[Non-English content] Good afternoon, ladies and gentlemen, welcome to Orion's earnings conference call and webcast for the financial period of January June 2021. My name is Tuukka Hirvonen and I'm the Head of Investor Relations here at Orion. In a few moments, our Chief Executive Officer Timo Lappalainen will present the results of the period, after which you will have the opportunity to ask questions from him and from our Chief Financial Officer, Jari Karlson. We will first take questions through the conference call lines, but you have also the option to send us your questions through the chat function of the webcast, and we will then read those questions after we have exhausted the conference call lines. Kindly state your name and the organization you are representing before asking your question. Just before I let Timo to step in, I'd like to draw your attention to this Safe Harbor statement regarding forward-looking statements. Without any further delays, it's my pleasure to invite Timo on the podium. Timo, please. Thank you, Tuukka. If we take the highlights for the first half this year, certainly one can say that of course the period was still plagued by the COVID-19. Orion was able to operate throughout the period without major disruptions from the COVID-19. In terms of the financials, we were missing substantial milestones as we had booked those in the comparable period. Nubeqa, our proprietary product, continued to show strong growth with our partnership with Bayer. Furthermore, specialty products, they had a good start for the year despite that we had the declined sale when we compare that to the comparison period because of the hoarding effect that we saw in the first half last year. Also, our animal health business developed very favorably, had good news despite that there were some major distribution arrangement that ended last year. As many organizations, we are still hampered by the pandemic in terms that how well we can operate internationally and our operating expenses continued to be lower in the first half. The good news for the Animal Health is that European Medicines Agency have either recommended or approved our two new products for animal health, Bonqat for feline and Tessie for canine anxiety in certain conditions. We also reported positive results from our digital therapy study, which is studied for pain alleviation. As mentioned, COVID-19, we were able to continue our operation throughout the period. We saw no material disruptions of availability of either intermediates products or workforce. Of course, as the pandemic continues, we cannot rule out such events. Securing the health and safety of employees, patients, and many of our coworkers, partners who work on the premises is a key priority for the company. In terms of the headline numbers, so net sales north of half a billion EUR, shy of last year's numbers and when we had a very strong year for the first half. Operating profit, we came down, however, meeting our operating profit margin target of 25%, so surpassed that. The cash flow per share was lower than last year and there were a couple of reasons to that. Of course, one of the reasons is that we continue to prioritize our capability of delivering products, and that means higher inventories. If we look at the Waterfall picture of how the net sales have evolved in the last 12 months with a comparable period, certainly the Dexdor sales, those were brought down and that's something that we've indicated as a risk for this year. On the other hand, Nubeqa, as it of course should continue plow ahead, showed a strong growth. Also, Simdax has shown negative numbers here. The Simdax is going to experience a generic competition, but that has been postponed a couple of months from what we earlier thought. Easyhaler had a rough start for the year, but now seems like things are moving ahead. But still, for the first half, it was -5%. Other human pharma, which includes pretty much everything else, we had showed a positive growth. Exchange rates had only a very small effect this time, but as said, the royalties and milestones, those were a major component. That continued also, of course, to reflect in the bottom line when we look at the operating profit. Product sales, product mix contributed about EUR 24 million downward from the last year comparable number, but the milestone and royalties, those were a bulk of that. Of course, the fixed costs, as the operations continued to be a little bit on the slower mode, that then improved the profitability by EUR 15 million. The geographical breakdown of the sales. When we look at the overall numbers compared to the last year, of course, there were substantial changes, especially we saw the hoarding effect, and now some of the governments, they are pushing back some of the inventories that they purchased last year. Overall, not a major change when we look at the geographical distribution. When we split the sales the other way around and look at from the product perspective, we see that the specialty products, those actually fared fairly well over the period. Proprietary products, the reasons that I mentioned, were the key aspects for the negative growth. In terms of the animal health, fared very well because the major contract that we lost last year, animal health was able to make up partly that. Fermion contract manufacturing, no material change, with the exception of Fermion is running at the full capacity at this time. When we look at the top league of the products, Easyhaler, certainly we showed a negative number there. Stalevo, Comtess, Comtan at par with last year, and Simdax and Dexdor showing negative numbers. Nubeqa