Good afternoon, ladies and gentlemen, and welcome to ORION Earnings Presentation for the Financial Period of January 2019. My name is Dukka Hirbanen, and I'm the Head of Investor Relations here at ORION. Shortly, our CEO, Timo Lappelainen, will walk you through with the first nine months of this year, after which you will have the possibility to ask questions either from him or from our CFO, Mr. Jari Carlson. We will first take questions here in Espoo from the live audience, after which we will then turn to the conference call lines.
And kindly state your name and the organization you are representing before asking your question. And just before I let Timo to take the floor, I'd like to draw your attention to the safe harbor disclaimer statement. But now without any further delays, I'd like to invite Timo on the podium.
Thank you, Tukka. It's my pleasure to introduce you to the first nine months of this year and some of the key highlights. Of course, the key highlight for this period was the NDA approval of darolutamide, the brand name NUBECA in The U. S. Darolutamide additional marketing authorization applications, those have been submitted throughout GLOBE.
And the most important ones, the review period is ongoing in Japan and in Europe and quite a few other core markets as well. For the nine months, the net sales as well as the operating profit, those were higher than in the comparable period. And both net sales as well as the operating profit, those include the milestone that was related to the darolutamide and Nubeqa first commercial sales in The U. S. The outlook for the year remains unchanged.
Apart from that key event, the proprietary product sales, especially in terms of the eSiHaler and Symdox, those performed very well for the first nine months. Specialty products also had a growth, especially in Scandinavia. That continued. However, our generic business is affected by the price competition that has been continuing and also the product shortages that the entire industry is facing. Another important event for us was the recruitment of the REFALS study, which is our ALS program, where we are studying the orally administered levodsemandan for the symptomatic treatment of ALS patients, and that recruitment was completed.
Highlights of the key numbers. So the net sales, we were about 9% higher than in the comparable period, so nice growth in that. And operating profit, 198,000,000, also ahead of last year with that regard. And the operating profit margin actually right on the money in terms of the target, what we have said to ourselves, as a minimum of 25. Then the cash flow per share, when we look at that before the financial items, that was also very favorable.
Of course, last year, the comparable period, that includes the divestment of Orion Diagnostica. And apart from that, all the other numbers, those are only continued operations. Now how we have evolved then in the nine months to where we are today. When starting with 2018, then some of the drawbacks that we had for the first nine months, certainly in terms of the sales, Parkinson's disease products as well as the reference pricing in Finland. Those ate into our sales, roughly €10,000,000 Then the royalties in the comparable period, those were higher, of course, boosted by the milestone event in The U.
S. Relating to Nubeqa. E inhalers had also strong growth, continued. Animal health, also nice growth. And then also exchange rates were favorable for us for a little bit.
And that's how we ended up at $7.76 in terms of the sales. Then when we look at the operating profit, there certainly the product sales, those helped us and we had an increase in that. However, the margin and the product mix, so how that evolved, that ate up into quite a bit of that gain. Also exchange rate, those assisted us there. Milestones and royalties as those flow directly through the P and L, was of course a major event in that.
And then as we have said, we are investing this year roughly CHF30 million in growth initiatives. And we've broken that now down for your convenience and highlighting that the €9,000,000 out of those investments for this first nine months are depreciation relating to the product acquisition of Stalevo and Compton rights. And that's how we ended up into $2,000,000 shy of $200,000,000 in terms of the operating profit. Now when we look at the geographical breakdown of the sales, so not much change in there. Finland continues to be the largest country market with a little bit less than onethree of our sales.
Scandinavia growing very nicely. And of course, the large European markets, Mediterranean countries, Italy, Spain, Portugal and Greece, important markets for us, of course, in Germany, The UK and France, growingly, especially with Stalevo. North America also, of course, boosted by the milestone as, again, taken a share of this pie. Then the rest of the world were a couple of Latin American countries and most notably, of course, Japan is an important market. Then when we look at how the sales have evolved in those markets, so in most of the markets we see actually positive gains with the exception of the rest of the world and Finland.
