Good afternoon, ladies and gentlemen, welcome to Orion's earnings conference call and webcast for the financial period of January-September 2020. My name is Tuukka Hirvonen, and I'm the head of IR here at Orion. In a few moments, our CEO, Timo Lappalainen, will give a brief presentation on our results, after which you will have the possibility to ask questions from him and also from our CFO, Mr. Jari Karlson. Due to the COVID-19 pandemic situation, we do not have a live audience here today, but you may post your questions either through the webcast tool by typing it on below of the screen, or then if you are attending through the conference call lines, then you just need to ask the permission from the operator to pose your question. Kindly, please state your name and the organization you are representing before asking your question.
Just as a reminder before I let Timo step in, the disclaimer, which we typically present in the beginning of these briefings. Now, without any further delays, I would like to give the stage to Timo. Timo, please.
Thank you, Tuukka. Let me kick off the first three quarters of 2020, what we've done, what are the highlights, and then kick off the discussion with our CFO, Jari Karlson. Orion has done a lot of work to prepare for the continuation of COVID-19 pandemic. We appreciate that in many countries, we are experiencing a second wave, and so far things at Orion have been good as far as the health of our personnel goes. However, of course, maintaining the health of all the Orionees, that's paramount and that is required that we can continue to supply the products those needed. We've also taken additional steps, including increasing our inventory, which is visible also if you briefly scrutinize our balance sheet, you notice that the inventories have been increased, and this is by purpose.
For the first three quarters, our net sales grew slightly due to the net sales growth, also the favorable product mix and the lower expenses as the activity level in certain functions has been lower than the previous year. That meant that the net result is that the operating profit increased. The setback was, of course, for the ALS patients, their caregivers, as well as the society and the company, is that our study ODM-109, the big study of REFALS aiming for the approval of the product for treating ALS patients, unfortunately did not meet its endpoints. We've also had successes. We published new data on ARAMIS study, which is the legacy study, pivotal study for the approval of darolutamide, in most markets called NUBEQA, and these data were published in the New England Journal of Medicine.
We've also announced that we had cooperation negotiations regarding the renewal of our R&D organizations. Those negotiations have been recently then concluded. Of course, now as we lost a product opportunity, 109, that means that we will put more emphasis on other product opportunities that are either already approved or are still in the clinical trials for, and to grow the company to the goal of EUR 1.5 billion. Of course, Easyhaler product line, that is there as of today. We have additional Easyhaler products in the pipeline for treating COPD. Our darolutamide, in most markets called NUBEQA, that product is being studied for further indications. Should those studies be successful, of course, that will increase then the product opportunity for this product. Our Animal Health business continues to deliver also new product opportunities.
Some of those are still waiting for data, but many of them are already close to hitting the market. Of course, we continue to also look for external opportunities, be that in licensing across the board and also looking for product acquisitions. Of course, we are also looking for company acquisitions that would fit in our business model. We've already announced and actually told the market that we have plans and some of those are already realized, especially in Southeast Asia, where we have initiated commercial operations of marketing and commercializing our own assets in Thailand, Singapore, and Malaysia. There's the other side, which is of course, there are risks that one should be aware of, and those relate, of course, to the patent expires, which is the name of the game in our industry.
The most latest one for us is Simdax product, which we've announced also continuously updated the market on the situation as far as we are aware of the generic situation, and we expect that there will be generic competition to this product. However, the impact of that will not be material this year. Of course, the pricing pressure that we all know, and as we move forward with the austerity measures, as the pandemic eats into the various national economies, I think it is prudent to assume that this will not, at least, go away. Of course, the competition is there as in any industries. Then, which is specific to our industries, of course, is the risk with all the R&D programs.
In terms of the COVID-19, of course, as I said, the most important for us is to secure, as far as the company can do that, the health of all the Orionees. Only by doing that, we can secure the continued supply of the product to the market, take care of the patients in clinical trials. As we've noted earlier, we had a spike in demand in March, April, and there was a hoarding effect also to that effect. Now that has more or less leveled off, and in some cases, we had little bit in the summer months, we had slower months as those inventories were eaten up and depleted.
When moving forward, we are happy to note that the disruptions in supply chains, be that logistics, be that operations across the planet, we seem to have much less risk for those operations, especially as far as it goes to the end of the year where the outlook is valid. We've also taken our own steps to secure the supply, and one of those immediate effects have been the increase of our inventories. There has been, of course, some delay in R&D programs, especially if that deals with patients who need to visit hospitals and phase I trials or some more severe trial patient populations. Of course, that would be affected. So far as said, so good. Summary of the key numbers for the first nine months. As said, net sales increased by 6%, so EUR 823 million.
