduced fixed costs in your very helpful slide. If I look at the same slide for the first half, that was only EUR 1 million. So you seem to have been able to do quite a lot with fixed costs. We're really trying to think of what we should be thinking of in terms of cost structure for 2021. Are there costs that you've been able to take out that you think will stay low, and therefore, you'll be able to have a materially higher-margin going forward? And a couple -- 1 product-related question, on the product-related question, please. Domitor, the Animal Health product, went up extremely, a lot, 100% in the quarter. Is there anything -- just in terms of timing, do we assume that, that goes straight back down? It was just 4Q sales were shipped early? And my final question, please, is on R&D. You have said in your guidance that R&D should be about flat for the year. But it was materially down in the third quarter. Just wondering whether some of the delays that you have alluded to with COVID will mean it's actually quite difficult to get to that flat for the year, or whether there will be a strong rebound in R&D expense in the fourth quarter?

Okay, thanks very much. We'll split the questions, maybe, so that if -- Jari, you'll take the Nubeqa costs -- Nubeqa, sorry, sales; maybe Domitor as well, because you're responsible for Animal Health, and I'll address the 2 others, cost and the R&D.

Okay. So I mean the EUR 11 million we told about Nubeqa, that number doesn't include any milestones for the Nubeqa milestones were the ones which we booked already earlier this year, the EUR 28 million for the approvals in or first commercial sale in Europe and Japan, but that was already during the first half of the -- half of the year. So the EUR 11 million, like Timo explained in his opening words, is divided accounting-wise to 2 lines. Part of that is booked as product sales, and part of that is booked as royalties. But that's only the timing question because the arrangement with Bayer means that what we ultimately get is the royalty from -- which then includes the product sales. But as we ship the product, we book it to the product line. And then in the coming quarters, when Bayer is then finally making the final royalty calculation, then they deduct the value of the products we have shipped to them. So the end result is only the royalty. But there is certainly, especially now during this early stages when there are production, both in the launching inventories and so forth, there is a little bit of timing variance. So there is more variance between the quarters as we book record to sale as is the case in the market sales. Part -- out of this 11 -- part is royalty and part is booked as product sales, but ultimately, it all will end up to being according to the royalty percentage. The fixed cost development during this year definitely has been impacted by the COVID, especially the sales and marketing cost. So the reductions there, compared to last year, is very much related to the fact that people, for example, cannot really travel at all. Also, all kinds of conferences and other promotional events like that have been postponed or canceled for this year, and that has definitely reduced the costs. So those are the main elements why the costs are down from last year. What will happen next year remains to be seen in these areas because, of course, during this type of a period, you can reduce the cost burden, at least temporarily, without hurting the development of the business. But it's, of course, very questionable whether you really can do that in the long run. You were asking about the R&D cost. I'd say that pretty much, we are at the same level as last year at this stage. There is a couple of million variants, but that's pretty much rounding for -- as far as we can see for the time being, we are at the same level as last year in R&D and expect this to continue mostly towards the end of year as well. And then when it comes to the Animal Health sedatives sales, there is a lot of variation [ due bigly ] based on the timing to the deliveries to partners because our own in-market sales, what we are doing in our territories, mainly in the Nordic countries, that's only very, very tiny part of the overall sedative business. So mainly business are deliveries to partners and especially to Zoetis in the U.S. and there, they typically don't buy the products, same amount for every month or even every quarter. So based on the planning, they sometimes pay a little bit more, sometimes a little bit less. And now during the third quarter of this year. They ended up ordering quite a lot of more material than last year. But when one looks at full year sales for these products, we are relatively close now to last year's numbers, but we were very much behind during the early part of the year. And now it has leveled off.

Our next question comes from the line of Peter Smith at Bank of America.

