Orion Group Half-Year Financial Report January–June 2024
ORION CORPORATION
HALF-YEAR FINANCIAL REPORT 1–6/2024
8 AUGUST 2024 at 12:00 EEST
Orion Group Half-Year Financial Report January–June 2024
- Net sales totalled EUR 636.7 (January–June 2023: 567.5) million
- Operating profit was EUR 121.8 (102.0) million
- Basic earnings per share were EUR 0.68 (0.57)
- Cash flow from operating activities per share was EUR 0.98 (0.27)
- The outlook for 2024 was upgraded after the reporting period on 1 July 2024: Net sales are estimated to be EUR 1,440 million to EUR 1,480 million. Operating profit is estimated to be EUR 350 million to EUR 380 million. Previously net sales were estimated to be EUR 1,340 to EUR 1,410 and operating profit was estimated to be EUR 280 million to EUR 310 million.
Key figures
| 4-6/24 | 4-6/23 | Change % | 1–6/24 | 1–6/23 | Change % | 1-12/23 | |
| Net sales, EUR million | 328.2 | 289.6 | +13.4% | 636.7 | 567.5 | +12.2% | 1,189.7 |
| EBITDA, EUR million | 78.8 | 59.2 | +33.0% | 147.3 | 126.9 | +16.1% | 326.4 |
| % of net sales | 24.0% | 20.5% | 23.1% | 22.4% | 27.4% | ||
| Operating profit, EUR million | 65.8 | 46.5 | +41.5% | 121.8 | 102.0 | +19.5% | 274.9 |
| % of net sales | 20.1% | 16.1% | 19.1% | 18.0% | 23.1% | ||
| Profit before taxes, EUR million | 65.1 | 45.8 | +42.1% | 120.0 | 100.9 | +18.9% | 271.9 |
| % of net sales | 19.8% | 15.8% | 18.8% | 17.8% | 22.9% | ||
| Profit for the period, EUR million | 52.0 | 36.4 | +42.7% | 95.7 | 80.2 | +19.3% | 216.8 |
| % of net sales | 15.8% | 12.6% | 15.0% | 14.1% | 18.2% | ||
| Research and development expenses, EUR million | 43.6 | 31.3 | +39.1% | 80.4 | 63.0 | +27.6% | 126.9 |
| % of net sales | 13.3% | 10.8% | 12.6% | 11.1% | 10.7% | ||
| Capital expenditure, excluding acquired in business combinations, EUR million | 21.4 | 17.6 | +21.4% | 34.5 | 35.7 | -3.5% | 92.7 |
| % of net sales | 6.5% | 6.1% | 5.4% | 6.3% | 7.8% | ||
| Acquired in business combination, net of cash, EUR million | 0.1 | 0.1 | 0.1 | ||||
| Interest-bearing net liabilities, EUR million | 111.2 | 132.1 | -15.8% | 93.3 | |||
| Basic earnings per share, EUR | 0.37 | 0.26 | +42.6% | 0.68 | 0.57 | +19.2% | 1.54 |
| Cash flow from operating activities per share, EUR | 0.20 | 0.24 | -17.4% | 0.98 | 0.27 | > 100 % | 0.85 |
| Equity ratio, % | 52.7% | 59.2% | 62.3% | ||||
| Gearing, % | 14.6% | 17.2% | 10.5% | ||||
| Return on capital employed (before taxes), % | 23.4% | 20.0% | 25.3% | ||||
| Return on equity (after taxes), % | 23.2% | 19.1% | 24.1% | ||||
| Average personnel during the period | 3,726 | 3,577 | +4.1% | 3,599 |
President and CEO Liisa Hurme:
First half of 2024 was strong for Orion
"In January–June 2024, our net sales increased by 12.2 percent to EUR 636.7 (567.5) million and operating profit increased by 19.5 percent to EUR 121.8 (102.0) million.
Nubeqa® continued to perform well and was a clear growth driver for Orion and the Innovative Medicines business division. Nubeqa® sales recorded by Orion, i.e. tablet deliveries to Bayer and royalties, grew faster than we expected, reflecting the strong performance of the product and our partner Bayer in the market.
