Orion Oyj (ORNBV) Earnings Call Transcript & Summary

Dear audience, shareholders and their representatives, welcome to listening to my remarks before the AGM. This presentation was recorded on Friday, February 25, when the news are dominated by the war in Ukraine. We are monitoring the situation closely and continue to assess the potential impact on Orion. At the moment, however, our primary concern is the safety and well-being of our Ukrainian colleagues, and our thoughts are with our colleagues in Ukraine, their close ones and all of those suffering from the war. Firstly, I want to draw your attention to the disclaimer statement. So Orion assumes no obligation to update or revise any information included in this presentation. It is my great pleasure to introduce the Orion Executive Management Board. Satu Ahomäki is responsible for our commercial operations of our human products, including our Proprietary Products unit. Olli Huotari, who is also our General Counsel and Secretary for the AGM, is responsible for corporate functions. Liisa Hurme, responsible for global operations, meaning our manufacturing operations, our own and externals as well as our Fermion unit. Our CFO, Jari Karlson, is also responsible for Animal Health in our Management Board. Virve Laitinen is responsible for Specialty Products, and Professor Outi Vaarala leads our research and development. Now in terms of the highlights during the last year when COVID was still ravaging around the globe, we did very well. Of course, the key highlight for the year -- towards the end of the year was the meeting the primary endpoint of RSN study. Earlier in the year, we initiated a new study, ARANOTE, for the darolutamide, our joint effort with Bayer to treat prostate cancer patients. In the midst of the year, European Medicines Agency granted authorizations for animal health products: Bonqat for feline and Tessie for canine species. We've had for years 2 programs treating later-stage prostate cancer products. And last year, towards the end of the year, we've selected ODM-208 for the next development stage in that mode of action. We've also initiated a new clinical development trial for ODM-105. And of course, we concluded the early research phase collaboration agreements. In terms of the business, Nubeqa continued to plow ahead and showed strong growth, as it should be, at this stage. Our operating costs were lower than anticipated, and one of the reasons, of course, was COVID. And also in the midst of the year, we were able to secure sales and marketing rights for ganaxolone for rare epilepsies in Europe. In terms of the operating environment, we continue to see the cost inflation, which in our line of industry are very difficult to pass to our sales prices. We still continue to have the risk of availability of disruptions as relating to the products, raw material intermediates, and that's why we have increased the level of our inventories. Orion Board is proposing to the AGM a dividend of EUR 1.50 a share. The key numbers for last year on the net sales and operating profit, we were shy of a year before, and one of the key reasons here was that we missed the major milestones that we had in 2020. We're a little bit shy on the operating profit. On the cash flow per share, we also did not meet the last year or the year before, and that was due to the investments that we made for the future. We have a strong balance sheet. We have a negative gearing, which means that we are debt-free. Our equity ratio is also strong and above our long-term target. If we look at the geographical breakdown of the sales. Finland continues to be the largest country market, followed, of course, by large European countries. Scandinavia is very important for us. And now outside Europe, we've initiated also activities in Southeast Asia and continue that track as the year goes on. In the largest market, in North America, Orion does not have its own operations, but we operate with our partners. When we look at the breakdown of the sale by businesses, Specialty Products, that's our largest single business unit today and followed by Proprietary Products. Animal Health suffered last year from the loss of one important distributorship agreement. However, the impact of that to the bottom line was lower than average. And Fermion was about the par with the year before. Our top league of products. Easyhaler caught up very nicely towards the year-end, the loss that it was in the beginning of the year and became our largest product, followed by Stalevo; Comtan, our Parkinson's franchise. Simdax, where we anticipated genericization over the year, did not meet any material generic competition throughout the year. And then Nubeqa, of course, as said, had a strong growth. And very nice also going for our animal sedative business last year, growing by 12%. If we then turn to Proprietary Products. Certainly, the Easyhaler had a strong growth, as said. And then the Simdax did not meet the material competition yet. Nubeqa, strong growth. Dexdor had very strong generic competition, and we expect that to continue. Then the Specialty Products, which is our business comprising of generic pharmaceutical self-prescription products as well as self-care products. And both segments, they were pretty much at par. In Finland, Orion fared much better than the market, especially when we look at the reference priced market, which is our most important market segment here in Finland. That part of the market went down by 4%. We were able to increase our business by 5 percentage points, which means that in the declining prices, our volume share increased quite well. And that -- if we look at then the overall market, our overall market share is 11%. But in this reference priced market, we are at 27%, so growing by 2 percentage points over the 2020. And in self-care products, we have 25% of the market. Then the future of the company, the key clinical development pipeline in the human side. The RSNs, we've also already flagged, and that's been discussed over the past week also in media as well as in scientific forms. Of course, we are very happy for the patients. There seem to be an interesting treatment alternative for the patients. Also the ARANOTE, which is an ongoing study, also