In line with our strategy, and with positive growth prospects, we want to allocate more capital to building Orion's future, and in particular to advancing and growing Orion's own R&D pipeline. However, we will increase our spending in a controlled manner, guided by our financial objectives.
Published on 25 April 2024
"In January–March 2024, our net sales increased by 11 percent to EUR 308.5 (277.9) million and operating profit was EUR 56.0 (55.5) million. All our business divisions contributed to the solid growth of net sales and the formation of operating profit. Nubeqa® and the Easyhaler® product portfolio continued to be the largest drivers of growth, but delightfully also many other sources contributed to the growth. Generics and Consumer Health business division's reported net sales were slightly down from the comparative period, but if we exclude dexmedetomidine products and Simdax®, which are facing increasing generic competition, and Russia, where in the comparative period we cleared our remaining inventories before withdrawing from the market, the net sales trend was positive.
Operating profit was at the level of the comparative period, due to a planned increase in expenses. Many ongoing research and development phase projects are progressing which explains the increase in research and development expenditure in the first quarter. Later this year, R&D expenditure growth is expected to accelerate as we enter planned Phase II studies with our pain molecule ODM-111. It is also worth noting that the bulk of R&D costs are allocated to the development of new innovative medicines and clearly lower share is allocated to the development of other products such as generics and animal health products. Nubeqa's royalty structure, with royalty levels starting at the lowest tier each calendar year, means that in the coming years a larger proportion of Orion's annual earnings will always likely to be made in the second half of the year. In addition, the EUR 70 million milestone payment related to the sale of Nubeqa®, included in our outlook this year, is expected to be realised towards the end of the year.
Cash flow from operating activities was strong as expected in January–March 2024. The cash flow includes, among other things, the EUR 30 million milestone payment related to Nubeqa® recognised last year and the majority of the cash flow impact of the transfer of the insurance portfolio of Orion Pension Fund's B Fund. In addition, the cash flow generated by Nubeqa's product sales and royalties, for example, was clearly better than in the comparative period.
In line with our refined strategy announced earlier this year, and with positive growth prospects, we want to allocate more capital to building Orion's future, and in particular to advancing and growing Orion's own R&D pipeline. However, we will increase our spending in a controlled manner, guided by our financial objectives. Over the period 2024–2028, we want to grow net sales by an average of at least 8% per year, grow operating profit faster than net sales and pay an increasing annual dividend to shareholders, with an annual dividend payout ratio of 50–100%. These objectives provide us with a financial framework within which we can increase our prudent growth efforts.
Of the projects in clinical development, the Phase I study with ODM-111 was completed during the period and we are now preparing to start Phase II studies with the molecule, first in acute pain and later in chronic pain. The expected news flow also includes the completion of the phase III ARANOTE study with darolutamide later this year.
The political strikes in Finland at the beginning of the year have added to the challenges facing Orion's supply chains, which have already been affected by geopolitical tensions in the Middle East, among others. The strikes did not have a material impact on Orion in the first quarter of the year, thanks to good inventory levels and Orion's agility in finding alternative supply routes.
All in all, the year has started well and even slightly better than we expected. As a result, we have also slightly specified our outlook for operating profit for 2024.”