[Non-English content] . Good afternoon ladies and gentlemen and welcome to Orion's full- year 2021 earnings conference call and webcast. My name is Tuukka Hirvonen and I'm the Head of IR here at Orion.
In a few moments our CEO Timo Lappalainen this time exceptionally remotely due to the COVID situation will present you the results and the key events of the year, after which you will have then the opportunity to ask questions from Mr. Lappalainen and from our CFO Jari Karlson. We will be first taking questions through the conference call lines and after that we will take questions we will receive through the chat function of the webcast. You should see on the bottom of your screen a chat box through which you can send us questions. Kindly state your name and the organization you are representing before asking your question. Just before I let Timo to step in I'd like to draw your attention to the disclaimer which is shown now on the screen about the forward-looking statements.
With these words without further delay I'd like to invite Timo to join us remotely as said.
Thank you Tuukka for your kind introductory words and let me plow through the highlights for the financial year 2021. I think the headline kind of tells it that we performed very well despite the pandemic. There were many good news about our development programs. We've highlighted here a few. Before just before the holidays we informed about the primary endpoint being met in the ARASENS study. We also in the early part of the year have announced that we've initiated another ARANOTE trial relating to our Nubeqa prostate cancer agent. Throughout the year we received two approvals, European approvals, in our animal health business both for feline as well as for canine applications.
As we informed the market throughout the year just before the year-end, we made a selection and decided to continue our development program for the CYP11A1 inhibitor with our ODM- 208 candidate. In the beginning of the year, we initiated a new clinical development program for ODM- 105. There were new research-phase collaboration agreements, and especially one of those with Alligator Bioscience, we informed the market at mid-year. In terms of the business, Nubeqa, our prostate cancer agent, the sales continue to show strong growth as they should be at this stage of the development. The operating cost base was lower than we initially anticipated, and one of the key reasons, of course, was the continued pandemic.
We were able to acquire the rights for ganaxolone, a compound from our partner company Marinus, for a rare disease category initially and hope to introduce that to the market in not too distant future. Certainly, as in many industries, we are also facing the fact that the inflation is certainly creeping in and that we see the production costs are rising across the board, or operational costs, and especially in terms of the prescription sales in human side, those are very difficult to pass on to our sales prices. We still face the risk of availability of products, raw materials, intermediates, especially today we see the logistics cost not only rising but just the capacity to continue to be under stress.
However, so far we've been managing the situation very well and there have been no production stoppages or even changes in our schedules due to the lack of material and this we've managed apart from many other things by increasing the inventory levels. Of course the important element is that the board has today decided to propose to the AGM a dividend of EUR 1.50 a share. If we look at the numbers for the full- year, so certainly on the net sales, we were a little bit shy of the last year number, and on operating profit, even more so. Here, there are a couple reasons and we'll provide you with the bridge on this. Operating profit margin, we were unfortunately a little bit shy on our target that we've set for ourselves of 25%.
In terms of the cash flow, also there because of the working capital changes and also, the increase in, capital expenditure, including our down payment, to the canagliflozin rights, ate into that. If we look at the bridge for the net sales, certainly we've seen, throughout the period, and we informed that the Dexdor is facing, the generic competition, both in terms of the pricing and of course also in volume. Nubeqa continues to plow ahead in a very nice curve. With regard to Simdax, we did not yet see material competition in that, for that product, although we are aware that there are generics that have been approved.
Easyhaler then succeeded to make up for the shortfall in the early part of the year, and also we had gains in volume in other human pharma part. As we said last year, we've lost one of the main distributor arrangements for animal health, and that of course ate into the sales in that side. However, as we have indicated, the profitability of that contract is lower than the average. Last but not least, of course the royalties and especially the milestones, which were substantially lower in 2021 than in 2020. A similar story then if we look at the operating profit. Certainly the pricing environment continued to be tough for us, especially with regard to Dexdor.
