Good afternoon, ladies and gentlemen, and welcome to Orion's earnings conference call and webcast for the financial period of January-September 2024. My name is Tuukka Hirvonen, and I'm the Head of IR here at Orion.

In a few moments, we will kick off with a presentation by our CFO, Rene Lindell. Our CEO, Liisa Hurme, she is recovering from a foot operation, which restricts her mobility at the moment, and thus, she couldn't join us here today.

But we have a good team here led by Rene, and also for the Q&A session, we have today here Mrs. Outi Vaarala, who is heading our R&D and Innovative Medicines business division.

After the presentation, you will have the possibility to ask questions from the management. And we will first take questions from the conference call line, and after that, then we will turn to the webcast chat questions.

[Operator Instructions] And just before I let Rene to take over the stage, I'd like to draw your attention to this traditional disclaimer about forward-looking statements. But with these words, I'm happy to hand over to Rene.

Thank you, Tuukka, and hello, and welcome to this interim presentation from my behalf as well. The quarter was eventful.

And also after the quarter's ending, we had a few news that we'll also discuss today in the presentation and I'm sure more also during the Q&A. The third quarter was strong.

It had a strong underlying business growth, but boosted by milestone payments. In total, milestone payments were €130 million.

€70 million of this was from Nubeqa sales milestone and €60 million was related to the MSD agreement, which in July was transferred from a collaboration agreement to a license agreement. And with that change, the €60 million item that was reserved on the balance sheet was released to the P&L, both to the net sales and operating profit.

This €60 million was reserved for potential costs related to collaboration agreement, but with this agreement change, then those costs didn't materialize. And consequently, the item was released to the P&L.

During this quarter, Nubeqa, Easyhaler, Animal Health were main drivers for growth, similarly as earlier this year. But in this quarter, also Generics and Consumer Health saw a very healthy growth of 5%.

Our operating expenses increased according to plan. And if we exclude the major milestones, €130 million in Q3 this year and €30 million in the comparable period, the underlying business growth was 25.9%.

And the net operating profit increased by €22 million. If we look at the year-to-date, the story is very similar.

Two milestone payments increased a lot the net sales and profit. But even without these, if you look at the net sales growth, it was 16.6% and operating profit increased by €42 million.

And over the year, the cash flow from operating activities has been strong as expected. Looking at some key components of the net sales through the net sales bridge.

We can see here Nubeqa standing out with close to €100 million growth from last year and then milestones net impact of another €100 million. But if you look at the other business divisions here, calculate them together, they contributed with €55 million of growth.

And the largest negative contributions were, as before, Simdax and dexmedetomidine and entacapone. On the operating profit side, main positive contributors were the sales growth and the royalties and milestones and then some negatives from product mix changes and price changes that impacted the margin.

And also a negative contribution, as I said earlier, from the planned rise in operating expenses, which then together was about €50 million, mainly from R&D and sales and marketing. Next, let's look at the performance of each business division.

Net sales of Innovative Medicines showed strong growth and includes the 2 major milestones, as mentioned earlier. But even with excluding the milestones, the underlying sales increased by 73.5%.

It's good to, at this point of time to discuss about the remaining milestone for Nubeqa. It's in total €180 million and it is actually one milestone, which could, according to our current estimates, be recorded in 2026.

After the reporting period on last week's Thursday, Marinus reported the results of the ganaxolone's Phase III study for the TSC indication, which unfortunately was negative. It didn't meet its primary endpoint and Marinus also was announcing that they discontinue their further ganaxolone clinical development.

Now this means also that Orion is currently assessing its situation with ganaxolone. We have the CDD indication.

It's a rare disease indication, but with a much smaller business potential than we had expected for the TSC if that would have been successful. Moving on to Branded Products, a healthy growth of 10.3% year-to-date with Easyhaler leading that growth at 18.3%.

Sales volume of entacapone products did increase volume-wise, but due to declining prices, we see that the total net sales is lower than in the comparative period. In the women's health segment, the Divina series grew by 13.7%, also a very healthy number.

You can also see in the bar chart in the other numbers some expansion of the Branded Products portfolio building on the Easyhaler, on the entacapone and the Divina series. So there is approximately €5 million of growth year-to-date there.

