Orion Group net sales for 2001 came to EUR 970.8 million (EUR 947.5 million in 2000), up by 2.5%. Operating profit came to EUR 116.4 million (EUR 114.5 million), up by 1.6% (down 7.7%). Profit before extraordinary items and taxes was EUR 123.6 million (EUR 125.4 million), down by 1.5%. Net sales of continuing operations were EUR 958.0 million, up by 3.5%, and the corresponding operating profit was EUR 115.9 million (EUR 112.6 million), up by 2.9%. Profitability was very satisfactory in all the four business divisions and for the Group. Net sales of the Group's core business division, Orion Pharma, grew by 7.7% while its operating profit decreased by 5.7%. Earnings per share were EUR 1.25. Proposed dividend per share is EUR 1.10.
At its meeting held yesterday, the Board of Directors signed the year 2001 Financial Statements for the Orion Group. Part of this stock exchange release is formed by the Report by the Board of Directors.
The figures in this release have not been audited. 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 year 2000.
Orion's Annual Report 2001 will be published on 22 March 2002 and will be mailed to the shareholders during week 13/2002.
The Annual General Meeting will be held on Monday, 15 April 2002.
Continued growth of operational volume.
Operating profit at the previous year's level
The core business division, Orion Pharma, contributed 50% of the net sales, 71% of the operating profit of the Group. Consignment trade decreased Oriola's net sales and led to the low growth of the Group net sales by 2.5%. Operating profit for the Orion Group was at the same level as in the previous year, and the profitability of all the four business divisions was very satisfactory.
Milestone payments contributed to profit
Net sales EUR 487.0 million (EUR 452.2 million), + 7.7% (+3.3%).
International operations EUR 293.3 million (EUR 261.4 million), +12.2% (+16.9%).
Operating profit EUR 82.4 million (EUR 87.4 million), - 5.7% (-3.6%).
The exceptionally high total amount of license agreement-based payments received from marketing partners, total more than EUR 50 million, contributed considerably to the operating profit and the net sales growth of Orion Pharma. Product sales were approximately at the level of the previous year. Net sales from the products resulting from the own R&D pipeline increased by 7.3% and they contributed 27% to the net sales. The sales revenues from these products are shown in the tables section.
Operating profit declined from the previous year due to accelerated research expenditure towards the end of the year. The profit was also burdened by the high spending on new product launches in the first half of the year.
Orion Pharma had devoted a lot of effort in the preparations for a European-wide launch of Simdax (levosimendan), the new proprietary drug for heart failure, with the marketing partner in the course of 2001. In the spring it turned obvious, however, that big EU countries like Germany, France and the UK, which are key markets in Orion Pharma's own sales territory, as well as some minor countries would not have granted marketing authorisation for the product, and the application was withdrawn from them. The product was, however, approved by nine countries, among which Finland, Norway and Iceland are within Orion's own marketing area, as well as Sweden where the product was approved already in late 2000. Simdax was launched in some of the countries having approved it, but sales revenues were fairly low. In the course of the second and third quarter of the year the marketing cost structure was adapted to the changed situation.
Altogether EUR 78.1 million were spent on pharmaceutical research and development, representing 16% of Orion Pharma's net sales. Although the investment was the largest ever in Orion Pharma's history, it remained below the originally planned level, because the start of the additional studies with Simdax was postponed towards the end of the year. One of the two largest single research programs in the year was the investigational drug deramciclane, with which a major clinical Phase 3 study was and still is underway in Europe and with which a corresponding big effort in the USA was being prepared. Another large program in the research pipeline is the tablet combining three active ingredients in one, for the treatment of Parkinson's Disease. More about the research projects is in the Report by the Board of Directors.
A marketing agreement for non-European countries was concluded with Pharmacia Corporation on deramciclane in August. This agreement represents the largest sales potential of all marketing partnerships of Orion Pharma hitherto.
