Published on 6 February 2019
Important year for future growth
“Our key objective in the upcoming years is to systematically strive for growing more rapidly than the growth in the market and to increase our net sales to EUR 1.5 billion by 2025. The capital gain from the sale of the Orion Diagnostica business division in 2018 allows additional investments in our own pharmaceutical research as well as in boosting our sales and marketing efforts, among other things. It also allows us to maintain the good level of dividends. The growth projects will burden the profit in 2019, but at the same time the investments lay an important basis for our growth targets.
Our single most important growth project during the next few years is the development of the prostate cancer drug darolutamide, in which crucial progress was made in the year under review. The Phase III trial of darolutamide in patients with non-metastatic castration-resistant prostate cancer, which was carried out in cooperation with Bayer, met the primary endpoint in October: the oral androgen receptor antagonist darolutamide significantly extended metastasis-free survival compared to placebo. More detailed data from the trial will be presented in mid-February at the ASCO GU (Genitourinary Cancers Symposium). Bayer has started the discussions with health authorities regarding the submission for a marketing authorisation application, but the timing is still open. Darolutamide has been granted Fast Track designation by the U.S. Food and Drug Administration (FDA). If the process proceeds as planned, in the best-case scenario, the product could be launched in the United States already at the end of this year. We are eligible to receive significant milestone payments upon first commercial sales, which amount to EUR 45 million in the United States. We also continue our ongoing trial with Bayer which evaluates darolutamide in patients with metastatic prostate cancer. Darolutamide’s potential will attain a significant increase upon completion of this second Phase III clinical trial (ARASENS) approximately in 2022.
The agreement in early December to reacquire the sales and distribution rights for the Parkinson’s disease drug Stalevo from Novartis reinforces Orion’s growth targets in Europe. The repatriation of the sales rights will initially increase sales by about EUR 20 million on annual level. The fact that we, as the developer and manufacturer of the drug, are also responsible for the sale and distribution of the product in its entire domestic market area in Europe further highlights Orion’s role as a major pharmaceutical company focusing on central nervous system disorders. It will also enable us to more actively promote Stalevo’s sales and extend the life cycle of the product.
In the year under review, we also made the decision to start on our own a Phase III clinical trial (REFALS) evaluating orally administered levosimendan (ODM-109) for the treatment of symptoms of amyotrophic lateral sclerosis (ALS). We will invest approximately EUR 60 million over the next three years in this project.
We also continue to seek in-licensing opportunities of research projects in the late stage of development and new products.
Our profitability in 2018 was good: our operating profit margin for continuing operations was 26%, and above our financial target. Our cash flow was stronger than in the comparative period. Net sales and operating profit for our continuing operations were lower than in the comparative period, which was due to unfavourable exchange rate changes, milestone payments and royalties being lower than in the previous year and research and development expenses being higher than in the comparative period. Other than that, the profitability of the business was on the same level as in the comparative period despite many challenges, including price decreases in Finland and lower sales of biosimilars.
Net sales of Proprietary Products slightly increased from the previous year. Its most promising source of growth in the near term is the Easyhaler product family for the treatment of asthma and COPD, the sales growth of which remained strong especially due to the budesonide-formoterol product. In the period under review, we invested in the sales and marketing of the product family particularly in Germany. The sales of the sixth product of the Easyhaler product family, salmeterol-fluticasone, started in the last quarter of the year in the first European countries. There are also plans to further expand the product family with new products in future. Development of the seventh product, tiotropium, is progressing according to plan.
The sales of branded Parkinson’s drugs were lower than in the previous year, as anticipated. However, the decline in sales was significantly slower than our long-term average has been. We expect sales of Parkinson’s drugs to continue to decrease in the coming years, as the products have generic competition in practically all markets. Due to additional sales following the reacquisition of Stalevo’s sales and distribution rights, Orion’s branded Parkinson’s drugs sales are expected in 2019 to remain at the same level as in the previous year despite continuously expanding generic competition.
Sales of Dexdor intensive care sedative remained at a good level and grew in most of the countries despite generic competition having expanded to several European countries. Sales of Simdax, a drug for treatment of acute decompensated heart failure, increased slightly.
Net sales of Specialty Products decreased in Finland and Scandinavia. Tougher price competition in Finland following decisions made in 2016 regarding the pricing of substitutable generic drugs has led to an overall decrease in the reference priced prescription drugs market. The impact on Orion has been significant due to our broad product range and market share. Price competition reduced our sales in Finland by approximately EUR 15 million a year both in 2017 and 2018. The impact has sustained longer than previously anticipated. We expect prices to continue decreasing in 2019, but we anticipate the impact on sales to be slightly lower than in 2018.
The sales of Remsima biosimilar (infliximab), a driver of Specialty Products sales growth in 2017, were significantly lower than in the comparative period due to intensified competition. In order to succeed in this competitive market, we need a broad product portfolio. In 2018, we expanded it with Amgevita (adalimumab), our first biosimilar for outpatient use, by signing an agreement for its sale and marketing in Finland with Amgen. Amgevita’s sales started in the last quarter of the year.
The Animal Health business developed favourably and net sales grew faster than the market.
The ongoing projects supporting growth are expected to burden Orion’s profit in 2019 by an estimated EUR 30 million. This comprises clearly increased depreciation as well as investments in sales and marketing and research. At the same time, operating profit is burdened by intense price competition in the market and gradually expanding generic competition for Orion’s old proprietary drugs.
Orion estimates that in 2019 net sales will be slightly higher than in 2018. The estimated net sales include the possible EUR 45 million milestone payment associated with the commercialisation of darolutamide. Operating profit is estimated to be at the same level as in 2018. The estimated operating profit includes the possible EUR 45 million milestone payment associated with the commercialisation of darolutamide as well as significant investments in measures to boost growth."