now reaching position number five in the product table of Orion. A strong first half for the animal sedatives. This typically is that we may have shipments tilted on either half, and this year it is a little bit more tilted towards the first half than evenly spread out. When we move to the proprietary products business. Certainly the Easyhalers, those had a rough start for the year. Parkinson about flat. The Simdax, Dexdor, as anticipated, we have seen there the negative growth. Nubeqa, strong continued growth. Here are the quarterly numbers, and you may recall that our discussion earlier that how these are calculated, it's a royalty including the product sales. The royalties are adjusted always in the following quarter, depending how much material we have shipped to our partner, Bayer. That's why it's not a straight line curve, but you will see a little bit of volatility there depending on quarter. A strong start for the first half. The Easyhaler, here you see that there, if one looks at the second quarter, that was picking up the business and the first quarter was a tough one. That was across the board for the whole market, and we have fared with the market at least as well, in some cases a little bit better. The second quarter was an improvement in that business already. Steady as she goes in Parkinson's franchise. There our own sales continue to contribute more. As we may remember that we have opened up about a year ago our operation in Southeast Asia, where we market our own products, and also of course now throughout Europe. The trend lines, especially for Dexdor, which is still a sedative that is used in case COVID patients are admitted in ICU. We see there a very strong volatility, which is very difficult to anticipate and forecast, but I think the overall trend line is pretty clear. Now with the Simdax, we anticipate that we will see first generic launches in the third quarter that would have a material impact and probably five generic launches as we close the year. Of course, that's not in our hands. We don't have any privilege to that information, that's how we expect the things turn out. Moving on to specialty products, so that's generics, OTC, non-pharma. Even though it was a tough comparison, we had a good start for the year, and we are happy with the numbers given the circumstances and even seeing growth in some territories in Eastern Europe and Russia. The generic prescription products, a slight minus number there. In self-care products, as we have reported earlier on, we are actually missing a good old flu season because we all take care washing our hands, keep social distancing. That's a big question, how that will evolve as we close the year. Will we see flu season in the Northern Hemisphere? In Finland, the largest country market and the reference price products, we were able to fare better than the market. The market declined by 6%, whereas Orion's share, we increased the market by 2 percentage points. When we look at the overall market, we continue to command a roughly 25% in self-care products, and in the overall market, 11% market share. When we look at the future research and development, the ARASENS trial, the timeline has been now updated, and we expect to see the headline results of the study later this year. ARANOTE trial, there is no update on that, so that is actually recruiting as we speak. Orion's own, which we are doing by ourselves, ODM-208, ODM-209. We've indicated earlier that we expect to make our decision on which compound to continue to phase III by the end of this year, and that is still something that we shoot for. In Easyhaler, we are also continuing our development work for our COPD product, tiotropium, and also evaluating a new product opportunity for Easyhaler platform. We also evaluated, would it make sense for Orion to develop a new platform, and that work had continued for a few years. We decided against that because we still feel that Easyhaler is a very good device, very competitive device, and we have already numerous products, six products in the Easyhaler platform, so we continue to work on that. By the way, Easyhaler is the first inhaler product that we understand, dry powder inhaler, which is carbon free. Okay. Key business targets for this year, as we've updated the market every quarter. Our estimate for this year is that Nubeqa will continue doing well. We are very happy with the business, how that's going on in Europe. Of course, the ARASENS trial, how that will turn out, that's unknown, so we'll have to wait until we see the data. We are having taken the ARANOTE trial further, that is proceeding as planned. Easyhaler, as said, had a rough start for the year. We'll have to see how this year will pan out. We still are expecting growth. Let's see if that will be modest this year. As I mentioned, the ODM-208, that decision whether to proceed with ODM-208 or ODM-209, that decision will be taken later this year. In Finland, we've been able to maintain and even strengthen our market position in prescription products. As we saw, there is work still to be done in the OTC products. In Scandinavia, we continue to push for the generic prescription products, still work underway. There is a large program in in-licensing new products, and that's bread and butter that we do all the time for generic products, OTC products. We feel very strongly about also opportunities that would be fit for us in a more proprietary side, but as we move forward and hopefully close those, we'll obviously update the market also on those. The portfolio and real M&A, there the systematic work that we've had initiated, that continues, but there is