Orion aims to grow faster than the pharmaceutical market
Research and development are Orion's strengths, and the company will continue to invest in them. The target is to increase net sales 1.5-fold by 2025.
In 2025, Orion will look a bit different. At least it will look larger in terms of sales. The company has a strong upward direction.
“We aim to grow faster than the pharmaceutical market. Our strategic goal is to have sales reach EUR 1.5 billion in 2025. That is, we want to increase our turnover 1.5-fold in about six years,” said CFO Jari Karlson at the Sijoitus Invest 2019 fair in November.
Karlson believes that the growth target will be achieved if Orion succeeds in product development and accesses the global market with new products.
While growth efforts are focused on new innovative products, generic products will continue to play a key role in business development in the future.
“To be able to invest in R&D, we must ensure that all other business units can continue to operate profitably and even grow. With a steady cash flow, product development risks are acceptable,” says Karlson.
In relation to these targets, Orion strives to keep its equity ratio at at least 50 per cent and maintain solid profitability. Operating profit should exceed 25 per cent of net sales.
Megatrends support demand and form the basis for business strategy. Orion has defined ageing population, high healthcare costs, scientific progress, increased responsibility for one's own health plus sustainable development and responsibility as such trends.
The ageing population has a direct impact on drug consumption. From a societal point of view, costs must not rise too high, and cheaper generic medicines are the solution to this according to Karlson.
“What’s more, science is advancing and we have to keep up with it. People also want to take care of their own health so a proper range of self-care alternatives is also needed. ”
Karlson emphasises that the only way to build well-being is to do it responsibly.
“Patient safety is at the heart of all responsibility: medicines must work and be safe. We also take the environment into account by collecting all production waste water to minimise the risk of pharmaceutical emissions, for example.”
According to Karlson, the main drivers of profitable growth are R&D projects or, more specifically, the pharmaceuticals that result from research and product development. Some are already on the market, while some are still on their way.
“For instance, we are adding new products to the Easyhaler® family of asthma treatments. We are also conducting research on veterinary medicines, and we will be introducing new products there, too.”
Because we cannot do everything by ourself, our goal is also is to acquire and license products in addition to in-house manufacturing and product development.
"It would also make sense to expand our presence beyond Europe," Karlson says.
This year we have been looking closely at the US market in particular, which involves ODM-109, orally administered levosimendan for the treatment of ALS symptoms. This Orion-developed molecule is already in use and is now being tested for a new disease.
Levosimendan may help maintain respiratory capacity and thus support ALS patients’ overall functional ability. Orion will carry out the research alone and its total investment will be approximately EUR 60 million, spread over three years. Results are expected next summer.
“ODM-109 has been granted orphan status in the US and the EU, and we intend to apply for marketing authorisation if the results are positive. If the research is successful, the product will also benefit from product protection,” says Karlson.
Another key drug development project is Orion's own innovation, the darolutamide molecule, which is being developed jointly with Bayer. The drug has already been approved in the United States for the treatment of non-metastatic castration-resistant prostate cancer.
Marketing authorisation applications have been filed in Europe and Japan. In addition, Orion and Bayer are currently in the final clinical phase of research into the treatment of metastatic hormone-sensitive prostate cancer. This project is expected to be completed by the end of 2022.
In the darolutamide collaboration, Bayer has paid most of the development costs and plans to commercialise the product globally. Orion is responsible for the manufacturing and is working together with Bayer in the sales and marketing in Europe.
"The financial impacts for Orion are the milestone payments it receives from first sales: EUR 45 million has already been received in the US, and EUR 20 million in the EU and EUR 8 million in Japan."
When the product begins to sell worldwide, Orion will receive tiered royalties on global darolutamide sales, which will be approximately 20% including production revenue. With sales increase, royalties may increase slightly. In addition, there are potential one-off payments when certain sales thresholds are met.
There are challenges, too, however. Sometimes research and development projects fail along the way. According to Karlson, self-criticism is necessary: when research results are not promising, costs alone are a sufficient reason to terminate a project.
Even in difficult times, Orion has been able to ensure business development and has launched numerous products on the market. That is why the company is confident of the eventual success of its current research and product development, which will enable the company to achieve its growth target. Karlson points out that there is a constant need for new drug treatments.
“If we want to be a EUR 1.5 billion company in 2025, we will have to invest up-front. The company’s growth and profitability will be reflected in its valuation. The goal is to pay a reasonable dividend also in the future. ”
According to Karlson the company intends to distribute an annual dividend of at least EUR 1.30 per share over the next few years and to increase the dividend over the long term.
Finland is the largest single geographical area of net sales with a 30 per cent contribution. About half of the net sales come from Finland and the Nordic countries together. The rest of Europe covers just under a third. In five years’ time, the distribution may be even more global.
Text by Tarja Västilä
Photos by Sami Heiskanen
January 8, 2020