Orion’s Financial Statement Release for 2019, published today at 12.00 noon, had wrong dividend payment date for the dividend (3 April 2019). The correct payment date is 3 April 2020. The error was both in the stock exchange release and the actual Financial Statement Release. The corrected stock exchange release is below and the corrected Financial Statement Release is attached to this release. The dividend payment date was correct in the Finnish stock exchange release and the Finnish Financial Statement Release.
Orion Group Financial Statement Release for 2019
This is a summary or Orion’s Financial Statement Release for 2019. The complete report is attached to this stock exchange release and is available at https://www.orion.fi/en/Orion-group/investors/financial-reviews-and-presentations/
- Net sales totalled EUR 1,051 million (EUR 977 million in 2018).
- Operating profit was EUR 253 (253) million.
- Profit before taxes was EUR 251 (248) million.
- Net sales and operating profit include the EUR 45 million milestone payment received from Bayer.
- Equity ratio was 77% (69%).
- ROCE before taxes was 30% (44%).
- ROE after taxes was 26% (45%).
- Basic earnings per share were EUR 1.43 (1.40).
- Cash flow per share before financial items was EUR 1.68 (2.32).
- The Board of Directors proposes payment of a dividend of EUR 1.50 (1.50) per share.
- Orion estimates that in 2020 net sales will be at a similar level as in 2019 (net sales in 2019 were EUR 1,051 million). Operating profit is estimated to be lower than in 2019 (in 2019 operating profit was EUR 253 million).
|10-12/19||10-12/18||Change %||1-12/19||1-12/18||Change %|
|Net sales, EUR million||274.5||262.4||+4.6%||1,051.0||977.5||+7.5%|
|EBITDA, EUR million||69.5||79.7||-12.8%||308.9||293.9||+5.1%|
|% of net sales||25.3%||30.4%||29.4%||30.1%|
|Operating profit, EUR million||55.0||68.6||-19.9%||252.8||252.8|
|% of net sales||20.0%||26.1%||24.1%||25.9%|
|Profit before taxes, EUR million||54.7||67.5||-19.0%||250.8||248.4||+1.0%|
|% of net sales||19.9%||25.7%||23.9%||25.4%|
|Profit for the period, EUR million||45.2||53.7||-15.9%||200.4||197.3||+1.6%|
|% of net sales||16.4%||20.5%||19.1%||20.2%|
|R&D expenses, EUR million||32.8||27.8||+18.1%||119.3||104.0||+14.7%|
|% of net sales||11.9%||10.6%||11.3%||10.6%|
|Capital expenditure, EUR million||14.5||35.4||-59.0%||42.6||64.8||-34.3%|
|% of net sales||5.3%||13.5%||4.0%||6.6%|
|Interest-bearing net liabilities, EUR million||-139.1||-132.1||-5.2%|
|Basic earnings per share, EUR million||0.32||0.38||-14.9%||1.43||1.40||+2.0%|
|Cash flow per share before financial items, EUR||0.40||0.22||+84.6%||1.68||2.32||-27.4%|
|Equity ratio, %||76.7%||68.8%|
|ROCE (before taxes), %||29.9%||44.3%|
|ROE (after taxes), %||25.8%||45.5%|
|Average personnel during the period||3,251||3,179||+2.3%|
The Diagnostics business, sold on 30 April 2018, has been reported as a discontinued operation since the interim report 1-3/2018 and is not included in consolidated statement of comprehensive income. The return on capital and cash flow per share figures in the comparative period also contain discontinued operations, including the capital gain from the sale of Orion Diagnostica.
President and CEO Timo Lappalainen:
Darolutamide dominated the headlines in 2019
“In 2019 Orion's net sales increased by 8% to EUR 1,051 million and operating profit was at previous year's level at EUR 253 million. The operating profit level was affected by planned additional investments in research and development as well as sales and marketing. All our business units reported an increase in net sales in 2019.
Growth of the Proprietary Products business unit was boosted by the EUR 45 million milestone payment from Bayer, but it is worth noting that net sales increased even without that payment. The growth in sales of proprietary products was driven by the Easyhaler® product family, and the budesonide-formoterol combined formulation in particular. The overall trend in net sales was also boosted by the sales and marketing efforts made to promote the product portfolio. The net sales of the Parkinson's disease drugs Stalevo® and Comtess®/Comtan® remained at previous year's level as predicted following the reacquisition of their European sales and distribution rights. The sales of Simdax® continued to develop well, but the sales of Dexdor® turned to decline following generic competition, as expected.
