Afternoon. Welcome to Orient's Earnings Call First Half twenty nineteen. My name is Timo Vlappelainen. I'm the President and CEO of the company. I will firstly have a few prepared remarks.
Thereafter, I will invite our CFO, Yari Kasan, to join me here to the podium, and we are happy to address any questions, comments that you may have. At this stage, I want to draw your attention to the disclaimer. This presentation contains forward looking statements, which involve risks and uncertainty factors, Orion assumes no obligation to update or revise any information included in this presentation. So if we kick off by getting reviewing some highlights for the first half of twenty nineteen. Of course, for the company, the major, major event was the submission of marketing authorization for darolutamide, a prostate cancer agent candidate in the main markets.
And those include The US, Japan, Europe, and now the rolling submissions in many other markets are taking place. Also, we've been informed during the course of the first six months that the compound was granted prior to review by the FDA in The U. S. In terms of the financials, the net sales were approximately at the same level as in the comparable period. The operating profit was lower than in the comparable period because, as we noted earlier, there are substantial investments that we are putting forth in our growth plan.
And in part of that, the R and D expenses increased as we are investing more money in the future. However, we maintain our outlook for the financial year. A little bit more on the product sales. The proprietary products were approximately at the par. We continue to plow ahead with eSeehaler as well as Cymdox.
The specialty products there, the sales seem to flatten out as we've had decline for a period of years now and especially strong growth we had in Scandinavia. Another important milestone took place early this week when we informed that our refills, that's the, our ALS compound candidate, was recruited in full, the trial, a phase three trial in that. And that trial evaluates orally administered livosimendon for the treatment of symptoms in ALS. Some of the key numbers for the first six months. As said, the net sales pretty much at par, $493,000,000.
Operating profit was at the lower rate. And all of these numbers, by the way, with the exception of the cash flow per share, those were we've eliminated the divestment of OREO and Dagnostica, which took place in the first half of twenty eighteen. So the operating profit was down, and the operating margin as well down from the previous year. And then the cash flow in the operating sense was very strong for the first half of the year, but naturally because there was a nonrecurring item last year of the divestment of Oriental Stickup that is not fully comparable. And now if we look at the how we arrived in terms of the sales and the operating profit this year, when we started out the year or from the comparable period, we had actually a lower shipments of Parkinson's products, Stelivo as well as intercomponent and Novartis When comparing to the period before, it seems like now it's still a little bit towards the second half of the year.
The milestones were also lower in the period as compared to last year. The decline of the prices in the important market for Orion and Finland continued in the generic space. However, it seems like there, at least the slope is declining. So we are not yet flattened out there, but the decline seems to be now striking out here. We had however, we had a nice sales growth in eSeehaler as well as in Animal Health business, had a strong start for the year.
And then as said in Syndax, we actually had a small gain in exchange rate as opposed to the loss we had last year. In the operating profit, the product sales and the mix thereof, that took its toll on the ForEx. We had a small gain there. Royalties and milestones, those flow directly to P and L to the bottom line. And then especially on the fixed cost side, as we've indicated, we are having a fairly substantial investment to our growth plan to the magnitude of order of EUR 30,000,000 this year.
And that's earning the disposal for the first half. No major change in the geographical breakdown of our sales. Finland continues to be the largest country market. However, the Finnish share is one of the lowest for a long time. Scandinavia plowed ahead and of course the rest of Europe as well and also some of the other markets.
Now in terms of the sales by the divisions, the Specialty Products was pretty close at par for the first six months. Proprietary Products was suffering from the shipments Stalivo to our partner, Novartis. But as I indicated, the animal health had a strong start for the year. Permian had a good start as as well. And our largest business still continues to be the Specialty Products followed by the Proprietary Products business.
And then when we look
at the league table of the products, so EasyHare now the number one product for the first six months, continuing strong growth there. Salivo is the product where we acquired rights back in Europe from our partner in Novartis. And there, we are developing as planned very well, and I'll have a little bit more on that. Syndax had a nice start for the year with a 17% growth. Dextor, still flat despite that what we've indicated that there is a number of our competitors that we understand have received marketing authorizations.
Animal Health had a strong start for the growth as we did as well with our biosimilar business. Fairly nice start, but as we've indicated several times earlier, the impact of that to the bottom line is of a different magnitude than any of the other product lines here. So if we first reviewed of the proprietary products there, the e inhaler had a nice start. Parkinson franchise in totality, so that comprises of the Stalivo as well as some then the Compton Fontes Compton products had a decline due to the shipment pattern of our partner. Nextdoor, flat and nice growth in SIMDUX.
