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, December 2020. My name is Tuukka Hirvonen, and I'm Head of Investor Relations here at Orion. In a few moments, our CEO, Timo Lappalainen, will present the results, after which you will have the opportunity to ask questions either from him or from our CFO, Jari Karlson. We will first take questions from the conference call lines. And after that, we will then read questions, which we have received through the webcast tool. So you see on the bottom of the screen, a form where you can type in your questions, and then we will read those after we have finalized with the teleconference lines. [Operator Instructions]. And just before I let Timo to step in, I'd like to take a moment for a short commercial. So Orion is holding Capital Markets Day this year in May, 26th, here in Helsinki. And even though we so much would like to see all of you face-to-face, due to the pandemic situation, we are not able to do that. So the event will be fully virtual. Further information will be available later on, but you can now pencil in the date to your calendars if you are interested in attending the event. Then finally, just a disclaimer regarding the forward-looking statements. And with this, it's my pleasure to invite Timo on the podium. Timo, please?

Thank you, Tuukka. It's my pleasure to discuss the highlights for the past year. And that -- of course, what else could we start with than COVID-19? The 3 points that we've strived for the entire year was, naturally, to secure the continuity of our operations throughout the company. That meant that we paid specific attention to the health and safety of all Orionees and also the patients who were enrolled in our ongoing trials. That was the foundation, how we were able to maintain the continuity of operations. Also, due to the hard work by Orionees, our partners, there were no material disruptions in terms of the availability of products, starting our raw materials. Of course the -- when we look at the -- what was the bottom line of the year, in terms of the financials, we saw that there was the increase of demand of certain products. Also we saw, of course, the decline of certain products due to the COVID situation. But in overall, the net result was satisfactory. Of course, when we look at the impact of the COVID, the operating profit would have been roughly EUR 40 million or so lower than what we thought in the beginning of 2020. The Board is proposing a dividend of EUR 1.50 a share to the forthcoming AGM. And of course, in R&D, that's the future lifeblood of the industry and also for Orion, we had a setback where our ALS trial did not meet its prespecified end points. However, there were no safety concerns to the compound either, which is also marketed under a different brand name for a different indication. We were happy to announce a new leader, professor Outi Vaarala, to lead our R&D organization, and she has taken swift action also to make sure that we will continue to have a progression in our clinical trials and in early pipeline. So the key figures. The net sales were -- we had an increase of 3%, so north of EUR 1 billion. The operating profit ended up at EUR 280 million, so a substantial hike from the 2019. Operating margin was -- we met our target that we set ourselves -- or our goal, financial goal of 25%, so with 26%. And also we had a strong cash flow per share, EUR 1.85, with a 10% increase over the comparable period. If we look at the waterfall from the perspective on net sales, how those developed, we had a setback, which was pretty even across the last year in terms of the net sales. So there, we saw EUR 16 million that we took a hit in terms of the net sales. Our products, Easyhaler, continued to plow ahead throughout the year. Nubeqa, first time made to the top 10, as this was, of course, a little bit of a question for some of you. But with a EUR 14 million increase over the year, and this includes the product sales as well as royalties. We were able to increase our business in the reference priced market, which is one of the main market segments for us in Finland. In biosimilars, we lost some tenders in Scandinavia, and we informed you across -- throughout the year that we expect the biosimilar business to be lower last year than it was in the comparable period 2019. And then when we look at the -- all the rest of the products, there was a substantial increase in those. Also, our Fermion and contract manufacturing fared well last year. Then the royalties and milestones, excluding the royalties related to Nubeqa, there, we -- that part of the sales contracted by EUR 7 million, and that's how we ended up in -- then in -- north of EUR 1 billion. Then when we look at the operating profit, certainly, of course, the volume that was product volume, that was the major factor plowing ahead our sales. Then the margin product mix, how that varied, had a positive effect. The exchange rate, so we burned EUR 16 million in sales and roughly EUR 14 million in operating profit. Milestones certainly had an impact as well. And then the fixed cost, of course, we saw that especially in the beginning of the year, we saw a decline in fixed cost because there was less operational activity, and that's how we landed in at EUR 280 million for last year. Now happy to note that when we look at the sales, no major changes. So Finland plowed ahead in a difficult environment, very volatile environment. Scandinavia reached a plateau, which is -- and we'll discuss that a little bit more in a very exceptional circumstances where the biosimilars took a substantial hit. Then the rest of the Europe certainly fared well. North America, the decline there is mainly due to the Nubeqa milestone that we recorded in 2019. and then the rest of the world, many things going on, of course, in that -- there. Happy to note that all our businesses, they all reported growth, be that specialty products, so our generic business, both in terms of prescription products, OTC products and biosimilars; proprietary products as well. Animal had a strong year again. And then Fermion and contract manufacturing did an excellent work also throughout the year. So the league table of the products, Easyhaler, the entire product portfolio, continued to grow by 10%, so 2-digit number. Stalevo, Comtess, Comtan, our Parkinson's franchise, flat for the year. In Simdax, we saw a decline towards the end of the year. The patent expired, as we remember, in the -- at the end of the third quarter. Then Dexdor, this certainly was a different -- what was realized throughout the year, how we entered into the year, and we'll have a couple of graphs on that. Animal sedatives had a strong year as well. And then #10, make the league