Milestones, those were of course an important element why our profitability then declined. On the other hand, when we look at the fixed cost base because of one of the reasons being the COVID that made some gains in terms of the lower base, and that's how we landed at EUR 243. In terms of the revenue breakdown, Finland continues to be the largest single country market. Of course, the large big European big five, those are important for the company, including Scandinavia. As we remember, outside Europe, especially North America, we do not sell our own products, and in Asia Pacific, we've initiated activities in three countries in 2021.
When we look at these by businesses, at the specialty products, there was a small gain, but of course, because the base is so high, half a billion EUR, so there even a 1% makes a difference. In proprietary products, certainly we saw a decline driven by Dexdor. In animal health, as said, we lost one of the distributorship agreements. With Fermion pretty much at par with the previous year. When we look at the league table of the top products, Easyhaler continued to be the largest business for us, then followed by our Parkinson franchise, Stalevo, Comtess, Comtan, and then Simdax, our heart failure compound, despite showing decline, still continued to perform well. Nubeqa of course, the new introduction continues to increase and climb up on the league table.
I'd like to also draw the attention to the animal health products that continue to show good performance. Now if we turn to proprietary products and look at the key products there, this is the summary table. However, if we look at a little bit in the longer horizon over the quarters, how the sales have evolved. Here firstly, the Nubeqa sales, and these are the sales that Orion books for our products that are intended for commercial use, including the royalties that we received. So there was quite a step up in our income or our revenues from that base. As we see, there certainly are these quarter-to-quarter variations, and we would expect the volatility on the quarterly base to continue because the base number still is relatively low.
Many of you remember that the accounting for our revenue is both the sales of the product as well as the royalties and the timing effect of combining these is one cause for the volatility. Easyhaler, our largest franchise, after the first quarter, we were quite a ways behind the previous year 2020. When the year closed, we were at par, actually a little bit on the positive side in terms of the growth. There the key product continues to be our budesonide-formoterol, which not only continued to be the largest product in that category, but also continued to grow very nicely. The Parkinson franchise pretty stable.
As we've indicated, we would expect, you know, no dramatic changes in that because of course the product itself is indicated for chronic use. When we look at the numbers over the past quarters, it's been relatively stable. Dexdor, this is a product that has shown great volatility, of course because of its utility in treating seriously ill pandemic patients, and we've seen that. But also what we've seen is that since the patent expiry there are numerous competitors in the market and the price decline has also been steep in some markets. Overall, with losing one-third of that business, of course, took its toll on the total numbers. In Simdax, as I mentioned, we have seen no substantial or material competition in the marketplace.
There are some products where we've seen generics, but in anticipation of the new entrants or generic players, in some cases we've been forced to lower our prices. I'll flip over to our specialty products, which is our largest business. Here if we look at in Finland we were pretty much at par, which is our largest market. In Scandinavia, a little bit lower, basically there was some inventory build up during the 2020 and some of the inventory declines in 2021 as the inventory build up reversed. When we look at the growth in Eastern Europe and Russia, of course that was very strong.
As we split this in two categories, the prescription products and the self-care products are pretty even performance with those and would also like to draw your attention to the fact that the self-care products are about one quarter of the entire business in this. In Finland, which is our largest single country market, the entire market for the reference-priced products. These are the products, generic products, where there's a reference price. That market segment declined by roughly 4%, and Orion was able to increase its market share by five points. That of course, given the decline in the pricing, this was a substantial volume growth.
When we look at the overall pharmaceutical market in Finland, the reference-priced market, we were able to increase our market share by 2 percentage points. We are at 27% now, and in self-care products one percentage point, and in overall pharmaceuticals we continue to command an 11% market share. If we look at the future, what are the key clinical development programs that we have in the human side? Of course, the ARASENS that we've announced the top line results just before the holidays. We would expect that to be discussed in the forthcoming scientific meetings.