Growth in the Specialty Products division's net sales was mostly due to biosimilars, prescription drugs in Scandinavia and self-care products in Finland. Disruptions in product availability and tougher price competition in generic drugs had a negative effect on the business division's net sales in all markets. The prices of reference-priced prescription drugs in Finland continued to decline compared with 2018, but in 2019 the price decline appeared to be levelling off. At the same time, availability disruptions have increasingly affected our net sales.
The Animal Health business division achieved its best net sales of all times so far, and sales by active pharmaceutical ingredients manufacturer Fermion and by Contract manufacturing also developed positively.
Darolutamide, invented by Orion and developed in collaboration with Bayer for the treatment of prostate cancer, dominated Orion's media releases in 2019. The key results of the ARAMIS trial were published and marketing authorisation applications were submitted in the United States, EU and Japan, among others. As a highlight, in July the United States Food and Drug Administration (FDA) granted marketing authorisation under the Priority Review designation to darolutamide for the treatment of non-metastatic castration-resistant prostate cancer, under the trade name Nubeqa®.
We have received many news on darolutamide also after the review period. New results from ARAMIS trial, published in January 2020, demonstrate that darolutamide plus androgen deprivation therapy show statistically significant improvement in overall survival (OS) in men with non-metastatic castration-resistant prostate cancer compared to placebo plus androgen deprivation therapy. Detailed data on the updated OS and other additional endpoints as well as an update on longer term safety will be presented at an upcoming scientific meeting.
In addition, in January 2020 Bayer received marketing authorisation for darolutamide in Japan, where market launch is now pending price decision. The Human Pharmaceutical Committee of the European Medicines Agency gave a positive recommendation for darolutamide, so we anticipate the Commission's marketing authorization decision in the next few months. Orion is due to receive milestone payments for darolutamide from Bayer, EUR 8 million upon first commercial sales in Japan and EUR 20 million in Europe.
We are continuing the Phase III clinical trial ARASENS with Bayer, evaluating the efficacy and safety of darolutamide in the treatment of patients with newly diagnosed metastatic hormone-sensitive prostate cancer (mHSPC) who are starting hormone therapy. Darolutamide’s commercial potential will increase significantly if the ARASENS trial yields positive results in around 2022.
Besides ARASENS, Orion has another ongoing Phase III clinical trial investigating orally administered levosimendan (ODM-109) in the treatment of amyotrophic lateral sclerosis. Patient recruitment for this REFALS trial was finalised in July 2019. The patients will be followed for a period of roughly one year, so the trial will be completed in the coming summer. We are conducting this trial alone and, if the findings are positive, it is possible that Orion will commercialise the product on its own not just in Europe but also in the United States.
The ODM-208 and ODM-209 molecule development projects proceeded as expected in 2019. We have decided to expand these ongoing Phase I projects to ensure that we have sufficient data to make informed decisions regarding subsequent phases.
With regard to other earlier phase development projects, we are looking for partners for possible next development phases of the ODM-203 and ODM-207 molecules.
A year ago, we set ourselves the target of increasing Orion's net sales to EUR 1.5 billion by 2025. To achieve this, we would need to grow net sales at an average rate of 6 per cent a year from the 2019 level. However, growth will not follow a straight line. While darolutamide and ODM-109 are crucial, they are not the only sources of aspired growth. We estimate that Nubeqa® will start to generate more substantial net sales growth starting from 2021-2022 and ODM-109, if successful, to have a significant impact on net sales growth from around 2022 to 2023. We see growth prospects in all our business units and we are actively seeking opportunities to grow through targeted product or company acquisitions. We are also seeking to grow by expanding our own sales network outside Europe. In the context of the REFALS trial, we have initiated an assessment on the prospects of launching the product in the United States on our own. We are also in the process of launching sales ventures in certain Southeast Asian countries.
Orion's solid balance sheet enables investments in growth without jeopardising our ability to distribute dividends or our equity ratio. However, significant growth investments to be made in research and development and sales and marketing in 2020-2021 will have a reducing effect on annual profitability.
Outlook for 2020
Orion estimates that in 2020 net sales will be at a similar level as in 2019 (net sales in 2019 were EUR 1,051 million).