Demand for Easyhaler® products remained strong, which explains the growth of the product portfolio and, to a large extent, of the Branded Products business division. The net sales of the Generics and Consumer Health business division were almost at par compared to the comparative period.
The first half of 2024 was strong for our Animal Health business division. The development is explained by the weak comparative period when soft market and optimisation of partners' inventory levels were causing headwinds.
Fermion's important strategic role is to manufacture active pharmaceutical ingredients for Orion's innovative medicines as well as for other important medicines. Fermion also increased its external sales in the early part of the year, although more capacity has recently been reserved for the manufacture of Orion's own products.
Orion's operating profit grew faster than net sales, even though operating expenses increased in a planned and anticipated manner. The good development of all business divisions contributed to the increase in operating profit, but the strongest impact was on Nubeqa® royalties.
After the review period in July, we reported that Orion and MSD have exercised the option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat and other candidates targeting CYP11A1 into an exclusive global license for MSD. The conversion of this collaboration into a license agreement allows Orion to focus our resources to progress our other promising development candidates while both remaining well positioned to benefit from the development and potential commercialisation of opevesostat and meeting our financial objectives. We believe MSD provides the best choice to maximise the potential of opevesostat, a compound discovered by Orion’s scientists. As a consequence of the exercise of the option, we will release a EUR 60 million item from our balance sheet, which will have a positive impact on the third quarter 2024 net sales and operating profit, and as a result, we upgraded the outlook for the current year.
In mid-July, together with our partner Bayer, we reported that the ARANOTE trial had met its primary endpoint, showing that darolutamide in combination with androgen deprivation therapy (ADT) significantly increases radiological progression-free survival compared to placebo plus ADT. Safety analysis shows darolutamide plus ADT to be comparable to placebo plus ADT, reconfirming the established tolerability profile of darolutamide as observed in the ARAMIS and ARASENS trials. The results of the ARANOTE trial reconfirm that darolutamide, a compound discovered by Orion scientists, is a viable treatment option for patients with metastatic hormone-sensitive prostate cancer.
Otherwise, our clinical development pipeline remains the same. We are preparing to start the clinical phase II program with the ODM-111 molecule for the treatment of acute and chronic pain during 2024 or early 2025.
I am proud and happy of all the achievements we have already achieved together at Orion this year. We are eager to continue on our growth path!”
Outlook for 2024 (updated on 1 July 2024)
Net sales are estimated to be EUR 1,440 million to EUR 1,480 million.
Operating profit is estimated to be EUR 350 million to EUR 380 million.
Previous outlook for 2024 (provided on 13 February and specified on 25 April 2024)
Net sales are estimated to be EUR 1,340 million to EUR 1,410 million.
Operating profit is estimated to be EUR 280 million to EUR 310 million.
Basis for outlook in more detail
Collaboration agreements with other pharmaceutical companies are an integral part of Orion’s business model. Agreements often include payments recorded in net sales and operating profit that vary greatly from year to year. Forecasting the timing and amount of these payments is difficult. In some cases, they are conditional on terms such as R&D outcomes which are not known until studies have been completed, the progress of R&D projects or the attainment of specified sales levels. Regarding possible new contracts under negotiation, neither the outcome nor the schedule of contract negotiations is generally known before the final signing of the agreement.
Orion is eligible to receive milestone payments from Bayer based on sales of the Nubeqa® product upon meeting certain global annual sales thresholds for the first time. In 2023 Orion received one such milestone payment of EUR 30 million. The outlook for 2024 includes one Nubeqa® sales-related milestone payment of EUR 70 million which is included in both the net sales outlook and the operating profit outlook.
In addition, both the net sales outlook and the operating profit outlook include a EUR 60 million item which Orion will release from the balance sheet in Q3 2024 after Orion and MSD exercised an option in July 2024 to convert the companies’ co-development and co-commercialisation agreement for opevesostat (MK-5684/ODM-208), an investigational CYP11A1 inhibitor, and other candidates targeting CYP11A1 into an exclusive global license for MSD.
The outlook does not include any other material milestone payments or one-offs.
The outlook assumes that Orion's own production and other operations will be able to operate normally throughout the year, and the supply chains of raw materials or ready-made products are not facing significant disruptions. These and other risks are discussed in more detail under 'Near-term risks and uncertainties'.