table is Nubeqa, and of course, the growth percentages are great. So if we flip then to Proprietary Products. There, of course, the main new item is Nubeqa, but let's turn first to the old workhorses. So Easyhaler, here you see the difference that the initial COVID did, that was for the first quarter when there was a hoarding effect. And then we came back to the more stable growth path for the remaining of the year. And of course, in this, as we reported several times, the budesonide-formoterol, that has been the growth item. That has been pulling the entire portfolio with it. Then the Parkinson's franchise, and this of course, today, it's a little bit more balanced in terms of what we do, our own sales and how much we deliver to our partners across the globe. Today, Orion markets the Parkinson's products by ourselves in Europe and also in certain Southeast Asian countries where we've taken over the business, and now it's pretty balanced. We informed and discussed that in the beginning of the year towards the end of last year, there were stockpiling effects because of these changes of our partners and then that took a toll when we move to the latter part of last year. So then the story of Dexdor, which is a sedative agent used in ICU setting. And this is the left-hand chart here. And here we really see the volatility of that for the first and second quarters when there was a substantial demand of the product throughout Europe. Then the situation calmed down a little bit for the third quarter, and we also saw many generic players in Dexdor space having their capacity available. And then the second or third wave, depending how you count those, that had again Europe, and we saw the increase of the demand of Dexdor products in the fourth quarter, so towards the end of the year. In Simdax, here as the -- we started to move to the post-patent area -- or the era, we saw the decline of the product. And this of course we've informed you duly how this -- we expect this to develop. So then moving on to our largest business, which is the Specialty Products. And that -- when we look at the -- first, the right-hand pie here, we see that Finland continues to be a substantial part of the business and had a nice growth of 3% there. Scandinavia suffered from the biosimilar business. But in the -- when we look at the business without it, it did a very good job. And Eastern Europe as well as the rest of the Europe showed growth for the past year. And then the COVID, of course, had an impact, but the biosimilars really took a toll because we lost some tenders. And here you see the more than 50% decrease over the 12-month period, which, of course, is substantial. But on the other hand, then, these businesses where there is more durability, in terms of the prescription products or self-care products, there was a healthy growth. And to illustrate this a little bit more, we have here made a slide, which gives you quarter-to-quarter and, of course, this now being presented to you now, it's just pulled together, what is actually the changes of the different parts of the Specialty Products. So you see there the substantial decline of the biosimilars. However -- then the Prescription Products as well as the OTC, in overall, continued to provide a healthy growth in the business. And I said, Finland is, by far, the largest country market for our Specialty Products. And here in Finland, the market was more or less flat for the last year. And we had a slight growth, especially strong for the reference priced market, because that is the key market for us. And the overall market was a little bit on the negative side for the reference price market. The overall market, when we look at that, the -- we continue to plow ahead. And as said, with the reference price market, we had a 25% market share. Here the baseline actually varies from year-to-year. And you have to understand that the baseline is calculated based on a certain point of time which products are in this group, and this group may change or evolve as the time goes by. In the self-care products, a strong growth. We have a 26% growth. And in overall, in the human pharmaceuticals, we had a 11% market share as we did last year. Then moving on to research and development. And of course, the -- what we are all looking forward this year, is -- are the results, the data of ARASENS, our darolutamide study, which we expect to report in the course of the summertime. And then we recently announced a new study for darolutamide aiming to the same patient group. However, with a different underlying treatment, are a note, and that we expect to start recruiting still in the first half of this year. We continue to plow ahead with our 208, which is indicated for our study for prostate cancer. This is the CYP11 inhibitor. And here, we are moving to Phase II. We have -- from the same mechanism of action, we have sister compound, 209, that has A -- we are studying for a little bit broader basket indications, including breast cancer, that's still in Phase I. Then the Easyhaler tiotropium is in bioequivalence study, and we also informed that we are developing -- initiating a new dry powder inhaler platform development with the first new compound. And as we did last year, we've now taken a practice that we give you, as a little bit guidance, how we think, internally, what are the important milestones, events that we look at internally. And certainly, in our -- all of our lips is, of course, the performance of Nubeqa. And here, we can -- how we can do that is be a good partner with Bayer and do the co-promotion and see that the adequate patient population gets access to the product in Europe. Of course, as mentioned, the ARASENS trial results, those will be an important data point. And then that we get smoothly built up and the -- start recruiting patients for the ARANOTE trial. Easyhaler, of course, we are pushing hard that entire product portfolio. As we said, we still have follow-up products to that, and we have a continuum to the entire Easyhaler platform. Then 208, we expect, as I said, to start to recruit patients to the Phase II trial in that. And of course, we want to move that expeditiously forward. In Finland, this is the largest country market for us, so we are working hard to maintain and strengthening our market position, as well as in Scandinavia, to make certain that we grow our business in generic prescription product as well as in self-care. We are also investing a lot to enable future growth through an inorganic growth, and that in our case means in-licensing new products. We do that all the time. That's our bread and butter in generic business, in Animal Health business. But here we make a reference to a little bit larger deals. And of