Welcome to Orion's earnings call, first quarter 2019. My name is Timo Lappalainen. We will hold first this session here. I have a few prepared remarks. Thereafter, we open the lines for any questions, comments that you may have. At that time, I will also invite our CFO, Jari Karlson, here to the podium with me. Firstly, 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. Having said all that, let's first draw our attention to the highlights of the first quarter. Of course, the big event was that the marketing applications for darolutamide, for our prostate cancer candidate molecule, that was submitted in the main markets in the U.S., as well as in Europe and in Japan.
Our top line as well as the bottom line, those were lower than in comparable period. We continued to plow ahead and invest in R&D. Our outlook remains unchanged. Our proprietary product sales were slightly behind last year. However, our Easyhaler, Dexdor and Simdax, those sold very well in the first quarter. As we've indicated earlier, the specialty products, especially here in Finland, continued to suffer from the headwind. However, in some other markets in Scandinavia, we had a tailwind. The update on our pipeline is that we've initiated a new phase I trial for ODM 209. This is a molecule with the same mechanism as the ODM 208 and a selective hormone synthesis inhibitor. Currently, we are studying that for both prostate as well as breast cancers.
We've also made a decision not to independently pursue the further trials on ODM 104, which is our Parkinson's compound, but actually to allocate our resources into these first in compounds. The key numbers for the first quarter. The net sales, EUR 240 million. We were slightly behind last year. Operating profit, we've indicated earlier that this year, the operating profit will be under pressure due to the commitments that we are making for our road toward the EUR 1.5 billion growth track, certainly this quarter we suffer from that. The operating margin, we did not quite reach the 25% target. However, we were still at the very good level. The cash flow per share was a strong cash flow, especially driven by our favorable working capital commitments. Here is the waterfall, how the first quarter evolved compared to the last year.
When we start with 2018, the Parkinson's products there, we suffered. There were certain timing issues related to that. In terms of the milestones and royalties, there were no major milestones in this quarter. The reference pricing system that continues to put pressure on pricing here in Finland. Easyhaler plowing strongly ahead. That seems to be in a very good track now in trajectory in becoming our largest product this year. For this quarter, we had a favorable exchange rates for EUR 2 million. Last year, the swing was totally different. There, of course, were some other factors as well. How that then translates to operating profit, certainly the product sales, we took a hit there. Also the margin in terms of the pricing, there was a slight impact from that. The Forex, there we gained EUR couple million on the milestones.
Those obviously fly directly flow to the bottom line, so the EUR 3 million from the net sales flows to the bottom line. The other income also, we had last year certain income that we were missing this year. The fixed cost really plowing ahead toward our growth plans there. As we've indicated, we are estimating about EUR 30 million on the top of the normal expenditure, what we are inputting to make the growth story to happen. That's how we've ended up with the EUR 55 million here. When we look at the sales from the geographical breakdown, of course, we notice that Finland continues to be the largest single country market, followed by the other European countries, Scandinavia. In North America, our exposure is fairly limited. In other markets, especially in Japan and China, are important for us.
In Finland, we continue to suffer, as I said. Scandinavia, we had a slight growth there, and in other European countries or the large European countries, there we continue to plow ahead. In North America, pretty much at par and other markets, we had a decline. When we switch our site to the product portfolio view. In specialty products, which is very much Finland dependent and also strong presence in Scandinavia, there we had a 5% decline in that business. Proprietary products, mainly relating to the entacapone products, was at the 4% decline. Animal health had a good start for the year, Fermion as well, and contract manufacturing, of course, the base number is fairly small.
Here you see also on the right-hand side pie here that the specialty products, so that's generics, prescription products, OTC products, non-pharma, as well as biosimilars, that is currently our largest business. The number one product that has changed. The Easyhaler product family indicated for asthma, COPD, based on Orion's proprietary drug delivery vehicle as well as formulation that continued to plow ahead and now commands number one position in our league table of products. Stalevo second place there. Dexdor continuing to grow, as well as our acute heart failure indicated Simdax, and also Orion's proprietary animal sedatives. Thereafter, there's a whole array of products and biosimilars, of course, being an important part of our growth story. If we look at the proprietary products, there the Easyhaler is the important product family for us today.