Peter Smith, Bank of America. My first question is on the core impacts that led to the guidance upgrades throughout the year. To what extent might the trends continue into 2021? And also longer-term deposits, so you mentioned potential austerity measures that, yes, could potentially need to pricing pressure as countries look to bring down their health care costs. Have you got any indications here? Any discussions or any signs of this? And what could this do to how far away you're going to be, potentially, from your 2025 EUR 1.5 billion target? And would that intensify your focus on inorganic growth or perhaps focus on your current products? And could you be a bit more specific on what products could potentially be boosted currently?

Okay, I'll start to cracking this. And then Jari, you'll drive in. The impact on the guidance, as we have said, that the guidance change that we did had twofold. Of course, the first was the -- in the first half of the year, especially end of first quarter, beginning of second quarter was the spike in demand, especially for Dexdor. As you saw that also in the graphs. When you look at the trend line, there were 2 outliers, first and second quarter in those. So that, of course, had its impact also that we had the plants fully loaded to cope with the hoarding effect for pretty much across the portfolio for a period of time. So that's one impact. The second impact was that now, as we move forward and the -- I'm not saying -- it will be too naive to say that the situation is stabilized, but at least, from the logistics supply chain perspective, we -- for the ongoing year, we do not expect any more -- any material disturbances with the supply chain issues as far as getting material from external sources to Orion take place. We are -- naturally, we have increased the inventory in the course of the year. Also the material, as it goes to the products that we sell as ready-made products, but also the components, inventories have been increased. Now what's going to happen next year, I'm happy to hear anybody's thoughts on this. I think it is -- we -- none of us should be surprised if the COVID situation, with waves, continues to play a major role in our daily lives next year, but how that will turn to the -- or impact the business, at least for the time being, we do not see any impact of the second wave in our current business. So that's absent, be that in the broad portfolio or be that for the products intended to be used in intensive care setting. Then addressing your second question is the -- our target of 1.5 billion, what means do we take there? Of course, we continue to plow ahead with the products that we already have. And there, of course, Nubeqa, by no means, is a very central element to that. And there, we are working hard with our partner, Bayer. And also of course the Easyhaler product line, which is growing nicely. That's why we are putting more efforts in there also in terms of R&D coming up hopefully, with a new Easyhaler version, tiotropium there. And we are also, as I think, rightly mentioned, putting efforts behind external opportunities, be those licensing opportunities across the R&D spectrum, all the way to the products that are already marketed. So approved products or portfolios that would fit our -- or companies that would fit in our business. And of course, in today's environment, with the sub-zero interest rates, that means that the valuations of many assets have been quite a lot inflated. And you have to be very careful that you don't run into buyer's remorse here, but we continue to push ahead that. Then there was a specific question on the reimbursement environment. I think it is fair to say that none of us should expect that, that would become easier, that we have no dreams of that. I think the data required, also in the future, to gain reimbursement or to gain even an access to reimbursement discussions, you need to have substantial evidence for that. In the short term, what we've seen in some countries, that the reimbursement decisions have been postponed by a quarter or so because of the amount of work that has been focused on fighting the pandemia.

Next question comes from the line of James Vane-Tempest from Jefferies.

Just a few if I can, please. Firstly, you'd mentioned, Timo, sort of possibility of pricing, a question of probably when rather than if we see that, given the amount governments have spent on furlough schemes. Just wondering if you can comment on what you've seen in markets, particularly Scandinavia. Any sort of signs of that emerging or in other countries across Europe? Secondly, looking at Dexdor, just curious if you can comment on the dynamics around the price erosion you've seen in 3Q, given the strong sales we saw coming into the pandemic and how we should think about that going forward. And also, is that a fair sort of case example we could extrapolate for Simdax, what we could expect to see next year? And then my last question is on biosimilars. It's been well flagged about losing some tenders, but just curious how you're viewing this business longer term, given it has been in decline in the last couple of years as a small part of the company and how much emphasis we should put on that as a growth opportunity going forward.

