The year has progressed mostly in line with our expectations despite slight headwinds with certain markets and timing of deliveries
Published on 17 July 2023
"In January-June 2023, our net sales increased by 2.4% to EUR 567.5 million and our operating profit decreased by 33.5% to EUR 102.0 million. The operating profit decline from the comparative period was mainly as expected but, due to discontinuation of Russian business operations, softening demand in animal health market and inventory level adjustments among some of our customers, the full year operating profit is expected to be slightly higher than in 2022 – not slightly higher or higher as we estimated earlier. The estimated operating profit increase during the second half of 2023 is based on assumptions including continued good performance of Nubeqa, growing sales of Easyhaler product portfolio, good performance of generic portfolio, easing of cost inflation in the second half of the year, levelling off of the decline in sales of Simdax and dexmedetomidine products for human use, and a EUR 30 million milestone payment related to the sales of Nubeqa.
The Innovative Medicines business division's revenue increased significantly thanks to the good performance of Nubeqa®. Sales of Nubeqa are expected to grow strongly in the coming years, which is why in June we announced an investment to increase production capacity for darolutamide at Fermion's Hanko plant.
The net sales of the Branded Products business division, on the other hand, decreased. The Easyhaler® product portfolio continued to grow, but lower deliveries of Parkinson's medicines to our partners and lower sales of the Divina® series due to discontinuation of the business in Russia weighed on net sales. At the Capital Markets Day in May, we announced that the Easyhaler® product portfolio has the potential to reach annual sales of more than EUR 200 million. In view of the growth prospects, we decided in June to invest in increasing Easyhaler's production capacity at our pharmaceutical plant in Espoo and to build a new filling line for dry powder inhalers.
In Finland, sales of generics and OTC products increased due to strong volume growth. However, the overall sales of the Generics and Consumer Health division declined due to generic competition and declining prices of Simdax® and dexmedetomidine products for human use, together with the discontinuation of business operations in Russia.
The animal health market as a whole has experienced weakening demand both in companion animal and livestock segments, which is also reflected in Orion’s Animal Health business. Net sales of the Animal Health business division in January–June 2023 include the turnover of the animal health company VMD (Inovet), acquired in June 2022, which explains the strong increase from the comparative period. Excluding VMD, the net sales of the business division would have declined.
The decline in operating profit had several reasons, some of them one-offs like the discontinuation of business in Russia. The total impact of Russia-related items on our operating profit in January–June 2023 was EUR 25 million negative compared to January–June 2022. Declining sales volumes and lower prices of Simdax and dexmedetomidine products for human use as well as clearly lower sales of entacapone products also had significant negative impact. Third major contributor to the decline of operating profit was the increase in fixed cost. Cost inflation also still caused some pressure on margins. On the positive side, growing products and especially Nubeqa royalties had a clear positive impact on operating profit. Nubeqa’s role would have been even more significant without the temporary negative impact on gross profit which was due to a lower than in the comparative period delivery price to Bayer.
Operating costs increased mainly as expected. Sales and marketing expenses increased because in the comparative period COVID-19 still limited promotional activities in some areas. In addition, sales and marketing expenses as well as administrative expenses now also include the expenses of the acquired animal health company VMD (Inovet), which were absent in the comparative period. The role of various information management tools and systems is becoming more important and consequently related costs, which are booked to administrative costs, have increased. In addition, the ongoing revamping of Orion’s Enterprise Resource Planning (ERP) system causes extra temporary costs.
At our Capital Markets Day in May, we announced that Orion plans to initiate a Phase I clinical trial with ODM-212 in the second half of 2023. ODM-212 is a TEAD inhibitor, aimed for the treatment of solid tumours with YAP/TEAD activation. We have also selected insomnia as a target indication for tasipimidine, or ODM-105, and have initiated a Phase II clinical trial with the molecule. The project fits well into our pipeline as insomnia is often associated with pain as a co-morbidity. Our other projects in the clinical phase are also progressing as planned. We look forward to continuing all our R&D projects to develop new treatments for the benefit of patients with unmet need”