course, we are evaluating also opportunities to get access to in-line products or through mergers or acquisitions. We are very strong in sustainability. We have a commitment to ensure the patients' safety and, of course, the reliable supply of medications, that's been paramount. I think that's been substantiated over the past year, and that all starts with our responsibility for employees, the environment, the ethics, and the transparency of our operations. And some of the key data from last year, some of the key indicators, how we look at the performance against our goals, we put forth here. Customer complaints and this, we measure as per million. We are at the same level as 2019, despite the increase in volume. We performed substantial number of audits. These are good clinical practice -- sorry, good manufacturing, good clinical, good laboratory-related practices or even good distribution practices. Of course last year took a toll, and we were not able to do physical audits as we have had in the past. We are also working hard on the CO2 gas emissions with the Scopes 1 and 2, and are making headway in there throughout also through the energy-saving targets which we set for ourselves. And here, we are in good path as well. We've had also a hefty target to reduce our work-related injuries and here, this measure is per million working hours, the absentee days per million working hours. And last year, the number that we had on the same event was 6.6, and that certainly was not a good number. There's still a lot of work to be done, but we've improved ourselves. And I'm very proud to see this number because it's been a hard work throughout the entire organization. And of course, then we need to operate ethically and the code of conduct training covers pretty much the entire organization. So then if we move on to ongoing year. So the outlook for '21, we estimate that the net sales will be slightly lower than 2020. And in terms of the operating profit, estimated to be lower or clearly lower than 2020. And to give you a little bit of background how we're thinking of this, we are putting forth here the key assumptions behind our outlook. Of course, the growth businesses are Nubeqa, we know that. There are other growing products that we've introduced in the generic space, of course the Easyhalers. But we are going to see a lower number for milestones. We expect also Dexdor to be lower than last year. Of course, much will depend here how the COVID situation emerges out, but it is very unlikely that we will see such a surge as we saw in the beginning of 2019, as there are now product available. There are stockpiling in the countries. In terms of the Simdax, we are in the post patent era now and we expect those sales to be lower. Also in terms of the Animal Health, we informed last year that our long-time partner in Scandinavia decided to set up their own operation and we lost those sales. Of course, the question mark that is on Specialty Products, we expect that to be lower. How much lower, how will that pan out throughout the year, that remains to be seen. But we expect that due to the -- some of the hoarding effects that we saw last year, there is a possibility that some of that hoarding will, of course, not anymore -- we will not see that. However, will there be then the working down of the inventories in the countries, that is highly unlikely. Of course, it is possible, but we don't expect to see that this year. Then in terms of the profitability development, of course, the Nubeqa sales, that's an important driver there. Also the Parkinson's franchise, the product rights that we acquired in Europe, we will not anymore have those depreciations in our books. Milestones, those flowed pretty much directly to the P&L. Dexdor and Simdax as well. And also of course the cost level, we are by no means giving up. We are plowing in full force ahead, be that in R&D or be that in sales and marketing. Of course especially in sales and marketing, depending on the circumstances in specific countries. There are some countries where we can meet our customers face-to-face. But of course in quite a few countries, it is virtual today. And of course then, depending on the sales development of Specialty Products, that certainly, of course, will have an impact on the overall profitability. And then to assist you in looking at this here. We also put here a graph discussing the royalties and milestones, and especially the royalties, ex Nubeqa, that are ongoing business. But here, you see the milestone impact from the various years of how that has evolved. And as we've said, that is a substantially volatile component Orion's final results for any given year, not to talk about any given quarter. So we hope that these 2 slides opens up a little bit our thinking here behind how we are looking forward to this year. Then the -- of course, the overarching goal for ourselves is the '25 growth targets with -- of EUR 1.5 billion. We're working hard to meet that. We think we have a very good opportunity still, despite the setback of the ALS compound -- or the ALS program. Of course, there's a lot that rests with Nubeqa. And there, we've flagged already the important studies of ARASENS and ARANOTE. Easyhaler, of course, important part of the growth story of the company. The Animal Health continues to plow ahead with new product introductions. And of course, we are continuously looking also for opportunities outside Orion's sphere for in-licensing or acquiring in-line products. And then of course there are also challenges. We see that with the -- some of the products within generic competition. There's a pricing pressure, and -- which is a big question, of course, as we move on, probably beyond '21 to '22, '23, how Europe is going to cope with all the [ QE ]. So we'll see that. And then of course, for this year, the expiry of our Scandinavian distributorship agreement for Animal Health partner, that will take its toll to the top line. And then inherent risk of course in our line of business is always the success of the R&D programs. With these, I note that the AGM -- we expect to have that on the March 25. And then the first regular update of the company situation in terms of the first quarter report is on April 27. And as Tuukka already said, please pencil in the -- our CMD, May 26, and we will hold that virtually. So you will have an access to that without the need to travel. And with that, I'll invite to the podium, our CFO, Jari Karlson, to take any questions you may have. And as Tuukka here said, we will first take the questions from the webcast lines. And once we've exhausted that, you can type your question to the question box, and then Tuukka will here moderate and read out questions. So...