Parkinson's disease products, Stalevo, Comtess, Comtan, they're being invested in that towards the end of last year and beginning of this year, where we participated the products of Stalevo as well as Comtan here in Europe. Dexdor still moving strongly as well as Simdax. On PRECEDEX, those are mainly royalties as well as API sales to our partner, Pfizer. With Easyhaler, the combination product, budesonide-formoterol, that is today the large bulk of our business and continues to grow strongly with almost 35%. We have a strong market position in some countries, especially here is an example in Sweden. There is also quite a runaway still to grow in some other markets. Here we're taking the largest country market in Europe and Germany, where we are still only at 7%.
As we mentioned in our last earnings call, the salmeterol-fluticasone combination products, those sales have only initiated towards the end of last year and the beginning of this year. We are in very early stages of that. We are working on the development of our seventh Easyhaler product for tiotropium, where the indication is likely to be COPD. The Parkinson's disease products. Orion took over the Stalevo sales in Europe from our partner, Novartis, in the beginning of December, and of course, the transition period has taken place and we haven't booked all the sales in the first quarter. However, we expect that the second quarter, we would capture the majority of all those sales booking by Orion, and then we'll continue to see a little bit more of our own sales. That's the darker part of this bar always.
Of course, still we have the fluctuation of our partner sales, Novartis, how their purchasing pattern goes from quarter to quarter. Here you see that Japan, Europe, as well as rest of the world, those are pretty much at the equal footing, and North America, mainly the U.S., is actually very small part of the business today. The Dexdor continued very strong performance in the first quarter. We also hear flak to everybody to note that the base patent has expired or the use patent at the end of March. However, the first quarter, we did not see any material competition in that in the excess what we've seen in the past. We'll see how this will pan out this year, but a very strong start for this for the first quarter. We'll switch gears to specialty products.
Those are the generics, OTCs, non-pharma, and biosimilars. If we look at that first by territory. In Finland, we suffered from the heavy price competition, especially in the prescription product side. In Scandinavia, we were pretty much at par as well as in Eastern Europe and Russia. This really tells you also the weight of this business of Finland, Scandinavia, and selected Eastern European countries as well as Russia. Also it's good to note always that the generic business, those are prescription products, is almost 70% of our business. One quarter is self-care products, including the non-pharmaceutical products, and less than 10% are biosimilars. So in Finland, we've continued to suffer, especially in the reference pricing system, and those product categories, which are an important category for Orion.
The entire market for the first quarter was roughly EUR 100 million, about 10% down that market. Our market share is more than a quarter in that market, and we also went down, but a little bit less than the market and continued actually to gain on the volume. In the overall pharma market here in Finland, the market was a little bit more than half a billion. Orion continued to command about 11% market share. Of the self-care products, we have about a quarter of the market. As I said, the reference market business, that is very important for us and with 26% market share. Our future, R&D, where we put more than EUR 100 million investment every year. The tiotropium, that, of course, we continue to work with that for the seventh Easyhaler version.
On darolutamide for the first indication, as I said, the rollout of the first marketing authorization applications has taken place. Now, of course, there will be subsequently also other markets to follow. There is another trial ongoing to potentially expand the indication area, and that is fully recruited. There, of course, we need to wait for the results of that trial before we can talk more about that. Our ALS trial, where we are actually developing to increase the skeletal muscle, especially relating to breathing function of the patients. levosimendan oral formulation, that is recruiting currently in about 100 centers around the globe, and the recruitment is going fine and according to our plans. There are some earlier compounds, including the 209 out of the same mechanism as 208.
However, here we are expanding the trial from the very outset, so we have a basket trial, including prostate cancer and breast cancer patients. Now we've also taken out from this table the 104, which was a COMT inhibitor program for Parkinson's disease, as we made a decision that we would be partnering that compound and focusing on bringing these assets further in our clinical pipeline. Here is just the reminder that the darolutamide, we have an ongoing phase III trial that we are collaborating with Bayer, and the patient recruitment is finalized. On the ALS trial that the program is going. Of course, the new thing for us, the 209, is of the same mechanism as 208.
In the beginning of this year, we set certain targets for ourselves in our drive to business for EUR 1.5 billion and also, of course, to maintain other business targets. The first one is the drive the business through the successful commercialization of darolutamide. There, for the first quarter, we have the marketing authorization applications. Those have been submitted. Of course, then the [RSNs] continues with the effort to extend the indication. The other one big trial that we are doing solely by ourselves is the ALS trial. The patient recruitment is proceeding as planned. The specialty products business in generics and in OTC and biosimilars, that's an important part of our business, and our volume share in Finland continued to grow faster than the market.