And then if that was a geographical breakdown, then when we break the sales by businesses, then we note that all the businesses had gain in the first nine months. Specialty Products today, our largest business, was a little bit higher than the bar, so that was important. And of course, the Proprietary Products that enjoyed the milestone event. Animal Health, strong growth there for the first nine months. And FerriMill, which is our API production unit, had also nice growth.
And also in Contract Manufacturing, we saw a slight growth. And then when we look at the products, the lead table of the products, so eSiHaler has plowed its way to the top of the lead here and continued to grow with 16% growth over the last nine months. In Parkinson's disease, we'll discuss that a little bit more. We had a slight decline, but it seems like that is more of a timing event. Then in Cymdox, our heart failure compound continued strong growth.
Dexter facing generic competition yet in this nine month period, close to last year's numbers. Strong growth in biosimilars. With biosimilars we've often flagged that, of course, the profitability of that business is lower than the group average. So one should treat this with caution. And as said, the animal sedatives, strong growth there.
Now if we move to the divisions, how we report, so take first the proprietary products and there, the EZHaler, that's the growth engine for this part of the business today. And then also, Cymdax enjoyed a nice growth in this period. So EZHaler, really the growth has been catapulted over the years by the introduction of budesonide for METRO EZHaler combination product that continues to drive the growth there and affects the entire product family because we have a number of products there, six altogether, both combination products as well as mono products. And as we have flagged the competition and the competitive situation with our other combination product, salmeterolfluticasone, has been tougher than what we initially anticipated and especially compared to the budesonide formoterol. The seventh product in that family, the thiotropium development continues.
Now the message of this picture is really when we look at the darker part of the bar here, our own sales reflect the acquisition of product rights from Novartis in Southern Europe and that part then of the business is growing substantially now as we have seen that. And as we have given the estimate for this year, it's pretty much what we had last year in terms of the sales. Then the Dexter, here we are facing generic competition in quite a few European markets. And that is also visible in our numbers now, although the entire market for the European sedatives, that continued to grow by four percentage points. And Dexter as a brand product has about 72,000,000 out of that $05,000,000,000 market.
Then turning over to specialty products, so these are the products that include generic prescription products, OTC products, non pharma products that we sell through pharmacy channel, as well as biosimilars. And here, our largest single country market is Finland, and there was a slight drawback pretty much at last year's numbers, but still a little bit lower. Scandinavia had a strong nine month period for this. As well, we had also enjoyed growth in Eastern Europe and Russia. And here we see also on the right hand side, a pie here, the generic drugs, so those are prescription products, that's the bulk of the business.
Then the self care products is about onefour and the biosimilars is less than 10%. In Finland, where the specialty products have an important role in our business and especially in the reference priced prescription product category. There, the entire market shrunk over the nine month period by 7% and we shrunk less than the entire market, which of course meant that then our market share of the entire pie then grew. And when we look at over the nine month period, our share of the entire reference priced products category is 27. We continued the strong market share development also in self care products with 25%.
And of the overall market here in Finland, our business commanded 11% market share, about the same level as last year, which is a good performance in a declining market. Then in research and development, so this is the future of the company where we continue to invest strongly both in terms of monetary assets as well as brainpower. And when we look at what is going on here, I mean, this is pretty much the same picture what we had here last time. Obviously there is a strong internal development here. E Z inhaler Thiotropium, we continue to develop that.
Darolutamide, as said, that has been filed in numerous countries and the first approval, The U. S. NDA, is now at hand. Then the follow-up trials is ongoing, so the RSNs trial, which is fully recruited and that's an event based trial. So we expect that still to take a few years to report out.
And as I mentioned, the ALS program that is fully recruited now and we expect to have some of the headline results probably around this year, next year. And as we've earlier flagged in the earlier pipeline, are interesting opportunities and one of them is the two zero eighttwo zero nine family, which is a inhibitor. And I guess our belief in that molecule family is demonstrated by the fact that we have two out of that family at the same time in clinic. In the beginning of the year, we wanted to share our thoughts, what are the important milestones, how we drive our growth toward the €1,500,000,000 that we set as a yardstick for ourselves. And obviously, the first one there is the successful commercialization of darolutamide compound and then continue to develop that compound.
And so far, we are on the track. So the submission has taken place. The marketing authorization was granted in a faster than I think most of us expected by the U. S. FDA in July and the launch took place very soon thereafter.
