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Orion Oyj: Orion Group Interim Report January-June 2014

2014-07-29 11:01:00
Ticker Giełda ISIC Kraj Miasto
ORN XHEL Finland Espoo








ORION CORPORATION     / INTERIM REPORT / JANUARY-JUNE 2014 / 29 July 2014 at

12:00 noon EEST





Orion Group Interim Report January-June 2014





Orion's net sales in January-June 2014 totalled EUR 522 million (EUR 497 million

in January-June 2013).



* Operating profit was EUR 153 (135) million.

* Profit before taxes was EUR 151 (134) million.

* Equity ratio was 51% (48%).

* ROCE before taxes was 42% (41%).

* ROE after taxes was 49% (43%).

* Basic earnings per share were EUR 0.86 (0.72).

* Cash flow per share before financial items was EUR 0.93 (0.27).

* Orion and Bayer entered into partnership for development and

commercialisation of ODM-201. Orion received an upfront payment of MEUR 50,

of which MEUR 23 is included in profit for the reviewed period and MEUR 27

is estimated to be used for development costs of ODM-201.

* The outlook estimate for 2014 was updated during the review period. The

current outlook estimate is that in 2014 net sales and operating profit will

be at similar level to 2013.

* Stalevo received marketing authorisation in Japan in the beginning of July

after the review period.

ORION'S KEY FIGURES FOR THE REVIEW PERIOD



  Q2/14 Q2/13 Change % Q1-Q2/14 Q1-Q2/13 Change % 2013

-------------------------------------------------------------------------------

Net sales, EUR million 276.7 248.0 +11.6% 521.7 497.4 +4.9% 1,006.9

-------------------------------------------------------------------------------

International

operations, EUR

million. 204.7 180.4 +13.5% 379.3 361.9 +4.8% 732.3

-------------------------------------------------------------------------------

  % of net sales 74.0% 72.7%   72.7% 72.8%   72.7%

-------------------------------------------------------------------------------

Operating profit, EUR

million 86.0 61.1 +40.8% 153.4 135.2 +13.4% 267.7

-------------------------------------------------------------------------------

  % of net sales 31.1% 24.6%   29.4% 27.2%   26.6%

-------------------------------------------------------------------------------

Profit before taxes,

EUR million 84.7 60.5 +40.0% 151.2 134.3 +12.6% 264.0

-------------------------------------------------------------------------------

  % of net sales 30.6% 24.4%   29.0% 27.0%   26.2%

-------------------------------------------------------------------------------

Income tax expense,

EUR million 16.7 14.6 +14.1% 30.5 32.9 -7.0% 57.8

-------------------------------------------------------------------------------

R&D expenses, EUR

million 30.6 26.3 +16.1% 56.9 50.9 +11.6% 101.9

-------------------------------------------------------------------------------

  % of net sales 11.0% 10.6%   10.9% 10.2%   10.1%

-------------------------------------------------------------------------------

Capital expenditure,

EUR million 13.5 17.3 -22.2% 29.6 36.7 -19.4% 77.9

-------------------------------------------------------------------------------

  % of net sales 4.9% 7.0%   5.7% 7.4%   7.7%

-------------------------------------------------------------------------------

Assets total, EUR

million       943.0 887.7 +6.2% 979.0

-------------------------------------------------------------------------------

Equity ratio, %       51.3% 48.1%   53.6%

-------------------------------------------------------------------------------

Gearing, %       18.9% 32.7%   8.4%

-------------------------------------------------------------------------------

Interest-bearing

liabilities, EUR

million       252.8 278.2 -9.1% 257.8

-------------------------------------------------------------------------------

Non-interest-bearing

liabilities, EUR

million       226.0 182.1 +24.1% 207.3

-------------------------------------------------------------------------------

Cash and cash

equivalents and money

market investments,

EUR million       164.9 138.6 +19.0% 214.7

-------------------------------------------------------------------------------

ROCE (before taxes), %       42.1% 41.0%   38.5%

-------------------------------------------------------------------------------

ROE (after taxes), %       49.3% 43.3%   40.3%

-------------------------------------------------------------------------------

Basic earnings per

share, EUR 0.48 0.33 +48.7% 0.86 0.72 +19.3% 1.46

-------------------------------------------------------------------------------

Diluted earnings per

share, EUR 0.48 0.33 +48.7% 0.86 0.72 +19.3% 1.46

-------------------------------------------------------------------------------

Cash flow per share

before financial

items, EUR 0.62 0.19 +221.2% 0.93 0.27 +247.9% 1.02

-------------------------------------------------------------------------------

Equity per share, EUR       3.30 3.03 +8.9% 3.66

-------------------------------------------------------------------------------

Personnel at the end

of the period       3,594 3,663 -1.9% 3,519

-------------------------------------------------------------------------------

Average personnel

during the period       3,507 3,541 -1.0% 3,540

-------------------------------------------------------------------------------

Personnel expenses,

EUR million       114.0 110.9 +2.9% 218.1

-------------------------------------------------------------------------------





President and CEO Timo Lappalainen:



"Payments from partners increased net sales and operating profit"



"In the first half of 2014 our net sales were slightly higher and our operating

profit higher than in 2013. Significant part of the increase in net sales and

operating profit were due to milestone payments received from collaboration

partners during the review period.



"At the beginning of June we announced that we had entered into a global

partnership with Bayer for development and commercialisation of the compound

ODM-201. From the upfront payment of EUR 50 million Orion received, EUR 27

million will be used for the currently estimated development costs of ODM-201

during 2014 and EUR 23 million we have recorded in profit, following which we

updated our outlook estimate for the current year as regards operating profit.



