The net sales of the Orion Group in 2000 grew by 3.9% to MEUR 947.5 (MEUR 912.2 in 1999). In Orion Pharma, the core business division of the Group, the share of drugs originating from the own research pipeline rose to 28% of net sales. They also largely accelerated the growth of Orion Pharma's international operations, now up by 16.9%. Increased investment in pharmaceutical R&D and international marketing of the products from own reseach were reflected in the declined operating profit for the Group. Profit before extraordinary items and taxes came to MEUR 125.4 (MEUR 136.4), down by 8.1%. All the four Business Divisions made a very satisfactory result and the Group profitability continued at a very satisfactory level.
Orion Group in brief in 2000
- Net sales grew by 3.9% to MEUR 947.5
- Operating profit declined by 7.7% to MEUR 114.5.
- Earnings per share declined by 10.9% to EUR 1.22
- Equity ratio was 74.2%
- A dividend per share of EUR 1.20 is proposed by the Board of Directors.
The Board of Directors has signed the year 2000 Financial Statements for Orion Corporation at its meeting held yesterday.
In this announcement, the percentages showing the changes from the previous year have been calculated from more exact figures than the published ones. The figures in parentheses refer to the comparable ones for the previous year. The figures in this announcement have not been audited.
Orion's Annual Report 2000 will be published on 16 March 2001.
The Annual General Meeting is planned to be held on 29 March 2001.
International operations were accelerated
by Orion Pharma's own drug innovations.
Expenditure on product launches and research is putting pressure on earnings.
The Orion Group net sales came to MEUR 947.5 (MEUR 912.2 in 1999), up 3.9%. International operations contributed MEUR 384.0, up 16.4%. Domestic sales were down by 3.2%. The comparable net sales growth was 4.3% for the continuing businesses.
Anticipatedly, operating profit for the Group came down. It declined by 7.7% to MEUR 114.5. Group profit before extraordinary items and taxes declined by 8.1% and came to MEUR 125.4 (MEUR 136.4).
Operating profit for Orion Pharma decreased due to the opposite directions of the domestic and the international business, and due to increased expenditure on research and development as well as international marketing operations. The particularly high increase in marketing expenditure was related to the international launches of the parkinsonian drug Comtess and the Easyhaler inhaler, as well as to the preparations for launching the heart failure drug Simdax and the novel hormone replacement therapy products. Expenses also cutting down the profit include MEUR 4.1 in expenses and impairment written down due to the decisions to shut down the pharmaceutical plants in Oulu, Kemijärvi and Seinäjoki. Income from the divestment of the LVP (large-volume parenterals) business and the repayment of surplus funds from a Swedish pension insurance company, altogether MEUR 5.9, counterbalanced these expenses. The net gains at MEUR 4.8 from the sale of certain product rights also contributed positively. The improved cost management of Soredex had a positive impact on Oriola's profit which was, however, pressed down by the decreased volume in the distribution business and the unsatisfactory development of the dental business in Sweden. Orion Diagnostica's profit was good. Increased advertising expenditure pushed down Noiro's profits. Other operating expenses in the consolidated Income Statement include a reduction in the value of the Tamro Corporation shares by MEUR 2.7
Net income from ordinary financial operations was MEUR 10.9 (MEUR 10.5). Net interest gains were MEUR 6.8 (MEUR 3.9). Currency exchange rate changes resulted in a net loss of MEUR 0.7 (net gain of MEUR 2.1). Net income from securities and dividends came to MEUR 4.8 (MEUR 4.5).
Group solidity and solvency were strong. Equity ratio improved to 74.2% (73.1%) by the year-end. Net indebtedness, or the gearing was -26.7% (-28.0%)
Jukka Viinanen, Group CEO:
"Proprietary drug innovations are the strategic core for Orion"
"In 2000, we increasingly sharpened the Group's strategic focus on pharmaceuticals", says Jukka Viinanen, the Group CEO who joined Orion last summer. "The core in the Group is Orion Pharma, an intensively research-oriented manufacturer of pharmaceuticals that are increasingly based on proprietary innovations from the own research pipeline. With a portfolio of products that are under our own control, intended for global markets and well protected with immaterial rights, Orion Pharma can take its share of the constantly growing pharmaceuticals market, thereby being able to show accelerated net sales and earnings growth. With a gradually heavier portfolio of strong proprietary medicines we can also reduce our dependence from license agreements."
Jukka Viinanen points out, however, that the successful launches of completely new treatment approaches call for great financial inputs to the time-consuming research and development process, to the production processes in order to meet the international quality standards, as well as to the development and gradual extension of the own marketing network, and sales promotion.