And then the RSNs trial is fully recruited and that trial continues as planned. Then the ALS, which is an important opportunity for patients suffering from ALS disease, That was fully recruited in July. And we have also now initiated an assessment of potentially launching the product by ourselves in the largest market in The U. S. And then, of course, the Finnish market is important for us and we continue to invest in that.
And we certainly saw that the volume share of our business continued to grow faster than the market. And then eSiHaler family is an important growth driver and that continued to plow ahead with 16% growth over the nine month period. And then the new in licensing opportunities that would augment and add on onto our own pipeline, there the work continues and we don't have anything to report in public at this time. Now one theme that has created a lot of discussions throughout Europe this year are the product shortages in terms of the supply of especially generic products. This is not only European issue.
We see the same effect in North America. But it landed in Europe maybe more severely in recent times than what we have seen earlier. And of course there are many reasons to this. One is that the generic compounds, have seen substantial consolidation of the industry there. The price pressure has driven much of the industry to consolidate not only the finished dosage form manufacturing, not only the API production, but especially when we go to the starting materials and intermediates.
And there any disturbance in that very, very complex supply chain will then result to potentially product shortages. When we take the sample here in Finland, we always have to remember that actually what we are talking about, of course, is mainly generic products that get affected by this. And it is always, of course, not a desirable situation when the prescription doesn't get fulfilled. That is a loss to the patient, loss to the pharmacy or the distribution chain, and loss to the company. But at the end of the day, we are actually discussing quite a rare event.
And as an example, here in Finland most of the prescriptions actually get filled at ninety eight percent rate at the first time. And when you go to the next day, we are talking about more than 99%. So it is a rare event. It's not a desirable event. But should we have product shortages, that's a rare event.
Of course, we take it very seriously. And we work with our partners throughout the globe here to have our products available as well as possible. Our availability of products here in the local market where we have major and generic business here is 97%. And of course, that we start with. We need to have safe, efficacious medicines for the patients when they need it.
And that is an important task that all the RNEs take very seriously. Now turning to the financial outlook, as said, we have not changed that and we estimate for the net sales that this year's net sales would be slightly higher than 2018, including then the $45,000,000 milestone payment that related to the commercialization of darolutamide in The U. S. And whilst this is still in a conditional form, we know now that that event has taken place, but we do not want to change the wording of this because that would have triggered then a profit warning. Operating profit, the same thing here.
The operating profit is estimated to be at the same level as 2018, including then the realized $45,000,000 milestone payment and, of course, continuing our investments in growth. And the next scheduled events, the full year release is going to take place February 5 and the AGM has been planned to be held March 25. At this stage, I'd invite our CFO, Yari Carlson, to join me here at the podium and we are happy to take your questions. And as Tuca said in his opening message is that we'll take first questions here in Espoo in the auditorium, and then we'll turn to the telephone lines. So please, should you have any thoughts, we are happy to take your questions at this time.
Okay. It seems like we are first turning to the telephone lines.
Thank you,
sir.
We will take our first question from Jo Walton of Credit Suisse. Please go ahead. Your line
is open.
Thank you. If I could start with three brief ones. Firstly, as we're beginning to think about 2020, I wonder if you can help us on some of the pushes and pulls that we should be considering for next year. For example, are there any further milestones in 2020 that or material ones that you might earn from Bayer, for example, for a European approval of darolutamide? And if you could give us any sense of when any sales related milestones might come in?
And then on the cost side, presumably as you will be expecting European approvals, you may be investing a little more because we would be expecting you to co promote the drug in Europe. So just some help on the level of investment there. My second question would be specifically around oral levasimidan, where you have said that you are looking at the possibility of launching this on your own in The U. S. I wonder if you could tell us, and I know this probably wouldn't impact next year, it would be the year after, but what sort of level of expense do you think would be appropriate, for you to invest to do this yourself rather than to take a partner?
Presumably, and maybe I'm wrong, you don't have any infrastructure available to do that yourself at the moment. And finally, could you just expand a little bit more on the product shortages commentary that you made? Is this already impacting your P and L? And if so, how? Is it impacting it through lower sales than you might expect or higher costs and therefore lower profitability?