Operating profit EUR 246 million with a substantial increase of 24%. The operating margin surpassing our target, which we announced of 25%. With 30%, we are north of that, and also strong cash flow during the period of EUR 1.52 a share. The waterfall of the net sales as we look at the two nine-month periods. The exchange rates, those actually ate into our sales by EUR 11 million during the period, which is fairly substantial number. Parkinson franchise, we had an uptake there as we discussed already in the first half results. As we've increased inventories, there have been some transition and transfers of inventories from one partner to another, and also in some cases for our own sales operation in Southeast Asia. That has increased some of the inventories with partners and subsequently our supply. Easyhaler doing strongly.
For the first time, we also put here NUBEQA as there have been a substantial number of questions relating to that and this time NUBEQA did not make the top 10 product, but we want to flag the product sales and the royalties. The NUBEQA sales that we report here is essentially this royalties plus then the supply of the product for commercial use for Bayer. As the math goes that we actually at the end of the day, it is the royalty where the supply of the product is subtracted and the net result is only royalties, there will be substantial variations to that number, especially when we are still in the launch phase. The reference price situation here in Finland has somewhat eased the pressure on that as we have experienced substantial decline on that pricing for several years.
Now we seem to be easing on that. We had a substantial additional sales on other specialty products and also in some other products as well. On royalties and milestones, and those are of course an important number as those flow directly to the bottom line, we had a negative effect there of EUR 8 million compared to last year. When we turn the side to the operating profit, the product sales and the margin of the product mix, those were certainly the major contributors for the increased profit. Exchange rate, as said, fairly substantial number, EUR 1 million a month. Also the milestone royalties substantial number there as well. The fixed cost we had some improvement there and this was slowing down the activity level as I think all the organizations have experienced that especially in terms of the travel.
The geographical breakdown, no major change there. Seems like Finland is a little bit lower number than has been over the years and the other regions have grown. When we look at this chart on the right-hand side here, the only region experiencing decline is North America and this is mainly due to the substantial milestone that we received last year. All the rest of the regions recorded very nice growth. When we look at the portfolio from the product perspective, the specialty products, which is our generics, had a nice run as well as proprietary products. Animal health, substantial growth over the period. Also Fermion and contract manufacturing experienced growth over the period. The league table of the products. Easyhaler continues to plow ahead and being our largest franchise, followed by Parkinson franchise, Stalevo, Comtan, experiencing strong growth.
As we said, that is now partly inventory build-up with our partners. Simdax at about par, and then we will look at a little bit more on the Dexdor, it is declining. There was a substantial peak on that, but now we are pretty much following the trajectory that we, in the beginning of the year, also estimated. Animal health recording nice growth. We see spot number nine, the biosimilars, substantial decline there as we lost some of the tenders for that. As we've indicated earlier, the profitability of that business is below company average and has a lower meaning for our profitability. I move over to the proprietary products, and there we see the numbers that we looked at, and the especially growth numbers for Easyhaler, which is naturally for us is an important part.
Also we have to remember that the Parkinson's franchise continues to be a very important part of our business, despite the fact that it's been off patent for many years already. Here, the Easyhaler product, and of course there the major growth driver in that franchise continues to be budesonide/formoterol Easyhaler combination product with 24% growth over the period. Also the other portfolio continued to grow with 6%, which is a nice growth in a mature market. In Parkinson's disease product, the deliveries to partners, so that is mainly, as I said, stockpiling. The own sales growth, that is we've taken over the business from our longstanding partner of Novartis here in Europe, and that still has an impact for this period. Also now, not yet shown really in the numbers, but as we move forward, also the business in Southeast Asian three countries.
The Dexdor on the left-hand side chart here, we see the spike in that demand for the first and second quarter of this year. Even if we split the first quarter in two parts, we'd see even a more dramatic number there. It was really in the second half of the first quarter. Also the second quarter, we saw an uptake on that, but now we are back to normal and seems like the market has stockpiled the product. Our competition is back online, so we are following the trajectory that we initially thought for this year. Simdax, somewhat seasonal variation, but we have to remember that the Simdax product will face now competition as we move forward. However, the impact of that for this year is not expected to be material. Moving along to specialty products.