nothing to report at this time. Our corporate responsibility. These are 2020 numbers. The availability of products, that's of course one of the prime reasons why we exist, and we are happy to report that we had a satisfactory performance there. Also ensuring patient safety. This includes this composite endpoint, also the potential withdrawals from the market, so that's why it's labeled yellow. In terms of our share of the CO2, we are continuously investing in energy efficiency, and by that, reducing greenhouse emissions with substantial numbers, and that work is well underway, including, of course, the waste and all over. Our taking care of our own employees, the lost time injury rate is at the high end at our end, and that is something that we are working on. Of course, we work in an environment where the transparency is a code, and code of conduct is something that we trained every employee. We did not change the outlook. The outlook for the year is that we estimate the net sales to be slightly lower than in the previous year, and the operating profit lower or clearly lower than 2020. Also when you look at the key assumptions that are behind this outlook, of course, in terms of the positives, it is Nubeqa, as we have shown. There are other growing products as well. The milestones, you have seen how those flow almost directly to the bottom line. That is an important part of that equation. Also Dexdor and Simdax, we expect, especially with regard to Simdax, intensified competition as the year closes. Also, the loss of the animal health distributorship contract was something that we flagged late last year. The operating profit, of course, Nubeqa is a positive sign, also that the amortization for the acquisition of Parkinson franchise from our long-term partner, Novartis here in Europe, those are now absent in our P&L, so that helps us about EUR 12 million a year. I said milestones, Dexdor and Simdax, that will be pretty much the same as for the sales. Then the big question, of course, is that what will happen and how will the business activity pick up after the COVID, or how we will see the remaining part of the year allow us to do activities vis-à-vis, as an example, customers. Then the next scheduled event is the interim report for the third quarter, end of October 20th, and then we've already announced today that we expect to release the full year numbers, February 10th, and expect to hold the AGM in 23rd of March next year. At this stage, I'd invite our Chief Financial Officer, Jari Karlson, to join me here to the podium, and we are happy to take your questions. As Tuukka here said, we will entertain first the questions from the phone lines, and then, after we've exhausted those, should you have preferred to send your question via chat, then Tuukka will moderate those questions. Thank you. Ladies and gentlemen, if you do wish to ask a telephone question, press zero one on your telephone keypad now. We have a question from the line of Peter Smith from Bank of America. Please go ahead. Hello, Peter Smith, Bank of America. On your expected higher costs in half, what are your kind of base assumptions on the COVID-19 situation and relaxation there built into those? Second question, on the halting of development of the new dry powder inhaler, what changed in the market or your market view that drove this? What was the new information that caused you to halt that after developing it for years? Thank you very much. Thank you, f or the COVID-19, our expectation is today that we'd anticipate that starting from the end of third quarter, fourth quarter, the things would start to resume back to normal-ish. Having said that, we do not expect that any society would fully open and remain open. As an example, the visits to physicians, hospitals, pharmacies, et cetera, would probably continue to be a hybrid model. Also, if we look at medical conferences, we'd expect at least this year still to continue to be pretty much either remote or max hybrid model. The one bigger question is that, would we assume the recruitment having still being curtailed by various hospitals, and that situation seem to be improving. The hospitals are not any more burdened by COVID patients. Of course, one has to respect that there is actually a patient pool that did not get the normal treatment during COVID-19 time. There's a little back stop of that. More or less towards the end of the year, that's our planning assumption in terms of the financials. In terms of the inhaler, we had worked on the new platform already several years. We were quite advanced with that. When we started to put the numbers all together, looked at the market, we felt that either converting the entire Easyhaler business to the new platform, that would be quite an exercise and probably would not pay off. When we look at the new opportunities in the business, we felt more comfortable also from the risk management perspective that we'd continue to use well-defined, well-serving, and robust Easyhaler technology. Great. Thanks. Our next question comes from the line of Jo Walton from Credit Suisse. Please go ahead. Thank you. A few quick ones, please. Firstly, on the Easyhaler, I wonder if you could tell us a little bit more about how you think you're developing in the market. I know that you've said that you think that the respiratory market is very weak. The innovative companies seem to be much more optimistic about the performance of the respiratory market in Europe. Is it that there's been a move to a new generation of products, maybe offered at not much more than a generic price, and therefore, there's been less demand for some of the older generic