CEO Timo Lappalainen’s reviews 2013

Published on 4 February 2014

“Orion’s net sales over EUR 1 billion”

 “Our net sales exceeded EUR 1 billion for the first time since the demerger in 2006. Our operating profit was as anticipated slightly down on the previous year.

 “Deliveries of our Parkinson’s drugs to Novartis were lower than a year ago as expected. Total sales generated by Stalevo® and Comtess® products in Orion’s own sales organisation were also slightly down. Despite the trend in sales of Parkinson’s drugs, net sales of the Proprietary Products business division decreased only slightly because sales of other products in the portfolio grew. In particular, the intensive care sedatives Dexdor® and Precedex® continued to grow strongly. We are also pleased that all the other business divisions increased net sales during the year. Fermion, which manufactures active pharmaceutical ingredients, increased sales especially strongly. The Specialty Products business division has grown as large as the Proprietary Products business division, balancing the Group’s structure.

 “In 2013 we received positive news from many of our research projects. In March we took a step in broadening the Easyhaler® product family into combination products when we submitted an application for marketing authorisation for a budesonide-formoterol formulation product in Europe. In June our partner Novartis submitted a marketing authorisation application for Stalevo in Japan. In December we announced that we had signed a licensing agreement with Janssen Pharmaceuticals, which includes clinical phase trial of an alpha-2c adrenoceptor antagonist (ORM-12741) being developed for the treatment of symptoms of Alzheimer's disease.

 “During the year we terminated our collaboration agreement with Endo Pharmaceuticals concerning oncology drug research, development and commercialisation. All rights to the androgen receptor inhibitor (ODM-201) for the treatment of prostate cancer covered by the agreement reverted to Orion. We have started preparations for a Phase III clinical trial with ODM-201 and continue negotiations to find a suitable partner for collaboration on the next phase of worldwide development and commercialisation of the product. We also decided to end development of a more effective levodopa product (ODM-101) into a finished product.

 “The significant investment and production reorganisation projects progressed as planned during 2013, and some of the projects are still continuing during the current year. Through the measures being undertaken, we will develop and ensure future growth, delivery reliability and quality standards. However, the projects have been temporarily increasing production costs and decreasing production capacity, and that reduced our margin during the year.

 “In Europe data protection of Stalevo expired in October 2013, following which sales of our Parkinson’s drugs are forecast to continue to decline as generic competition to Stalevo is expected to commence in Europe in 2014. The basic patent for Precedex has expired and this product may also face generic competitors during the current year. The generic competition to these products will significantly affect Orion, but the precise timing of commencement of competition is difficult to forecast. The rest of the product portfolio will continue to grow, but products with lower margins will account for an increasing proportion of sales. Progress in our research projects will increase our research expenses, and our capital expenditure will still be higher than average. We estimate that our net sales in 2014 will be at similar level to 2013 and our operating profit will be slightly lower than in 2013.”

 

Published on 22 October 2013

“Year progressed as anticipated”

 “Our net sales were at similar level to the previous year and as expected our operating profit was slightly lower than in 2012.

“Deliveries of our Parkinson’s drugs to Novartis were clearly lower than in the previous year. The decrease in the past quarter was strengthened by about EUR 10 million of non-recurring compensatory payments related to pricing received in the comparative period of 2012. Total sales generated by Stalevo® and Comtess® products in Orion’s own sales organisation were slightly down on the comparative period.

“The entacapone molecule patent will expire in October 2013 in the United States, where generic competition commenced in April 2012. Orion has delivered generic entacapone products to its partners in the United States and will continue these deliveries after the expiry of the patent. In Europe data protection of Stalevo will expire in October 2013, after which generic competitors can refer to results from Orion’s clinical trials in their applications for marketing authorisation. Despite intensifying generic competition, Parkinson’s drugs will continue to be an important product group for Orion.

“Although sales of Parkinson’s drugs clearly declined, net sales of the Proprietary Products business division decreased only slightly because dexdor® and Precedex® maintained strong growth. In addition, after the review period, we extended the licensing agreement with Hospira concerning the sedative agent Precedex® in the markets outside the Europe. We are also pleased that all the other business divisions increased net sales during the year. Fermion, which manufactures active pharmaceutical ingredients, increased sales especially strongly.

“At the end of September we reported positive Phase II clinical trial results for an androgen receptor antagonist (ODM-201) for the treatment of advanced prostate cancer. The collaboration agreement with Endo Pharmaceuticals concerning development of ODM-201 has been terminated and subject to an ongoing royalty obligation due Endo, all rights to ODM-201 revert to Orion. Ending the collaboration with Endo will not affect progress of the project. We have started preparations for a Phase III clinical trial and also continue negotiations to find a suitable partner for collaboration on the next phase of worldwide development and commercialisation of the product. A broader collaboration agreement between the companies concerning oncology drug research, development and commercialisation has also been terminated. All the drug candidates covered by the agreement and all their rights will return to respective originators.

“In addition, we have continued negotiations with possible partners for the further development of an alpha-2c adrenoceptor antagonist (ORM-12741) being developed for the treatment of Alzheimer’s disease. 