This is the product sales of our generic prescription products, also our non-prescription products, so self-care pharmaceuticals and non-pharmaceuticals, as well as the small part of biosimilars. If we look at the pie on the right-hand side, we note that the generic prescription products, I mean, those are the bulk of this business. The business, by far the largest country market is Finland. However, Scandinavia is an important market, and the number here on the left-hand side panel here, where it shows a negative growth for Scandinavia, is mainly due to the loss of biosimilar tenders. The underlying business continues to perform strongly there. Finland also went ahead this period as well as Eastern Europe and Russia, which is just a little bit smaller business.
In Finland, the reference price market is the important market, and that market leveled off during the first nine months. We saw there the hoarding effect, but that has now leveled off. We were able to grow in that period a little bit faster than the market, but basically we are pretty much at par there. We look at this nice chart, what is this overall situation in the market here in Finland, and as earlier, we've broken down for your convenience, our sales to self-care, reference price, and others, and also show you the market share. We continue to hold good market share in reference price products, about 1/4.
Same in the self-care products and overall market share continues to be at that 11%. Moving to research and development, here you see the table of our key clinical programs. The tiotropium for Easyhaler is moving along. Darolutamide, that would be the ARASENS study that as well is fully recruited. We earlier informed that we expect to see the headline results next year. We have a couple other next oncology assets that we've already told the market that we do not expect to continue the development of these assets by ourselves, but are looking for partner for these and the 207, which is a BET protein inhibitor that has completed the phase I trial. 208, our CYP inhibitors, and 209. Simultaneously, we have a strong interest in continuing the development on those and hope to announce their next steps soon.
When we started out this year, we told that how we are following ourselves. Are we making progress towards our targets? Of course, one of those key targets is the sales number EUR 1.5 billion and the commercialization of darolutamide is there in the center. The ARASENS trial, of course, is fully recruited and we expect that to report next year. We've seen the first commercial sales both in Japan as well as in the European Union. The REFALS study for ALS patients, the product opportunity ODM-109, unfortunately did not meet its endpoints. Subsequently, we do not have plans currently to set up our own commercial footprint in the U.S. The situation in Finland is of course very important for the company. We are a clear market leader here and have been able to either maintain or expand our market share.
Easyhaler franchise continues to plow ahead, strong growth there. Then looking for new opportunities that would then break the ceiling for our press release or stock exchange release. We do that all the time, but any single deals that would be maybe worth mentioning, that work continues. Of course, the sustainability continues to be on everybody's lips, and only by caring for our people, maintaining the safety and our people healthy, can we then also continue to supply the market, can continue to take care of the patients who are enrolled in clinical trials. We've taken, of course, number of measures to that effect, be that segregation, be that protective measures in the company, in the commute to the company, or be that when we hold internal meetings or of course, also then remote work. Also we are running virtual audits.
Of course, today traveling is somewhat complicated, so we see also that taken care. We are prepared should the need arise, we are prepared to step on the plate. As we did in the springtime, we actually had to prioritize certain production and should that be needed, of course, we will act accordingly. We updated our outlook earlier this week, and now the updated outlook for the ongoing year says that we expect our net sales to be at a similar level or slightly higher than 2019. In terms of the operating profit to be either higher or clearly higher than 2019. In terms of Orion diary, the full year financial statements will be released on February 9th, and then the AGM has been planned to take place on March 25th.
At this time, we will open the web lines to questions, comments you may have, and I invite also our CFO, Jari Karlson to join me here to the podium to take any questions you may have. Please.
Thank you to the participants on the phone. If you do have a question, please dial zero one on your telephone keypad now to join the queue. If you find your question has been answered before it's your turn to speak, you can dial zero two to cancel. Okay, we have a few questions coming through on the phones. The first one is from the line of Jo Walton at Credit Suisse. Please go ahead. Your line is open.
Thank you. I've got a few, please. Just to clarify on NUBEQA, in the nine months you had EUR 11 million of income, of which royalties and milestones were EUR 8. Could you remind us what milestones you would have had this year? Do we then just do the simple arithmetic and assume that EUR 3 million or so was your product supply to Bayer? My first question, my second question is looking at costs going forwards for next year. In the slides, you talk about EUR 6 million of reduced fixed costs in your very helpful slide. If I look at the same slide for the first half, that was only EUR 1 million. You seem to have been able to do quite a lot with fixed costs. We're really trying to think of what we should be thinking of in terms of cost structure for 2021.