"We are pleased with the agreement made with Bayer, under which Orion and Bayer

will jointly develop ODM-201 and Bayer will contribute the major share of future

development costs. Bayer will commercialise the product globally, but Orion has

the option of co-promoting it in Europe, and we are also entitled to receive

from Bayer certain milestone payments related to successful development,

technology transfer and commercialisation phases, and substantial royalties on

future sales. In addition, Orion will be responsible for manufacturing of the

product.



"We received other favourable news about our drug development projects in the

beginning of July when our collaboration partner Novartis announced that it had

been granted marketing authorisation for Stalevo(?) in Japan.



"Deliveries of our Parkinson's drugs to Novartis were clearly lower than a year

ago. Total sales of Stalevo(?) and Comtess(?) through Orion's own sales

organisation were lower than in 2013. In Europe generic competition to Stalevo

has begun in Germany, but this has not yet materially affected our sales.



"Among our other proprietary drugs, the intensive care sedative dexdor(?) and

the Easyhaler(?) product family maintained their strong growth. During the

review period we were granted the first national marketing authorisations for

Bufomix Easyhaler(?), and we have started the launches. In addition, we recorded

a milestone payment of EUR 6 million from Takeda related to national marketing

authorisations granted for Bufomix Easyhaler. Sales of the intensive care

sedative Precedex(?) were clearly lower because the royalties received by Orion

from Hospira decreased. Generic competition has not commenced in US markets.



"The Specialty Products business division continued to grow steadily. Net sales

of generic entacapone products in particular grew strongly, but sales of the

other products in the portfolio also grew slightly. For the other business

divisions, the first half of the year has proceeded as anticipated. The

significant investment and production reorganisation projects have progressed as

planned.



"Our outlook estimate, which can be found with the basis for it under 'Outlook

for 2014' and 'Basis for outlook' in this report, was updated during the review

period. We estimate that our net sales and operating profit in 2014 will be at

similar level to 2013."









Events during the period



On 14 April Orion announced that it had received the first marketing

authorisations in Europe for Bufomix Easyhaler(?).



On 2 June Orion and Bayer entered into an agreement for development and

commercialisation of a novel prostate cancer treatment. At the same time Orion

upgraded its outlook estimate for 2014.

Events after the period



On 4 July Orion's partner Novartis was granted marketing authorisation for

Stalevo(?) in Japan.





News conference and teleconference



A news conference and teleconference on the published results will be held

today, Tuesday 29 July 2014, at 13:30 EEST in Hotel Kämp, address:

Pohjoisesplanadi 29, Helsinki. President and CEO Timo Lappalainen will give a

brief presentation in English on the financial review.



The event can be followed live as a webcast accessible at Orion's website at

http://www.orion.fi/en/investors. After the presentation, questions can be asked

by telephone in Finnish and English.



The teleconference code is 945663 and to participate in the teleconference,

please call:



from United States: +1 334 323 6203

from other countries: +44 (0)20 7162 0125



News conference recordings



A recording of the webcast of the event in English and a recording of the

presentation by the President and CEO in Finnish will be published on the Orion

website during Tuesday 29 July 2014.



Financial report material



Financial reports and related presentation material are available at

www.orion.fi/en promptly after publication. The website also has a form for

subscribing to Orion's releases.



Dates in Orion Calendar 2014-2015



Interim Report January-September 2014 Tuesday 21 October 2014



Financial Statement Release for 2014 Wednesday 4 February 2015



Planned to be held on 24 March 2015

Annual General Meeting 2015





Interim Report January-March 2015 Wednesday 29 April 2015



Interim Report January-June 2015 Tuesday 28 July 2015



Tuesday 27 October 2015

Interim Report January-September 2015







The Financial Statements and Report by the Board of Directors for 2014 will be

published on the Company's website at the latest in week 10/2015.





For additional information about the financial review:



Jari Karlson, CFO                                        tel. +358 10 426 2883



Tuukka Hirvonen, Communications Manager       tel. +358 10 426 2721 / mobile

+358 50 966 2721

http://www.orion.fi/en

http://www.orion.fi/en/investors





Financial review Q1-Q2/2014



Net sales



The Orion Group's net sales in January-June 2014 were up by 5% at EUR 522

million (EUR 497 million in January-June 2013). The net effect of currency

exchange rates was EUR -9 million.



The Pharmaceuticals business's net sales were up by 5% at EUR 494 (469) million.

The net sales includes milestone payments of EUR 23 million received from Bayer

and EUR 6 million received from Takeda. Net sales of Orion's Stalevo(?)

(carbidopa, levodopa and entacapone) and Comtess(?)/Comtan(?) (entacapone)

Parkinson's drugs were down by 16% at EUR 93 (111) million, which was 19% (24%)

of the Pharmaceuticals business's net sales. The Pharmaceuticals business's net

sales of products in the portfolio other than Stalevo(?) and

Comtess(?)/Comtan(?) and excluding significant milestone payments were up by 4%

at EUR 373 (358) million.



The Diagnostics business's net sales were down by 3% at EUR 29 (30) million. The

decrease was mainly due to the ending of sales of products discontinued in 2013.



Operating profit



The Orion Group's operating profit was up by 13% at EUR 153 (135) million.



The Pharmaceuticals business's operating profit was up by 12% at EUR 155 (138)

million. The increase was due to payments of EUR 23 million and EUR 6 million

received from Bayer and Takeda. The gross profit percentage excluding

significant milestone payments remained similar to the previous year.



The Diagnostics business's operating profit was up by 59% at EUR 2.9 (1.9)

million. The operating profit in the comparative period included EUR 1.4 million

of costs related to contraction of the product portfolio, closure of the Turku

manufacturing plant and personnel reductions.



Operating expenses



The Group's sales and marketing expenses were down by 4% at EUR 96 (100)

million.



R&D expenses were up by 12% at EUR 57 (51) million and accounted for 11% (10%)

of the Group's net sales. Pharmaceutical R&D expenses amounted to EUR 53 (47)

million. Research projects are reported in more detail under Pharmaceuticals in

the Business Reviews.