Operating profit is estimated to be lower than in 2019 (in 2019 operating profit was EUR 253 million).
Basis for outlook in more detail
Orion continues persistent actions to generate growth more rapidly than growth of the market in the long term. However, significant growth investments to be made in research and development and sales and marketing in 2020-2021 will affect annual profitability.
At the same time, operating profit is burdened by intense price competition in the market and gradually expanding generic competition for certain proprietary products. It is estimated that this impact cannot be fully compensated by growing proprietary products in 2020. For example, sales of Nubeqa® is expected to start generating more revenue only from 2021 onwards.
The outlook does not include any income or expenses associated with possible product or company acquisitions.
The sales of the Easyhaler® product family will continue to grow also in 2020 due to combined formulations (budesonide-formoterol and salmeterol-fluticasone) launched in the past few years.
Orion reacquired from Novartis the European sales and distribution rights for the Parkinson's drugs Stalevo® and Comtan® in December 2018 and April 2019, respectively. Except for Japan, Orion's arrangements with Novartis in other markets will expire during 2020 and in most of these markets, Orion is transferring the distribution to new partners. In a few Southeast Asian markets, Orion is planning to sell these products through its own sales organisations, which are being set up. After these changes, the sales of Orion's branded Parkinson's drugs (Comtess®, Comtan® and Stalevo®) are estimated to remain at the same level as in the previous year.
Generic competition for Dexdor® started in Germany in 2017 and has since expanded to most countries in the European Union, turning down sales of the product. Orion has also been informed that marketing authorisation applications have been filed for a generic version of Simdax® in Europe. It is, however, difficult to predict the impact of generic competition on the sales of Dexdor® and Simdax® in particular with any precision. The patent for the Simdax® molecule expired in September 2015 and its other product protection will expire in September 2020. The expiry of product protection is not estimated to materially affect Simdax® sales in 2020.
Sales of generic products account for a significant proportion of Orion’s total sales. Disruptions in product availability and tougher price competition in generic drugs have had and will continue to have a negative effect on the business division's net sales in all markets. The prices of reference-priced prescription drugs in Finland, which is our biggest individual market, continued to decline in 2019 compared with 2018, but over the course of the year, the price decline levelled off. At the same time, the impact of availability disruptions on our net sales has intensified, and in 2019 their negative impact was roughly equal to that of the price decreases, at approximately EUR 10 million. The combined negative impact of price decline and product shortages is estimated to be slightly smaller in 2020 than in the previous year.
Net sales of Orion's biosimilars (Remsima®, Ritemvia® and Amgevita®) have fluctuated heavily in the past few years. Their net sales were EUR 57 million in 2017, EUR 25 million in 2018 and EUR 38 million in 2019. The changes are due to varying success in national or regional tendering competitions. Tendering competitions for this year have been challenging for Orion, and therefore the net sales of biosimilars are estimated to decline significantly in 2020.
Collaboration agreements with other pharmaceutical companies are an important component of Orion’s business model. Agreements often include payments recorded in net sales that vary greatly from year to year. Forecasting the timing and amount of these payments is difficult. In some cases they are conditional on, for instance, the progress or findings of research projects, which are not known until studies have been completed. On the other hand, neither the outcome nor the schedule of contract negotiations is generally known before the final signing of the agreement. In 2019, milestone payments amounted to EUR 51 million, including the EUR 45 million milestone payment from Bayer for the commercialisation of the prostate cancer drug darolutamide in the United States. The outlook for 2020 includes milestone payments worth around EUR 35 million, the largest single payments among which are EUR 20 million for the commercialisation of darolutamide in the EU and EUR 8 million for its commercialisation in Japan.
Sales and marketing expenditure for 2019–2020 includes a EUR 12 million annual depreciation related to the acquisition of the European sales and distribution rights for the Parkinson's drugs Stalevo® and Comtan®. Orion paid a total of USD 28 million for the transfer of the sales rights in December 2018 and in April 2019, and the investment will be depreciated over two years. The outlook also includes an estimated expenditure of EUR 5 million for preparing the launch of the ALS drug as well as costs associated with Orion's potential branching out to the United States. Most of these costs will only materialise in the second half of the year, provided that upon completion, the results of the ongoing Phase III REFALS clinical trial are considered sufficiently positive for obtaining marketing authorisation in the United States.
