Review from President and CEO Timo Lappalainen
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.