"The three other Business Divisions in our Group are supporting the goals of the core business. Oriola, with its superior logistic knowhow, is an efficient drug distributor and a marketer of a versatility of other healthcare products. Orion Diagnostica is a successful pioneer in a very exciting niche of point-of-care diagnostics. Noiro is
a house of superior market leading brands for cosmetics and personal hygiene in our home country. Oriola and Noiro have clearly limited possibility to grow and go international as rapidly as Orion Pharma. Orion Diagnostica that again improved its operating profit handsomely, has for long been the most internationally operating Business Division in the Group, and its growth opportunities are bright. But the global market for diagnostic equipment is limited and the growth rates there are fairly low", Jukka Viinanen reminds. "All the three businesses are, however, standing on a solid and healthy ground, and they are able to finance their own investments and developments from their own income. It is also worth mentioning that these businesses contribute more than one-third of the Group's cash flows", Mr. Viinanen points out.
set for growth
Net sales MEUR 452.2 (MEUR 437.8), + 3.3% (+7.0%).
International operations MEUR 261.4 (MEUR 223.6 ), +16.9% (+15.6%), share 57.8% of total net sales.
Operating profit MEUR 87.4 (MEUR 90.6), - 3.6% (+20.3%).
The basis of Orion Pharma's growth is in the products from its own R&D pipeline. Orion Pharma only started its own pharmaceutical research about twenty years ago. The results are now starting to bear fruit. While the share of the own research products was only 7% five years ago, it now came to 28%. Milestone payments from marketing partners were received altogether MEUR 19.4 (MEUR 19.2). Of these, MEUR 17.2 were received from Novartis on the basis of the new marketing agreement concerning the combination tablet in which Orion is putting three co-administered drugs for Parkinson's Disease, entacapone, levodopa and carbidopa. In terms of anticipations and market potential, the agreement is the most significant one ever for Orion, so far.
The net sales from preparations from Orion Pharma's research pipeline, shown in the table below amounted to MEUR 124.5.
Net sales form domestic operations were MEUR 190.8 (MEUR 214.1), down by 10.9% (down 0.6%). The impacts of terminated sales licenses, publicly induced wholesale price reductions and increased price competition are reflected in the sales. The Finnish total market for pharmaceuticals grew, however, by 8.9%. Orion's market share was 14.9% of the total. Orion's share of prescription drugs was 13.4% whereas in over-the-counter products it was 28.2%. Orion Pharma aims at strengthening its domestic portfolio in products with promising growth outlook. Special attention is paid to so-called blockbuster products near patent expiry.
Orion Pharma's operating profit declined anticipatedly. The pressures on the profit came from the planned additional expenditure on the launches of the products being introduced to new markets, as well as on pharmaceutical research and registration procedures. Great financial inputs are required by the comprehensive clinical trials with the new drug candidate, deramciclane for anxiety disorders. Also the extensive registration procedures of Simdax for heart failure, the Easyhaler inhaler for asthma, and the two new hormone replacement therapies caused high expenses.
A major IT investment project was started in Orion Pharma in order to renew the information systems that support the business. The aim of this project is to establish an enterprise resource planning system that enables the centralised management of the data flows of the supply chain and the financial control.
Marketing power was reinforced
During the past year, Orion Pharma reinforced substantially its own marketing network that concentrates on the western European markets. New sales force was recruited by the marketing subsidiaries, and readiness was trained for the approaching new product launches. The personnel in the foreign locations for pharmaceuticals marketing grew by almost 19% to 475 persons. The net sales generated through the own subsidiaries contributed 35.2% of Orion Pharma's international operations. In most subsidiaries, the focus of sales efforts and also the best-selling product was Comtess, for Parkinson's Disease.
Comtess was the best-selling single product
After two full years on the market in Europe and one year in the US, the Parkinsonian drug, trade names Comtess and Comtan, generated MEUR 52.5 in net sales and was the best-seller among Orion Pharma's products. Sales grew by 71.7 % from the previous year. As the mechanism of action is new, there are still great variations in the penetration by country. The marketing partner for the product is Novartis whose territories include the USA, where the share of Comtan was 6% of all Parkinson's treatments for the first year on the market. The American sales have progressed according to plan.