Pretty much the same story, of course, when we look at the overall portfolio of that business, because the heavy weight of Finland in that business. Easyhaler, that is the near-term online products, which is important and following up on that. The entire Easyhaler family had a strong start for the year. Of course, the salmeterol-fluticasone combination, we are following that closely. The in-licensing opportunities with a broader indication or materiality, that work is continuing, and at this stage, we have nothing to report on that. Important part for all organizations today is corporate responsibility. Of course, the patient safety with the new serialization that took place in February in Europe. That has been implemented in Orion plants, facilities, and by our partners.
We were ready on day one to go ahead with that, and we understand that there will be other countries following a little bit of a similar type of anti-tampering or serialization approach, and we are making ourselves ready for those markets as well. We had our value sets. We had a large questionnaire on that to all the Orionees, and we had more than 90% strong response rate to that, and those were approved and are being implemented. We feel very strongly about our values. Of course, the climate change is an important part of everybody today, all the businesses, and we've set ourselves a pretty strict target for those, which is reducing the CO2 emission at 75% against our actual 2016 by 2025. In terms of the financial outlook, that is unchanged. We estimate that the 2019 net sales will be slightly higher than 2018.
This estimate includes the darolutamide, EUR 45 million milestone payments that relates to the commercialization of darolutamide in the U.S. A similar fashion on the operating profit that is estimated to be at the same level as 2018. Also, this includes the aforementioned EUR 45 million milestone payment. That, of course, those are important elements. The next bigger event for the company is our Capital Markets Day, which will be held for institutional investors and analysts in Helsinki, May 22nd, and thereafter, the normal course again takes place, and towards the mid-July, we will report the second quarter results. At Orion, we had a good start for the year, continue to build the company for our goal for the EUR 1.5 billion. In the meanwhile, of course, continue to invest strongly also in our future in R&D.
At this stage, I invite our CFO, Jari Karlson, to join me here at the podium to take any questions or comments that you may have. Now we turn over to the phone lines and are happy to take any thoughts, questions you may have. Please.
If you wish to ask a question, please signal by pressing star one on your telephone keypad. We'll take our first question. Please go ahead.
Hello, it's Jo Walton from Credit Suisse. I believe I'm open for a question. I've got a few if I could, please. Firstly, if I'm right in remembering when you sold your diagnostics business, there was a potential for an earn-out. We're about a year or so from that disposal. Is there any timeline and is there any expectation of an earn-out coming? Secondly, I wonder if you could give us a little bit of an update on the outlook for the biosimilar tendering business. Are there any big tenders coming up that we should be aware of? Do you have any sense yet of when you will be able to launch your Herceptin biosimilar? My next question is an R&D one. I wonder what ODM-209 does that perhaps ODM-208 did not do.
Should we assume that your efforts will really move on to the second one of those molecules, or are they distinct in some way in that we should think of value for both of them? Continuing on R&D with ODM-104, now you've made a decision to do no further work on it yourself. I wonder if you could tell us what the prospects might be for partnering that. It's not attractive for you to do the work. You feel it would be attractive for somebody else to do the work. Should we assume that you would just hand it over and perhaps get a royalty on the product if it ever comes to the market? My final question would just be on PRECEDEX, which was obviously down very strongly. You pointed out that that was royalties and product sales.
Is that a reflection of an ongoing level of quarterly income, or is that just volatility and it will pop back and still be one of your top 10 products at the end of the year? Many thanks.
Okay. Thank you. Excellent questions. I'll start out with the earn-out. Actually, the structure, what we said in the press release is that we have the right for the earn-out up to EUR 60 million. It's anywhere between zero and EUR 60 million. That actually will depend on the exit of the existing owners. The buyer, when they make an exit, that depends on their return. It's tied to that. As they are still owners of the business, this earn-out has not materialized.
Very likely we are talking about still several years to the future. I mean, like the exit for these private equity investors, you are talking about maybe four or five years minimum. We are not expecting to see anything from that for many years to the future.
In terms of the biosimilars, there are some tenders coming out that there is a possibility actually to supply those toward the end of the year. However, as the price level of biosimilars in our markets, especially in those national tenders that I am referring to in Denmark or Norway, is at the fairly low level. I would not get all that excited about the profit impact of those. Of course, there will be profit impact, but probably not material this year, even if they did materialize. Pretty much the same story is actually with any subsequent new launches of biosimilars this year. There will be some smaller tenders where we will be participating with the entire portfolio and depending on the label in some markets.
I think the materiality threshold will not be broken with any of the biosimilar business that we don't have in our outlook yet.