Administrative expenses were EUR 21 (23) million.



Other operating income and expenses increased profit by EUR 1 (2) million.



Group's profit



The Group's profit before taxes totalled EUR 151 (134) million. Basic earnings

per share were EUR 0.86 (0.72) and diluted earnings per share were EUR 0.86

(0.72). Earnings per share grew more than operating profit because the Finnish

tax rate was reduced. Equity per share was EUR 3.30 (3.03). The return on

capital employed before taxes (ROCE) was 42% (41%) and the return on equity

after taxes (ROE) 49% (43%).



Financial position



The Group's gearing was 19% (33%) and the equity ratio 51% (48%).



The Group's total liabilities at 30 June 2014 were EUR 479 (460) million. At the

end of the period, interest-bearing liabilities amounted to EUR 253 (278)

million, including EUR 227 (251) million of long-term loans.



The Group had EUR 165 (139) million of cash and cash equivalents and money

market investments at the end of the period. The cash and cash equivalents are

invested in short-term interest-bearing instruments issued by financially solid

financial institutions and corporations.



Cash flow



Cash flow from operating activities was higher than in the comparative period at

EUR 161 (70) million.

The significant improvement was mainly due to the increase in operating profit

and the decrease of EUR 19 million in the amount of cash tied up in working

capital. Working capital increased by EUR 44 million in the comparative period.

The decrease in working capital was mainly due to EUR 27 million of advance

payment received from Bayer that will be used in the research and development

costs of compound ODM-201.



Cash flow from investing activities was EUR -30 (-32) million.



Cash flow from financing activities was EUR -182 (-43) million. The change was

mainly due to the EUR 150 million bond issued in the comparative period.





Capital expenditure



The Group's capital expenditure totalled EUR 30 (37) million. This comprised EUR

27 (32) million on property, plant and equipment and EUR 2 (5) million on

intangible assets.



Outlook for 2014 (updated on 6 June 2014)



Net sales will be at similar level to 2013 (net sales in 2013 were EUR 1,007

million).



Operating profit will be at similar level to 2013 (operating profit in 2013 was

EUR 268 million).



The Group's capital expenditure will be about EUR 60 million excluding

substantial corporate or product acquisitions (the Group's capital expenditure

in 2013 was EUR 78 million).



Basis for outlook



Competition in the Finnish market will remain intense in 2014. However, product

launches will continue to support Orion's position as market leader.



The generic competition that commenced in April 2012 in the United States has

decreased sales of Orion's Parkinson's drugs. US markets accounted for about EUR

60 million of the net sales of Orion's Parkinson's drugs in 2011, about EUR 33

million in 2012 and about EUR 10 million in 2013. In addition, sales of generic

entacapone products to the United States amounted to about EUR 9 million in

2013. In 2014 sales are expected to be still slightly lower.



The entacapone molecule patent expired in November 2012 in the main European

countries for Orion, and as a result generic competitors to Comtan and Comtess

entered these markets in 2013. Data protection of Stalevo expired in the

European Union in October 2013, and since then many generic pharmaceutical

companies have applied for marketing authorisation for their own products in

different European countries. In March 2014 the first generic marketing

authorisations for Stalevo were granted in Germany, where generic competition

has commenced. Elsewhere in the world generic competition is not expected to

have a material impact on sales volumes of these products in the current year.



Sales of generic products will account for a greater proportion of Orion's total

sales and price competition will remain intense in many markets. Investments

commenced in 2012 to develop and ensure future growth, delivery reliability and

quality standards, and related reorganisations of production are still

continuing. Their effects in temporarily decreasing production capacity and

increasing production costs will be less than in 2013, but not yet totally

eliminated.



Marketing expenditure will be similar to the previous year. Because the

registrations and launches of new products are projects that take more than a

year, the increases in resources and other inputs required in 2014 were planned

mainly during the previous year. Royalty payments to AbbVie recorded in

marketing expenditure and related to the reacquisition of rights to Simdax ended

in April. About EUR 10 million of royalties were paid in 2013.



Research and development costs will be slightly higher than in 2013. They are

partly the Company's internal fixed cost items, such as salaries and maintenance

of the operating infrastructure, and partly external variable costs. External

costs arise from, among other things, long-term clinical trials, which are

typically performed in clinics located in several countries. The most important

clinical trials scheduled for 2014 are either ongoing from the previous year or

at an advanced stage of planning, therefore their cost level can be estimated

rather accurately. The accrued costs are materially affected by collaboration

arrangements and how the costs arising are allocated between Orion and its

collaboration partners. The major share of the ODM-201 research costs in 2014,

for instance, will be covered by the upfront payment received from Bayer.

Near-term risks and uncertainties relating to the outlook



Sales of Orion's Parkinson's drugs will decrease in 2014 due to generic

competition. The effects of the competition have been taken into account in the

outlook estimate. However, the timing of commencement and the intensity of

generic competition to Stalevo in Europe entails uncertainty that may materially

affect the accuracy of the estimate made at this stage.



The basic Precedex patent expired in the United States in January. The outlook

estimate already includes the estimated effect of the consequent decrease in the

royalty payment on the product received by Orion and also the assumption that

generic competition will commence during 2014. However, the timing of

commencement of generic competition entails uncertainty that may materially

affect the accuracy of the estimate made at this stage.



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 affect Orion's products. Deliveries to Novartis are based on

timetables that are jointly agreed in advance. Nevertheless, they can change,

for example as a consequence of decisions by Novartis concerning among others

adjustments of stock levels. In addition, changes in market prices and exchange

rates affect the value of deliveries to Novartis.



A significant proportion of the exchange rate risk is related to the US dollar.