Simdax rolled out in Sweden
One of the major achievements for Orion Pharma in 2000 was the marketing authorisation for Simdax in Sweden whereby the sales started. Simdax is the first new treatment approved for the severest degree of heart failure in a decade. The active ingredient, levosimendan, is an innovative discovery by Orion Pharma. It increases the failed heart's pumping capacity, and it is used for intravenous treatment of hospitalised patients with acute heart failure. During 2001, marketing authorisations are sought for Simdax in the other EU countries and elsewhere in Europe
as well. The registration files were submitted to the EU member states in January 2001.
For the US new drug application, Orion Pharma is starting an additional Phase 3 clinical trial program, the details of which have been agreed with the US Food and Drug Administration. The program will start in the spring of 2001 and the studies are estimated to take about two years.
A comprehensive and long-lasting Phase 3 clinical trials program is being designed for the orally administered formulation of levosimendan. The drug candidate will be studied in patients with milder stages of heart failure. The number of patients in this category is many times higher than that for severe HF, and long-term treatment is needed.
Precedex launched in the US
Orion's drug discovery, Precedex (dexmedetomidine) was introduced by the partner Abbott Laboratories in the US in the spring of 2000. The drug is for the sedation of intubated patients in intensive care. Sales are steadily growing. Also Precedex has a unique mechanism of action. It reduces the release of noradrenaline from the nerve endings thereby causing sedation. As a hospital treatment, it is anticipated to penetrate more slowly than new prescription drugs. Accumulated positive experience is supposed to promote the adoption of Precedex in the intensive care departments of American hospitals. Altogether MEUR 0.3 were received by Orion from Abbott in royalties for Precedex sales for 2000. Abbott has carried out the studies with Precedex since 1994 when it acquired the research and marketing rights for the product from Orion. An additional clinical trial program with Precedex
for the EU new drug application is being prepared.
Fareston selling well in Japan
Net sales increased from Fareston (toremifene) for breast cancer. Sales in Japan, the largest single territory, continued to develop positively, and the market share was 25%. Japan accounted for 62% of the altogether MEUR 17.8 net sales, and 20% came from the US. Orion Pharma's deliveries of Fareston to the US partner Shire Roberts took place mainly during the first half of the year. In Japan, the marketer is Nippon Kayaku.
The clinical trials with Fareston (toremifene) for extending the indication to the treatment of earlier stages of breast cancer are being completed. An application for a broader indication could possibly be filed in the USA and Europe in 2001.
New hormone replacement therapies being launched this year
The sales of Orion's hormone replacement therapies for menopausal symptoms decreased in the heavy competition among this product sector. The two new preparations, Indivina and Diviseq, received marketing approvals in several European countries, and promotional activities for their launches in 2001 were prepared for.
Easyhaler family getting new members
Sales of the dry-powder inhaler Easyhaler (beclomethasone and salbutamol) increased from the previous year.
The inhalers were introduced with a strong campaign in France in the summer, and the sale took a good start.
The Easyhaler family will be complemented with two additional substances, budesonide and formoterol, both representing a newer generation of respiratory drugs. A new drug application for the budesonide Easyhaler, for
use in the prevention of the symptoms of asthmatic inflammation, is currently under review by the German drug authority. The Phase 3 clinial trials with formoterol, a long-acting bronchodilator, may possibly start in 2001.
Deramciclane is the largest ongoing clinial trial.
A clinical research centre being established in England
Group expenditure on research and development was MEUR 72.1 (MEUR 67.9). The share of Orion Pharma's R&D was MEUR 66.1 or 91.7% of the total. Orion Pharma R&D expenditure corresponded to 15.3% (14.9%) of the pharmaceutical net sales.
The pharmaceutical research activity focuses on treatments for neurological, cardiac and respiratory diseases as well as on hormone therapies. The research encompasses the entire long-lasting drug development process starting from molecule discovery throughout all the different phases, and the target of this function is to discover and develop proprietary innovative new chemical entities for the basis of the company's future operations and for generators of strong global growth.
The most significant one of the research projects disclosed by Orion from its pipeline is deramciclane, a compound licensed by Orion from the Hungarian Egis Pharmaceuticals. Comprehensive Phase 3 clinical studies with deramciclane in ten European countries are progressing according to plan. The compound seems to have favourable anxiolytic properties. Orion's goal is to commercialise dermaciclane globally.
The CNS product portfolio is being complemented with a new treatment for Parkinson's Disease, combining three substances, i.e. levodopa, carbidopa and entacapone in one single tablet. The preparation is planned to be launched in 2003-2004.