Conference call first.

Sorry, conference call first. Yes.

[Operator Instructions] Our first question is from Peter Smith of Bank of America.

Peter Smith from Bank of America. So on operating profit margin in 2021. Can you give just some sense of the relative margins with Dexdor and Simdax being last versus Easyhaler and Nubeqa growing. And just any other points, if you can, on how we should be thinking about margin decline? And then on Nubeqa, the ARANOTE trial, what drove initiation of the trial? And then ARANOTE completion is in 2024 on clinicaltrials.gov, but can we expect any interim readouts from that? And then are there any potential plans for kind of further trials of Nubeqa to expand its coverage as the prostate cancer treatment paradigm?

Do you want to take the first -- I'll take the ARANOTE.

Yes, I can start. So obviously, like we have indicated for years, Dexdor and Simdax are the type of the products which are on the top-ranking in terms of the product margins. So when we lose sales in these products, it's very difficult to compensate with anything else we have in our product line. Nubeqa of course is different because there is the royalty component part. But then when it comes to Easyhalers and, of course, the generic products and so forth, they will generate lower margins. So very likely, the impact, especially on the product margins will be negative as if Simdax and Dexdor will decline, as we currently expect.

Okay. In terms of the ARANOTE trial. Firstly, there is -- in the current protocol, there is no plans for the interim readout. Of course, that -- as I said, that's in the current protocol. The reason for setting up that trial is that, of course, we want to see that the product is made available to the treating physicians for different patient populations, how those patients are treated. There are some patients who are treated with both androgen deprivation therapy and docetaxel. So -- and then there is a group of patients who are treated only with androgen deprivation therapy, and these depending a little bit on the patient category. And that's why we wanted to expand also to have a trial where Nubeqa is studied against the androgen deprivation therapy. So having these alternatives that we can have for the patients for treating patients in a different manner, depending on the physician's preference. Whether this will drive into new treatment paradigm, I think one has to be careful here. But nevertheless, we are offering here new treatment options for different patient groups, different patient populations to the physicians.

Our next question is from Sami Sarkamies of Nordea Markets.

I would start from the Q4 report. I think you raised the guidance ahead of third quarter results and were expecting about 15% EBIT growth last year. But now you have ended the year with only 11% growth. So can you elaborate on the reasons why Q4 came in below your expectations? Just looking at some of the sales areas, Parkinson's, Simdax and Easyhaler, look clearly soft while then costs may be on the high side.