ARANOTE is currently recruiting, and then as said the ODM-208 is in phase II, and over the course of the year we'd expect that these data to be read out and then we'll make the next decisions to continue on that program. Our ODM-105 program, which we've initiated the phase I, we would expect that to be developed for treatment of psychiatric disorders, and that we expect that phase I to be concluded during the year. The Easyhaler franchise, we have already six products there and we are plowing ahead with this franchise and continue to develop new products to that platform with tiotropium and indacaterol, glycopyrronium all being the next products especially for COPD. Now, the sustainability agenda and our indicators, we formulated our sustainability in four pillars.
Of course, the patient safety is our top priority. That includes providing the medicines that we produce and market to the marketplace. Taking care of our professionals, that means Orionians. Of course, working for the environment in totality, and then having the ethics in the core whatever we do. Here are some of the sneak preview data from our corporate responsibility report that we will be issuing later this coming spring. Here you see that the audit situation has improved quite a lot, and we are back on track pretty much in the audit numbers as we were before the pandemic. Of course, many of these have been remote audits. I'd also like to flag that we have made nice progress also in our energy savings target that we've set for ourselves.
Of course, we also have to recognize that our injury rate is nowhere close where we would like it to be, and we are working very hard to get that at a lower level. Now, over the past couple of years, we've also indicated to the markets what we think would be valuable attributes, how when you look at Orion, how we are performing, are we making strides towards the future? Of course, Nubeqa has been one of the key items on that, and given the positive outcome of the ARASENS trial and also the launches in Europe in collaboration with Bayer, we can say that, you know, these indicators are on green. Easyhaler, of course, we would have liked to see stronger growth there.
We were able to meet the growth, so it was positive, but of course, we'd like to see stronger growth there. The development ODM-208 actually took place according to the plan, and we are moving ahead with that. Also in Finland, we continue to command a strong market share. In Scandinavia, of course, when we look at the numbers, we still have work to be done there. We have a good foundation, but there's still work to be done. We continue to license in products, not only the ones that we mentioned, the large ones, but we have a strong portfolio that we do all the time, and that's sort of the bread and butter business for us.
While we have been involved and continue to monitor the market, evaluate opportunities also for larger portfolio or company acquisitions, in that regard, there were no nothing to report at this time. Now, when we look at the 2022, the indicators that we'd advise you to take a look at that is of course the sales performance of Nubeqa as we book them. Also Easyhaler, we've set the target for us with a growth of more than 5%. Building the long-term future, of course, the continued striving in the in-licensing of new products to augment our own portfolio. Also, the entire product portfolios or even company acquisitions, we continue to monitor that market.
We've also announced that we are currently evaluating opportunities to partner ODM-208 for development and commercialization, and we hope that this progress or this process could be concluded throughout this year. That is also tied to the fact that we would expect towards the end of the year to be able to announce the launch of phase III trial for ODM-208. Also, to bolster our clinical pipeline, we would expect to have at least one new product or project in our clinical pipeline. Of course, we continue to evaluate also opportunities in our R&D in early development for the external opportunities. As always, we report the progress of those against our targets in our quarterly reports.
Then the outlook for this year, we would expect the net sales to be at a similar level as 2021, and the same for the operating level to be at a similar level as 2021. As last year, we also here open up a little bit the key assumptions that we feel are the important ones to impact potentially the outlook. One is of course the Nubeqa, the sales performance of that. Then the declines of Dexdor, we've seen the trajectory of that product so that we would expect that to continue. Simdax is a wild card. We expected the generic competition already last year to hit the product.
We understand there are multiple products that have received the approval either at the national level or in multi-country level, but as said, so far, there is limited competition in that regard. Also, of course, Nubeqa has a major impact in the operating profit, as does the sales development of Simdax and Dexdor. One factor that we or the entire industry or the world competes with is of course the inflation, and then the price competition in generics is a fact of life that we live with. The sales and marketing spending expenses of course ties in not only to the cost inflation, but also in our investments in for the future growth. Let me discuss a little bit of our growth target that we set for ourselves for 2025.