At the end of the year, 868 persons were directly engaged in Orion Pharma's R&D operations. It has not been quite problem-free to obtain the necessary additional work force, because competent researchers are not sufficiently available. As a partial solution to this, a clinical research centre particularly focusing on the treatment of cardiovascular and neurological diseases, was established in Nottingham, England in early 2001. Experienced research professionals are recruited from the local markets. In the spring of 2000, the premises for drug research and development in Espoo more than doubled when the new part of the R&D centre with modern high tech equipment was taken into use.
showed slow growth
Invoicing MEUR 595.7 (MEUR 593.3), +0,4% (+8.6%).
Net sales MEUR 365.5 ( MEUR 356.0), + 2.7% (+13.4%).
Operating profit MEUR 21.7 (MEUR 24.4), -11.3% (+1.7%).
After several subsequent years of strong growth, Oriola slowed down due to discontinued distribution agreement, which led to lower distribution volumes. Oriola's share of the Finnish drug wholesales came down to 35%. In all the three Baltic countries the profitability of the subsidiaries was still unsatisfactory, but the new premises introduced will improve competitiveness, and profitability will be improved through increased sales volumes. On the other hand, Oriola stregthened its position in Finland in hospital and dental equipment and supplies, both showing rapidly increased net sales. Net sales for Prolab declined clearly due to terminated product representations, but the loss will be compensated with new product agreements. Medion's development was hampered by certain project deliveries that were postponed to 2001. Soredex' net sales increased and operations in the US recovered.
The dental business in Sweden that was started two years ago continued to progress unsatisfactorily.
Net sales MEUR 32.2 (MEUR 29.7), + 8.3% (+0.1%).
International operations MEUR 26.4 (MEUR 23.3), +13.1% (+1.2%).
Operating profit MEUR 5.4 (MEUR 3.8), +44.2% (+39.3%).
The main factors behind the continued positive development of Orion Diagnostica include the restructured product portfolio, operational focus on point-of-care diagnostics, and the growing export areas such as China and Iran.
The sales of the QuikRead test for the diagnosis of inflammation by measuring the CRP (C-reactive protein) concentration from whole blood, reached a new record and the product rose to number one by Orion Diagnostica's sales. The second-best selling product was the Uricult test for urinary infections. Although this product has been available for more than 30 years, it is still the world's leading dip-slide method for demonstrating urinary tract infections, thanks to continued development and high quality. Uricult continued to stregthen its market position in the USA and in South America.
Net sales MEUR 114.4 (MEUR 101.4), +12.8% (+1.1%).
International operations MEUR 37.3 (MEUR 27.5), +35.5% (-8.8%).
Operating profit MEUR 7.6 (MEUR 8.0), -4.8% (+30.7%).
Noiro continued to show very strong performance in Finland and in Russia, mainly due to the Lumene cosmetic series and in exports also due to the Herbina products for personal hygiene. The biggest export market was Russia, with new recods of deliveries that already exceeded the level from which they dropped as the Russian economy collapsed in mid 1998. All the major brands of Noiro stregthened their market positions in Finland. Enhanced marketing efforts in Finland as well as the promotional investments required in exports, however, hampered Noiro's ability to generate profits.
Outlook for 2001
The growth of Orion Pharma's international operations is expected to continue. The most important growth generators will be the patented products from Orion's own research, particularly the Parkinsonian drug Comtess/Comtan but also Fareston, Precedex, and Simdax following receipt of marketing authorisations, as well as the animal sedatives. Growth opportunities are also seen for the hormone replacement therapies and Easyhaler. Domestic sales are anticipated to grow slightly. Investment in pharmaceutical R&D and international marketing will be increased remarkably, as many research projects are in the clinical development phase and many new products are being launched. The operating profit for Orion Pharma as a whole is estimated to be less than in the previous year, but in 2002, it is anticipated to turn to growth.
Oriola's net sales are estimated to show low growth and the operating profit is anticipated to improve somewhat. The operating profits for Orion Diagnostica and Noiro are estimated to improve from the previous year.
The Group net sales growth is forecasted to accelerate, but the Group operating profit is estimated to be lower than in the previous year. Net gains form ordinary financial operations are awaited to slightly increase.
The budgeted R&D expenditure is MEUR 100 (MEUR 72.1). Planned investment in fixed assets, excluding possible company and product acquisitions, is MEUR 95.
1.20 euros proposed for dividend per share
The Board of Directors proposes that 1.20 euros be distributed per share on the 67,518,421 shares, altogether 81,022,105.20 euros.
Espoo, 21 February 2001
President and CEO
Executive Vice President
The full report including tables can be downloaded from the enclosed link.