Are there costs that you've been able to take out that you think will stay low and therefore you'll be able to have a materially higher margin going forwards? One other product related question, please. Domitor, the animal health product, went up extremely a lot, 100% in the quarter. Is there anything, just in terms of timing, do we assume that that goes straight back down? It was just 4Q sales were shipped early. My final question please is on R&D. You have said in your guidance that R&D should be about flat for the year, but it was materially down in the third quarter. Just wondering whether some of the delays that you have alluded to with COVID-19 will mean it's actually quite difficult to get to that flat for the year, or whether there will be a strong rebound in R&D expense in the fourth quarter.
Many thanks.
Okay, thanks very much. We'll split the questions maybe so that if, Jari, you'll take the NUBEQA sales, maybe Domitor as well, because you're responsible for animal health, and I'll address the two others, cost and the R&D.
The EUR 11 million we talked about NUBEQA, that number doesn't include any milestones. All the NUBEQA related milestones were the ones which we booked already earlier this year, the EUR 28 million for the approvals in our first commercial sale in Europe and Japan. That was already during the first half of the year. The EUR 11 million, like Timo explained in his opening words, is divided accounting-wise to two lines. Part of that is booked as product sales and part of that is booked as royalties. That's only the timing question because the arrangement with Bayer means that what we ultimately get is the royalty, which then includes the product sales.
As we ship the product, we book it to the product line, and then in the coming quarters, when Bayer is then finally making the final royalty calculation, then they deduct the value of the product we have shipped to them. The end result is only the royalty. There is certain, especially now during these early stages, when there are products both put into the launching inventories and so forth. There's a little bit of timing variance. There is more variance between the quarters as we book record to sale as is the case in the market sales. Out of this EUR 11, part is royalty and part is booked as product sales, but ultimately it all will end up to being according to the royalty percentage.
The fixed cost development during this year definitely has been impacted by the COVID, especially the sales and marketing cost. The reductions there compared to last year is very much related to the fact that people, for example, cannot really travel at all. All kinds of conferences and other promotional events like that have been postponed or canceled for this year, that has definitely reduced the costs. Those are the main elements why the costs are down from last year. What will happen next year remains to be seen in these areas because, of course, during this type of a period, you can reduce the cost burden at least temporarily without hurting the development of the business. It's of course very questionable whether you really can do that in long run. You were asking about the R&D cost.
I'd say that pretty much we are at the same level as last year at this stage. There is a couple of million variance, that's pretty much rounding. As far as we can see for the time being, we are at the same level as last year in R&D. Expect this to continue mostly towards the end of year as well. When it comes to the animal health sedative sales, there is a lot of variation typically based on the timing to the deliveries to partners because our own in-market sales, what we are doing in our territories, mainly in the Nordic countries, that's only very tiny part of the overall sedative business. Mainly the business are deliveries to partners, especially to Zoetis in U.S. There, they typically don't buy the products same amounts on every month or even every quarter.
Based on their logistics planning, they sometimes buy a little bit more, sometimes a little bit less. Now during the third quarter of this year, they ended up ordering quite a lot of more material than last year. When one looks at the full year sales for these products, we are relatively close now to last year's numbers. We were very much behind during the early parts of the year and now it has leveled off.
Okay. Our next question comes from the line of Peter Smith at Bank of America. Please go ahead.
Hi, it's Peter from Bank of America. Thank you for taking my question. My first question is on the COVID impacts that led to the guidance upgrades throughout the year. To what extent might the trends continue into 2021? Also longer term from COVID, you mentioned potential austerity measures that could potentially lead to pricing pressure as countries look to bring down their healthcare costs. Have you got any indications here, any discussions or any signs of this? What could this do to how far away you're going to be potentially from your 2025 EUR 1.5 billion target? Would that intensify your focus on inorganic growth, or perhaps focus on your current products? Could you be a bit more specific on what products could potentially be boosted currently? Thanks.
I'll start to cracking this. Jari, you'll chime in. The impact on the guidance as we've said that the guidance change that we did had twofold. Of course, the first was in the first half of the year, especially end of first quarter, beginning of second quarter, was the spike in demand especially for Dexdor, as you saw that also in the graphs. When you look at the trend line, there were two outliers, first and second quarter in those. That, of course, had its impact also that we had the plants fully loaded to cope with the hoarding effect pretty much across the portfolio for a period of time. That's one impact.