These are the financial objectives that we set for ourselves. One is of course that growth target requires us to grow net sales more rapidly and faster than the market overall. We believe this is quite possible. This of course requires continued investment in our portfolio in terms of the products, in terms of the markets. However, while doing that, our target is to keep the operating profit at a good level, and that threshold we set for ourselves at 25% of net sales. Also the balance sheet that we've kept quite solid over the years, here the target is equity ratio at least 50%. Orion is known for being a shareholder-friendly company by also distributing capital back to the shareholders in the form of dividends.
Here we said that our target is to distribute at least EUR 30 and increasing that over the long term. Bearing these in mind, our target for EUR 1.5 billion by 2025, we believe the financial targets that are here above, those are important. We need the balanced growth also. Of course, we have to look at also the timing of all of these events. I'll discuss that a little bit later. Now, over the years, as we've announced the target, we've had both positives and we have some negatives. Of course, the Nubeqa has done well, also Easyhaler, despite that we had a little bit setback last year. We've been able to license in new products.
We've expanded geographically most notably last year in Asia-Pacific area, and that work continues there. We've also repatriated Parkinson's products in Europe. We've also had some downsides. Our ALS program unfortunately did not work out. The generics pressure continues to be there. We lost also the major distributorship arrangement in animal health, and then the patent expiry. Those are, of course, part of life in pharma. Now what we have communicated over the years is that this growth is not going to be linear. We would expect that to be back-end loaded. This is a graph that we highlighted several times. The growth that will drive this curve is coming from the Nubeqa, Easyhaler.
Of course, all the businesses we would expect growth from there, including the geographical expansion. The licensing MMA, those are sort of the cherries and the cream, and of course, we are working on those as well. Those provide us a little bit insurance against this target or meeting this target. There are, of course, always unknowns that relate to the development programs and also the potential regulatory changes, including pricing. Some of the downsides, those have already either materialized, including the loss of patents or are, as we speak, including the price pressure. The upcoming events, the AGM, we expect that to be held in March, and then the first quarter report at the end of April.
With these prepared remarks, now I would invite also to the podium our CFO, Jari Karlson, and we are happy to take your questions. As Tuukka said, we are firstly taking the questions from the webcast telephone lines, and then we will follow up on the chat lines. Please.
Press zero one on the touchtone keypad. We have a question from the line of Harry Simpson from Credit Suisse. Please go ahead.
Brilliant. Thank you for taking my questions. My first one is a clarification on the Nubeqa royalty payments that you are logging. You've clearly explained the variation of Nubeqa income quarter to quarter based on the stock levels that you distribute to Bayer. You also report a separate group royalty income, which was EUR 24.3 million in 2021. My question is that royalty income also impacted by the stock that you sell on to Bayer? Because if it is or if it is not, then that EUR 24.3 million compares to around the EUR 220 million that Bayer have pre-announced, which would only imply around an 11% royalty rate. I just want to understand about the ramp-up in that royalty rate to that 20% level that you previously communicated to us.
I'll come back for further questions.
Okay. Jari, you wanna take this.
Yeah.
Since we've been going through this several times.
Yes, I can. It's a little bit complicated, but maybe one thing to start with the clarification is that as we have indicated, this 20% is the average of during the first years of the product in the market. We have indicated also that it's a tiered royalty, which means that at the beginning it's a little bit below 20%, and over the time as sales growth, it goes above the 20%, which basically means that currently the royalty rate is slightly below 20%. Coming to the methodology of calculating the royalty. Orion's only income is the royalty. How it is booked is slightly complicated. We produce and ship the materials to Bayer and invoice them with transfer price, and that we booked as product sales.
One quarter later when buyer does ask the royalty calculation, they deduct from the royalty the value of the shipments we did to them during the previous quarter. That generates certain variability at least at this early stage when the inventory levels are still being built up as the product sales increase. That means that when there are large shipments in one quarter, and then lower shipments in the second quarter, it means that the amount value which is deducted from the royalty varies quite a lot from one quarter to another.