products that you've been able to put in the Easyhaler? If you could just tell us a little bit more about how you think your share has developed. My second question is really on costs. You've emphasized your caution on the supply chain a number of times, and you say that you're not seeing much disruption now. When you forecast your sort of gross margin for the year, I assume that you were expecting slightly higher costs, which appear not to be coming through. I'm just wondering where you might be spending extra if you're not spending it there. It certainly doesn't look like at the moment you're spending it on SG&A. My final question, just you've said that you're going to make a decision about taking a partner on ODM-208 or Sorry, not taking a partner, on moving ODM-208 or ODM-209 forwards. How far do you think you'll take those yourselves versus bringing a global partner on board? Many thanks. If I'll take the first and the last one, I'll start with the Easyhaler. I think the comment is a very good one, and the way we see that the innovative compounds, as those are launched to the market, they tend to be for a very narrow patient audience. For the ones whose COPD or asthma cannot be controlled by the existing products, and thus warranting a more expensive treatment. That certainly is when we look at how the business is evolving, I think the volume still continues to be with the compounds that we already know and are typically generic. However, the value shift is certainly something that we are seeing as well. Of course, many of the innovative companies use marketing tactics, pricing generics at the low end and then converting business to the innovative product. That is certainly something that we are seeing. In terms of the volume, I think the volume growth, underlying volume growth there, especially for products that have been developed over some 60 years ago, are still going to continue to plow ahead. We saw the about six months period of time, or nine months, when even the volumes came down. Now we are seeing the reverse of that and the market seems to be picking up. I think the notion of the value shift to innovative products, I think that's quite correct. Jari, you want to address the cost question? Yes. If we think of the cost of goods side, I don't really think we have seen much difference in the actual cost compared to what we were expecting at the beginning of the year. Even if there are some changes, their role in the overall cost structure is fairly limited. The worry has been more about the availability of the materials and availability of the logistics, transportation, and so forth. I don't really see that there's that much difference in the cost of goods cost structure, at least from the material point of view. Then, of course, one needs to remember that fairly large part of the cost structure is the fixed cost and the cost of running the plants, even though, of course, materials are also a major component. Like I said, no major differences which would really have had a material impact on our numbers so far. The last question on the ODM-208, ODM-209, and the potential partnering there and how we would take forward the development. We are now, as we speak, we are developing the plans already, of course, for the phase III and how we would go about that. We are prepared to make the decision and enter the phase III. We did the similar type of exercise when we look at the Nubeqa. We initiated the phase III and only then partnered up the product with Bayer. Here, really the big question from our perspective is that what type of position or view we would take towards the U.S. market. That's really the driver there. Would we be prepared? What's the internal situation? Prepared to invest, not only in the development of the product, but also the market access and later commercializing the product in the U.S. market, or would we like to see somebody to share that with us? We don't have any specific schedule for that. Currently, we are not looking for a partner. As a public company, you never say never. No decisions with that regard have been taken. Thank you. Can I just go back on the cost, the SG&A? Most companies last year, their SG&A was really held back in the second quarter because you were in the absolute teeth of the COVID pandemic. Most companies have indicated that they are being a little bit more relaxed on their SG&A costs as they move into 2Q because they're seeing more opportunity for promotion, and yet you managed to lower your SG&A from 2Q last year to 2Q this year. Just a little bit on the outlook there. I do apologize, a very quick housekeeping. Is there any other product left in your portfolio that has a material royalty? Or is the royalty number that we see now essentially all Nubeqa? Thank you. No, it's not only Nubeqa. We have still several products. Precedex is probably the largest of the other ones, but in addition to Precedex, we have large number of smaller products which generate royalty income for us. Definitely Nubeqa currently is the largest one. The SG&A, last year, if we look at our cost structure, the first and second half from the SG&A point of view were fairly similar. It was relatively flat. Now we have seen a little bit of decline, but then when looking at those numbers, one needs to remember that last year we had EUR 12 million of the amortization of the acquisition of the Stalevo and Comtess right in Europe, a couple of years back from Novartis, and now that is gone. That is in our numbers, a relatively large variable. That probably explains to some extent why the costs were down from last year during the first half of the year. If you