The second impact was that now as we move forward, and I'm not saying it would be too naive to say that the situation is stabilized, but at least from the logistics supply chain perspective, for the ongoing year, we do not expect any more material disturbances with the supply chain issues as far as getting material from external sources to Orion take place. Naturally, we've increased the inventory in the course of the year. Also, the material as it goes to the products that we sell as ready-made products, but also the components inventories have been increased. Now, what's going to happen next year, I'm happy to hear anybody's thoughts on this. I think none of us should be surprised if the COVID situation with waves continues to play a major role in our daily lives next year.
How that will turn or impact the business, at least for the time being, we do not see any impact of the second wave in our current business. That's absent, be that in the broad portfolio or be that for the products intended to be used in intensive care setting. Addressing your second question is our target of EUR 1.5 billion, what means do we take there? We continue to plow ahead with the products that we already have, and there, of course, NUBEQA by no means is a very central element to that, and there we are working hard with our partner, Bayer. Also, of course, the Easyhaler product line, which is growing nicely. That's why we are putting more efforts in there also in terms of R&D coming up, hopefully, with a new Easyhaler version, tiotropium there.
We are also, as I think rightly mentioned, putting efforts behind external opportunities, be those licensing opportunities across the R&D spectrum, all the way to the products that are already marketed, so approved products or portfolios that would fit our or companies that would fit in our business. Of course, in today's environment with the sub-zero interest rates, that means that the valuations on many assets have been quite a lot inflated, and you have to be very careful that you don't run into buyer's remorse here. We continue to push ahead that. There was a specific question on the reimbursement environment. I think it is fair to say that none of us should expect that that would become easier. Have no dreams of that.
I think the data required also in the future to gain reimbursement, or to gain even an access to reimbursement discussions, you need to have substantial evidence for that. In the short term, what we've seen in some countries, that the reimbursement decisions have been postponed by a quarter or so because of the amount of work that has been focused on fighting the pandemic.
Thanks.
Thank you. Our next question comes from the line of James Vane-Tempest from Jefferies. Please go ahead. Your line is open.
Yes. Hi. Thanks for taking my questions. Just a few if I can, please. Firstly, you'd mentioned, Timo, sort of possibility of pricing, a question of probably when rather than if we see that given the amount governments have spent on furlough schemes, just wondering if you can comment on what you've seen in markets, particularly Scandinavia, any sort of signs of that emerging or in other countries across Europe. Secondly, looking at Dexdor, just curious if you can comment on the dynamics around the price erosion you've seen in 3Q given the strong sales we saw coming into the pandemic and how we should think about that going forward. Also, is that a fair sort of case example we could extrapolate for Simdax what we could expect to see next year? Then my last question is on biosimilars.
It's been well flagged about losing some tenders. Just curious how you're viewing this business longer term, given it has been in decline in the last couple of years as a small part of the company and how much emphasis we should put on that as a growth opportunity going forward. Thank you.
Thank you for questions. The pricing pressure, we haven't seen any imminent impact of that actually in any of the markets so far. On the contrary, during the summer months, there was a price increase for generic products in Norway, but that was for a limited period, and that was to secure the supply of generics in Norway. I think the comment that was made was more towards the proprietary products. Of course, the guidelines are there, so there would need to be a change in the guideline. I think it certainly is not going to be easier as we move forward. I wouldn't have any specific examples on that except what I mentioned that now there is a postponement by some of the regulators or pricing authorities in terms of then addressing the requests.
Dexdor price erosion, if we look at the quarter three, we've lost certainly some volume in some of the tenders, but it is a very heavily competed product as we speak. The prices in general, the band of the prices is quite broad when we look at the different geographies. The different contracts, there are still some contracts that run out. Certainly as in any hospital product which is an injectable product, we've seen substantial price decreases there and the competition is very heavy in terms of the pricing. We currently, based what we understand, also given the market size and the regulatory status for Simdax, we do not expect that to follow the Dexdor pricing as steeply as what we saw with Dexdor. Time will tell are we right or not. We will see their price reduction, that's given.
How steep we will go there, I think that time will tell, but so far the expectation is not as steep as what we saw with Dexdor. I think one should take couple notches up from extrapolating those from Dexdor. In terms of the biosimilars, that's true. The biosimilar business has now declined. We, however, see that as a very interesting opportunity moving forward. We will probably take a couple of years pause there also in discussing a lot of that, but we expect that to be a very important part of our specialty products portfolio in years to move forward. Even when you look at the league table of products, basically in any country, you see that the top seven or top eight out of 10 products, they are biological products. Subsequently then, there will be an opportunity also for biosimilars.
It will take couple of years before we build the pipeline, but we are working on that and we will be back here as well.