Well, in terms of the sales, there's always seasonality from quarter to quarter, as we've many times have highlighted, and I think many of these graphs that we also provide, those -- show that there is seasonality in those. There was nothing specific, I think, on fourth quarter in terms of the sales, except for shipments moving here or there, something from the third quarter to fourth quarter and vice versa, and from the -- for the next year. So nothing specific in terms of the sales. We saw, in some markets, really, really strong pickup towards the end of the year and some were softer, but nothing that would highlight across the board even as per product.

And then also on the cost side, we -- actually, we are very happy to see that some of our R&D programs actually started getting speed during -- towards the end of the year. So I think from that point of view, the fact that we were able to spend as much on R&D as we did was actually a positive sign after a little bit slower period during the earlier part of the year. Then also, I think it's fair to remember that the fourth quarter in 2019 was one of the all-time highest quarters in Orion's history. Only the first quarter in 2020, because of the COVID, actually, was higher. So the comparison period when -- to which the sales are compared in the end of the last year was very, very tough target. So the sales actually were fairly normal level when looking at the product sales quarters we have experienced over the last few years.

Okay. Then I want to understand your thinking behind assumed cost structure this year. Regarding for higher sales and marketing costs, what is driving this increase? And then secondly, could explain how R&D costs will remain flat as you ended the ALS study last year and the starting ARANOTE study looks smaller than ending ARASENS study.

Okay. Thanks. Very good questions. In terms of the sales and marketing, you may recall that we are actually co-promoting Nubeqa. And of course, we are taking our share of that part. And when we compare that to the last year, we actually started the co-promotion effectively only in Germany. Towards the end of the last year, there were 2 other countries, including Finland, but that bore into that. And this year, we expect, of course, more countries to come onstream. Our planning assumption for the ongoing year is also that after the summer break, we'd be able to resume to more normal sales and marketing, whatever that might mean, but at least it is more normal than what we are experiencing today. In terms of the R&D, whilst the -- we expect to have the headline results in the summertime, unfortunately, the -- from the financial perspective, the study still carries on, which is good for the patients because there is still patients on the trial that we continue to monitor those patients, but this is where we take account for the debts. So those costs carry on still for a period of time. Also of course the ARANOTE ramp-up starts this year. So we will have a little bit of those at the same time on our -- in our books.

And in addition to that, we, of course, are now moving the 208 program to Phase II, and we have now initiated some of the new Easyhaler-related or respiratory studies. So even though none of those, as individual studies, as large as the ALS study was, but when you count all these together, they pretty much come up with a -- more or less the same clinical trial type of cost than the ALS was. And of course, one needs to always remember that the clinical trials are not the only part of our R&D expenses. So there's the infrastructure, there's the preclinical research. So all of those contribute as well. So that pretty much explains. And in the sales and marketing cost, of course, one needs to remember that last year was not a normal year. So the costs were to somewhat artificially low because the activities were much below the normal level. So the assumption now is that gradually, during this year, we will get back to the normal level, which then, of course, shows up in the cost line as well.

We're actually pretty excited that we have opportunities, good investment opportunities, in late-stage clinical programs as well as in early parts. So we are pretty fired up on that.

Okay. That's very helpful. And then on the Specialty Products outlook this year, can you still repeat why you were negative on that one? Because I think the message was also that you were not overly concerned with supply chain distortions. And you also made the point about nonbiosimilar part of the business having turned the corner last year.

That's true. This -- your notion on the biosimilars is exactly correct. We saw the big correction last year because we lost the tenders. There's still a little bit of a spillover for this year, but nothing compared to last year. What -- the way we look at the Specialty Products business in overall, we -- today, the way we look at the supply chain, we believe that we are fairly well established for -- at least for the first half of the year. Of course, this is all subject to that our colleagues remain and stay healthy. But from that perspective, we think that is well covered. But of course, also last year, despite that, we saw this hoarding effect, which, by and large, was a bump and then it leveled out. However, there were some countries who actually stockpiled material for forthcoming purposes. And this is not really all that material. But of course, if you don't have this, this year, you're seeing this much last year and then this much this year, and then when you add those up, it adds up a little bit. So that's one of the reasons for that.

Okay. And then finally, on the ARANOTE study that we discussed earlier, could you somehow explain how that broadens the market potential for Nubeqa, for example, relative to earlier ARAMIS or ARASENS studies? Just trying to understand the -- what would be the patient population benefiting from this type of treatment plan.

Well, we continue to be very careful here and can only refer to the Bayer's statement for the entire potential for Nubeqa exceeding EUR 1 billion. So I'm sorry, but that's the arrangement that we have.