Typically, less than 15% of Orion's net sales comes from the United States. As

regards currencies in European countries, the overall effect will be abated by

the fact that Orion has organisations of its own in most of these countries,

which means that in addition to sales income, there are also costs in these

currencies. Changes in the Japanese yen exchange rate have become more important

as sales of Parkinson's drugs in Japan have increased.



Orion's currently high production capacity utilisation rate and its broad

product range may cause risks to the delivery reliability and make it more

challenging than before to maintain the very high quality standard required.

Authorities and key customers in different countries undertake regular and

detailed inspections of development and manufacturing of drugs. Any remedial

actions that may be required may at least temporarily reduce 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 they are

not expected to have a material impact on earnings in the current year. Owing to

the nature of the research process, the timetables and costs of new studies that

are being started are known well in advance. They therefore typically do not

lead to unexpected changes in the estimated cost structure. Orion generally

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.



Possible collaboration and licensing agreements may include advance payments

recorded in net sales that may materially affect Orion's financial results.



Group's financial objectives



Orion's financial objectives are ensuring the Group's financial stability and

profitable growth.

These objectives are achieved through:



* Increasing net sales. Achievement of this objective requires continuous

investment in development of the product portfolio.

* Maintaining profitability at a good level, the aim being operating profit

that exceeds 20% of net sales.

* Keeping the equity ratio at least 50%.



Orion's dividend distribution policy



Orion's dividend distribution takes into account the distributable funds and the

capital expenditure and other financial requirements in the medium and long term

to achieve the financial objectives.



Shares and shareholders



On 30 June 2014 Orion had a total of 141,257,828 (141,257,828) shares, of which

41,522,816 (42,272,816) were A shares and 99,735,012 (98,985,012) B shares. The

Group's share capital was EUR 92,238,541.46 (92,238,541.46). At the end of June

2014 Orion held 569,665 (188,991) B shares as treasury shares. On 30 June 2014

the aggregate number of votes conferred by the A and B shares was 929,621,667

(944,252,341) excluding treasury shares.



At the end of June 2014, Orion had 53,666 (53,942) registered shareholders.



Voting rights conferred by shares



Each A share entitles its holder to twenty (20) votes at General Meetings of

Shareholders and each B share one (1) vote. However, a shareholder cannot vote

more than 1/20 of the aggregate number of votes from the different share classes

represented at a General Meeting of Shareholders. The Company itself and Orion

Pension Fund do not have the right to vote at an Orion Corporation General

Meeting of Shareholders.



Both share classes, A and B, confer equal rights to the Company's assets and

dividends.



Conversion of shares



The Articles of Association entitle shareholders to demand the conversion of

their A shares to B shares within the limitation on the maximum number of shares

of a class. In January-June 2014 a total of

500,000 shares were converted.



Trading in Orion's shares



Orion's A shares and B shares are quoted on NASDAQ OMX Helsinki in the Large Cap

group under the Healthcare sector heading under the trading codes ORNAV and

ORNBV. Trading in both of the Company's share classes commenced on 3 July 2006,

and information on trading in the Company's shares has been available since this

date.



On 30 June 2014 the market capitalisation of the Company's shares excluding

treasury shares was EUR 3,827 million.



Orion shares are also traded on various alternative trading platforms in

addition to NASDAQ OMX Helsinki.



Authorisations of the Board of Directors



Orion's Board of Directors was authorised by the Annual General Meeting on 19

March 2013 to decide on acquisition of shares in the Company and on a share

issue in which shares held by the Company can be conveyed. The authorisation to

acquire shares was utilised during 2013. The terms and conditions of the

authorisations were reported in more detail in a stock exchange release on 19

March 2013.



The Board of Directors is not authorised to increase the share capital or to

issue bonds with warrants or convertible bonds or stock options.



Share-based Incentive Plans



Orion has two currently operating share-based incentive plans for key persons of

the Group, which were announced in stock exchange releases published on 18

February 2010 and 5 February 2013.



Share ownership



Orion's shares are in the book-entry system maintained by Euroclear Finland, and

Euroclear Finland maintains Orion's official shareholder register.



At the end of June 2014 Orion had a total of 53,666 (53,942) registered

shareholders, of whom 95% (95%) were private individuals holding 44% (45%) of

the entire share stock and 61% (64%) of the total votes. There were altogether

54 (50) million nominee-registered shares, which was 38% (36%) of all shares,

and they conferred entitlement to 4% (7%) of the total votes.



At the end of June 2014 Orion held 569,665 (188,991) B shares as treasury

shares, which is 0.4% (0.1%) of the Company's total share stock and 0.06%

(0.02%) of the total votes.

Personnel



The average number of employees in the Orion Group in January-June 2014 was

3,507 (3,541). At the end of June 2014 the Group had a total of 3,594 (3,663)

employees, of whom 2,908 (2,953) worked in Finland and 686 (710) outside

Finland.



Salaries and other personnel expenses in January-June 2014 totalled EUR 114

(111) million.



Significant legal proceedings



Legal proceedings in the United States concerning patent No. 6,716,867



On 12 November 2010 Orion Corporation and Hospira, Inc. filed a patent

infringement lawsuit in the United States against Caraco Pharmaceutical

Laboratories, Ltd. and Gland Pharma Ltd. to enforce Orion's and Hospira's joint

patent No. 6,716,867, which protects Orion's proprietary drug Precedex(?)

(dexmedetomidine hydrochloride 100 ?g/ml).



In addition, there are also other patent infringement lawsuits pending in the

United States relating to patent No. 6,716,867 that were initiated in April

2014 by Hospira and Orion as plaintiffs.



Orion estimates that the costs of the aforesaid legal proceedings will not be

material for the Company.