Thank you for questions. The pricing pressure, we haven't seen any imminent impact of that in -- actually, in any of the markets so far. On the contrary, during the summer months, there was a price increase for generic products in Norway, but that was for a limited period, and that was to secure the supply of generics in Norway. But I think the comment that was made was more towards the proprietary products. Of course, the guidelines are there, so there would need to be a change in the guideline. But I think it certainly is not going to be easier as we move forward, but I wouldn't have any specific examples on that, except what I mentioned that now there is postponement by some of the regulators or pricing authorities in terms of then addressing the requests. Dexdor price erosion, if we look at the quarter 3, we've lost certainly some volume in some of the tenders. But it is a very heavily competed product as we speak. And the prices, in general, they are still very -- the band of the prices is quite broad when we look at the different geographies. And the different contracts, there are still some contracts that run out. But certainly, as in any hospital product, which is an injectable product, we've seen a substantial price decreases there, and the competition is very heavy in terms of the pricing. We currently -- based what we understand, also given the market size and the regulatory status for Simdax, we do not expect that to follow the Dexdor pricing as steeply as what we saw with Dexdor. Now time will tell, are we right or not. But that is -- we -- of course, we will see there, price reduction. That's given. But how steep we will go there, I think, that, time will tell. But so far, the expectation is not as steep as what we saw with Dexdor. So I think one should take couple notches up from extrapolating those from Dexdor. In terms of the biosimilars, that's true. The biosimilar business has now declined. We, however, see that as a very interesting opportunity moving forward. So we will probably take a couple of years pause there also in discussing a lot of that. But we expect that to be a very important part of our specialty products portfolio in years to move forward. Even when you look at the league table of products, basically in any country, you see that the top 7 or top 8 out of 10 products, they are biological products. So subsequently, then, there will be an opportunity also for biosimilars. It will take a couple of years before we built the pipeline, but we are working on that. And we'll be back here as well.

Yes, and what Timo also means with that is that the current portfolio, we don't expect those products to start growing again. So there, the price levels and situation is already such that, that business is what it is for the growth in the coming years means that we will get able to -- we'll be able to launch in our markets, new biosimilars.

Our next question comes from the line of Sami Sarkamies of Nordea Markets.

I have 3 questions. Firstly, I would come back to the cost base topic that was discussed earlier. What can you say about planned R&D activity enrolled next year? And should we assume a reduction in R&D costs? Also that's normalization of sales and marketing costs require a more normal operating environment, thinking of, for example, travel and event costs.

Okay. In terms of the R&D, no really change there. Probably can be some quarter-to-quarter variances. But in overall, as Jari stated here earlier, we expect to continue to invest in R&D in -- both in clinical side as well as in the discovery, research side. And these comments that we said that good proxies this year are close enough, these do not include any external opportunities. Sales and marketing cost, that is an excellent question. I think it is fair to say that if the situation in -- with the second wave and then subsequent measures by authorities, if they do not substantially allow travel and people feel safe in traveling, there will -- that will mean that many of the events, marketing events, be that customer interface or be that larger scientific meetings, those will be held either virtually; in the best case, they will be hybrids; and in quite a few cases, we've seen already postponements until a year ahead. So I think there, at least today, I think all the organization have slashed the estimates for travel budgets. The other side is that how -- what are the new innovations, how to market the products, how to access customers and so forth, how to discuss science amongst the opinion leaders and present data, if we find new ways to that. But at least so far, I think the sales and marketing costs, probably we will not return next year to the activity level that we saw before the COVID-19.

That's very helpful. Then my second question would be on Nubeqa, where Bayer has launched a new Phase III study this year. I guess you're not yet part of the study but it would be interesting to hear your thoughts on whether you're likely to join in, in the future and when will you be making that decision.

There are number of Nubeqa studies. Some of those are Bayer-sponsored, some of those are investigator-initiated studies. And as in any oncology product, it is fair -- safe to assume that there will be new studies also proposed by these sponsors. And we will take then those decisions study by study as we, jointly, have agreed with Bayer. So once we make our decisions and we join -- are prepared to communicate, we will certainly let the market know.

