Orion Group Financial Statements Bulletin for 2002

 

- The 2002 net sales of the Orion Group increased by as much as 67.8% to EUR 1,628.6 million (EUR 970.8 million in 2001). The strong growth was due to the consolidation of Kronans Droghandel (KD), a Swedish pharmaceutical distributor, in the Group as of 1 July 2002.  Net sales of Orion Pharma, the core business of the Group, came to the level of the previous year.

- Operating profit declined by 16.2% due to the impact of Orion Pharma.

- The lower profit was consequence of considerable R&D expenditure on the clinical trials with proprietary investigational drugs.

- Earnings per share were 0.93 euros. Proposed dividend per share is 0.93 euros.

- The proposals by the Board of Directors to the AGM concern merger of the share classes and authorisation to buy back and convene the Company's own shares.

 

At its meeting held yesterday, the Board of Directors signed the year 2002 Financial Statements for the Orion Group. The Report by the Board of Directors is attached to this stock exchange release. The figures have not been audited. 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 2001.

 

Orion's Annual Report 2002 will be published on 14 March 2003 and it will be mailed to the shareholders during week 12/2003.

The Web edition of the Annual Report will be available on the Orion Group homepage www.orion.fi as of 17 March 2003.

The Annual General Meeting will be held on Thursday, 27 March 2003 in Helsinki.  The matters to be dealt with are provided in a separate stock exchange release published today 18 February 2003 at 08.35 am.

 

The drug sales in the key pharmaceutical markets world-wide grew at a moderate average growth rate of around 8%. With a rate of 12%, North America continued to be the fastest growing market world-wide, while the sales growth of the top five European countries remained at around 7%. The combined 2002 sales of the top 13 markets came to around USD 272 bn.

 

The biggest therapeutic area was the Cardiovascular group with USD 53 bn sales followed by Central Nervous System (CNS) with over USD 47 bn. In North America, these two groups grew by 13%. The biggest increase worldwide was in Cytostatics, 15%.

 

The total wholesale value of pharmaceuticals in Finland came to EUR 1.4 bn, up by 10.4% which was somewhat lower than in the previous year. Two-thirds of the growth was attributable to the same therapeutic categories as lead the world sales: cardiovascular, CNS and cytostatics.

 

 

Orion Group in 2002

 

 

The majority of the shares in Kronans Droghandel AB (KD), a Swedish pharmaceutical distributor, was acquired by Orion on 1 July 2002. Orion's ownership rose from 10.6% to 69.3%. A new business division, Wholesale and Distribution, was formed of Oriola and KD. The two wholesalers continue to operate as independent units on the market.

As a result of the acquisition, Orion's position on the Finnish and Swedish pharmaceutical wholesale markets changed radically: Oriola and KD became the largest operators both in Finland and in Sweden. Their aggregate share of the Finnish market was about 60% at the end of 2002 while KD held about 50% of the Swedish pharmaceutical distribution market.

 

 

Due to the huge volumes in KD's pharmaceutical distribution, the net sales of the Orion Group jumped to a new level. Although the contribution of the Group's core business, Orion Pharma, to the Group net sales declined to just 30 percent, its share of the operating profit remained at a high level 63 %. Although Orion Pharma's all-time high expenditure on pharmaceutical R&D profit pressed down the Group's operating profit and profit after financial items, the overall profitability of the Group remained on a good level. KD, Noiro and Orion Diagnostica improved their operating profits, while that of Oriola was slightly down due to considerable volume increase and related warehouse arrangements and resource additions. Also KD's volumes increased considerably and its profit improved notably.

 

The Group's equity ratio and solvency were good. Due to the change in the Group structure, the equity ratio dropped to 48.2% from 72.6%. Gearing was -9.1% (-24.7%).

 

 

Jukka Viinanen, President and CEO of the Orion Group:

- The sales of Orion's proprietary drugs developed favourably. The development of profits was anticipated, but the changing market conditions in Finland will necessitate cost cuttings.

The acquisition of KD does not change Orion's direction and intention to become a significant European pharmaceuticals company.

By rearrangements in the management we have relocated the right persons to the right positions: Dr. Jyrki Mattila to look after the progress of certain research projects, Dr. Risto Miettunen to renew the overall management of Orion Pharma, Pauli Torkko to look after the profitability of the Wholesale and Distribution division, Jari Karlson to renew our financial reporting and control, Pekka Kaivola to pave way for our operations in the US, Hilkka Tuhkanen to meet the challenges of generic substitution, Matti Vaheri to lead the Core Therapies process in Orion Pharma, and Jaakko Rissanen as new President for Orion Diagnostica.

 

 

Gross investments for the year were exceptionally high, EUR 155.6 million (EUR 79.2 million). The KD share acquisition accounted for EUR 61.2 million of the total. Buildings accounted for EUR 18.4 million. Construction projects completed during the year included the cosmetics plant of Noiro in Espoo, and two expansions in Turku: the R&D centre of Orion Pharma and the Farmos detergent plant of Noiro.

A new business information system was taken into use in Orion Pharma. Marketing rights for hormone replacement therapies were reacquired in France with a sum of EUR 16.5 million. 

 

 

Orion's investment in R&D rose by 31 % to a new record, EUR 109.5 million from the previous year.  A substantial part of the effort and the growth was allocated to the large Phase 3 clinical trials underway in Orion Pharma.

 

 

 

Due to the lack of statistically significant efficacy as shown by the combined results from the Phase 3 clinical studies conducted in Europe and the US with deramciclane, an investigational compound studied in patients with generalised anxiety disorder (GAD), Orion Pharma and Pharmacia Corporation have decided not to continue the clinical trials programme with the compound. Pharmacia Corporation has been Orion's collaboration partner for the drug candidate since mid 2001. Based on the collaboration agreement with Pharmacia in 2001, Orion has received around 39 million euros in signing fees and milestone payments, which partly compensate for the costs of the Phase 3 trials.

A separate stock exchange release has been published about the matter today, 18 February 2003 at 8.28 am.

 

 

In January, Orion Corporation acquired altogether 41,134 own A-shares at an average price of EUR 21.35 and with a total sum of EUR 0.9 million. At the end of January 2003, the total number of own shares held by the company was 893,932, representing 1.3% of the total share stock and 0.7% of the total votes. A-shares accounted for 208, 938 and B-shares for 685,000 of the total of acquired shares. 

 

 

 

The Annual General Meeting of Shareholders will be held on Thursday, 27 March 2003 at 6.00 pm at the Marina Congress Center, Helsinki.  In addition to the matters provided for the AGM in the Bylaws, the agenda will include the proposals by the Board of Directors concerning merger of the share classes and authorisation to buy back and convene the Company's own shares.

A separate stock exchange release was published on the proposals today, 18 February 2003 at 8.35 am.  The Invitation to the AGM will be published in the Helsingin Sanomat newspaper on 19 March 2003 and on the Orion Group homepage www.orion.fi.  The invitation will also be mailed to the shareholders, in accordance with the addresses recorded in the Finnish Central Securities Deposit.

 

 

 

As stated in the Dividend Policy, "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 0.93 euros per share on altogether 66,665,623 shares be distributed for the year 2002, altogether EUR 62.0million. This means a payout ratio of 100%.