Comtess, the flagship
The Parkinson's Disease medication Comtess/Comtan (entacapone) was Orion Pharma's largest single product by sales, generating net sales of altogether EUR 56.4 million. The product has been available for three years in Europe and two years in the US. Net sales from it grew by 7.5%. More than half of its sales revenues came from the purchases by Novartis, the marketing partner covering the markets outside Orion's own territory under the product name Comtan. Comtan sales by Novartis came to CHF 165.8 million, or EUR 109.8 million, 67% up on the previous year. The sales of Comtan in the US grew by 95% whilst sales in the rest of the Novartis territory grew by 31%. Additional markets also opened up for Comtan, and today, products containing entacapone are available in over 40 countries. Sales in 2001 of entacapone-containing preparations in selected countries in wholesale prices are shown in a table in the tables section.
The network of own foreign marketing companies accounted for EUR 92.6 million or almost one-third of Orion Pharma's foreign operations. The development of their net sales is shown in a table found in the tables section. Comtess was the largest selling product for most of the companies.
The development of all the foreign subsidiaries is reflecting sharpened focus on the core therapy areas. The net sales of the core therapy products increased according to plan whereas other sales, mainly generic, decreased. Orion Pharma S.A. in France, increased its net sales by successful sales of the Easyhaler in the first half of the year, but the growth faded towards the end of the year. The low growth of the German subsidiary was largely due to outlicensing of certain products to Galen Pharma in the previous year. The decreased net sales of the UK subsidiary were due to the Fermion API products stepping out from its portfolio.
Orion Pharma's net sales of the domestic pharmaceutical operations returned to growth after two consecutive years of decline. The net sales of self-medication products came to EUR 58.5 million, up by 7.5% while those of prescription drugs were EUR 116.8 million, down by 1.2%.
The efforts of the own marketing organisation are increasingly focusing on the products in the core therapy areas and physicians specialising in the treatment of the target disease. In the marketing of products typically prescribed by general practitioners Orion Pharma prefers partnerships with other pharmaceutical companies.
A vast project for upgrading the information systems is in progress in Orion Pharma. The target is to create a uniform integrated system for improved control of the business operations and to incorporate the data flows of the supply chain and financial reporting into one centralised information management system.
Invoicing EUR 622.8 million (EUR 574.0 million), +8.5% (+0.1%)
Net sales EUR 329.3 million (EUR 343.9 million), - 4.2% (+2.3%)
Operating profit EUR 20.3 million (EUR 19.7 million), +3.2% (-19.5%)
Oriola, engaged in the distribution of pharmaceuticals and in the marketing of healthcare equipment and supplies, showed good growth and operations were standing on a strong ground. Product deliveries to pharmacies and hospitals were managed without problems throughout the year. The backbone of all operations in Oriola is an agile and reliable logistics system that helps to manage the rapid flows of goods and related data efficiently.
Invoicing is a figure that reflects Oriola's volumes better than net sales, which declined from the previous year due to the fact that some distribution agreements were changed to apply so-called consignment trade pattern. From drug distribution based on this kind of agreements only the distribution fee paid by the principal is booked as net sales for Oriola.
Pharmaceutical wholesale and distribution accounted for 65% of Oriola's net sales while 35% came from the medico-technical equipment and supplies marketed by Oriola. Operations in Finland accounted for 86% of the net sales and 14% came from the businesses in the Baltic countries and Sweden. The foreign operations showed good growth but profitability continued to be unsatisfactory.
Oriola's share of the Finnish market for pharmaceutical distribution was 32%. Major principals in pharmaceutical distribution included Orion Pharma, Novo Nordisk, Janssen-Cilag, Organon and Boehringer Ingelheim. Merck KGaA and Fujisawa joined Oriola's distribution in early 2002, while Warner Lambert exited at the turn of the year in consequence of a merger. In February 2002, Oriola started pre-wholesaling and logistic co-operation with Aventis, taking care of Aventis' exports to Russia. The products are stored by Oriola in Finland and Oriola also forwards them over the border. Aventis is the largest importer of pharmaceuticals to Russia.
The net sales of the Medical and Technical business grew particularly well for the Medion business unit. Also the other units, i.e. Oriola Medical, Oriola Dental and Prolab developed positively and strengthened Oriola's position further in their specialist market segments.