Generics and Consumer Health, our largest business division, had a very good quarter. It grew around 5% in Q3 and also reached cumulatively a growth for the year of just below 1%.

And this is really a good result in a very competitive market and it was achieved, thanks to good portfolio management and service level. And as you remember, Generics business also has its headwinds from Simdax, dexmedetomidine and the fact that we exited the Russia business last year.

So the result would have been, of course, much bigger even without these effects. Animal Health has continued its good performance in Q3 and its recovery from last year's dip and the year-to-date sales is now 20.9%.

It came from various sources, but animal sedatives being the single largest contributor. Fermion is slightly lower year-on-year, but this is mainly due to the fact that ever more of Fermion's capacity is being diverted to supporting Orion's internal API production and naturally Nubeqa is taking a larger share of the capacity.

So it is capacity constrained for the external sales. Looking at our top products, Nubeqa has grown by 80% year-to-date, Easyhaler product portfolio by almost 20% and animal sedatives over 40%.

And the negatives are the ones that we have seen earlier this year, Simdax. Dexmedetomidine for human use, around 30% decline, so similar as earlier.

Trexan's decline year-to-date is partly explained by large shipments that happened last year during this time. On the clinical pipeline, we have ARANOTE.

In darolutamide, we had positive results in Phase III during the quarter and thus registrations are now ongoing for expanding Nubeqa indication by Bayer. And ARASTEP is ongoing in Phase III.

For opevesostat or ODM-208, Phase III programs, OMAHA1 and OMAHA2, are ongoing in Phase III by our partner, MSD. Regarding our own pipeline, last week, we announced, unfortunately, that we had to cancel the ODM-111 project within the pain area.

It's our NaV 1.8 blocker due to findings in preclinical toxicology studies that showed that the molecule did not support long-term use. What this also means is that the therapeutic window for the molecule became too narrow to continue the project.

It should be noted that in Phase I clinical studies, there was no significant safety concerns. Due to the decision to cancel ODM-111, Orion will write down €17.5 million of assets related to the molecule.

There are some savings this year that partly compensate for this, savings in external R&D, but they don't fully compensate for this. We're talking about a few millions, and we are still looking at how much that in the end will be.

On the other Orion pipeline project, ODM-105 targeted for insomnia is ongoing and proceeding in Phase II. And ODM-212 for solid tumors is also proceeding in Phase I.

And during the Q&A session, as Tuukka said, Head of our Research and Development, Outi Vaarala, will also be here with us answering any questions related to ODM-111 or all the research pipeline. A few words about our progress in sustainability.

We have received validation from the Science Based Target initiative who confirmed our near-term emission reduction targets are in line with latest climate science. Our commitments in this area are that Orion commits to reduce absolute Scope 1 and 2 greenhouse gas emissions by 70% by the year 2030 from the base year of '23.

Additionally, we commit that 78% of our suppliers also have Science Based Targets by the year 2029. Finally, our outlook for '24, which we updated during the quarter of -- in the 11th September remains the same.

So our net sales is estimated between €1.47 billion and €1.51 billion and operating profit between €370 million and €400 million. And with this, I will invite Outi and Tuukka here with me, and we'll be ready for your questions.

Thank you for the presentation, Rene. And as said earlier, we will first turn to the conference call line.

So at this point, I would like to hand over to the operator with the teleconference. So please, it's time for the questions.

I'm sorry, I joined a bit late. So if you've addressed this, then apologies.

But just maybe anything you can share on where you'd expect to allocate the additional R&D spend that you've now got post the ODM-111 failure. In your press release, you said other promising projects.

So just anything you can give us on that would be helpful. And then how we should be thinking about your '24 to '28 outlook?

Maybe I can start on the '25-'28 outlook. So overall, I mean, that long-term target that we have set is -- remains the same.

So there's no change to that EBIT and sales growth targets. And of course, we already there said that we are planning to also increase our spend in R&D in -- across the board, but with keeping that guidance that we have given for the long term.

Maybe, Outi, you want to continue on the overall research investments.

Yes. In our clinical pipeline, we have oncology project, ODM-212 TEAD inhibitor and it’s developed for solid cancer indications in plural.

So many indications are possible for that medicine. And now we have opportunities to explore those indications in Phase II studies in parallel.

That’s one way how we can reallocate the resources from ODM-111. In addition to that, we have in our research pipeline biologics projects also for multiple indications in mmune-oncology area.