But like Timo explained earlier in the ARASENS study, we have a little bit different underlining treatments than now in the ARANOTE. So combining these together should kind of give data showing that more or less all the patients in that group can benefit from our product. And of course, from the ARAMIS (sic) [ ARANOTE ] study, the difference is that this is metastatic, while ARAMIS was nonmetastatic. So there is this clear difference in the patient population.

Our next question is from James Vane-Tempest of Jefferies.

Yes. First one is just regarding your longer-term EUR 1.5 billion revenue target. Just wondering how we should think about the balance to get there, in terms of capital return and investments? And as we progress over the next few years, I'm just wondering at what point Orion might have to decide if they're going to need to do more M&A to reach its target enough, considering its dividend policy, or maintain its current capital allocation policy. The second question is, what are your assumptions, please, on any changes on European pricing this year? And what are you hearing from your country teams about the various European markets? And then the third question is, you mentioned about the depreciation of the legal portfolio being a benefit in 2021. Please, can you just remind us what that would be?

Thank you. The EUR 1.5 billion target and the funding to reach that, so far, when we look at the cash generation of the company, the payment of the dividend is not a cash flow issue. It is actually a balance sheet issue from the perspective of distributable funds. And this is a little bit a specific issue relating to the corporate law in Finland because you can only distribute or basically a retained earnings, and not even all of those, from the parent company. And that is actually what is restricting the possibility of returning capital to the owners. Now we received a substantial win, a book gain, when we divested the Orion Diagnostica. And as we have now for the past 2, 3 years, have informed the market that we expect that there will be a bumps on our way to the EUR 1.5 billion. However, we can bridge that from the return of the capital from the perspective of dividends to the shareholders because we have this gain in our books. So, so far, it is not a cash flow issue. It is more from the distributable equity. But even that, we have bridged. But of course, should we make a very, very large investment, then we have to see if that has impact for the dividend-paying capability, but so far, we're nowhere reaching that as of yet. But of course, then the other side of the coin is, should there be other opportunities, be that in running late-stage clinical trial by ourselves and potentially then gaining the fruit of those trial -- that trial and those data and also with the upside. That, of course, would then eat in our annual profit that would then limit potentially our dividend-paying capability. Anything you want to add on this topic or plow ahead?

No, I think for the time being, as we see it, that the M&A should not make that much difference in our capability to pay dividends. But of course, if the M&A results in a growing company, which hopefully then results in a growing profitability, it might have some impact on the payout ratio, which we have seen in the past, by maybe lowering that a little bit. But in the absolute terms, at least we are fairly confident that we can continue. And over the time, also grow even the absolute dividend.

Okay. Then we had the second question on the European pricing scenery and what is our basing assumption. We are not aware, as of today, that there would be a material change -- system changes in any of the key markets important for us in the product categories where we are present. That, we are not aware and as such, we have not factored those in. What we are seeing, though, is actually, we had 2 opposite effects last year. For Norway, we saw a couple of months a systematic change when Norway decided to increase the prices of generic products for a short period of time, for a 3-month period, just to make certain that the country was able to access the product. Of course it is fair to assume that COVID has had an impact on the timings of the reimbursement. And as we've probably indicated earlier, we've seen delays in some cases in the timings of reaching reimbursement. It has nothing to do with the data, but it's just the availability of personnel in the countries. So we -- as I said, we are not aware of any material impact to our pricing scenarios.

And then your question about the Parkinson's depreciation and why that had an impact. We acquired the European rights for the Stalevo and Comtess, Comtan a couple of years back and depreciated that acquisition price over 2 years. And that depreciation is now basically ended, which basically means that we don't have any more this roughly EUR 1 million a month amortization of that acquisition anymore this year. So that has a positive impact of more than EUR 10 million on the EBIT line.

That's great. If I can just have a quick follow-up question regarding the guidance, I understand it's not a cash flow issue. And your 2025 target is a top line rather than a profit target. So clearly, investments can be made. But I guess I was just curious in the release how it talked about investments currently being made, will be delivering beyond 2025. So perhaps so I can ask my question in a different way, and that is, what level of product acquisitions do you think the business can support at the moment so that you could still maintain the current dividend policy? Just to give us an understanding of the flex in the cash flow statement in terms of what you could potentially additionally require to maintain both as a balance? If I could ask that as a follow-up.