It also, of course, means that towards the end of the year, the full- year royalty doesn't totally represent the end market sales Bayer has booked during the whole year because we basically receive the final royalty calculation for 2021 only during the first quarter of 2022. That explains that the numbers that you take, what Bayer is reporting, you cannot exactly compare it to our royalty plus product sales number. Ultimately our product sales plus the royalty is what one should compare with the Bayer sales and then taking into account that the royalty rate is currently slightly below 20% and there are these variations from one year to another because of the timing of the royalty reporting.
Brilliant. No, that's very clear. The royalty income is impacted by the stocking to Bayer. I then have three further questions. The first one is on the generic segment. You reported a high single-digit growth in the fourth quarter there. Can you maybe give us an update on what was driving that and then also the dynamic for generic pricing in Scandinavia and if you're able to offset any of the cost inflation you're seeing in the cost of goods for that segment? My second question is on Easyhaler, which you saw strong performance in the fourth quarter. I think you mentioned there were deliveries to partners in that. Is that strong performance more a catch-up and stocking rather than a reflection of the in-market sales dynamics?
My third question is on your 2025 target for EUR 1.5 billion sales. Clearly if you're expecting organic sales to be relatively flat in 2022, you've already mentioned that you expect it to be back-end loaded, but clearly we'd expect that it implies a high contribution from M&A in those targets. Given that you haven't been able to meet your M&A targets in 2021, just want to get an understanding of what you're seeing in the market in terms of the availability of deals that you target and also if you are looking to change your approach to M&A if you're not currently hitting your targets. Thank you.
Thank you. Excellent questions. Let me try to address these first and then I'll invite any further comments from Jari if I did not address these properly. Firstly the generics growth and the drivers thereof. Clearly we had a strong fourth quarter performance towards the end of the year, especially in Finland, also in Scandinavia. The inventory reduction that we expected to hit fourth quarter did not take place at least in the full force. I think also we are now in the era when we see that clearly the consumer or patient it's much more difficult to forecast when they will pick up their scripts as in the earlier, especially if there are maybe not lockdowns, but even semi-lockdowns in the countries.
It is clear that one of the key reasons why we have been able to gain market share is actually our product availability. The products in this category, having those available continuously is one important competitive factor, and we've been able to meet that. If I'll continue to Easyhaler, I think in Easyhaler, certainly we started to see the pickup of Easyhaler business already towards the second half as you can look at the numbers of the bars, how those have evolved. Certainly of course there are catch up by everybody, because you don't know how your inventories are going to perform, how the patients are picking up their scripts.
Overall, we continue to see the demand for Easyhaler to perform, and that's why we set as our target for this year to exceed the 5 points there. The third question on the M&A trail. That's true. We have not been able to meet that target. This is also to say that we don't have. The money is not burning a hole in our pockets. We want to also exercise financial discipline when we look at the opportunities that are available. We think that there are still opportunities. The market for M&A, as we all know, it's very, very competitive. However, there are opportunities for companies such as Orion. Of course, there are certain areas where we are much more focused on in our search.
If we look at, I think we feel very comfortable about the approach. I think we have a solid pipeline of opportunities that we continue to evaluate. Last year also the AGM for the first time maybe ever provided or gave the authorization for the board to issue stock if that was needed for any transaction. We'll continue to monitor the opportunities, but continue also to keep our financial discipline as we have in the past. Jari, anything that you want to add to my comments?
Maybe one thing I think, I mean, there was also a little bit of question of the capability to increase prices in the generic side to offset the costs. I think unfortunately, especially here in the Nordic markets, so far there has not been any signs of the market pricing decline to stop. Just to remind that this is not really a market where the government sets the generic prices. It's basically the competitive situation. There is this tendering type of situation where all the players provide their prices to the market. Then you have the reimbursement system which allows people to get reimbursed if they pick up the products which are towards the lower end of the pricing range. Like last year, we saw still quite heavy price decline in Finland.
Of course, the cost inflation will hit all the players in the marketplace and time will show whether that will start limiting the willingness of the various players in the market to decline their prices. So far, we haven't really seen the signs of it and it's very difficult to predict. I think at best we see a lower decline in the prices or even stable prices in the best possible situation. To increase the price is to offset the cost. I think currently we don't probably see that very likely scenario.