And there, we have opportunities also to expedite the programs. In research pipeline, we have also other interesting and promising projects.

So these are some examples.

A couple of questions from me, and if I start with your guidance. So you will book some write-downs relating to ODM-111 and ganaxolone in Q4, but can you like explain what is included in your EBIT guidance as you kept it unchanged for now?

Yes. So the guidance includes everything we, of course, know up to this point.

And yes, ODM-111 that we know that, that write-down will be €17.5 million. So ganaxolone, maximum write-down is €25 million, but we are assessing that project and what the final write-down will be, then we don't -- we cannot yet tell.

But before the year-end, we will, of course, look at this project. And other than that, we are still within the outlook.

And there are also, as we saw here, good underlying business performance.

And if I may add, Anssi, as Rene said in the presentation also regarding ODM-111, yes, we are going to have the write-down. But on the other hand, there will also be less R&D costs related to ODM-111 for the remainder of the year than we earlier had.

And also related to ganaxolone, whatever happens after the assessment, what we are going to do with that, also there are planned costs for ganaxolone for the remainder of the year. But at this stage, it's not certain that those will take place.

So also in that area, there might be some balancing coming from that.

Okay. Got it.

And then about your sales and marketing expenses in Q3, like was there anything unusual or onetime items, to say, included in that number?

There was nothing unusual, but it's good to note that we also record the Nubeqa Endo royalties within that number. So that kind of increased in this quarter because of the milestone of €70 million.

So there is an increase in the sales and marketing side, just mainly due to the Nubeqa royalties that we paid to Endo.

Okay. And this is the ballpark we should expect in the future as well, especially in H2, and of course, increasing with Nubeqa.

Yes, it’s proportional to the Nubeqa sales. Of course, this €70 million was now a very big peak in this quarter.

So – but yes, we pay on all the income that we get.

This is Iiris Theman from Carnegie. I have a couple of questions.

Firstly, can you comment on how much you have spent R&D costs for ODM-111 so far this year? And secondly, you now expect next Nubeqa milestones to be recorded in 2026.

What visibility do you have this payment? I mean, have you received any sales outlook from Bayer for '25 and '26?

And did you have any comments regarding the sales threshold that will trigger the payment? And perhaps my third question is basically regarding your R&D pipeline news flow that what should we expect in the next 12 to 24 months?

And also, if you can comment what are your expected next updates regarding opevesostat?

Okay. There were so many questions.

Yes. Really many, yes.

Should we start with the cost side, Rene, regarding how much cost do ODM-111 so far we have booked this year?

Yes. I mean, we don't disclose single project cost items on that level.

So that one we will not continue answering, but we can move to the next one.

Then the next question was regarding the next Nubeqa milestone, which is now single €180 million milestone. And currently, we estimate it to be booked in '26.

So the question from Iiris was that have we received some information from our partner, Bayer, that made us to give out this outlook or estimate?

Yes. So of course, we are in continuous discussions with Bayer regularly on how the Nubeqa business goes.

And of course, we can also see how it actually goes and compare those two. And those two led to make this estimate.

So I think that's a very simple answer for that one. And of course, we don't disclose what the milestone threshold is even in this case.

Thanks, Rene. Then maybe to Outi, the question regarding our R&D pipeline.

So what's the expected news flow for the next 12 to 24 months?

Yes. If I start from the clinical pipeline, when it comes to -105, we hope to see the results of Phase II study to be ready by the end of year '25.

And then according to the results, we could have a move to Phase III study also during the next 24 months period. When it comes to -212, also there, we expect to have a chance to move to Phase II studies already next year, so 2025.

And as I already mentioned, we have there options to start in parallel a few Phase II studies in different indications. And then from the research pipeline, we expect to see that we can make a first-in-human Phase I start in 2 of our biologics projects.

We are preparing those to be started in a 12-, 18-months period. And then we have also in our research pipeline small molecule projects, both in oncology and pain, where we could have a start of Phase I study in 24-months period.

Thanks, Outi. And then there was the last question regarding when is the next update from Orion regarding opevesostat.

And maybe I can answer to that, Iiris, that now that we have transferred or converted the agreement to licensing agreement to MSD, that means that opevesostat is now fully in MSD’s hands. So we need to rely on what they are publicly giving out and then mirror anything they say about the program.