Thanks. Of course one question is from the cash flow perspective, that if we are able to acquire products or product portfolios or companies, to that matter, that are generating then, of course, we always have the opportunity to raise cash through issuing debt. And the -- it's -- when you look at our numbers, we certainly have a debt capacity of several hundreds of millions that we could do. And if then those acquired assets generate cash, I think we are okay from that perspective. The other side is, of course, that if we were to acquire or invest in product development programs that only potentially yield results after several years of development, and we have to contribute into those development efforts. That, of course, may be a different issue because that's then the P&L issue rather than the cash flow issue. But I'm a little bit circling back to the same answer that from the cash flow perspective as we have substantial debt capacity that is untapped. We don't think that -- at least of the assets that, of course, we are interested in that we would be hampered by our cash flow or raising cash funding capability from that perspective.

Our next question is from Jo Walton of Crédit Suisse.

I've got a few questions. A couple of financial, a couple of products and a couple of strategic ones. Just starting on the financial ones, simply. You say that your CapEx is going to be higher in 2021 than the EUR 49 million that it was in 2020. On the cash flow, I can only find EUR 40 million in 2020. Can you just tell us what sort of things you'll be spending that money on? And while we're on the cash flow, you've had 2 years where you had working capital in, EUR 27 million in, in 2020, which is obviously very strong. With your growing business next year, particularly with things like Nubeqa, should we expect working capital to be a positive again in 2021? And the final financial one is just if you can help us a little bit more on the gross margin as we go forward. You talk about operating expenses being broadly flat. I'm not sure, is cost of goods part of that operating expense? Or is that seen as something different? My 2 product-related questions are -- your -- just to get a sense of your enthusiasm about your tiotropium Easyhaler development, we can see that Easyhaler has been growing. But it's really been grown very strongly off your Bufomix, your effective Symbicort product. As far as I can see, the Advair product really has taken off. So perhaps you could tell us a little bit about that. And given that, that was your most recent Easyhaler launch, why should we think that your tiotropium Easyhaler launch should be materially different? My second product-related question is just at the Simdax decline that we saw in the third -- in the fourth quarter, which was about 30-odd percent. Is that a good guide for the rate of decline that we should be experiencing in 2021? And I have 2 strategic questions. One, if you could just help us on any level of incremental infrastructure you are putting in place to help you with the co-marketing of Nubeqa, whether the fact that you're being effectively funded by Bayer to be able to do that co-marketing, you're able to capitalize on that? And you're actually building your net infrastructure across Europe? And the final one, really, comes back to questions that we've been hearing from others about your ability to do deals going forward. I know you've talked about in-licensing a lot, you've wanted to get products, maybe companies. In what you've looked at through 2020 -- because you've been talking about this for a long time, and you haven't actually done much, have you found things that you've wanted to do, but they haven't met your stringent commercial threshold and so you've walked away from things you would otherwise like to have done? Or have you just not found anything that you've wanted to do yet?

Okay. Good questions. All right.

Okay. I can start from the financial ones. So I was not quite sure about the CapEx question. But of course, typically, there is a difference between cash flow and the capital expenditure based on the timing when you get the invoices in. So we had a few in-licensing cases towards the end of the year where the invoice actually came so late that we didn't pay yet those invoices in 2020. So that explains a little bit of the difference why the investments may be higher than the cash flow for the investments. So that's kind of a normal. And in the way how we report the cash flow statement, that's not included in the net working capital, but that is included in the investment capital expenditure cash flow part. So the net working capital, yes, we are very happy that we have seen the decrease in the net working capital over the last couple of years. And there are various reasons for that. Inventories have gone up. But on the other hand, we have seen a reduction in our accounts receivables, which is very much due to hard work all around the organization to collect money, get the customers pay on time and so forth. And then there is a little bit more of coincidence type of element that when do we purchase some materials, what type of a noninterest-bearing liabilities we happen to have in our balance sheet at the end of the year. But I think it's fair to say that we don't assume the same trend releasing tens of millions of working capital continues. So we probably have done the easy parts. One thing which might be beneficial for us in the coming year is the fact that if the COVID situation improves, we probably will not have the need to maintain as high safety stocks as we did last year. And then coming to the growth margin. No, the operating expenses are not in the growth margin. So the growth margin development is probably, in our case, more dependent on the development of the pricing environment in the market and then the product mix. And especially in the coming year when we see, for example, Simdax starting to face generic competition. The assumption is that we will see a fairly fast decline in the pricing of Simdax, which will then definitely hit more the gross margin percentage than would be only losing volumes of Simdax business. So it's not a question of cost structure going up. Definitely, we are all the time working to streamline our operations, so it's more the product mix and market pricing question which is hitting the gross margin.