And then the Prezadex product, which is actually a Dex, more or less same product as what we market as Dexdoor in Europe. It's marketed as, Presidentex outside Europe by our partner, Pfizer, and these are royalties as well as especially API shipments to our partner. And then eSailor, strong growth there, especially with our combination product of budesonide for METROL. The total franchise grew by 20%, but the budesonide bulk grew that currently. As we've indicated last time, it seems like the salmeterol, fluorescein, that is facing a little bit tougher times in penetrating the market as what we saw with budesonide or Mentorol product.
And we continue with a new EZHaler version for COPD, which is the thiopropion version of EZHaler. And here you see the change that took actually place when we look at the mix of our sales of anti capone product. So for the second half, that's when our own sales kicked in, in Europe for the acquired territories. And then the shipments to Novartis, especially outside Europe, actually were much lesser in the quarter two last year. And still, that the acquisition of those rights and getting the business back, that seems to be running pretty much along the plans as what we had early part of this year.
And as I mentioned in Deck store, the sales for the first six months pretty much flat. We are certainly seeing competition out there. There are numerous players who have received marketing authorizations, and there is certainly competition in some markets. But in all, the overall market has grown for this class. But as said, most of these numbers, what we see here, these are actually face numbers and not the actual market pricing.
Then if we turn to Specialty Products, so that is the business which comprises of generic prescription products. It has the OTC products. It has the non pharma products. We sell some of those as well. And then the biosimilar products.
And there, the main market is the local Finnish market, especially in terms of the OTC and the prescription products. There, we still saw a little bit decline there, especially in the reference priced products. However, the volume growth for Oreo seems to be picking up, and we are outgrowing the market in terms of volume. In Scandinavia, we had a good start for the year, especially in terms of biosimilar products. And here you see also the split of this segment by these different product categories.
So certainly, the prescription products, those are the major part of that, and then the self care products. So as said, Finland continues to be a main market for our prescription generic products. The reference price products, which potentially are up for bidding, those that market actually shrunk by eight percentage points during the first six months. And ORION fared a little bit better with our development of minus 7%. But as said, it seems like our volume is picking up now.
And in terms of the overall pharma market here in Finland, the reference price products, we have a very strong position in that with 26%, also a strong position in OTC, self care products with 24% and in the overall human pharma, roughly 11%. So that's sort of the split of the ORION business within the market here in Finland. Then our future, the R and D. Not really changes in this picture as, I guess, is reasonable to also assume in every three months. Tough to make a change in this picture because we here show our most important preclinical trials.
The thiotropine is going ahead. That development, dorolutamide, as said, that is being reviewed for the first indication by numerous regulators around the world as our partner, Bayer, continues to submit the dossier. Then the next indication, what we have indicated is that, that is fully enrolled. Now we are only waiting for to have the actually the results of that trial that will still take a couple of years. In the ALS trial, that is now fully recruited, and we expect to have the final results in about years' time or so.
The protocol calls for a forty eight week treatment for all of these patients. Then we have some earlier pipeline there as well. Mostly today, what we are here demonstrating are in the area of oncology. And last time, we've included the, u two zero nine, which is a CYP11 inhibitor in this. And, there, we are running that trial as a basket trial, including prostate cancer and breast cancer patients.
So the ALS trial was now fully recruited. It took about a year in total to randomize all four ninety six patients. Generally, a global trial, we had 104 sites participating there, numerous physicians, and of course, patients and their caregivers are all very important parts of this. And the objective here is to demonstrate the benefit of boroligosimendam, especially in the respiratory function of these patients, and also using the overall ALS scoring system. Now for this year, when we started out the year, we gave our internal objectives for this year and promised that we will report the progress thereof.
And of course, now the number one is the darolutamide, preparing for that commercialization. Now the marketing authorization are being submitted and have been submitted in numerous markets. It received a priority review in The U. S. And then, of course, the next phase is then the RFNs, once that then will be reported in the next few years.
Then the ALS, now fully recruited, and we have to wait about a year before that is completed and then some more months before that is reported. Then, of course, the local market here, the generics, that's an important part of our business, and we need to stay competitive there in terms of providing the broad portfolio as we carry here. And today, we are happy to note that our volume share is actually increasing faster than the market. And then, of course, the assets that we have online on stream, the eSeehaler is one of the key assets there. And there, we are pushing every button to make that grow, and it seems like that is working.