deduct EUR 6 million from our last year's cost, that gives a better comparison. I guess that explains it a little bit. When it comes to the other side, outside of sales and marketing, the administration, that in our case is pretty much salary and personnel cost. That's why the COVID really hasn't had that much impact on that part of the cost structure. Thank you very much. I remind you that if you want to ask a question, you will have to press zero one on your telephone keypad now. We have a question from the line of Sami Sarkamies from Nordea Markets. Please go ahead. Hi, thanks. I have two questions. Firstly, starting from guidance, what are the main reservations for the second half of the year as you chose not to upgrade your guidance at this point? Well, if I'll speak for the second half, typically when you look at the history of Orion, the second half has always been weaker than the first half. That varies from 20% to almost 40% in some cases. There are two main reasons there. One is that we have a plant closures in the second half. They tend to be in July typically, and then starting up the plant takes some time. That's a seasonality effect. The other seasonality effect are really the summer time and also December as we see the patient numbers being admitted to hospital wards. Also running down the hospital capacity, in some cases, even physician capacity in Continental Europe and also in Scandinavia in some cases. Those two aspects are the main aspect why we see always this difference in the financial outcome of the first quarters. For two halves, sorry. This year on top of those, we of course are expecting the competition to hit Dexdor and Simdax sales during the second half compared to the first one. Those are on top of that normal seasonality. That's an excellent point. Both Simdax and Dexdor, we do not expect that the two halves would have comparable numbers. Okay, thanks. That's very helpful. My second question may have been asked already, but there were some technical difficulties early on in the call. I would just like to know your thoughts on the market normalization for Easyhaler and generics that are still suffering from COVID-19. At which point would you expect sales to be at normal level? In the meanwhile, do you anticipate a step up from current run rate during the second half of the year? Yeah. When we look at the second quarter and compare that with the second quarter last year, there is certainly pick up of the market. That seems to be also at least in the last weeks, the message that we get from the market. The market seem to be picking up. How that will pan out for the entire year, I think that's a big question. We expect that we would see growth there, but how much can we barely go above the threshold, that is still to be seen, but the market seem to be picking up as we speak now, and we expect stronger second half certainly. That's our baseline assumption as we speak. In case of Easyhalers, we actually had the second best ever quarter in the second quarter. The first quarter last year was even better. When we look at this, it was actually from Easyhaler business, one of the best three-month period we ever had. Yeah. Maybe a follow-up. Did I understand right that you're expecting both generics and Easyhaler sales to grow on a full year level? Oh, I am sorry. I mixed the generic. I was talking about the Easyhalers. Thank you for correcting that. On the generics side there, the big question there is actually, how will the, probably the fourth quarter turn out in terms of the upper respiratory infections in the Northern Hemisphere? Because we have a substantial business, not only in OTC, but also in antibiotics. Of course, last year we did not see that disease at all, or in very small numbers. Should that take place, then there is a good opportunity that we continue to grow. When we compare then this year to last year, in 12-month basis, the last year was, in overall, pretty much a normal one, despite the first half was very exceptional. Then it leveled out. There is a good opportunity that we would continue to grow in generics as well. Yes. In Finland, which of course is still the major part of that business, the volumes have already been growing, but prices continue to come down. The volumes really need to continue increasing in order to also see growing monetary values of the business. The trend which has been going on for many years just seems to be continuing still this year as well. Okay, thank you very much. I don't have any further questions. Our next question comes from the line of Krishna Chaitanya Arikatla from Goldman Sachs. Please go ahead. Hello, everyone. Thank you for taking my question. On Simdax, you talked about generic competition starting in 3Q as opposed to 2Q previously. It's probably a bit unfair to ask you for the reasons for this delay. Are you aware of any potential reasons behind the delay in generic launch? Does it have to do with any API procurement issues, please? Just trying to understand if there is a chance for extending Simdax position in the market beyond 3Q. Thank you. No, we don't have any insight of the chains of our competition, so we cannot comment on that. We are only basing our information on the public domain, which is either the approvals and in some countries the pricing information. When you seek a pricing or get into the reimbursement system, that's public information. In terms of the supply chain, we don't know that. Thank you. There are no further telephone questions registered, so I hand back to the speakers. Thank you, operator. We have few questions from the chat. These are all from Anssi Raussi from