What Timo also means with that is that the current portfolio, we don't expect those products to start growing again. There the price levels and situation is already such that that business is what it is. The growth in the coming years means that we'll be able to launch in our markets new biosimilars. That's great. Thank you.
Thank you. Our next question comes from the line of Sami Sarkamies of Nordea Markets. Please go ahead, your line is open.
Hi. Thanks. I have three questions. Firstly, I would come back to the cost-based topic that was discussed earlier. What can you say about planned R&D activity level next year and should we assume a reduction in R&D costs? Does normalization of sales and marketing costs require a more normal operating environment, thinking of, for example, travel and event costs?
Okay. In terms of the R&D, no really change there. Probably can be some quarter to quarter variances, but overall, as Jari stated here earlier, we expect to continue to invest in R&D both in clinical side as well as in the discovery research side. These comments that we said that good proxies this year are close enough, these do not include any external opportunities. Sales and marketing cost, that is excellent question. I think it is fair to say that if the situation with the second wave and then subsequent measures by authorities, if they do not substantially allow travel and people feel safe in traveling, that will mean that many of the events, marketing events, be that customer interface or be that larger scientific meetings, those will be held either virtually, in the best case, they will be hybrids.
In quite a few cases, we've seen already postponements till a year ahead. I think there, at least today, I think all the organization have slashed the estimates for travel budgets. The other side is what are the new innovations, how to market the products, how to access customers, and so forth, how to discuss science amongst the opinion leaders and present data if we find new ways to that. At least so far, I think the sales and marketing costs, probably we will not return next year to the activity level that we saw before the COVID-19.
Okay, thanks. That's very helpful. My second question would be on NUBEQA, where Bayer has launched a new phase III study this year. I guess you're not yet part of this study, but it would be interesting to hear your thoughts on whether you're likely to join in in the future and when will you be making that decision?
There are a number of NUBEQA studies. Some of those are Bayer sponsored, some of those are investigator-initiated studies. As in any oncology product, it is safe to assume that there will be new studies also proposed by these sponsors and we will take then those decisions study by study as we jointly have agreed with Bayer. Once we make our decisions and we jointly are prepared to communicate, we will certainly let the market know.
Okay, thanks. Finally on Simdax, you continue to estimate that the patent expiry will not have a material impact this year. Do you have any visibility on generic competition taking place and will it have some impact already in the fourth quarter?
Far, for one three-month period, it's tough to say to separate that from the statistical noise. We do not expect that. We are aware that there are two, I think, approved generics, and there are a couple ones in the pipeline. One should assume that we will have their ample of providers. However, for the fourth quarter, what we said is not material based on our expectation, but of course, we can only state the fact once we've seen the numbers.
Yeah. We are now through roughly almost one-third of the fourth quarter, and so far we haven't really seen that much. It's not likely that there is enough time for the changes to really have any material impact for the full year this year. Next year, definitely, we are quite certain that there will be. Like Timo discussed earlier, at this stage, it's a little bit difficult yet to estimate how hard the price competition will be for this specific product. We'll know only once the competitors really start launching their products and we see what type of a pricing they are using.
Okay, thank you. I don't have any further questions.
Thank you. The next question is from the line of Iiris Theman of Carnegie. Please go ahead, your line is open.
Hi. Thank you for taking my questions. A couple of questions from my side on NUBEQA. How has the sales started in Europe and Japan and which are the markets where is it now available in Europe and are there still any postponements in reimbursement decisions due to COVID-19? Yes, still on NUBEQA, just based on your sales figure of EUR 11 million for January-September and royalties for Q3. Is it fair to assume that your product sales for NUBEQA were about EUR 5 million in Q3?
Very good. Thank you. NUBEQA is available today in Europe as a reimbursed product only in Germany. We expect a couple more countries to come on board in Europe later this year. When we look at the numbers from Germany, of course, we are only a couple months, we are jointly with Bayer, we are very satisfied. They are actually higher than we originally estimated. In Japan, the product has also been launched. In Japan, the access to physicians in terms of for the COVID-19 has impacted the access to the physicians. There the situation is still work to be done on that front. We've seen a few countries who have postponed the access to reimbursement systems or let's say the decisions thereof because of the COVID-19 and the regulators' focus on fighting the pandemic. Product sales, Jari.