ESeeHaler franchise growing by 20%. And naturally, we are also evaluating opportunities, how to invest and acquire assets to be commercialized, also maybe to outfit our own R and D pipeline. But that work is continuing, and we have nothing to report at this time. We also want to draw your attention to the sustainability report that we published in May. There's the link to that.
So orient.fi, you will find the sustainability report there. And what we've coined Orient's sustainability is actually under four pillars. The first one is, of course, the patient safety and having the products in the market, which is not all that evident these days as the supply chains are extremely complex also in the sphere of medicines. Then, of course, the environment, how we produce, how we test our products. They have to be sustainable methods being used.
And they're, of course, taking care of our own people, so all the Oryonees, the 3,500 Oryonees who work every day here. We also want to be transparent in dealing with the numerous stakeholders that are part of the Pharma and the Healthcare business and overall and want to have a very high ethics as is demanded by us. And also, we believe that is the cornerstone of the long term sustainability. Here are just a couple of points from our sustainability report. There are some products.
API is here taking as an example of methotrexate, which is a very important medicine for rheumatoid arthritis patients and certain cancer indications. So we are a major player in producing that. Of course, the quality that comes with not only by making the quality, but also controlling the quality. So numerous audits are being performed on us, and we perform those as well. Of course, there are customer complaints.
We receive those as well, and you have to have a very strict process to those. Also, we are very proud to report that we've reduced our waste actually quite a lot in our production facilities and especially in the wastewater that has been the residuals of pharma products in those has been This was also a year when European Union implemented the serialization and anti tampering systems and procedures in place. Organ has been one of the front runners here and investing over several years quite a lot manpower as well as finance resources to prepare ourselves for the serialization, and that work is now actually bearing fruit as we are in very well prepared for that. And then we've committed ourselves to the climate change to fight that.
And there, the CO2 reduction target for ourselves is a reduction of 75%, our emission of CO2 gases by 2025. The outlook, we continue to maintain our outlook. So in terms of the net sales, we expect that the net sales for this year would be slightly higher than 2018. That is including the anticipated milestone to be recorded in our books once the first darolutamide sales in The U. S.
Take place. In a similar fashion, the operating profit, we expect that to be at the same level as 2018, again, for the duralutamide milestone. And of course, this includes our substantial investments into the future and our growth plan. Today, we also published our quarterly calendar for next year. So here you have those.
The AGM is planned to take place 03/25/2020. And next time, actually, we will report on October 23 of our third quarter events and what took place there. Now at this stage, I would like to invite our CFO, Yara Khalson, to join me here at the podium, and we are happy to entertain any questions or comments that you may have. Please go ahead.
We will take our first question from Jo Walton from Credit Suisse. Please go ahead.
Hello. I have a few questions if I could please. Starting with the EZ HAILER franchise, I wonder if you can tell us what steps you can take and give us any additional color to increase the adoption of your effective generic to AdFair? Secondly, I wonder if you can tell us a little bit more about the animal health business. It's obviously done extremely well in the first half of the year.
Is there any phasing of that or could we expect to see, similar rates of growth in the second half of the year? I wonder if you could give us an update on any more tenders that may have come up in the biosimilar side just so that we get a sense of the full range of products that you're now allowed or able to market. So an update there. And then, finally, as we're coming up to darolutamide approval in The US, I wonder if you could help us at all with when we should start to see an increase in your SG and A because presumably you will opt in. Will that be something more towards perhaps the second half of next year when we could start to see your increment for marketing investment in that product?
Many thanks.
Thank you. Very good questions. Let me first address the salmeterol fluticasone penetration question. What we obviously, there what we see are actually the main tools available for us are the promoting the full line, what we have. So for the course of the asthma or COPD patient over the course of the disease, so we have a full line of products there.
Of course, the pricing point is an important element. And typically, we are priced. Our pricing point is lower than the originator. But in quite a few markets, there are one or another way. You have to win a tender.
I think Germany would be qualified as one of those. Also Sweden would be qualifying as one of those where you have to pass the threshold in order actually even to promote your product or in a meaningful sense. So what we are currently doing is, of course, addressing those. And as well, as we've indicated in the early part of the year, we've actually increased our sales force capacity, especially in Germany. And this, we are doing by having a contract sales force organization there to augment our own sales force.