Business Reviews

Pharmaceuticals



Review of human pharmaceuticals market



According to IMS Health statistics, Finnish wholesale of human pharmaceuticals

in January-June 2014 was up by 4% on the previous year at EUR 1,048 (1,011)

million.



Finland is the most important individual market for Orion, generating about one-

quarter of the total net sales. Orion was able to increase its sales and

maintained its position as leader in marketing pharmaceuticals in Finland.

According to statistics collected by IMS Health, Orion's wholesale of human

pharmaceuticals in Finland in January-June 2014 amounted to EUR 121 (116)

million, up by 5% compared with the previous year. Orion's market share of

Finnish pharmaceuticals markets was 12% (11%).



According to IMS Health pharmaceutical sales statistics, in the 12-month period

ending in March 2014 the total sales of Parkinson's drugs in the United States

were up by 8% at USD 792 million (USD 730 million in the previous 12-month

period). The five largest European markets for Parkinson's disease drugs were

Germany, the United Kingdom, France, Spain and Italy. In these countries, the

combined sales of Parkinson's drugs totalled EUR 993 (965) million in the 12-

month period ending in March 2014, and the average market growth was 3%. In

Japan sales of Parkinson's drugs were down by 15% at EUR 494 (580) million.



According to IMS Health pharmaceutical sales statistics, in the 12-month period

ending in March 2014 the total sales of Parkinson's drugs containing entacapone

were USD 138 (173) million in the United States and EUR 151 (155) million in the

five largest European markets.



The most important individual therapy area for Orion is still the treatment of

Parkinson's disease. Orion's branded Parkinson's drugs containing entacapone

(Stalevo(?), Comtess(? )and Comtan(?)) account for about one-fifth of the

Group's net sales. According to IMS Health pharmaceutical sales statistics, in

the 12-month period ending in March 2014, sales of Orion's branded Parkinson's

drugs in the United States were down by 68% at USD 26 (81) million. Sales were

down by 5% at EUR 128 (134) million in the five largest markets in Europe, and

in Japan sales were EUR 55 (66) million. The decrease in sales in Japan was due

to depreciation of the yen exchange rate. Measured in terms of local currency,

the market as whole and sales of Orion's Parkinson's drugs both grew. The market

share of Orion's branded Parkinson's drugs was 3% in the United States, on

average 13% in the five largest European markets and 11% in Japan.



According to IMS Health pharmaceutical sales statistics, sales of Precedex(?)

intensive care sedative (dexmedetomidine) were up by 22% at USD 378 million in

the 12-month period ending in March 2014 (USD 310 million in the previous 12-

month period). About four-fifths of the sales amounting to USD 316 (252) million

were in the United States, where Precedex sales grew by 26%. IMS Health

pharmaceutical sales statistics have become more comprehensive as regards

reporting of Precedex, following which the figures for the reported period and

comparative period are greater than as previously.



According to IMS Health pharmaceutical sales statistics, total sales of the most

common intravenous anaesthetics and intensive care sedatives (propofol,

midazolam, remifentanil and dexmedetomidine) in Europe in the 12-month period

ending in March 2014 were EUR 479 (472) million. According to IMS Health

pharmaceutical sales statistics, in the 12-month period ending in March 2014

sales of Orion's dexdor(?) intensive care sedative (dexmedetomidine) were up by

46% at EUR 22 (15) million in Europe.



Net sales and operating profit of the Pharmaceuticals business



Net sales of the Pharmaceuticals business in January-June 2014 were EUR 494

(469) million, up by 5% compared with the previous year. The operating profit of

the Pharmaceuticals business was up by 12% at EUR 155 (138) million. The

operating profit of the Pharmaceuticals business was 31% (30%) of the segment's

net sales. The net sales and operating profit include the payments of EUR 23

million received from Bayer and EUR 6 million received from Takeda.



Net sales of Orion's top ten pharmaceuticals in January-June 2014 were down by

4% at EUR 215 (223) million. They accounted for 43% (47%) of the total net sales

of the Pharmaceuticals business.



Proprietary Products



The product portfolio of Proprietary Products consists of patented prescription

products in three therapy areas: central nervous system diseases, oncology and

critical care, and Easyhaler(?) pulmonary drugs.



Net sales of Proprietary Products in January-June 2014 were up by 6% on the

previous year at EUR 204 (193) million. Significant part of the increase was due

to the payments received from Bayer and Takeda.



Orion's drugs for treatment of Parkinson's disease are Stalevo(?) (active

ingredients carbidopa, levodopa and entacapone) and Comtess(?)/Comtan(?)

(entacapone), and their net sales in January-June 2014 totalled EUR 93 (111)

million. Sales of Parkinson's drugs were down by 16% and accounted for 19% (24%)

of the total net sales of the Pharmaceuticals business. Deliveries of Stalevo to

Novartis were down by 12% at EUR 40 (45) million and deliveries of Comtan were

down by 36% at EUR 13 (20) million. Sales of Stalevo through Orion's own sales

network were down by 12% at EUR 37 (41) million. Sales of Comtess were down by

18% at EUR 4 (4) million. In the United States Orion's Parkinson's drugs have

several generic competitors. In Europe Comtess and Comtan have several generic

competitors, and generic competition to Stalevo has commenced in Germany. The

commencement of competition has not yet materially affected Orion's sales.



The US Food and Drug Administration (FDA) has an ongoing safety review of

Stalevo, which began in spring 2009. Orion is assisting the FDA in undertaking

the safety review. The FDA has requested additional data based on databases

concerning the significance of the results of the STRIDE-PD study, and

consequently Orion and Novartis have undertaken epidemiological studies, and

results from them were submitted to authorities for review in the third quarter

of 2012 and the study reports in early 2014.



Net sales of Simdax(?), a drug for treatment of acute decompensated heart

failure, in January-June 2014 were EUR 23 (23) million.