The outlook does not include income, expenses or other impacts related to any future material product or company acquisition or divestment.
Milestone payments received by Orion in 2019–2023
| Year | 2019 | 2020 | 2021 | 2022 | 2023 |
| EUR million | 51 | 42 | 3 | 234 | 32 |
Net sales
The outlook assumes that the net sales of Nubeqa® booked by Orion, and thus the net sales of the Innovative Medicines business division, will clearly increase in 2024. Orion’s assumption is based on forecasts received from its partner Bayer. However, it is difficult to predict the exact level of product sales and royalties fof a strongly growing product for the whole year. In addition, the EUR 70 million Nubeqa®-related milestone is expected to increase the net sales of the Innovative Medicines business division. The net sales of the business division increases also due to the EUR 60 million item to be released from the balance sheet in Q3 2024.
The Branded Products and Animal Health business divisions are also estimated to improve their net sales in 2024. Branded Products growth is anticipated to be driven by the Easyhaler® product portfolio. The sales of entacapone products are assumed to recover somewhat after challenging year 2023. At the same time, however, the market conditions for the entacapone products continue to be tough with increasing competition and declining prices in many markets, and as a result, the sales of the entacapone products are anticipated to be flat in 2024. Animal Health growth is anticipated to be driven by the sedatives portfolio, products in launch phase and improving market conditions.
The Generics and Consumer Health business division continues to suffer from the decline of Simdax® and dexmedetomidine products due to generic competition and falling prices, but less than in recent years. The overall volume of generic products is expected to grow. Due to the aforementioned reasons, the net sales of the Generic and Consumer Health business division in 2024 is assumed to be at a similar level as in 2023.
Fermion has been operating at very near full capacity over the past few years. The share of manufacturing of the active pharmaceutical ingredients of Orion's own proprietary drugs is estimated to increase, which may restrict capacity allocated to external business.
Operating profit
Gross profit is expected to increase clearly driven by growing Nubeqa® royalties, the EUR 60 million item to be released from the balance sheet in Q3 2024, and the anticipated EUR 70 million Nubeqa®-related sales milestone.
The range in the operating profit estimate is mainly due to Nubeqa's sales booked by Orion and the development of R&D costs. It is difficult to predict the exact level of royalties of a strongly growing product for the whole year. Any variance from the predicted level can have a notable impact on Orion's operating profit. Also, the mechanism by which each quarter's product deliveries are always fully deducted from the next quarter's royalty payments is causing variance to operating profit. Even though this impact on operating profit is only temporary, the timing of product deliveries may have notable impact on Orion's operating profit in one calendar year.
Over the past few years, Orion has been determined to increase its investment in early-stage research in line with its growth strategy. This work is now starting to bear fruit and several projects are approaching the clinical development phase. Progressing these projects will also require significantly higher R&D expenditure than in the past. At the same time, projects in the clinical development phase have advanced and will advance during 2024, which will increase project costs. However, there are uncertainties related to the progress and timing of projects, which may mean that not all the costs projected for 2024 will materialise.
Sales and marketing expenses are expected to increase mainly due to growing investments to the Easyhaler® sales and increasing Nubeqa® royalty payable as per an agreement with Endo Pharmaceuticals.
Capital expenditure
The Group’s total capital expenditure in 2024 is expected to be at a similar level as in 2023, when capital expenditure was EUR 93 million. The estimate of capital expenditure does not include any investments related to any future material product or company acquisition.
Near-term risks and uncertainties
The outlook assumes that Orion's own production and other operations will be able to operate normally. The realisation of sales of Orion-manufactured products requires that production and the related supply chains and other operations are able to operate at the planned level. There are a number of risks that could even materially disrupt Orion's production or other operations. Such risks include, for example, accidents, strikes, employee illness, poor availability of supplies, equipment, spare parts, products, energy, starting materials or semi-finished products, and the failure of logistics chains or serious disruptions to information or communication systems. Current risks to supply and logistics chains include geopolitical conflicts and unrest around the world. In addition to conflicts and unrest, any other unforeseen changes in the operating environment could cause disruptions to Orion's production, supply chains or other operations. Such risks may include accidents, strikes, natural disasters, epidemics and pandemics, wars, terrorism, cyber-attacks or hybrid influencing.