And is this something that we should be thinking of as a materially different and worse impact for 2020? Thank you.
Okay. Good deal. Do you want to take the mask, Gustafsar, something that was stated earlier?
Yes. So as we have already stated earlier, there are two approval milestones or first commercial sales milestone to be expected, euros 20,000,000 for approval in EU and €8,000,000 for Japan. And currently, of course, assuming that the approval time lines of roughly one year from filing are valid in these cases as well, both of those, of course, then should materialize next year. So those are major events. And like we have stated, there are sales related milestones, but those assume clearly higher sales than to be expected in the near future.
So those are for the more distant future to be expected.
And of course, in terms of the especially the European timing, we have to appreciate that the trigger for that is the first commercial sale. And then we'll have to see what countries are there in the first line. Buyer will take care of the market access. And as we know, there are countries where the market access or the pricing discussions will take a longer period of time than in some other markets. In terms of the investment in co promotion activities, actually relatively little will be taking place next year.
There will be, of course, preparation for the major launches. And probably, we will see back end loading of those costs, especially to the second half, then depending how the approval and pricing discussions will go on. So at least the early part of the year, it is fairly limited what either company will invest in terms of the sales infrastructure. Of course, there will be many other related activities, but those probably are not financially cost side relevant to discuss at this time. Then there was the question on our plans to The U.
S. With relating to the ALS or the oral livosan endon. And as we stated, we've initiated now the evaluation of that. So I think it will be premature to discuss any numbers at this stage. But obviously, when we look at the numbers for next year, those would then include that type of expenses should that development be mature enough that we would be prepared to discuss that.
And of course, that depends also on our view of the filing of that. But especially for the next year, they probably will not be material that we need to specifically flag those, although if the push comes to shove, we may have to, if you're very interested in those. But it shouldn't be material for next year. Then the third question was on the product shortages. This was mainly what we wanted to bring our view to the general discussion because this has become a topic, especially in Northern Europe, Germany, Scandinavia and also what we see in some other countries.
And of course, the impact for Orion in some cases has been that we are not able to deliver the product. Many of us are aware of the situation relating to Sartan family of products and there, Orion has also faced shortages in that. So we've lost the sales and, of course, subsequently then the margin. When moving forward, this if we knew that, what is coming up, that will be easier to maybe to run the business. But of course, we all the players in the industry, it is we do our utmost and sometimes a little bit more to secure the supply.
So nobody is planning for that. But, unfortunately, sometimes science actually evolves as we knew or noticed in the case of Sartans, new chemical synthetic science was created in that. But at this stage, we don't see that we would be any more affected by this in 2020, at least that's not in our plans. We fight very seriously against product shortages, be those, products that we manufacture or if there are partners who are involved in the supply chain.
Thank you.
We will take our next question from Harry Sutton of Jefferies. Please go ahead. Your line is open.
Hi there. Thank you for taking my questions. I just have three. Can you firstly give us some detail on what some of the challenges have been for your salmeterol fluticasone EZ HADAR product? And what your expectations for potentially reversing some of those challenges could be going into 2020?
My second question is on the darolutamide launch. I understand that you have little involvement and this is outside of your control, but could you provide any feedback that you've had from Bayer from the launch year to date? And then my third question on your ensicopone franchise, I've noticed that your year to date own sales haven't offset the declines that you've had from your deliveries to partners. Do you still expect that those can those sales can deliver flat as you guided for 2019? That's all.
Thank you.
Okay. Thank you. Very good questions. The challenges in fluticasone, salmeterol, of course, what we faced in the marketplace was that there is already some other players in the generic space of the product. Also, the originator, we've seen that there is a very aggressive move to switch patients from the current treatment to newer versions.
And, probably that aggressiveness of those activities, were a little bit more than what we had anticipated. Now, in how to then offset of that, we believe very strongly that in pharma, this is the longevity. What you do, you do the right thing. And we believe we have a very good product in our hands. We have a good product family.
We have it attractively priced. And once we get into the tenders, especially in the larger markets, I am sure we will see growth there. So it's probably the curve was not initially as deep as we thought. Darolutamide, the launch so far, of course, we have to remember that our partner Bayer, in order to assist patients, they have initiated a two month, free trial for the eligible patients in The U. S.