Like we have stated in our outlook, the estimate is that in the ballpark, the sales of biosimilar portfolio will be about the same as last year, this year.
On ODM-209 versus 208, of course, there is in the non-clinical experiments, they have shown differences. That's obviously why we are running these both molecules. Whether how does that replicate in men remains to be seen. I think the first one that you would notice there, however, is the patient pool. Whereas 208 is geared today solely for prostate cancer, 209, we go directly to a basket trial, including breast cancer patients and prostate cancer patients. At this stage, there's no way to make a determination whether both of them will move forward or either one or test one. Today, of course, we are optimistic because we are in the early stages. The potential best outcome could certainly be that we have both products, but they are differentiated by the indication. 104, what type of deal structure for the out licensing? Of course, that depends.
I think if we are not prepared to put the money on the table in collaborating in development of 104, I think the likely outcome there would be that there would be some sort of access fee, some sort of signing fee related to the product. Mostly, I think the income would be, as you suggested, in the form of royalties. Maybe we also supply product, but that remains to be seen.
In the question about PRECEDEX , the volatility mostly came this quarter from lower deliveries of the API. The royalties is more like timing, and there is no dramatic underlying decline in the market sales. The API deliveries have been changing from one year to another quite a lot, depending on the production strategies of Pfizer when they are buying the API from us. Of course, in the longer run, it is a declining product, but has been declining relatively slowly in the recent years. This first quarter decline in sales doesn't indicate similar type of decline for the full year, not at least as far as we know today.
Thank you.
As a reminder, if you wish to ask a question, please signal by pressing star one on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, to ask a question, please signal by pressing star one on your telephone keypad. We will now take our next question.
Yes, Iiris Theman from Carnegie. A few questions, please. Firstly, how do you expect your group margin to evolve if you reach your sales target of EUR 1.5 billion in 2025?
Okay. Of course, we are not that far yet. What we've said is that our operating profit margin target is 25%. On our road there, it is likely that there will be put pressure on that ratio, as we saw in the first quarter, that we've indicated also earlier as how to actually utilize then the proceeds that we received from divestment of Orion Diagnostica. That allows us to continue to pay attractive dividends, even if our profitability for any given year might not be sufficient to cover the dividends. That's one indication, what we've said earlier on. We certainly are not able to give you any exact operating profit guidance for that far out.
Okay. Then secondly, how much did you spend on ALS in Q1? What about other growth investments? Did you have any other or new growth projects in Q1, or are those going to be visible in the coming quarters?
Okay. What we've said on the ALS trial is that the overall expenditure on that over a three-year period is EUR 60 million. That certainly has the heaviest weight of that trial will be this year.
Yeah. In the February outlook, we actually estimated that it will be roughly EUR 25 million this year. We are pretty much spending that type of money at the current planning.
That was one. Of course, the acquisition of the Stalevo rights in Europe, the depreciation, amortization of those assets is roughly one point some million a month. That hits us every month now, every quarter for the two-year period. Also, we took online our plant in Fermion, which is mostly geared towards producing darolutamide. All of those are there, including then, of course, our extended efforts in Germany for commercialization of Azedra.
Most of the EUR 7 million increase in the fixed spending was related to this growth in effectiveness in either marketing and sales or in R&D.
Okay. Still on ODM-203, when should we expect phase II data for it? I think according to clinical trials, it should have been completed, if I understand correctly.
Whatever data will be published, it will be first published in the scientific congress. Unfortunately, we are not able to give the congress until it's been approved for presentation. Of course, we are all waiting eagerly for that data.
Okay. Still a final question regarding Finnish price competition. Are there any changes in the situation between Q1 and Q4?
No material changes, so there is no change in our law or system or the structure of the business. It is just continuing the same trajectory that we've seen earlier.
Of course, like we have indicated, the estimate for the full year is that we gradually see lower price decrease levels than last year. Especially during the first part of the year, we are still seeing the impact from the price decreases from last year, meaning that the prices today are still quite a lot lower than they were a year ago. I think we can reiterate that idea that we have seen some signs that the market is maybe getting slightly more stable than it was during the past couple of years. Still declining this year, that's clear.
Okay. Thank you.
It appears there are no further questions at this time. I would like to turn the conference back to you, sir.
Thank you very much. At this time, I'm thanking everybody for listening in, dialing in. I appreciate that at least here in the Nordic markets, this is so-called Super Thursday. There's a huge number of companies giving out their first-quarter releases as well as tomorrow. Thanks for joining us, and I hope to see quite a few of you in our CMD in about a month's time. Thank you.