And then finally, on Simdax, you continue to estimate that the patent expiry will not have a material impact this year. Do you have any visibility on generic competition taking place? And will it have some impact already in the fourth quarter?

So far, for 1 3-month period, it's tough to say, to separate that from the statistical noise. We do not expect that we will -- we are aware that there are 2, I think, approved generics, and there are a couple of ones in the pipeline. So one should assume that we will have, there, ample of providers. However, for the fourth quarter, what we said is not material based on our expectation, but of course, we can only state the fact once we've seen the numbers.

And I mean, we are now through roughly almost 1/3 of the fourth quarter, and so far, we haven't really seen that much. So it's not likely that there is enough time for the changes to really have any material impact for the full year this year. But next year, definitely, we are quite certain that there will be. And like Timo discussed earlier, at this stage, it's a little bit difficult yet to estimate how hard the price competition will be for the specific product. So we'll know only once the competitor really starts launching their products, and we see what type of pricing they are using.

The next question is from the line of Iiris Theman of Carnegie.

So a couple of questions from my side. On Nubeqa, so how has the sales started in Europe and Japan? And which are the markets where it is now available in Europe? And are there still any postponements meant in reimbursement decisions due to COVID? And yes, still on Nubeqa, just based on your sales figure, of EUR 11 million for January-September and royalties for Q3, so is it fair to assume that your product sales for Nubeqa were about 5 million in Q3?

Very good, thank you, the Nubeqa -- Nubeqa is available today in Europe as a reimbursed product only in Germany. We expect a couple more countries to come on board in Europe later this year. And when we look at the numbers from Germany, of course, we are only a couple of months. We are jointly with Bayer we are very satisfied, they are actually higher than we originally estimated. In Japan, the product has also been launched. However, in Japan, the access to physicians in terms of -- for the COVID-19 has been -- that's -- or the COVID-19 has impacted the access to the physicians. So the situation is still a work to be done on that front. And we've seen a few countries who have postponed the access to reimbursement systems or, let's say, the decisions thereof because of the COVID-19 and the regulators' focus on fighting the pandemia. Product sales, Jari?

Well, I mean, the EUR 11 million year-to-date number and the sales, out of which we get the royalty and for which we provide the product to Bayer, has been steadily growing throughout the year. So I cannot remember now the exact number what it was in the third quarter. But definitely larger than the second quarter which was then larger than the third quarter. So the quarter-by-quarter, the numbers are growing. So from that point of view, the direction is right, but I cannot now remember, recall the exact number for the third quarter.

Okay. And still regarding acquisitions, so what is the current activity in the M&A market at the moment? And in terms of potential deals, so are you targeting larger acquisitions? Or a couple of smaller deals? Or acquisitions or in-licensing deals? And just to confirm that what is so that your sale target of EUR 1.5 billion doesn't include acquisitions.

For the last one, true, it did not include that and does not include that. The target criteria that we are currently looking for is, I guess, one could say, to support our existing business franchises or our regions. And that is from, of course, from the in-licensing of clinical stage assets to online in-market assets, which are already marketed, approved. Typically, those would be baskets of products. Probably tens of millions in terms of the sales. And then in terms of the full organizations or company acquisition targets, those then, I think, what we are currently looking are tends to EUR 100 million or a couple of hundred millions. The target there is not to make a transformative 1 transaction, because we also respect the fact that it's been a while since the company, as an organization, have enacted in that front, and it's probably better that we learn, a little bit, this in a gradual sense and start executing these and gain a little bit more confidence and success in that as well. So likely to be smaller acquisitions first and then let's see, if we move forward with a larger transaction.

