Review from President and CEO Timo Lappalainen
Published on 18 July 2018
Continuing to build the future
"Our profitability was good in the first half of the year. The operating profit margin for continuing operations excluding the items associated with the sale of Orion Diagnostica was 28%, and above our financial target. Our cash flow was stronger than in the comparative period. Our research projects and product marketing authorisation applications have progressed, which supports our growth in the long term. Orion has three ongoing Phase III clinical trials, and the results from the first one are expected this autumn.
The sale of Orion Diagnostica that was completed at the end of April provided us with EUR 128 million in capital gain and additionally income of approximately EUR 5 million due to the departure of Orion Diagnostica from the Orion pension fund. The sale process incurred expenses amounting to approximately EUR one million. All of these items are reported as part of discontinued operations. The sale of Orion Diagnostica will allow us to further focus on growth and achieving our financial goals. Orion is currently working on numerous projects that target growth in our core area of the Pharmaceuticals business. For example, we are actively evaluating late stage in-licensing opportunities. We also continue to invest in our own research and development activities, with new clinical trials, for example. The capital gain from the transaction will strengthen our equity position and maintain our ability to achieve our dividend distribution objective.
The net sales and operating profit for our continuing operations fell behind from the exceptionally strong comparative period due to generic competition, tightening price competition especially in Finland, lower sales of biosimilars, smaller milestone payments and royalties and unfavourable exchange rate changes.
The growth of the Easyhaler product family has remained strong especially for our budesonide-formoterol product. The first national marketing authorisations for our other combined formulation, the salmeterol-fluticasone Easyhaler, have now been received, and we are preparing to launch the product in the first countries in the second half of the year. The significance of the Easyhaler product family to Orion is clearly increasing.
Sales of Simdax, a drug for treatment of acute decompensated heart failure, took a positive turn again after a decline in the first quarter, and sales in the first half-year were at the comparative period’s level. Net sales of Dexdor intensive care sedative continued to grow in most markets despite the generic competition expanding in Europe. As a whole, net sales of Dexdor were at the previous year's level.
Sales of the branded Parkinson drugs saw an unusual increase from the comparative period. However, the increase is explained by the timing of deliveries. In the longer term, we expect sales to continue to decrease, as the products have generic competition in practically all markets.
Sales of Specialty Products decreased in Finland and Scandinavia. In Finland, price competition has increased following the change made last year to the pricing system for substitutable prescription drugs by narrowing of the so-called price band. We expect the narrowing of the price band to decrease sales in Finland by approximately EUR 15 million in 2018.
The sales of Remsima biosimilar (infliximab), a driver of Specialty Products sales growth last year, were lower than in the comparative period, because Orion did not win national tendering competitions in Denmark and Norway since the comparative period. Sales development of Remsima will continue to fluctuate depending on our success in tendering competitions also in the future. In the near future, our biosimilar offer will expand by a third product: in the review period, we signed an agreement with Celltrion on the sales and marketing of the trastuzumab biosimilar.
Fermion, the manufacturer of active pharmaceutical ingredients, completed a significant expansion investment of more than EUR 30 million at its Hanko manufacturing plant in June. With the new facility, Fermion has ensured its preparedness to meet increasing global demand for active ingredients. In addition, it supports our aim to captively produce the active ingredients for Orion's in-house developed proprietary drugs.
The Phase III clinical trial (ARAMIS) on darolutamide (ODM-201) for the treatment of non-metastatic castration-resistant prostate cancer is progressing on schedule. Patient recruitment is completed, and the estimated primary completion date of the trial is in September. Our second darolutamide research project, Phase III clinical trial (ARASENS), is on track, and patient recruitment is now finalized also for this trial. Estimated to be completed in 2022, the ARASENS trial evaluates darolutamide in the treatment of patients with metastatic hormone-sensitive prostate cancer. Both research projects are carried out in collaboration with Bayer.
In July, Orion recruited the first patients in the Phase III clinical trial (REFALS) in which orally administered levosimendan (ODM-109) is being evaluated for the treatment of symptoms of amyotrophic lateral sclerosis (ALS). We are conducting the trial on our own and investing approximately EUR 60 million in it over the next three years. Orally administered levosimendan has now been granted an Orphan Drug Designation both in the United States and in the European Union.
We have completed the Phase II clinical trial with a drug candidate for the treatment of symptoms of Parkinson’s disease in which a new levodopa/carbidopa formulation is combined with the COMT inhibitor (ODM-104) developed by Orion. The primary endpoint of the trial was reached. We continue to analyse the results and evaluate moving on to Phase III. We are looking for a potential collaboration partner for this trial.