Thank you, Jari. If I may continue here, there is also a question that do we have an opportunity to lower our input costs and given the inflationary environment where entire globe lives, I think that at least today would be an unreasonable assumption, at least in the short term. Also, given the fact that we see the logistics costs as going through the roof. Of course, they are maybe a minor portion of the cost in the entire cost block in the pharma. Nevertheless, I think they are one indicator of that.
Brilliant. That's very helpful. Thank you.
Our next question comes from the line of Sami Sarkamies from Nordea Markets. Please go ahead.
Okay. Hi. I have four questions starting from the guidance you have provided for this year. Are you clarifying that you're not assuming any material milestone payments? Are you, however, assuming a similar amount you had last year? Secondly, can you also please elaborate on the magnitude of the Nubeqa sales milestone that may hit this year or then most likely next year, if not this year?
Okay. Jari, you want to take the first guidance, I'll take the Nubeqa.
Yes. As we indicated, no material milestones are included. As you saw last year, we had EUR a few million and partly that milestone even came from the allocation of earlier received monies over the years. When we license out some of our products, sometimes the IFRS rules require us to put them in the balance sheet and then release to the milestone payments over the year. We have EUR a few million of those a year. Then we had some very tiny ones on top of that in 2021. The assumption included in the guidance currently is that we will get those type of milestones. If we get something else, for example, the ODM-208 partnering program, then we need to evaluate that situation and see what the impact of that could be to our guidance.
The current guidance of similar level to last year doesn't include any major milestones.
Then a follow up turn over to the question on Nubeqa sales milestones. As we've indicated, we are to receive one-time milestones related to the certain performance, sales performance of Nubeqa in the marketplace. As we've indicated or stated in our release for us, given the fact that we are not the final selling party to the market, it is impossible for us to estimate and predict when that might take place. Subsequently, there are no such milestones included in our this year's outlook and as we do not we provide only the ongoing year outlook it's too early to discuss about the next year's.
Yeah. In terms of magnitude, are we talking about tens of millions EUR for these sales milestones?
At this stage, we have not disclosed any details about that. I think when we will make that disclosure, it's probably we need to make that to the market in totality.
Okay. Moving on ODM-208 and TO8, you sort of highlighted plans regarding a phase III study, I assume within prostate cancer by the end of this year. What are your plans regarding other potential indications, like breast cancer?
Given the nature of the product, certainly the first indication and the primary one for this type of mechanism of action would be prostate. We think that the breast cancer is probably at least it's not in the cards as a first indications, and this was in plural. It's really down the line. We think the first ones would be prostate. There may be some other minor indications, but at least so far, our understanding is that the utility of this agent in the breast would be much more limited and far higher risk than what we've seen in other hormone-related indications such as prostate.
Okay. Thanks. Moving on to ganaxolone, where you didn't get the fast track status in Europe just recently. Just curious, how does this impact the timing for the European launch? You know, will that still happen during this year? You know, will that also influence your sales and marketing costs during the second half of the year, maybe pushing those forward?
The overall delay in here, one can look at that from two perspectives. One is that, given that we have now a little bit more time to also prepare ourselves, including the market access, which is very tedious and time-consuming process, we are a little bit more relieved that we have time for that. I think that allows us to better prepare for the forthcoming launch. Now, the question for the cost side, I think there will be some costs that will be pushed, maybe some amortization-related cost. Overall, especially the sales and the marketing cost, those are probably not material that will be pushed over to 2023 because the marketing and preparing the market access, that work continues.
It's a fairly limited cost that can be pushed over to 2023 in that respect.
Okay. You're still preparing for a launch by the end of this year?
We'll see how that will take place, whether that will be in the last days of this year. Does it make sense or should we actually wait over the holiday season to pass till 2023? That's unknown as of today, and we'll probably need to update the market as we have more clarity on the overall approval, including in some cases, the pricing processes.