“The significant ongoing investment and production reorganisation projects have progressed as planned during the year. Through the measures being undertaken, we will develop and ensure future growth, delivery reliability and quality standards. However, the projects have been temporarily increasing production costs and decreasing production capacity, and that has reduced our margin this year.

“Our outlook estimate remains unchanged. We estimate that our net sales will be at similar level to the previous year and our operating profit will be slightly lower than in 2012.”

 

Published on 30 July 2013

“First half of the year progressed as anticipated”

 “Our net sales were at similar level to the previous year and as expected our operating profit was slightly lower than in 2012.

“As anticipated, deliveries of our Parkinson’s drugs to Novartis further declined. Total sales generated by Stalevo® and Comtess® products in Orion’s own sales organisation were also slightly down on the comparative period. Despite intensifying generic competition, Parkinson’s drugs will continue to be an important product group for Orion. In June we received positive news in this respect when Novartis announced its submission of an application for marketing authorisation for Stalevo in Japan.

“We were able to compensate for the decrease in sales of Parkinson’s drugs by increasing sales from the rest of our product portfolio. We continued to strengthen our market position by growing in many markets faster than growth of the pharmaceuticals market as a whole. Our newest proprietary drug, the intensive care sedative dexdor® (dexmedetomidine), maintained strong growth, and Precedex® and Simdax® also developed well. Sales of the Easyhaler® product family through our own sales network continued to grow strongly, but total sales were slightly down on the previous year, mainly because of the transitional period related to repatriation of product rights.

“Our Specialty Products business division continued to grow as expected and is already almost as big as the Proprietary Products business division. Net sales of the other divisions, especially Fermion, developed well during the review period.

“During the summer we have continued negotiations with possible partners for the next development phase for an alpha-2c adrenoceptor antagonist being developed for the treatment of Alzheimer’s disease and an androgen receptor antagonist for the treatment of prostate cancer. In addition, we began Phase I clinical trials with another alpha-2c adrenoceptor antagonist and a new COMT inhibitor.

“Orion Diagnostica held co-operation negotiations during the review period with the aim of streamlining its operations and improving profitability by, among other things, simplifying the product portfolio. As a result of the negotiations, Orion Diagnostica’s operations in Turku will cease and about 60 employees are being given notice of termination of employment. In addition, about 20 employees will leave their posts through for example retirement or ending of a fixed-term contract. We intend where possible to offer other employment within the Group to those given notice. We recorded about EUR 1.6 million expenses related to the restructuring in the second quarter of the year.

“In the review period we announced that we were issuing a EUR 150 million bond and would use the funds for the Group’s general financing purposes. We are preparing for, among other things, the many ongoing investment and production reorganisation projects through which we will develop and ensure future growth, delivery reliability and quality standards. The projects are temporarily increasing production costs and decreasing production capacity, and that reduced our margin in the first half of the year.

“Our outlook estimate remains unchanged. We estimate that our net sales will be at similar level to the previous year and our operating profit will be slightly lower than in 2012.”

 

Published on 23 April 2013

“Year has begun as anticipated”

 “Our net sales were similar to the previous year and as expected our operating profit was slightly lower than in 2012.

“As anticipated, deliveries of our Parkinson’s drugs to Novartis continued to decline. Total sales generated by Stalevo® and Comtess® in Orion’s own sales organisation were also slightly down on the comparative period.

“However, sales from the rest of our product portfolio increased slightly and compensated for the decrease in sales of Parkinson’s drugs, keeping our total net sales similar to the previous year. We also achieved further strengthening of our market position because in most markets our growth was faster than growth of the pharmaceuticals market as a whole.

“Sales of dexdor® intensive care sedative (dexmedetomidine) launched at the end of 2011 continued to develop well during the first quarter of this year. In March our partner Hospira was granted paediatric exclusivity for Precedex® in the United States until January 2014, so sales of the product are expected to remain good throughout the year.

“In March we took a significant step in expanding the Easyhaler® product family into combined formulations when we submitted the application for marketing authorisation for a budesonide-formoterol formulation in Europe. In early 2013 we also presented positive Phase I and II results received in 2012 with an alpha-2c adrenoceptor antagonist being developed for the treatment of Alzheimer’s disease, an androgen receptor antagonist being developed for the treatment of advanced prostate cancer and a new more effective levodopa product. Negotiations to find partners for the next development phase for these products are ongoing.

“After the review period, Orion Diagnostica gave a negotiation proposal, as laid down in the Finnish Act on Co-operation within Undertakings, on streamlining operations, reorganising production and possible personnel reductions. The total personnel reduction that would be needed is estimated at no more than 80 employees. The measures under consideration are intended to streamline operations and improve the Company's profitability by among other things simplifying the product portfolio, and at the same time ensure the continuity of operations and competitiveness in the future too.

“Following the increase in sales in recent years, Orion’s production capacity has reached a high utilisation rate. Consequently, we have started several significant investment and production reorganisation projects to develop and ensure future growth, delivery reliability and quality standards. However, they are temporarily increasing production costs and decreasing production capacity more than anticipated, which reduced our margin in the first quarter of this year.

“Our outlook estimate remains unchanged. We estimate that our net sales will be at similar level to the previous year and our operating profit will be slightly lower than in 2012.”