The EUR 11 million year-to-date number and the sales out of which we get the royalty and for which we provide the product to Bayer has been steadily growing throughout the year. I cannot remember now the exact number what it was in the third quarter, but definitely larger than the second quarter, which was then larger than the first quarter. The quarter by quarter, the numbers are growing. From that point of view, the direction is right, but I cannot now recall the exact number for the third quarter.
Okay. Thank you. Still regarding acquisitions, what is the current activity in the M&A market at the moment? In terms of potential deals, are you targeting larger acquisitions or a couple of smaller deals or acquisitions or in licensing deals? Just to confirm that was it that your sales target of EUR 1.5 billion doesn't include acquisitions? Thanks.
Okay. For the last one, true, it did not include that and does not include that. The target criteria that we are currently looking for is I guess one could say to support our existing business franchises or our regions and that is of course from the in-licensing of clinical stage assets or to in market assets which are already marketed, approved. Typically those would be baskets of products, probably tens of millions in terms of the sales. In terms of the full organizations or company acquisition targets those then I think what we are currently looking are tends to a hundred million or a couple hundred millions.
The target there is not to make a transformative one transaction because we also respect the fact that it's been a while since the company as an organization have enacted on that front and it's probably better that we learn a little bit this in a gradual sense and start executing these and gain a little bit more confidence and success in that as well. Likely to be smaller acquisitions first and then let's see if we move forward with the larger transactions.
Maybe I could also add a little bit to this EUR 1.5 billion because that's not the guidance. It's a target and as a target which is so far away as five years, we of course don't have exactly all the blocks available currently. We have different scenarios and strategic plans and like I said earlier, we do believe that if everything goes really fine, that target is achievable also without M&A. Of course by doing an M&A that gives more robust way of achieving that target. We have not provided any kind of a block by block guidance and the reason is that this is not such target that we already would have all the plans ready how to reach that. It's an ambition, and we definitely still hold that ambition and believe that there are still even internal ways of achieving that target.
Definitely, of course, achieving it becomes more easier if we also add on something from outside of the company.
Thank you.
Thank you. We have one further question on the phone. That's from the line of Harry Sefton at Jefferies. Please go ahead. Your line is open.
Yes, hi there. Thank you for taking my question. If I can start on the Parkinson's franchise. You seem to have been able to grow those sales incrementally even with having reacquired the rights to some of the European markets. Can you just talk through some of the dynamics you're seeing in that market and how you've been able to limit the impact from further generic erosion there? What we should expect for that franchise going forward? Quickly on the Easyhaler franchises, what has really been the drivers of the budesonide formoterol continued growth? Is that penetration into the Symbicort market, or are you still launching in new markets? Also, can you comment on the growth of your salmeterol fluticasone formulation since that launch last year? Just quickly on NUBEQA, are you looking to give guidance on that product as we go forward?
Thank you.
Okay. On the Comtess-Stalevo growth dynamics, for the first nine months, there was an element which shows in the numbers is actually stockpiling for the change or the transition from our longstanding partner, Novartis in quite a few countries to new set of partners. In order to guarantee and secure the uninterrupted supply to the market we had to increase the stock levels. As those are not our stock, but they are stocks held by our partners, be that Novartis or new partners, those we record as sales. Now, the pricing level for the Parkinson products, we have not seen any more substantial pressure on that, or continued pressure on that, let me say so. The decline price erosion has mostly taken place. Of course, we see that, but the steep curve side of that seems to be now flattening out.
We still, of course, see some, but not the steep one. On Easyhaler, the budesonide formoterol growth is from both sides. It is from the penetration of the existing markets, mainly European markets, but also some new markets where the product is still in the launch phase, in the regulatory phase, especially when we talk about the markets outside Europe. Of course, with all the respect and we've been doing a very good job there. Still, if we look at the on an annual level of the budesonide formoterol sales, if we're successful in one country, in one region, that is already big deal for us. The question on salmeterol fluticasone market continues to grow strong double digit. Unfortunately, it is a longer road, as we've indicated than budesonide formoterol. Before that becomes a substantial product will still take some time.
The road is much more narrow and winding as we, I guess, many of us originally thought, and at least I did. There was a question, was that on NUBEQA forecast?
Yeah, whether we give a guidance for that, and I guess we need to rely pretty much on Bayer there. Because Bayer is the one making the sales and booking the sales all around the place, even though we of course participate in the promotion here in Europe. We kind of have to rely on that, we cannot really give much more guidance than they are doing. We need to coordinate with them and for the time being, they have not given that kind of a guidance. If they change their way, then of course it's easy to see that we are also then changing.
Brilliant. That's very helpful. That's all from me. Thank you.