Okay. My final question would be on the sort of generics outlook where you're indicating flat sales this year with volume growth offset by cost sort of cost pressure. Can you give us a sense on what kind of price erosion you're sort of expecting this year?
Well, historically, it's probably been over the last years between 5 and 8 percentage points in that arena. A little bit depending on the category, but on average in Finland. To offset that, of course, that means fairly substantial volume growth.
Okay, thanks. I don't have any further questions.
We have one more question from the line of James Vane-Tempest from Jefferies. Please go ahead.
Hi. Thanks for taking my questions. I have three, please. Firstly, just to revisit some of the other questions, you know, talking about 2022 to 2025 is not going to be linear. Just wondering if there's a point where guidance needs revisiting if the gap requires more sizable M&A to get there. The second question is just on the dividend. EUR 1.5 is above your minimum of EUR 1.3. I guess you're now paying out more than your minimum at a time when investors, certainly from feedback we've had, would like to see lots of investment in the business.
I'm just wondering if this is this because there's a lack of suitable investment opportunities with what you're seeing, or is it increasing confidence within your existing portfolio? And my final question is just on your 2022 outlook. From the slide you've got, you know, it's essentially Nubeqa offsetting a number of headwinds, which you've highlighted. Given this materiality, is there anything you can share with us on either seasonality or stocking or your assumptions? Is inventory being built. And you know, also you're assuming your SG&A expenses are returning to normal as we emerge from the pandemic. Thank you.
Okay. If I'll take the couple first ones on the M&A and dividend and then, Jari can address the 2022 guidance. On M&A, as we've said earlier, we feel that the M&A, including the portfolio acquisitions, should a suitable opportunity present itself, we are prepared to move. There's no question about that. We have a number of projects that we are following up. But of course the financial discipline as we have our financial targets, we want to maintain those. Do we need M&A? Probably it will not hurt. It will give us insurance, as we've said, against or for meeting the 2025 goals. Will we at the end of the day need that? Remains to be seen.
Of course it will give us a little bit more headroom. This is not to say that we'd need a transformational transaction to meet that goal. I think we are anyway. That's sort of an insurance matter. Turning to the dividend question. Of course, you know, maintaining the dividend is a signal from the board that they have a confidence in the company's performance. On the other hand, if you remember when Orion divested Orion Diagnostica, and at that time we booked quite a substantial capital gain in that divestment.
Since that, we've communicated that gain will be distributed to the shareholders in the form of maintaining dividend payout stable despite the fact that we already at that point saw that there's a potential for a dip in our profitability. Now we are bridging that gap with among those dividends that gain. Last year we did not need that because of the performance of the company, but that is something that was already planned at that time. There is from that perspective it's no news. With 2022 guidance, Jari, you wanna address these multiple points that were raised?
Yeah. Starting from the sale. As we have discussed today already, the basic idea is that we will see decline in Dexdor and Simdax and growth in Nubeqa. The Nubeqa growth is very much driven by the development in the market or the expectations and the guidance Bayer has given to us. The fluctuation, quarterly fluctuation generated by the product shipments versus the royalties of course can have some impact on the full-y ear numbers, but not really as much as it does between the quarters.
Basically the assumption there is that we will see healthy growth in the in-market sales of Nubeqa, and that will be reflected in the royalties and the share of the royalties compared to the product revenues continuously will get bigger and bigger as the product grows. That's basically the planning there. Not that much really variability from one year to another based on the stocking effect. It's really driven by the development of the royalties. In the SG&A expenses, we probably will see some growth. Of course, already a year ago we predicted that towards the second half of 2021 we would see an increase in SG&A expenses when the COVID restrictions are gone. Of course that didn't really materialize.
Now we again are in a little bit similar situation that the world has not fully opened yet. As you see news coming from one country and after another, at least in most places around Europe, countries are trying to do that. That of course means that we can start opening up our operations more and more. On the other hand, there are some other things. Of course, we have need to evaluate how we sell our products after learning to do it virtually in many cases and so forth. Anyway, the assumption there is that we will see increase in the sales and marketing expenses, not that much in the administrative side and R&D expenses, relatively flat compared to last year. That's basically how the cost base is expected to develop.