Because the registrations and launches of new products are projects that generally take more than a year, the increases in resources and other inputs required in 2020 were mainly planned during the previous year.
Research and development costs are estimated to be roughly equal to those in 2019. The expenses from the Phase III REFALS clinical trial investigating levosimendan (ODM-109) for the treatment of symptoms of amyotrophic lateral sclerosis (ALS) will slightly decline from previous year, since the trial will come to an end in 2020. However, investments in earlier research phases are set to increase. Research and development expenses are partly the Company’s internal fixed cost items, such as salaries and maintenance of the operating infrastructure, and partly external variable costs. External costs arise from, among other things, long-term clinical trials, which are typically performed in clinics located in several countries. The most important clinical trials scheduled for 2020 are either continuing from the previous year or at an advanced stage of planning, therefore their cost level can be estimated rather accurately. However, the accrued costs are materially affected by collaboration arrangements and how the costs arising are allocated between Orion and its collaboration partners. For instance, Bayer is paying the majority of the darolutamide research costs.
The Group’s total capital expenditure in 2019 is expected to be higher than in 2019, when capital expenditure was EUR 43 million.
Near-term risks and uncertainties
The reacquisition of European sales and distribution rights for Stalevo® and Comtan® has generated additional sales for Orion’s branded Parkinson’s drugs since 2019. With the expiration of the Novartis contract in 2020, the distribution of these products will be handed over to new partners in most non-European markets, with the exception of Japan. In a few Southeast Asian markets, Orion is also taking over sales on its own. Sales will continue to be negatively affected by continued generic competition. All these changes and impacts have been taken into account in the outlook for the current year. However, they still entail uncertainty that may materially affect the accuracy of the estimate made at this stage.
The basic Dexdor® and Simdax® patents have expired and Dexdor®'s indication patent expired at the end of March 2019. The last product protection for Simdax® will expire in 2020. Generic competition for Dexdor® started in Germany in 2017 and has since expanded to most countries in the European Union, turning down sales of the product. Orion has also been informed that marketing authorisation applications have been filed for a generic version of Simdax® in Europe. It is, however, difficult to predict the impact of generic competition on the sales of Dexdor® and Simdax® in particular with any precision. The expiry of product protection is not estimated to materially affect Simdax® sales in 2020.
Sales of individual products and also Orion’s sales in individual markets may vary, for example depending on the extent to which the ever-tougher price and other competition prevailing in pharmaceuticals markets in recent years will specifically focus on Orion’s products. Product deliveries to key partners are based on timetables that are jointly agreed in advance. Nevertheless, they can change, for example as a consequence of decisions concerning adjustments of stock levels. In addition, changes in market prices and exchange rates affect the value of deliveries.
The structural exchange rate risk due to the US dollar has decreased in recent years because the share of Orion’s net sales invoiced in dollars has fallen to below ten per cent and at the same time the value of purchases in dollars has increased. The greatest exchange rate risk at present relates to European currencies such as the Swedish crown and British pound. However, the overall effect of the risk due to currencies of European countries will be abated by the fact that Orion has organisations of its own in most of these countries, which means that in addition to sales income, there are also costs in these currencies. Changes in the Japanese yen exchange rate have become more important as sales of Parkinson’s drugs in Japan have increased. The exchange rate effect related to the Russian rouble has increased due to the strong volatility of the currency. However, Russian sales are not a significant portion of Orion’s entire net sales.
Orion’s broad product range may cause risks to the delivery reliability and make it challenging to maintain the high quality standard required in production. The impact of availability disruptions on our net sales has increased in the past few years. Authorities and key customers in different countries undertake regular and detailed inspections of development and manufacturing of drugs at Orion’s production sites. Any remedial actions that may be required may at least temporarily have effects that decrease delivery reliability and increase costs. Orion's product range also contains products manufactured by other pharmaceutical companies and products that Orion manufactures on its own but for which other companies deliver active pharmaceutical or other ingredients. Possible problems related to the delivery reliability or quality of the products of those manufacturers may cause a risk to Orion’s delivery reliability. The single-channel system used for pharmaceuticals distribution in Finland, in which Orion’s products have been delivered to customers through only one wholesaler, may also cause risks to delivery reliability. In 2020, there is a heightened risk of strikes or other industrial action in Finland. If strikes or industrial action do occur, they may place Orion's delivery reliability at risk. Potential production and financial impacts will depend on the extent and duration of the action, which are difficult to predict.