Okay, there are no further questions on the phone at this time.
Some few questions coming through the webcast tool. Let's start with few questions from Anssi Raussi, OP Markets. The first one is that could you give us an info how you estimate NUBEQA sales to develop in 2021, 2022? Referring to your previous answer, I guess that is already covered here.
Yeah.
Yeah, maybe just in case here. The question was whether we will give any guidance for NUBEQA 2021, 2022, and the answer is like earliest that if Bayer is not doing that Oh, sorry, you had mic. Yes.
I'm aware.
Yeah, sorry.
The other question regards the animal health. We announced in first half year report that actually the contract with Zoetis on distribution in Scandinavian markets will end this year. Anssi's question is that have we been able to replace the hole that the Zoetis agreement will leave us to animal health sales?
No, definitely not. Like we announced, we were talking about roughly EUR 25 million of sales, which is really a large part of our current around EUR 80 million business, and especially much larger part of what we are selling in those countries where this is now taking these sales in their own hands.
The long-term goal is that gradually we will be able to replace, if not all, but at least a substantial part of that, but that will take time because most of the really big global animal health companies have their own operations in those countries. We need to make a lot of the smaller arrangements with larger number of companies in order to replace that. The answer is that definitely not for next year, but if we look at two, three, four, five years to the future, we definitely continue working towards that goal.
Okay, thank you. The next one touches the cost side. Are there any reasons to expect sales and marketing expenses to increase before the COVID-19 pandemic eases?
Tough question. Of course, it depends also on the activity level that we are able to ramp up with our partner, Bayer, with NUBEQA. I think even if we did, and as I said, I think it's safe to expect that still 2021, things will not become as they were before COVID-19. At least for the short term, I don't think so.
That, of course, means organically. If we end up doing any kind of an arrangement buying product portfolios or companies, that would of course be the change. If we think of the existing product portfolio, yes, I guess that's exactly what Timo said, that's not likely to change.
Okay, thank you. The final one from Anssi is that you have mentioned external opportunities a couple of times. Can you give us any update? Is there any active projects ongoing, and if there is, how far are you with this?
The answer is yes, but we cannot because of the confidentiality reasons.
Of course, I mean, typically in these processes, there are even in the final rounds, more than one company, which means that ultimately we even don't know whether something will come out before we then see the end result.
Okay, thank you. We move on. We have a question from Mr. Jarmo Helin. His question is that how is Orion contributing to the fight against the COVID-19? Are you, for example, developing a vaccine together with the academia or scientific organizations?
Our key contribution to the fight of pandemic is actually to be able to continue to supply the product to the market. Some of our products are being used for the treatment of severely ill COVID patients. As we know, many of the COVID patients, especially the ones who are severely affected by the disease, have also comorbidities. There, many of those comorbidities are treated with generic products, and of course, there we are a major supplier. Orion has no capability, nor do we have any plans to participate in supply of vaccines, nor do we have any activities in vaccine development.
Thank you, Timo. A couple of final ones from Diana Na from Goldman Sachs. First one on NUBEQA. How would you say access and reimbursement discussions have been going in Europe since product approval? Any color on how the EU launch has been going would be very helpful, according to Diana.
The reimbursement discussions have been very favorable. We are very satisfied with the discussions that we've held and also the classifications that we've received. We are very satisfied with those, of course, based on the strong data that we are able to supply also through the regulators. As we've said that we've seen in some cases also delays in reimbursement processes by some countries, and that is likely to hit also some of the NUBEQA decisions. The launches, which is the launch that's taken so far place in Europe, which is in Germany that has exceeded our expectations so far. We are of course in the very early stages with that.
Thanks, Timo. The final one from Diana is that on business development, does the ODM-109 trial setback mean greater urgency for you to look for inorganic opportunities over the course of the next 12 months?
Of course, we are putting more effort in there. It's not that we are pushing the panic button down because we want to be very careful how we invest and allocate capital. The most important resource is of course, time of the people who would be involved in that type of transaction, especially then integrating that. We are putting more effort, of course, and we've increased a little bit of resources also in that respect. Certainly we are looking into those opportunities maybe a little bit more in open eyes than we did earlier.
Thank you, Timo. Now we have exhausted all the questions through the webcast. Do we still have some pending questions on the conference call lines?
Okay, seems like we've exhausted all the questions. I thank you very much. Thanks for joining this earnings conference call, and I hope to see you then in February when we'll discuss the full year results. Everybody stay safe.