I have 4 questions, we'll take this one by one. First one to Rene, I guess.

Can you please confirm that you will not have to lower your outstanding EBIT guidance even if you end up not bringing ganaxolone to the market and need to write down it by €25 million in Q4?

Yes. The outlook is not dependent on single issues like that.

So it's a totality of the business. So there are many more moving parts.

So one single event like that is not necessarily the only thing, so that's why we have to assess the whole thing and look at how the quarter goes. This is one among many other things.

As Tuukka said, there are also upsides that we see in other parts.

Okay. And then moving on to ODM-111.

You've been talking about using ODM-111 for chronic pain and you are planning 2 Phase II studies, yet it seems that you did not have safety data on the long-term use. Can you please elaborate on your thinking here?

And when were you planning on safety data for long-term use?

No, I didn't get the end of the question.

Could you, Sami, repeat the end of the question? The line broke down for a couple of seconds for us.

Sorry about that. So can you please repeat?

Yes. So when were you planning on evaluating the suitability of ODM-111 for long-term use?

So we have now done the safety studies for long-term use and complemented them all the time, of course, in order to be ready for the Phase II start. And the results from the latest studies were such that it's not reasonable and feasible for us to continue because of the therapeutic window that remains too narrow.

The decision, of course, is always like a decision that is usually dependent on several factors. But in this case, the latest results that we got from our long-term safety studies revealed unexpected safety issue and that resulted like a relatively quick decision to terminate the program.

And it's not only about chronic studies, it's also about acute chronic pain indication. It's also about acute pain indication due to the fact that, in many cases, in real world, the patients who are treated for acute pain, they actually use medicines longer than prescribed.

So we have there very high demand for clean safety. So these findings as a whole made us to terminate the whole program.

Okay. I just wanted to verify the study -- the recent study you're referring to, which led to your decision, was that study requested by authorities?

It was agreed when we discussed with the authorities that we will do it. So it is -- of course, all the studies are studies that we agree with the authorities that we will do.

So yes, it's part of the data package that you need to have when you prepare Phase II studies.

Okay. And then finally, on your R&D cost level, how should we think about that going into next year?

Will we be returning to more historical levels as ARANOTE study has been completed and you will not be having the cost from ODM-111?

Yes. So of course, regarding next year, we’re not prepared to give detailed outlooks for that yet.

That’s not the time. But we’ve stated that we aim to increase our R&D investments over time.

So even with ODM-111 now canceled, of course, it does have a significant impact on the portfolio that we thought we’re going to have. But as Outi said here, there are other projects there that we might want to look at to accelerate or introduce that might have come later.

So this is not yet fully ready and planned. So we have to look at it and then come back to the overall outlook for next year in February next year as well.

But at this point of time, we don’t foresee, for example, that the R&D expense would absolutely decline from this year’s level. That is not something we are thinking of planning for.

Thank you, operator. From the webcast chat, we have actually a couple of questions.

So the first one is that when are you planning to release Phase I results of ODM-111?

Phase I results, we have planned that we will report in the coming conferences. So I think that in '25 in the conferences in pain therapy area, we are ready to report our Phase I results.

Thank you, Outi. And we'll continue with ODM-111, so the question is, can we know more details about the termination of the molecule as it was planned to enter Phase II?

I guess, you already exhausted that, but if there's anything you want to add?

Yes, these kind of things happen always in our business area. Drug discovery is a difficult area.

We were preparing Phase II studies very actively. We were ready to start Phase II studies, both in acute pain and in chronic pain.

We did the preparations for that. And of course, as always, it is a disappointment when we find something that will compromise safety and then, of course, efficacy because of the narrow therapeutic window.

But as I said, in my role, at least, Head of R&D, you need to be prepared for that. You need to prepare several scenarios for the future.

And in that kind of situation when we terminate something, we also see immediately the next scenarios and the next opportunities. And this is the way how we are now going forward.

Thank you, Outi. So closing one door may open others in this case.

Yes, yes. Absolutely.

Okay. We have no further questions coming in from the webcast chat.

So I guess that this time we will thank you, the audience, for your attention, for the good questions. And then like Rene mentioned, next time, we will be reporting the full year results in the end of February 2025.

Until that, take care, and bye-bye.