And maybe I could also add a little bit to this EUR 1.5 billion, because that's not the guidance, so it's a target. And we -- as a target, which is so far away as 5 years, we, of course, don't have exactly all the blocks available currently. We have different scenarios and strategic plans. And like I said earlier, we do believe that if everything goes really fine, that target is achievable also without M&A. But of course, by doing an M&A, that gives more robust way of achieving that target. But I mean, we have not provided any kind of a block-by-block guidance. And the reason is that this is not such target that we already would have all the plans ready how to reach that. So it's an ambition, and we definitely still hold that ambition and believe that there are still even internal ways of achieving that target. But definitely, of course, achieving it becomes more easier if we also add on something from outside of the company.

And we have 1 further question on the phones. That's from the line of Harry Sephton at Jefferies.

If I can start on the Parkinson franchise. You seem to have been able to grow those sales incrementally even with having reacquired the rights to some of the European markets. Can you just talk through some of the dynamics you're seeing in that market and how you've been able to limit the impacts from further generic erosion there and what we should expect for that franchise going forward? Then quickly on the Easyhaler franchises, what has really been the drivers of the budesonide-formoterol continued growth? Is that penetration into the Symbicort market? Or are you still launching in new markets? And then also, can you comment on the growth of your salmeterol-fluticasone formulation since that launch last year? And then just quickly on Nubeqa. Are you looking to give guidance on that product as we go forward?

Okay, on the Comtess, the lever growth dynamics for the first 9 months, there was an element, which shows in the numbers, is actually stockpiling. For the change or the transition from our partner, long standing partner, Novartis, in quite a few countries to new set of partners. And in order to guarantee and secure the uninterrupted supply to the market, we had to increase the stock levels. And as those are not our stock, but they are stocks held by our partners, be that Novartis or new partners, those we record as sales. Now the pricing level for the Parkinson's products, we have not seen any more substantial pressure on that or continued pressure on that, let me say so. The decline in price erosion has mostly taken place. Of course, we see that, but the steep curve side of that, that seems to be now flattening out. We will still, of course, see some, but not the steep one. On Easyhaler, the budesonide-formoterol growth is from both sides. It is from the penetration of the existing markets, mainly European markets. But also some new markets where the product is still in the launch phase, in the regulatory phase, especially when we talk about the markets outside Europe. And of course, with all the respect, and we've been doing a very good job there. Still, if we look at the -- on an annual level of the budesonide-formoterol sales, if we're successful in 1 country, in 1 region, that is already a big deal for us. The question on salmeterol-fluticasone market, continues to grow, strong, strong double digit. Unfortunately, it is a longer road as we've indicated at salmeterol-fluticasone. So before that becomes a substantial product, it will still take some time. The road is much more narrow and winding as we -- I guess, many of us originally thought and at least I did. Then there was a question, was that on Nubeqa forecast?

Yes, whether we give guidance for that. And I guess we need to rely pretty much on Bayer there. So -- because Bayer is the one making the sales and booking the sales all around the place, even though we, of course, participate in the promotion here in Europe. So we kind of have to rely on that, that we cannot really give much more guidance than they are doing. So we need to coordinate with them. And for the time being, they have not given that kind of a guidance. But if they change their way, then, of course, it's easy to say that we are also then changing.

And there are no further questions on the phone at this time.

Some few questions coming through the webcast, too. So let's start with a few questions from [ Ansi Rousey, Open Markets ]. The first one is that could you give us an info how you estimate Nubeqa sales to develop in '21-'22, but referring to your previous answer, I guess, that is already covered here.

Yes, I mean, maybe just in case here. So the question was whether we will give any guidance for Nubeqa '21-'22, and the answer is like earlier. It's that if Bayer is not doing that -- sorry, you had the mic, yes, sorry.

Then the other question regards the Animal Health. We announced in first half year report that actually the contract with Zoetis on distribution in Scandinavian markets will end this year. Ansi's question is have we been able to replace the whole that the Zoetis agreement will leave us to Animal Health sales.