Where they have access to a product at no cost to the patient. And what we understand so far, the program has been well received. There are numerous patients in that. But based on that, it's probably too early to draw conclusions either way. Then the question on the entagapone sales.
Really I think that was properly stated. The sales or the supply to Novartis, our partner, those are now a little bit back end loaded towards the end of the year, versus, then last year when we had the very, very strong second quarter in respect to deliveries to Novartis. And so far, I think we are still on the track to meet that guidance. Of course, there is always this last day event should the shipment leave here at the end of the year or beginning of the year. There are always some deviation possibility to that.
But in the broad strokes, I think we are still looking forward to having the sales at the comparable level to last year.
Yes. So the sales in our own countries have proceeded pretty much as anticipated. So the fluctuation is really coming to the timing of deliveries to partners.
That's really helpful. Thank you. I actually have just two further questions on the timing of some of the launches of your pipeline. So to start with, with the Thiotropium Easyhaler launch, what's the latest on your expectations for that potentially coming to market?
I think it's too early to discuss. We try to refrain from anticipating those until we have the data to submit the product. And as we stated, the product is still under development, so that would be probably too early.
Okay. And then also on the REFORCE trial for ODM-one 109. You mentioned that, that's expected to be completed by summer of twenty twenty. What are your sort of expectations around providing a data readout on that and any potential submission?
Second half next year. That's the best what we have today.
Okay. Thank you. That's all from me.
Thank you very much.
Thank We will now take our next question from Sami Sarkamis from Nordea. Please go ahead. Your line is open.
Thanks. I would first come back to sales and marketing expenditure that we discussed earlier. Just wanted to check if I understood you right that even though you will be investing into daroltamide co promotion in Europe and ALS market entry, these costs will not kick in materially before second half next year or even 2021?
That is correct in terms of the field force, absolutely, yes. Of course, there will be some costs related to that, but they are more in the volatility of the costs.
And of course, overall, there are some other changes all the time taking place. For example, now when the generic competition for Dexter is increasing, that, of course, has the impact on the effort on that product, lowering some cost there, which then, of course, to some extent, will be redirected to darolutamide. So the overall impact of these changes is shouldn't be too large.
Okay. And then secondly, how should one think about the level of R and D costs going forward? Next year, you will have ending ALS program, but will that be offset with other programs such as ODM-two zero eight and nine that are still in the earlier phase?
Well, I think we hope so that we are able to accelerate these programs. Of course, we have to remember that for 01/2009 next half year twenty twenty first half, we will have the fully loaded cost. We have all the patients in for the trial, Whereas still in the beginning of this year, we did not have all the patients recruited. So that's one fact. And then the continuation of the next set of trials really depends how fast we are able to move with the current phase in where those programs are in Phase I.
And we'll see how these data pan out then. Are there opportunities to accelerate the program or do we need to do some more studies? But certainly, there are no plans to cutting back on R and D, and we plough full force ahead.
Okay. And then finally, on eSiHaler combination products that we have also discussed already. I think you have previously talked about 100,000,000 to €150,000,000 peak sales potential for these products. Do you still believe in this target? And what could be the time line for this as sales growth doesn't seem to pick up despite your efforts and investments?
Well, we certainly still do. I mean, the product is growing. There's no question about that. But in terms of the timing, I don't think we ever said any years for that, but that's the potential. And certainly, we are geared towards that, including that our belief, I think, is demonstrated by the fact that we've invested in production capacity to support that.
So, certainly, we are driving business to that. And, that will then, of course, require that we will be successful, in penetrating the market. In some markets, it requires tendering and winning in toughly competed tenders. In some markets, it is more a sales force question. So it really varies in Europe market by market.
But certainly, we are still driving the business towards that goal.
Yes. The goal was €100,000,000 combined for these two businesses. The €150,000,000 was then this included the size of the total AsiHaler business, including also all the older products. And of course, originally, the idea maybe was that these two products would be about same size, and now it looks like that the Bundeslionide Formoterol combination will clearly be the larger one of those. But as a total, we definitely are still aiming at that CHF one hundred million.
Thank you very much.
Thank you.
Thank you. We will take our final question from Joe Walden of Credit Suisse. Please go ahead. Your line is open.