New tests providing competitive edge
Net sales EUR 33.5 million (EUR 32.2 million), + 4.1% (+8.3%)
International operations EUR 27.4 million (EUR 26.4 million), +3.9% (+13.1%)
Operating profit EUR 4.9 million (EUR 5.4 million), -11.0% (+44.2%)
Sales of the QuikRead CRP test, used for the diagnosis of inflammation on the basis of C-reactive protein content in a blood sample, came to a new record. The second best selling product, Uricult maintained its position as the world's leading culture method for the detection of urinary tract infections, although the product lost some market share in the USA. Although operating profit declined from the previous year it still came to a very good level.
Most products of Orion Diagnostica are meant for so-called point-of-care testing which speeds up the diagnosis and the onset of treatment and also facilitates follow-up of the treatment. Also different hygiene tests are important in Orion Diagnostica's portfolio. Own products accounted for 90% of the net sales and exports for 82%. The products are characterised by high degree of innovation and unique operating principles utilising Orion's strong analyte knowhow.
Lumene generating growth
Net sales EUR 125.3 million (EUR 114.4 million), +9.6% (+12.8%)
International operations EUR 43.9 million (EUR 37.3 million), +17.5% (+35.5%)
Operating profit EUR 9.2 million (EUR 7.6 million), +21.7% (-4.8%)
Noiro's net sales continued to show dynamic growth, and operating profit improved excellently. Activity was brisk all over and the production capacity was well in use. Exports reached a new record and accounted for 35% of Noiro's total sales. Lumene, the flagship proprietary brand of Noiro, enhanced its already strong foothold on the Finnish cosmetics market and accounted for more than one-third of Noiro's total net sales. Lumene is the leading product in exports too, constituting almost two-thirds of Noiro's exports. Another strong growth brand both domestically and in exports was Herbina, a product family of daily personal care and hygiene.
Outlook for 2002
Group growth on last year's level
Operating profit will decline
The growth of the Orion Group net sales is anticipated to be at the same level as in the previous year and operating profit is anticipated to decrease. Also net financial income will decrease.
Orion Pharma's net sales are anticipated to grow somewhat. Product sales are expected to grow more rapidly than last year whereas milestone payments will be lower. The most important growth products will be the Parkinson's Disease drug Comtess/Comtan and the hormone replacement therapy Indivina. R&D investments will increase considerably due to the ongoing large Phase 3 clinical studies with Simdax and deramciclane. For these reasons, operating profit is estimated to decline.
Oriola is anticipated to show lower volume growth than last year and its operating profit is estimated to be at the same level as in the previous year. Orion Diagnostica will show stronger growth than last year and its operating profit will remain at a good level. Noiro is anticipated to continue showing favourable progress both regarding net sales and operating profit.
The budgeted R&D expenditure is EUR 115 million (EUR 83.9 million actual in 2001). Planned investment in fixed assets, excluding possible company and product acquisitions, is EUR 100 million.
Orion Group Financial Goals
The Orion Group goal is to increase the consolidated net sales by over 10% on average. The target for the ROI is 20% on average. Equity Ratio will be maintained at a level of over 50%.
In its proposal for the distribution of dividends, the Board of Directors of Orion Corporation considers not only the amount of distributable profits but also the medium and long-term investment and other financial needs of the Group.
The Board of Directors proposes that a dividend of 1.10 euros per share be distributed among the altogether 67,518,421 shares, altogether EUR 74,270,263.10.
Annual General Meeting
On Monday 15 April 2002 at 5 pm in the Länsi-Auto Areena, Espoo
The Annual General Meeting of Orion's shareholders will be held on Monday, 15 April 2002 starting at 5 pm in the Länsi-Auto Areena hall in Espoo. An invitation to the Meeting will be published on the Orion Group homepage www.orion.fi as well as in the 7 March 2002 issue of the Helsingin Sanomat newspaper.
President and CEO
Executive Vice President, CFO
The full Report including tables is available to download from the enclosed link.