No. No, definitely not. I mean, we -- like we announced, we were talking about roughly EUR 25 million of sales, which is really a large part of our current, around EUR 80 million business and is especially much, much larger, but of what we are selling in those countries, where -- so this is now taking the sales in their own hands. So the long-term goal is that gradually, we will be able to replace, if not all, but at least substantial part of that, but that will take time because most of the really big, big global animal health companies have their own operations in those countries. So we need to make a lot of the smaller arrangements with larger number of companies in order to replace that. So the answer is that definitely not for next year. But if we look at 2, 3, 4, 5 years to the future, we definitely continue working towards that goal.

Okay, the next one, touches the cost side. Are there any reasons to expect sales and marketing expenses to increase before the COVID-19 pandemic eases?

Tough question. Of course, it depends also on the activity level that we are able to ramp up with our partner, Bayer with Nubeqa. But I think even if we did, I think, and as I said, we -- I think it would -- it's safe to expect that still, '21 things will not become as they were before COVID-19. So at least for the short term, I don't think so.

And that, of course, means organically, if we end up doing any kind of an arrangement, buying product portfolios or companies, that would, of course, be the change. But if we think of the existing product portfolio, yes, I guess that's exactly what Timo said, that's not likely to change.

Okay. Then the final 1 from Ansi that you have mentioned external opportunities a couple of times. Can you give us any update? Is there any active projects ongoing? And if there is, how far are you with this?

The answer is yes, but we cannot because of the confidentiality reasons.

And of course, I mean, typically, in these processes, there are, even in the final rounds, more than 1 company, which means that, ultimately, we even don't know whether something will come out before we then see the end result.

Okay. Then we move on, we have a question from Mr. [ Jarmo Gele ] and, he's asking -- his question is that how is Orion contributing to the fight against the COVID-19? Are you, for example, developing a vaccine together with the academia and scientific organizations?

Our key contribution to the fight of pandemia is actually to be able to continue to supply the product to the market. And some of our products are being used for the treatment of severely ill COVID patients. As we know, many of the COVID patients, especially the ones who are severely affected by the disease, have also comorbidities, and there, many of those comorbidities are treated with generic products. And of course there, we are a major supplier. Orion has no capability nor do we have any plans to participate in supply of vaccines, nor do we have any activities in vaccine development.

Thank you, Timo. And then a couple of final ones from Diana Na from Goldman Sachs. First one on Nubeqa, how would you say access and reimbursement discussions have been going in Europe since product approval? And any color on how the EU launch has been going would be very helpful according to Diana.

Okay. Reimbursement discussions have been very favorable. We're very satisfied with the discussions that we've held and also the classifications that we've received. So those are -- we are very satisfied with those. Of course, based on the strong data that we were -- we are able to supply also through the regulators. But then as we've said that we've seen, in some cases, also delays in reimbursement processes by some countries, and that is likely to hit also some of the new background decisions. The launches, which is the launch that's taken, so far, place in Europe, which is in Germany, that has exceeded our expectations so far. But we are, of course, in the very early stages with that.

Thanks, Timo. And then the final one from Diana is that on business development. Does the ODM-109 trial setback mean greater urgency for you to look for inorganic opportunities over the course of the next 12 months?

Of course, we are putting more effort in there. It's not that we are pushing the panic button down, because we want to be very careful how we invest and allocate capital. And the most important resource is, of course, time of the people who would be involved in that type of transaction, especially then integrating that. But we are putting more effort, of course, and we've increased a little bit of resources also in that respect. So certainly, we are looking into those opportunities, maybe a little bit more in open eyes than we did earlier.

Thank you, Timo. We have exhausted all the questions through the webcast. Do we still have some pending questions on the conference call lines?

Okay, it seems like we've exhausted all the questions. I thank you very much. Thanks for joining this earnings conference call, and I hope to see you then in February, when we will discuss the full year results. Everybody, stay safe.