Okay. Then on the future Easyhaler products on the tiotropium, we don't expect tiotropium to be such a big product for us than the budesonide-formoterol. However, we expect that to be a bigger product than salmeterol-fluticasone, so somewhere in the -- in that region. But the plan -- we don't expect that to hit such a numbers than Bufomix, at least initially. So I think point well taken there. Simdax, what is the development for the ongoing year? Really, really tough question. What we've assumed is not too far off the mark what you propose here from the -- based on the fourth quarter. But really, one should be really, really cautious with this because we don't know how many competitors, generic players, are able to, firstly, get the product approved or to get their supply chain ready or how will they then price their products. So that's a big unknown for us today. And in our -- some of the -- how we substantiated the outlook for this year, you saw that we just put a negative number there. I think that's a safe bet. But anything beyond that is a pretty good guesstimate. But I think the fourth quarter number is not a bad guesstimate. In terms of the infrastructure co-promoting Nubeqa, there are, I think, at least one country where we are recruiting additional personnel because we were -- had a very small operation in the country. In most of the countries, there is no material impact in terms of the head count. In quite a few countries, we are retraining people. In some countries, there are some people who have left the organization and we have a higher oncology experts. So in overall scheme of things, there is no really new infrastructure being put in. But your point is exactly correct. We are now focusing our capability towards the oncology. And of course, we expect that, the Nubeqa, to be followed up by our 208 later. Then on the M&A or the targets, have we found anything. I think the point that you raised is extremely correct, is that we have very stringent financial criteria. And certainly, there have been some cases where we would have been happy to be the new owners. But the -- it was not a meeting of minds or -- we did not feel that comfortable of -- with the valuations, and we all know how the valuations have gone in the past and -- but we are, by no means, giving up. There are stuff cooking in the pipeline, and we'll have to see if we'll find enough synergies or new thoughts how to develop these assets in our hands.

And of course one needs to remember that looking at the valuations in this industry, any meaningful sized addition, whether it's purchasing of product portfolio or a company, would very easily require EUR 100-plus million, EUR 200-plus million type of investment, which means that we, anyway, will not be able to do too many of those, which means that we need to be very careful that when we then decide to move, that we really find a target which fits our needs.

Our next question is from is [ Kethea ] [indiscernible] from SEB.

I basically have 2 questions relating to the products. So firstly, on the Easyhaler product, you mentioned some lower activity during Q4 due to the COVID-19 pandemic. Could you give us something -- some outlook for Q1 and how are things developing thus far? And then maybe some expectations from the new pipeline products on the Easyhaler or the dry powder inhaler product that you mentioned in the report? Then a second question relating to the Animal Health business and relating to the Zoetis deal that you are now losing in 2021. So how much do you expect the Clevor launch and the new deal with Vetoquinol to be able to offset the declines?

Okay. I'll take the Easyhaler. So the Easyhaler activity in the Q4, I don't know how much it was really impacted by the COVID situation. It was more of a seasonal effect that we saw, the quarter-to-quarter variance. And as we've announced, so we expect the Easyhaler to continue to plow ahead. And as was with the previous question, the budesonide-formoterol is on certainly the product that is taking with it the entire portfolio. So we expect that to carry on this year with the substantial growth in our books. With regard to the new invention for the dry powder technology, we really don't want to disclose anything on that in terms of the technology. And it is still quite -- it's still a few years ahead, so it would not have any impact on the sales this year. Certainly, it will have an impact on the profitability, because we are investing in that in R&D and other capabilities for the new platform. In Animal Health, Jari is responsible for that.

Yes. So the Zoetis sales, of course, was a very, very large portfolio in the Scandinavia, close to EUR 30 million in top line last year. And it's clear that from the top line perspective, the Vetoquinol deal is very, very different. So we are there talking about one niche-type of a product. In the long run, we, of course, believe that the Clevor product is going to generate a lot of sales. But still, it's very unlikely that any individual product in very -- in the near future will be able to compensate for the loss of this very large portfolio we had with Zoetis. And of course, one is to remember that Vetoquinol is now only starting to launch the product. So it gradually will take market, but it will take a longer period. So the answer is that it definitely -- it's not going to be able to compensate as an individual deal, the Zoetis, not in short-term and very unlikely even in long term. It's very different type of an arrangement and considering only one product instead of a very large portfolio.