Thank you. I just wonder if you could give us an update on when we might expect generics for Syndax. Still haven't had anything there yet. And also, could you tell us a little bit more about the biosimilar market? Is there anything that we should know about material contracts that will make a difference that you have some visibility for, for next year?
And update us on the timing of your ability to launch a generic Herceptin? Thank you.
Okay. Yes. Generic Cymdocs, we expect that there is a filing for that in Europe. Should that be successful also in terms of creating a supply chain, probably we will see competition in that regard, at least in some markets, towards the end of next year. That's where we are today with Atria.
In biosimilars, the market where we operate and now we operate in the Nordic market and the Estonian market, The market for the existing biosimilars is tough, especially for the products that are being tendered to hospitals. So we certainly have seen there a continued price pressure. How low we will see then the pricing, that will future will tell, but that continues. In terms of the next year's sales for the tenders, we now are supplying, especially in Norway and Denmark, to their large tenders. Also, business is doing well in Sweden.
We know that in Finland, we lost a couple of tenders now. In Finland, those are each tender are much smaller, so they are not country wide tenders. But as we've said flagged earlier, the profitability of biosimilars is lower than the group average. So that should be taken a little bit with a grain of salt, how those sales are developing in terms of the profitability. Then the ongoing sales or the future launches, some of these markets are tough markets, and, we don't even expect that we will launch all the products in all markets.
And so far, the biosimilar for Herceptin, it probably has disappointed, quite a few players, including ourselves in terms of the sales.
But you have actually you have the ability to launch it. It just hasn't had material sales yet, if And it ever could I just also ask, please, an update on any Finnish reform? We've had two years of a negative 15,000,000. We've got one year this year of a negative 10,000,000. How should we be thinking of the any continuing drag for 2020?
Or has the situation sort of stabilized so you're not expecting such Well, a significant negative drag for '20
I think when we look at now as the prices are bid every third month, so we've seen the deceleration of the price decline. It's not still bottomed out, but we certainly have seen that the second derivat of the price decline has now gone away. So it is slowly, slowly, it is decelerating. And I think once we move forward, the impact of the price decline, all other things being equal, should be lower next year than this year. But we'll have to see that with more analysis once we come up with the next year's outlook.
And of course, it's very difficult to predict because it's, of course, what we are doing, but also very much what the competitors are doing in the market. And in which product the pricing impact is largest and how large those products are in our portfolio, of course, has a big impact. Even today, we already are in a situation where most of the impact is coming from a relatively small number of the products. And then there, the large part of the portfolio actually is doing okay. So what will happen next year, very difficult to know, of course.
But of course, if I may continue on this, on Yarvi's remark, is that we are not aware of any changes regulatory changes in the marketplace that would impact that. That's so those are not in the air, at least as far as we understand.
I suspect I'm not going to get an answer to this, but I'll try it anyway. If we look at the consensus numbers for next year, they do show an increase, albeit not a very significant one, but they show an increase in your revenues and in your operating profits for next year. Given that you will have a much smaller potential milestone, which is obviously 100% profit coming in next year and you've also identified further pressures on the business, is it still reasonable that we should be expecting an increase in both revenue and profitability next year? Thank you.
Well, you started out that with the safe harbor statement. Of course, we will come out next year when we report the full year results. But I think the items that you flagged, I mean, we are fully aligned with those items that you flagged. I mean, there is nothing in our visibility that would reduce the pricing pressure that those we've seen. And also the milestones, as Jari already alluded, which are sort of contractually secured, I mean, those are the ones that Jari mentioned, and
those are lower than this year. But of course, we are still committed in our longer term growth target towards €1,500,000,000 And how that time wise impacts next year remains to be seen. But definitely, in long term, we are still moving towards that type of a top line with continuously good profitability.
Thank you very much.
Thank you.
Thank you. There are no further questions at this time. So I'd like to hand the conference back to your host for any additional or closing remarks.
Thank you very much. And I don't see any hands raising up here in Espoo. So at this time, it is my pleasure to thank you, everybody. Thanks for joining the call. Thanks for excellent questions.
And we will see all of you or hear from you again in February 5. Thank you. Thank you.