Animal Health, do you want to Yari is responsible for in our Management Board for Animal Health, so maybe you want to address that.
I mean, the year started very well and when comparing the total Animal Health numbers and the top product list, one could notice that the growth has basically been driven by this animal fedati product line, which is, on the other hand, very much driven by sales power partners around the world. And there, last year, we had a relatively weak spot for the year and then much more shipments to the partner during the second half of the year. And this year, it's going to be a little bit the other way around. So unfortunately, we cannot expect to see the similar type of growth during the second half of the year, which was especially driven by relatively large shipments to some of our big partners.
In terms of the biosimilars, it is unlikely that we will see any major tenders to materialize to shipments over this year. So pretty much what we now have in hand, they will go on. But any new tenders that would open for shipments this year to have a material impact, I think that would be a high stretch. So I think that is unlikely. Still the largest product there continue to be from CEMA in our part.
And then, of course, here locally, adalutamide is going to be continues to flow ahead. In terms of the darolutamide, that, of course, means for us, the sales and marketing efforts means Europe. Typically, the European approval tends to take a little bit longer time because you have to also include the reimbursement discussions there. And I think there will be naturally some start up costs when we start having some visibility on the approval time lines. But I think in terms of any major investments, I think at this stage, when we based on the information we have, I think the 2020 would be probably too early to see any additional impact of those.
It's probably then tilting towards the latter part of 2020.
Thank you. Can I just a final one? Can you just confirm whether you're able to market your biosimilar Herceptin yet?
In some markets, yes.
Thank you.
Thank you. We will now take our next question from Sami Sakhamis from Nordea Group. Please go ahead.
Hi, thanks. I have actually four questions. Starting from gross margins, these were on quite low sub-sixty percent level in Q2. Can you open up some of the main factors behind this?
Okay. I can stop that. So especially compared to last year, the gross margins definitely were lower than in 2018. And there, of course, the product mix is the key driver. So last year, we had a 50,000,000 more shipments of of parking from products than than we did this this year.
And, obviously, those products generate higher margins than the average of the company. So that was one one key driver. So it's more driven by the changes in the product mix and, of course, the pricing environment. I mean, like you have seen in our report, the prices of the reference price for us in Finland are roughly 10% down from year ago during the first six months of this year. So that of course has negative impact also on the gross margin.
So it's really driven by the sales mix and prices in the market, not cost as such.
Okay. And then secondly on Syndax, you did mention that marketing authorizations have been filed for generic Syndax. Can you be a bit more specific regarding which countries we are talking about? And also share your planning assumptions on how you expect the generic competition to eventually ramp up?
Well, actually the way typically the generics are filed in Europe, you have a so called mother country where you start the mutual recognition process. That's the country where you first file and then you subsequently roll that over to the other markets. Now in terms of the planning, we expect that these would have no material impact for this year's sales. On the contrary, we continue to and our planning assumption is that Simvax sales continue to grow this year.
And for next year, it's still a lot of uncertainty. So we really don't have enough information at this stage to be able to calculate potential impact for us. There probably will be some, but how big? We'll have to wait until we really start seeing the competition emerging.
Okay. And then thirdly, regarding Finnish market, you did mention that price levels have been stable now in Q2 for the generics products. If we assume that this is the case also during the remainder of the year, What sort of pricing headwind are we talking about after roughly EUR 15,000,000 headwind in 2017 and 2018?
Yes. I'm sorry if I hope not to mislead you. It doesn't mean that the price level has stabilized. I mean, we are still seeing decline, but the slope of the curve is actually slowing down. So the secondary one is coming down.
The current assumption, we started out, I think, roughly $15,000,000 $17,000,000 last year. Now we are probably looking either double digit or high single digit. I think that's an assumption that we are internally using the fiscal year 2019.
Okay. Thanks. And then finally regarding Animal Health, just wanted to check that did you say earlier that the growth you've been experiencing there is not contributing to margins in a meaningful way?
No, this was my comment was on the biosimilars.
Okay. Yes. Thanks. No more questions.
Thank you. As there are no further questions in the queue, I'll hand the conference back over to your CEO for any additional or closing remarks.
Okay. Thank you very much for joining us. We wish everybody a very nice summer. It's our final turn to be a summer at least for this afternoon here in Helsinki. We hope to see you all joining us on our conference call on October 23.