Total net sales of the Easyhaler(?) product family for treatment of asthma and

chronic obstructive pulmonary disease were up by 22% in January-June 2014 at EUR

16 (14) million. Bufomix Easyhaler(?) (budesonide-formoterol), the new combined

formulation in the product family, received the first marketing authorisations

in Europe in April, and the product has already been launched in many countries.

National marketing authorisation has been granted in Belgium, Czech Republic,

Denmark, Estonia, Finland, Hungary, Iceland, Ireland, Latvia, Lithuania, Malta,

Norway, Poland, Romania, Slovakia, Slovenia, Spain and Sweden. Processing of the

national phase of marketing authorisation application is ongoing in the

following EU countries: Bulgaria, Cyprus, Greece, Italy, Luxembourg and

Portugal. In addition, a milestone payment of EUR 6 million was recorded from

Takeda related to national marketing authorisations granted for Bufomix

Easyhaler.



Net sales of the Precedex(?) intensive care sedative (dexmedetomidine) were down

by 29% in January-June 2014 at EUR 16 (23) million. In the United States and

markets outside Europe the sedative is sold by Orion's partner Hospira.

Following the expiry of the Precedex basic patent in the United States in

January, the level of royalties received by Orion from Hospira decreased and

consequently the sales recorded by Orion have decreased. About four-fifths of

net sales of Precedex are in US markets, where generic competition has not

commenced.



Net sales of Orion's dexdor(?) intensive care sedative (dexmedetomidine) in

January-June 2014 were up by 38% at EUR 17 (12) million.



Specialty Products



Net sales of the Specialty Products business division's off-patent, i.e. generic

prescription drugs and self-care products in January-June 2014 were up by 9% at

EUR 204 (188) million. Sales of generic entacapone products were up by 180% at

EUR 14 (5) million. Sales of products from the rest of the portfolio were up by

4%.



Finland, Scandinavia, and Eastern Europe and Russia are the most important

markets for Specialty Products. The business division's sales in Finland in

January-June 2014 were up by 6% at EUR 122 (115) million. Orion managed to

increase its sales, especially in prescription drugs. Sales were up by 25% at

EUR 25 (20) million in Scandinavia and sales were down by 6% at EUR 23 (25)

million in Eastern Europe and Russia. The decrease in sales in Eastern Europe

and Russia was mainly due to depreciation of the rouble.



Animal Health



In the Nordic countries and some Eastern European markets Orion itself sells

veterinary drugs, and in other markets the Company operates through partners. In

addition, in the Nordic countries Orion markets and sells veterinary drugs

manufactured by several international companies. Orion's Animal Health business

division has a strong market position in the Nordic countries, its home markets.



Net sales of the Animal Health business division in January-June 2014 were down

by 7% at EUR 32 (35) million. Sales of the animal sedative product family at EUR

9 (11) million accounted for 28% (32%) of the division's net sales. The product

family comprises Orion's animal sedatives Dexdomitor(?) (dexmedetomidine),

Domitor(?) (medetomidine) and Domosedan(?) (detomidine), and antagonist

Antisedan(?) (atipamezole), which reverses the effects of the sedatives.



Fermion



Fermion manufactures active pharmaceutical ingredients for Orion and other

pharmaceutical companies. Its product range comprises nearly 30 pharmaceutical

ingredients. Fermion's net sales in January-June 2014 excluding pharmaceutical

ingredients supplied for Orion's own use were up by 2% at EUR 35 (34) million

and accounted for about two-thirds of Fermion's entire net sales. Several key

products performed well, even though competition in the markets remained

intense. Capacity utilisation at Fermion's plants was high during the review

period. Capacity utilisation was increased by manufacturing active ingredients

required for development work on Orion's own proprietary drugs, in addition to

the normal product range.



Research and development projects



The Group's R&D expenses in January-June 2014 were up by 12% at EUR 57 (51)

million, of which the Pharmaceuticals business accounted for EUR 53 (47)

million. The Group's R&D expenses accounted for 11% (10%) of the Group's net

sales. R&D expenses also include expenses related to development of the current

portfolio.



Orion has commenced global collaboration with Bayer in the development and

commercialisation of an investigational novel oral androgen receptor inhibitor

(ODM-201). ODM-201 is in clinical development for the treatment of patients with

prostate cancer. Bayer and Orion jointly have started a clinical Phase III trial

for further evaluation of the efficacy and safety of ODM-201 in patients with

non-metastatic castration-resistant prostate cancer (nm-CRPC). The first

patients will be recruited during the third quarter.



Orion has an ongoing project to broaden the range of the inhalable Easyhaler(?)

drugs product family.

Orion is developing a fluticasone-salmeterol combined formulation for European

markets. In this formulation fluticasone acts as an anti-inflammatory agent and

salmeterol acts as a long-acting bronchodilator.



Orion is preparing to commence additional trials with the Bufomix Easyhaler(?)

combined formulation (budesonide-formoterol). The aim is to obtain marketing

authorisation for the product in at least some of the European countries that

were not included in the decentralised marketing authorisation application

process. In this formulation budesonide acts as an anti-inflammatory agent and

formoterol acts as a long-acting bronchodilator.



Orion is continuing development of an alpha-2c adrenoceptor antagonist (ORM-

12741) for treatment of symptoms of Alzheimer's disease in collaboration with

Janssen Pharmaceuticals Inc. In the initial Phase IIa clinical trial conducted

by Orion, the efficacy and safety of the drug candidate in treatment of

cognitive and behavioural symptoms related to Alzheimer's disease were

investigated with positive results. Orion is preparing to commence an additional

follow-up Phase IIa clinical trial.