targeting a new patient population, we're very happy that -- the way that study is progressing. And as said, we have selected the ODM-208 for further studies. And currently, that is in Phase II for later-stage prostate cancer patients. We have a new agent in the potential evaluation for treatment of psychiatric disorders. It's currently in Phase I, so healthy volunteers. And we continue to build our Easyhaler platform, and now we have 2 programs in COPD in that arena. And here are some of the highlights for the RSNs, where the bottom line is that, that significantly increases the overall survival in patients in certain segments with the treatment phase. And also, this study was one of the main articles in the recent New England Journal of Medicine issues and of course, we are very proud of that. ECG, corporate responsibility is, of course one of the key agenda items for any company today. And we are happy also to flag this, how we've consolidated our thoughts in this very broad topic, mainly the patient safety and making sure that the medicines are available as those are needed. That's our top priority. Of course, we need to take care of the professionals who develop these, who manufacture these, who make the logistics and commercialize these products. We also work actively for the environment. We have good track record there. And of course, the ethics, that's in the core of everything we do. Later this spring, as normally, we will then publish our corporate responsibility report. But here are some of the highlights of that report, where we've made a good progress, but we are not there yet. There are still opportunities for us to improve. Our tax footprint is we pay the taxes where they should. And here is the tax footprint here locally in Finland. And of course, as the company performs well, then the society gets its fair share of the results. Now the COVID and how has that impacted in the overall our operations. I think the summary is that we've done fairly well under the circumstances. We've had no disruptions in production. Our professionals have been able to make sure with our partners that we have raw materials, intermediates, et cetera, available as those are needed. Our colleagues have been able to work. We have had no significant increase in sick leaves so that it would have impacted our operations. We've been able to secure the availability of medicines. Of course, there had been new ways of working, including the R&D, but no major delays in our programs. The supply chains continue to be under stress, even without the COVID. We see that the cost inflation is there for the time being. There are also operational bottlenecks. Certainly, just the availability, logistics is an issue. It's a global issue today. And of course, that means that we see huge and very steep cost inflation in logistics. Also, the intermediate and safety stocks, those levels have been more or less depleted over the past few years. And then the problem, of course, for this industry is that the passing on the cost to the prices is difficult, sometimes impossible. So that means continued work on productivity improvement. If we look at our growth target that we've set for ourselves for 2025 and communicated over the past couple of years, that means how we are going to achieve that is that we need to grow faster than the market. At the same time, of course, maintaining high profitability is one of the hallmarks of the company. We are a solid company, meaning that the equity ratio, we intend to keep at least at 50%. And knowing Orion means knowing a shareholder-friendly company, and we would expect to distribute at least a dividend of EUR 1.30 a share and increasing that in the longer term. So all of these financial terms are important. We need to balance them. And of course, they are dynamic over the time, some years, some occasions, some one of those might be more important than others. If we then look how we are going to achieve the target. Firstly, if we look at the right-hand side, that's -- it's skewed towards the end of the year. So it's back-end loaded. And that we already, at this time, say that the growth trajectory is not linear. The aims and means how we are getting there, of course, Nubeqa is an important asset that we have in hand, and we are plowing ahead with that with our partner, Bayer. Easyhaler, an important franchise, we expect that to give us a lot more mileage. We are growing in all our business units and, of course, looking continuously also new opportunities in in-licensing products to those. We are looking for geographical expansion and are continuing to plow ahead in our Asian expansion. And of course, then looking for broader portfolio acquisitions or M&A, that's also an option. There are unknowns still today. The ARANOTE study is ongoing for the new patient population. Of course, the tiotropium for Easyhaler is an ongoing program. And there are always potential changes in the regulations, including the pricing. There are some risks that have materialized. We know the Simdax and Dexdor, those have already faced generic competition, Simdax of a lesser impact so far. Stalevo is probably -- has phased and it's sort of stabilized in that -- where it's today, but we continue to face generic pricing pressure. Then if we look at the outlook for the ongoing year. So what we've estimated, the net sales to be at the similar level as 2021. And the same goes for operating profit. We estimate that to be at the similar level as 2021. And the key drivers that impact the outlook. One is, of course, on the net sales side is the Nubeqa performance of that. Then on the other side, on the negative side is the potential generic competition for Simdax and of course, Dexdor, which has already taken place. And all of these 3 items, they also, of course, carry on to operating profit side. There, the cost inflation is one of the items and the price competition, as already mentioned. And also, we expect that the cost level of our operations, including sales and marketing expenses, will resume back to the pre-COVID era as the societies around the world continue to open. With that, it is my great pleasure to thank you for your support for the past year. And we, at Orion, will continue to build well-being.