The outlook remains unchanged. Orion estimates that in 2018 the net sales excluding Orion Diagnostica will be at the same level or slightly lower than in 2017 and the operating profit excluding Orion Diagnostica and material capital gains is estimated to be lower than in 2017.
Published on 24 April 2018
A good start for the year
“In the first quarter our profitability was good, our operating profit margin was 28% – once again above our financial target – and our cash flow was strong. Also, our research projects and product marketing authorisation applications have progressed, which supports our growth in the long term. However, our net sales and operating profit fell behind from the exceptionally strong comparative period due to generic competition and tightening price competition, smaller milestone payments and unfavourable exchange rate changes.
In Proprietary Products, as expected, sales of Parkinson’s drugs continued to decline steadily due to the expiry of patents. On the other hand, sales of the Easyhaler product family for treatment of asthma and chronic obstructive pulmonary disease as well as of Dexdor, the intensive care sedative, developed favorably. Dexdor continued to grow in almost all markets despite the commencement of generic competition to the product in some European countries.
The growth of the Easyhaler product family has remained strong especially for our budesonide-formoterol product, which is now on sale in all key European markets. The Easyhaler product family will be expanded by a sixth product: In the review period, we received positive conclusions for the salmeterol-flucatisone Easyhaler under the decentralised EU marketing authorisation procedure, and the national approval procedures of the marketing authorisation applications have started in 23 EU countries. We are satisfied with the favourable results in this challenging development area, and will continue to expand the product family further in the future, for example with a tiotropium formulation that is currently under development.
Sales of Specialty Products grew in Scandinavia, and in Eastern Europe and Russia. In Finland, sales declined due to tougher price competition. We have launched in the Nordic and Estonian markets our second biosimilar, Ritemvia (rituximab), and the sales have started in the first countries. Remsima biosimilar (infliximab), a driver of Specialty Products sales growth last year, did not reach similar growth figures in the first quarter. New competitors have entered the markets, which has further increased competition and lowered price levels. Sales development of Remsima will continue to fluctuate depending on our success in tendering competitions also in the future.
The net sales of Animal Health business increased particularly due to good sales in animal sedatives.
Orion has received positive conclusions under the decentralised EU marketing authorisation procedure for Clevor (ropinirole eye-drop), a treatment for poisoning in dogs. Decline in Fermion's net sales is explained by fluctuation in business volume due to pharmaceutical raw materials' order cycles. Net sales of the Diagnostics business were at similar level to the previous year.
In our research and development, the first quarter was mostly a time of positive news: Phase III clinical trial ARAMIS on darolutamide (ODM-201) for prostate cancer is proceeding. Recruitment of patients is finalized, and the latest estimate is that we will complete the trial next autumn. The recruitment of our second trial on darolutamide, ARASENS, is also proceeding well. We have commenced a Phase I clinical trial to develop a novel selective hormone synthesis inhibitor (ODM-208, CYP11A1 inhibitor) for castration-resistant prostate cancer and we have decided to go ahead with a Phase III trial on oral levosimendan (ODM-109) for ALS. We decided to discontinue the Phase IIa clinical trial with an alpha-2c adrenoceptor antagonist (ORM-12741 for Alzheimer’s disease) conducted in collaboration with Janssen Pharmaceuticals, Inc. as the trial did not meet the efficacy objectives set for the product.
After the review period, on 21 April 2018, we signed an agreement on the sale of all shares in Orion Diagnostica Oy (i.e. the Orion Diagnostica business division) to an investment fund managed by Axcel Management A/S. Orion Diagnostica has operated as an independent business and it has no material business synergies with Orion’s other operations. The sale of the division will allow us to further focus on growth and achieving our financial goals. Orion is currently working on numerous projects that target growth in our core area of the Pharmaceuticals business. For example, we are actively evaluating late stage in-licensing opportunities. We also continue to invest in our own research and development activities, with new clinical trials, for example. The capital gain from the transaction will strengthen our equity position and maintain our ability to achieve our dividend distribution objective.
As a result of the sale of Orion Diagnostica, Orion has on 21 April 2018 updated its outlook for 2018 announced on 7 February 2018. Orion estimates that in 2018 the net sales excluding Orion Diagnostica will be at the same level or slightly lower than in 2017 and the operating profit excluding Orion Diagnostica and material capital gains is estimated to be lower than in 2017.