OP Markets. Let's start with a question related to Animal Health. Could you quantify the decline we should expect in Animal Health in second half of this year compared to first half of this year, as the decline in the first half was only 14%, even though you have lost the Zoetis distribution agreement? Maybe Jari is responsible for the. Yeah Animal. I can't remember exact numbers, but it will definitely be more. Like Timo said in his presentation, the timing of the sedative deliveries to our partners were this year, or are expected this year to be higher during the first half than during the second half. Last year, the Zoetis business was roughly 30% of our total Animal Health sales. Also during the second half of the year, the decline is expected to be less than that, but higher than the decline we saw in the first quarter, first half of the year. Thanks, Jari. The second question from Anssi is, could you give us some kind of rough estimate about how much Easyhaler was still impacted by COVID in the second quarter this year? Very difficult to say. As Jari said, the second quarter was very good one. Whether there was a pent up demand that patients had not renewed their prescription or they had depleted their inventory at their homes, and they had to repurchase the product. Maybe that's one factor or are we back on the track? As for the downside trend, I think all of this would speak for a positive. I don't think we saw any negative trend of any material aspect. Thanks, Timo. The last one from Anssi is that, could you remind us, was there anything special or unusual why Q4 2020 EBIT was so weak? Anssi is just trying to figure out if they have to expect same kind of weaker margin this year. Yeah, I'll take that. There were no individual major impacts. Last year, for example, the R&D programs were running relatively smoothly during the fourth quarter, and as a consequence of that, the costs were higher. We had maybe some timing of the deliveries of products. When these things just happen at the same time, it's almost like a coincidence that with our numbers you can very easily see a EUR 10 million, even EUR 15 million impact. No specific explanation really for the fourth quarter. It's just that many things happened to happen in the same direction. I don't think you can really draw a specific conclusion. Of course, in many years, the fourth quarter has been a little bit weaker than maybe the beginning of the year. That trend probably is likely to continue this year as well, but whether the fourth quarter, how this year's fourth quarter really will compare to the last year's fourth quarter, it's at this point a little bit difficult still to say because there are so many timing questions between the quarters that can have impact on those numbers. Moving on, we have couple of questions from James Vane-Tempest from Jefferies, the first one is that, what were the driving factors behind your significant outperformance of the Finnish market? I'd like to say hard work. That's what it is. Especially when we look at the reference priced product. We've been working on that for years. We were able also to continue to supply the market, so our forecast accuracy in terms of our sourcing, producing of the product, that was right on, so we were able to supply the market. Also as the market in reference priced products, that's a reverse auction effectively that takes place, so we also managed in those auctions very well. It's hard work, it's a competence of people. Of course, we have a scale benefit in the local market as well in supplying the market. The second one is regarding Simdax and Dexdor. With Simdax and Dexdor generics, what levers do you have to manage fixed costs and the negative contribution margin impact? Actually, if we look at the most markets, Simdax and Dexdor there is very little anymore SG&A that we are putting on those products. Of course, we continue to maintain the products, but the active promotion is in genericized markets that where it has converted actually to Nubeqa or Easyhaler or some other products, but actually the sales and marketing effort when the product goes generic, then it becomes a normal tender type of products in hospitals. Then it's a very limited impact what you can do with marketing. We still, of course, continue to work on the product and do some things. With the injectable products, of course, given that the initial margins are relatively high there is no way you can compensate for the entire decline of the gross profit. That's impossible. Of course, generally speaking, when there are changes in the portfolio, of course, in mid- and longer run, we try to manage our overall operations to match the current portfolio we have in our hand, whether it's sales and marketing force or whether it's the manufacturing footprint and so forth. Those are in many cases operations which don't change overnight, so to some extent, we have already started along years back, and to some extent, we will continue. Of course, we try to manage the costs so that they are the exact match with the existing portfolio we have. Thanks, Timo and Jari. We have now exhausted all the chat questions, and I got the word that we don't have any follow-ups either in the conference call line, so I guess it's time to wrap up. Well, thank you very much for joining the call. Appreciate it's midst of the summer in most places. We hope all of you are safe, not only from the COVID-19, but also from the flooding, and we are happy to report that all the Orionites, as far as we have received information, they're all safe. Have a great summer, and I hope that you can join us in our October Earnings Call.