Research projects always entail uncertainty factors that may either increase or decrease estimated costs. The projects may progress more slowly or faster than assumed, or they may be discontinued. Nonetheless, changes that may occur in ongoing clinical studies are reflected in costs relatively slowly, and they are not expected to have a material impact on earnings in the current year. Owing to the nature of the research process, the timetables and costs of new studies that are being started are known well in advance. They therefore typically do not lead to unexpected changes in the estimated cost structure. Orion often undertakes the last, in other words Phase III, clinical trials in collaboration with other pharmaceutical companies. Commencement of these collaboration relationships and their structure also materially affect the schedule and cost level of research projects.
Collaboration arrangements are an important component of Orion’s business model. Possible collaboration and licensing agreements related to these arrangements also often include payments to be recorded in net sales that may materially affect Orion’s financial results. In 2014–2019 the annual payments varied from EUR 5 million to EUR 51 million. The payments may be subject to conditions relating to the progress of research projects or sales or to new contracts to be signed, and whether these conditions or contracts materialise and what their timing is will always entail uncertainties. The outlook for 2020 includes milestone payments worth around EUR 35 million, the largest single payments among which are EUR 20 million for the commercialisation of darolutamide in the EU and EUR 8 million for its commercialisation in Japan.
The spread of a new coronavirus creates uncertainty that can affect, among others, the supply and logistics chains.
Proposal by the Board of Directors: dividend EUR 1.50 per share
The parent company's distributable funds are EUR 468,363,703.16 or EUR 3.33 per share. This includes EUR 211,377,323.85 or EUR 1.50 per share, of profit for the financial year. These per share amounts are calculated excluding treasury shares held by the Company. The Board of Directors proposes payment of a dividend of EUR 1.50 (1.50) per share from the parent company’s distributable funds.
No dividend shall be paid on treasury shares held by the Company on the dividend distribution record date. On the day when the profit distribution was proposed, the number of shares conferring entitlement to receive dividend totalled 140,492,429, on which the total dividend payment would be EUR 210,738,643.50. The Group’s payout ratio for the financial year 2019 would be 105.2% (63.8%). The dividend payment date would be 3 April 2020, and shareholders registered in the Company’s shareholder register on 27 March 2020 would be entitled to the dividend payment.
The Board of Directors further proposes that EUR 250,000 (250,000) be donated to medical research and other purposes of public interest in accordance with a separate decision by the Board and that EUR 257,375,059.66 remain in equity.
News conference and conference call
A news conference and a conference call for analysts, investors and media will be held on Wednesday, 5 January 2020 at 13.30 EET at Orion's head office, address Orionintie 1A, Espoo. Participants are requested to present a photo ID at the head office reception.
A link to the live webcast will be available on Orion's website at www.orion.fi/en/investors. A recording of the event will be available on the website later the same day.
To participate the conference call, please dial:
Finland: +358 9 817 103 10
Sweden: +46 8 566 426 51
UK: +44 33 3300 0804
USA: +1 855 857 0686
|Annual General Meeting 2020||planned to be held on Wednesday 25 March 2020|
|Interim Report January–March 2020||Tuesday 28 April 2020|
|Half-Year Financial Report January-June 2020||Friday 17 July 2020|
|Interim Report January-September 2020||Wednesday 21 October 2020|
The Financial Statements and Report by the Board of Directors for 2019 will be published on the Company’s website at the latest in week 10/2020.
Espoo, 5 February 2020
Board of Directors of Orion Corporation
For additional information about the report:
Jari Karlson, CFO tel. +358 50 966 2883
Tuukka Hirvonen, Investor Relations tel. +358 10 426 2721 or +358 50 966 2721
Orion is a globally operating Finnish pharmaceutical company – a builder of well-being. Orion develops, manufactures and markets human and veterinary pharmaceuticals and active pharmaceutical ingredients. The company is continuously developing new drugs and treatment methods. The core therapy areas of Orion's pharmaceutical R&D are central nervous system (CNS) disorders, oncology, Finnish heritage rare diseases and respiratory diseases for which Orion develops inhaled Easyhaler® pulmonary drugs. Orion's net sales in 2019 amounted to EUR 1,051 million and the company had about 3,300 employees at the end of the year. Orion's A and B shares are listed on Nasdaq Helsinki.