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 pharmaceutical markets in recent years will specifically focus on Orion’s products. Changes in pharmaceutical regulation in individual markets or more broadly, for example at EU level, may affect the sales and profitability of Orion's products. Changes in overall market demand may also have negative impact on sales.
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.
Currently no single currency is posing a material exchange rate risk for Orion. Key currencies that carry an exchange rate risk are the US dollar and European currencies other than EUR. However, the overall effect of the risk arising from currencies of European countries will be abated by the fact that Orion has organisations of its own in most European countries, which means that in addition to sales income there are also costs in these currencies. The exchange rate performance of the Japanese yen is significant due to sales of Parkinson’s drugs in Japan.
The current geopolitical conflicts and unrest, and other challenges in the global supply and logistics chains of pharmaceuticals have increased the already elevated risk of supply disruptions. Moreover, the disruptions, production volume changes and logistical challenges experienced in other industries may also have unexpected and sudden ramifications that can manifest as shortages of necessary raw materials, supplies and equipment in the chemical and pharmaceutical industries and as increases in prices. The possible rise of raw material prices and other supply chain costs deteriorates the profitability of Orion's products, since in the pharmaceutical industry it is very difficult to pass on cost increases to the prices of own products, especially prescription medicines, particularly in Europe. If high cost inflation occurs, it will pose a risk to Orion's profitability.
Authorities and key customers in different countries carry out regular and detailed inspections of drug development and manufacturing 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 supply active pharmaceutical or other ingredients and components or parts (among these the Easyhaler® products). 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.
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 are not expected to have a material impact on earnings in the current year. Owing to the nature of the research process, the size and costs of new studies that are being started are known relatively well in advance. However, there are uncertainties in the timing and progression of any individual study. Any changes in the timing of new research or development phases that are being launched may have a material impact on the projected cost structure within a single year. 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. 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 upfront and milestone payments paid by Orion to its collaborators, which are recorded as investments in intangible assets in balance sheet, include write-down risk that may be realised if, for example, a collaborative research project fails or otherwise has to be discontinued.
Webcast and Conference Call
A webcast and a conference call for analysts, investors and media representatives will be held on Thursday, 8 August 2024 at 13.30 EEST.
A link to the live webcast is 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.
Conference call can be joined by registering through the following link:
https://palvelu.flik.fi/teleconference/?id=5007087
Phone numbers and the conference ID to access the conference will be provided after the registration. In case you would like to ask a question during the conference, please dial *5 on your telephone keypad to enter the question queue.
Questions can also be presented in writing through the question form of the webcast.
Upcoming events
| Interim Report January–September 2024 | Tuesday 29 October 2024 |
| Financial Statement Release for 2024 | Tuesday 25 February 2025 |
| Annual General Meeting 2025 | planned to be held on 3 April 2025 |
| Interim Report January–March 2025 | Wednesday 23 April 2025 |
| Half-Year Financial Report January–June 2025 | Friday 18 July 2025 |
| Interim Report January–September 2025 | Tuesday 28 October 2025 |
The Financial Statements and the Report of the Board of Directors for 2024 will be published on the Company's website at the latest in week 11/2025.
Espoo, 8 August 2024
Board of Directors of Orion Corporation
For additional information about the report:
Tuukka Hirvonen, Investor Relations, tel. +358 10 426 2721 or +358 50 966 2721
Publisher:
Orion Corporation
http://www.orion.fi/en
http://www.twitter.com/OrionCorpIR
Orion is a globally operating Finnish pharmaceutical company – a builder of well-being. We develop, manufacture and market human and veterinary pharmaceuticals and active pharmaceutical ingredients. Orion has an extensive portfolio of proprietary and generic medicines and self-care products. The core therapy areas of our pharmaceutical R&D are oncology and pain. Medicines developed by Orion are used to treat cancer, neurological diseases and respiratory diseases, among others. Orion's net sales in 2023 amounted to EUR 1,190 million and the company had about 3,600 employees at the end of the year. Orion's A and B shares are listed on Nasdaq Helsinki.
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