Some growth, but nothing really major increase is expected there.
Thank you. As there are no further audio questions, I'll hand it back to the speakers.
Thank you, operator. Just as a reminder to the viewers that you may send us questions through the chat box on the bottom of the webcast stream. We have a few ones from Iiris Theman from Carnegie. Thanks, Iiris, for the questions. We can start with two COVID-related questions. The first one is, Do you expect COVID-19 to boost your Dexdor sales in the first half of 2022? The second question related to COVID is, And what about specialty products? Do you expect any positive or negative impact from COVID in early this year? I think with regard to the Dexdor, I think it's fair to say that given the trajectory that we are following now, that's likely to continue. There may be some quarter-to-quarter variation.
We see some countries where the Dexdor shipments have picked up, but in overall the generic pressure that we've seen, we expect that to continue and as such, in overall, absolute terms, highly unlikely that we would see growth and we have not planned that in our numbers. In terms of the generics, I think in most of the generic products that we supply, those are for broad indications, for chronic use. Of course, there are some OTC products that are maybe for more discrete use, but for chronic use and there the patients as soon as they have the opportunity to visit their physician and get the scripts filled, they are likely to visit pharmacies.
As we've seen in, I think the best case would be 2020, there was a huge surge in the sales, but then it leveled off. As the use of medicines still at the overall is likely to follow the large trend and, I think in the annual 12, rolling 12 month basis it will be very hard to see that there would be any material pickup in the SBP over the trend line what we've seen due to the COVID.
Thanks, Timo. Going forward, Iiris has a follow-up on the guidance and actually the missing of any major milestones. Iiris questions are does this mean that you don't expect your partnering negotiations to be completed this year or at least in the first half, and that you don't expect any sales milestones from Bayer?
For the first part of the question, the answer is, we absolutely do expect that we would be able to conclude our discussions with potential partner candidates this year and conclude the arrangement. Just because it's such an early stage it would not be prudent to give any number 'cause it depends totally on the structure of the arrangements. There are many components, many financial components or components that one could put value to. As such, this is too early to provide guidance on that 'cause we just simply do not know 'cause it really depends on the parties coming together and what are the different interests and how to align those. The second part of the question, there are no Nubeqa milestones in our outlook.
Thanks, Timo. Still couple of more from Iiris. Can you give any color on your current M&A activity and are the price levels the reason why Orion hasn't been able to make a deal in this area?
Well, of course, valuation of assets that's always a question, but it also depends of course on the opportunity that the opportunity presents itself. I think in our case when we look at these opportunities in different arenas, be that in specialty products, be that in some cases in more towards proprietary or in animal health products it takes two to tango. There may be some opportunities where the seller is not time-wise maybe prepared to consider. In, of course, in some cases where it is a true auction and these are quite frequent these days, and if the seller is interested in selling to a financial sponsor, so that means private equity.
With the private equity given their financial structure and their how they view the future and the longevity of their investments it's not easy for a strategic buyer to compete in that environment. Having said all that, we have quite a interesting opportunities that we feel would be suitable to Orion. As said, as of today we have nothing to report on that front.
Thank you, Timo. We have no further questions through the chat lines. It might be that it's very busy results day here in Helsinki and also in the pharma and healthcare sectors. I will turn once more to the operator whether there are any follow-ups on the conference call lines.
We don't have any further audio questions.
Thank you. I guess it's time for us to wrap up this time. Thank you, Timo for joining us remotely and Jari being here on stage. The next time we will actually hold the AGM on the 23rd of March. Due to the COVID situation it will be arranged in a special way like last year, so no attendance at the event. Only electronic voting beforehand will then take place. Hopefully we can see you there then on the webcast and also there we will have then after the AGM a Q&A session for the shareholders. Unfortunately for all our foreign viewers that event will be held only in Finnish. Until that time we all wish you a good spring, stay healthy, and see you in March.
Thank you.
Thank you.