Orion has ongoing Phase I clinical safety trials initiated in summer 2012 with a

new COMT inhibitor (ODM-103) and Phase I clinical safety trials initiated in

summer 2013 with another new COMT inhibitor (ODM-104). ODM-103 and ODM-104 are

new molecules that enhance the therapeutic effects of levodopa used to treat

Parkinson's disease by blocking the COMT enzyme. The pre-clinical study results

indicated that they are more effective than the COMT inhibitor entacapone, which

is already in the markets.



In October 2013 Orion and Phyxius Pharma, Inc. agreed on licensing of

levosimendan injection rights to Phyxius Pharma, which in turn has transferred

the rights to Oxygen Biotherapeutics, Inc. Oxygen Biotherapeutics will develop

and commercialise levosimendan in US and Canadian markets for a new

cardiovascular indication, prevention of low cardiac output syndrome (LCOS) in

cardiac surgery patients. The company has commenced a Phase III clinical trial.



Orion's collaboration partner Recro Pharma, Inc. is developing an intranasal

formulation of dexmedetomidine for treatment of pain. Recro has commenced a

Phase IIb clinical trial with patients suffering from post-operative pain.



In addition, Orion has several projects in the early research phase

investigating central nervous system diseases, cancer and neuropathic pain,

among others.





Diagnostics



Orion Diagnostica manufactures convenient and quick in vitro diagnostic tests

and testing systems suitable for point-of-care testing. Net sales of the

Diagnostics business in January-June 2014 were down by 3% at EUR 29 (30)

million. The decrease was mainly due to the ending of sales of products

discontinued in 2013.



QuikRead(?) infection tests remained the main product, with sales continuing

strong. Launching of new QuikRead go(?) tests in markets during 2013 progressed

as planned. With the QuikRead go(?) hsCRP+Hb test, two results - for CRP and

haemoglobin - can be obtained from a single sample. The QuikRead go(?) iFOBT

(Faecal Occult Blood) quantitative test is helpful in screening gastrointestinal

disorders. In addition, during the review period Orion Diagnostica released for

sale the first reagent kit based on SIBA(?) technology, which is intended for

general laboratory use and promoting licensing and partnering discussions with

potential partners.



The operating profit of the Diagnostics business was up by 59% at EUR 2.9 (1.9)

million. The operating profit in the comparative period included EUR 1.4 million

of costs related to contraction of the product portfolio, closure of the Turku

manufacturing plant and personnel reductions.







Espoo, 29 July 2014



Board of Directors of Orion Corporation



Orion Corporation











Timo Lappalainen Jari Karlson



President and CEO CFO



Tables



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



EUR million Q2/14 Q2/13 Change % Q1-Q2/14 Q1-Q2/13 Change % 2013

-------------------------------------------------------------------------------

Net sales 276.7 248.0 +11.6% 521.7 497.4 +4.9% 1,006.9

-------------------------------------------------------------------------------

Cost of goods sold -99.5 -98.9 +0.6% -195.3 -190.6 +2.4% -393.5

-------------------------------------------------------------------------------

Gross profit 177.2 149.2 +18.8% 326.4 306.8 +6.4% 613.4

-------------------------------------------------------------------------------

Other operating

income and expenses 0.5 1.4 -67.2% 0.7 1.7 -61.8% 5.6

-------------------------------------------------------------------------------

Sales and marketing

expenses -49.2 -51.1 -3.8% -95.5 -99.7 -4.2% -204.9

-------------------------------------------------------------------------------

R&D expenses -30.6 -26.3 +16.1% -56.9 -50.9 +11.6% -101.9

-------------------------------------------------------------------------------

Administrative

expenses -11.9 -12.0 -0.6% -21.3 -22.7 -6.0% -44.5

-------------------------------------------------------------------------------

Operating profit 86.0 61.1 +40.8% 153.4 135.2 +13.4% 267.7

-------------------------------------------------------------------------------

Finance income 1.4 1.2 +22.7% 2.5 2.8 -12.9% 4.4

-------------------------------------------------------------------------------

Finance expenses -2.7 -1.8 +52.8% -5.1 -4.0 +26.3% -8.3

-------------------------------------------------------------------------------

Share of associated

companies' results       0.4 0.3 +55.6% 0.3

-------------------------------------------------------------------------------

Profit before taxes 84.7 60.5 +40.0% 151.2 134.3 +12.6% 264.0

-------------------------------------------------------------------------------

Income tax expense -16.7 -14.6 +14.1% -30.5 -32.9 -7.0% -57.8

-------------------------------------------------------------------------------

Profit for the

period 68.0 45.9 +48.3% 120.7 101.4 +18.9% 206.2

-------------------------------------------------------------------------------





OTHER COMPREHENSIVE INCOME

INCLUDING TAX EFFECTS





-------------------------------------------------------------------------------

Change in value of

cash flow hedges -0.0 0.1   -0.0 0.1   0.1

-------------------------------------------------------------------------------

Change in value of

available-for-sale

financial assets 3.3     3.3

-------------------------------------------------------------------------------

Translation

differences 0.4 -1.1   0.6 -1.8   -1.3

-------------------------------------------------------------------------------

Items that may be

reclassified

subsequently to

profit and loss 3.7 -1.0   3.9 -1.7   -1.2

-------------------------------------------------------------------------------

Items due to

remeasurement of

defined benefit

plans 0.0 0.0   0.0 0.0   -9.7

-------------------------------------------------------------------------------

Items that will not

be reclassified to

profit and loss 0.0 0.0   0.0 0.0   -9.7

-------------------------------------------------------------------------------

Other comprehensive

income net of tax 3.8 -1.0   3.9 -1.7   -10.9

-------------------------------------------------------------------------------

Comprehensive

income for the

period including

tax effects 71.8 44.9 +59.9% 124.6 99.8 +24.9% 195.3

-------------------------------------------------------------------------------





PROFIT ATTRIBUTABLE

TO:

-------------------------------------------------------------------------------

Owners of the

parent company 68.0 45.9 +48.3% 120.7 101.4 +18.9% 206.2

-------------------------------------------------------------------------------

Non-controlling

interests 0.0 0.0   0.0 0.0   0.0

-------------------------------------------------------------------------------





COMPREHENSIVE INCOME

ATTRIBUTABLE TO:

-------------------------------------------------------------------------------

Owners of the

parent company 71.8 44.9 +59.9% 124.6 99.8 +24.9% 195.3

-------------------------------------------------------------------------------

Non-controlling

interests 0.0 0.0   0.0 0.0   0.0

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Basic earnings per

share, EUR (1)) 0.48 0.33 +48.7% 0.86 0.72 +19.3% 1.46

-------------------------------------------------------------------------------

Diluted earnings

per share, EUR (1)) 0.48 0.33 +48.7% 0.86 0.72 +19.3% 1.46

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Depreciation,

amortisation and

impairment 9.4 9.2 +1.9% 18.7 18.4 +1.7% 38.5

-------------------------------------------------------------------------------

Personnel expenses 59.3 56.8 +4.4% 114.0 110.9 +2.9% 218.1

-------------------------------------------------------------------------------





1) The figure has been calculated from the profit

attributable to the owners of the parent company.





 CONSOLIDATED STATEMENT OF FINANCIAL POSITION



ASSETS







EUR million 6/14 6/13 Change % 12/13

-------------------------------------------------------------------------------

Property, plant and equipment 259.9 223.5 +16.3% 247.3

-------------------------------------------------------------------------------

Goodwill 13.5 13.5   13.5

-------------------------------------------------------------------------------

Intangible rights 51.5 57.3 -10.2% 54.0

-------------------------------------------------------------------------------

Other intangible assets 2.9 3.7 -20.3% 3.3

-------------------------------------------------------------------------------

Investments in associates 2.1 1.7 +25.0% 1.7

-------------------------------------------------------------------------------

Available-for-sale financial assets 4.6 0.5 +859.4% 0.5

-------------------------------------------------------------------------------

Pension asset 24.1 38.5 -37.5% 26.6

-------------------------------------------------------------------------------

Deferred tax assets 1.0 1.3 -22.0% 1.2

-------------------------------------------------------------------------------

Other non-current assets 0.9 1.3 -26.7% 1.2

-------------------------------------------------------------------------------

Non-current assets total 360.5 341.3 +5.7% 349.2

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Inventories 196.2 196.2   195.5

-------------------------------------------------------------------------------

Trade receivables 175.1 163.8 +6.9% 169.9

-------------------------------------------------------------------------------

Other receivables 46.3 47.9 -3.5% 49.7

-------------------------------------------------------------------------------

Money market investments 3.0 15.0 -80.0%

-------------------------------------------------------------------------------

Cash and cash equivalents 161.9 123.6 +31.0% 214.7

-------------------------------------------------------------------------------

Current assets total 582.4 546.5 +6.6% 629.8

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Assets total 943.0 887.7 +6.2% 979.0

-------------------------------------------------------------------------------





EQUITY AND LIABILITIES







EUR million 6/14 6/13 Change % 12/13

-------------------------------------------------------------------------------

Share capital 92.2 92.2   92.2

-------------------------------------------------------------------------------

Expendable fund 0.5 0.5   0.5

-------------------------------------------------------------------------------

Other reserves 5.1 1.4 +272.6% 1.6

-------------------------------------------------------------------------------

Retained earnings 366.3 333.3 +9.9% 419.6

-------------------------------------------------------------------------------

Equity attributable to owners of the parent company 464.1 427.4 +8.6% 513.9

-------------------------------------------------------------------------------

Non-controlling interests 0.0 0.0 +17.8% 0.0

-------------------------------------------------------------------------------

Equity total 464.1 427.4 +8.6% 513.9

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Deferred tax liabilities 31.1 42.5 -26.7% 32.1

-------------------------------------------------------------------------------

Pension liability 1.5 1.3 +11.0% 1.6

-------------------------------------------------------------------------------

Provisions 0.4 0.1 +260.8% 0.1

-------------------------------------------------------------------------------

Interest-bearing non-current liabilities 227.4 250.5 -9.2% 233.3

-------------------------------------------------------------------------------

Other non-current liabilities 0.3 0.6 -43.9% 0.5

-------------------------------------------------------------------------------

Non-current liabilities total 260.8 295.1 -11.6% 267.6

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Trade payables 59.9 62.7 -4.5% 60.0

-------------------------------------------------------------------------------

Current tax liabilities 4.3 0.3   1.7

-------------------------------------------------------------------------------

Other current liabilities 128.4 74.5 +72.4% 111.2

-------------------------------------------------------------------------------

Provisions 0.1 0.0 +35.1% 0.1

-------------------------------------------------------------------------------

Interest-bearing current liabilities 25.4 27.7 -8.3% 24.5

-------------------------------------------------------------------------------

Current liabilities total 218.0 165.2 +32.0% 197.5

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Liabilities total 478.8 460.3 +4.0% 465.1

-------------------------------------------------------------------------------



-------------------------------------------------------------------------------

Equity and liabilities total 943.0 887.7 +6.2% 979.0

-------------------------------------------------------------------------------



 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY







a. Share capital



b. Expendable fund



c. Other reserves



d. Items due to remeasurement of defined

benefit plans



e. Translation

differences



f.  Retained earnings



g. Non-controlling interests



h. Equity total



Equity attributable to owners of the

  parent company

-------------------------------------------

EUR million a. b. c. d. e. f. g. h.

-------------------------------------------------------------------------------

Equity at 31 December

2012 before change in

accounting policies 92.2 0.5 0.8   -2.6 420.5 0.0 511.3

-------------------------------------------------------------------------------

Effect of change in accounting

policies     0.2   -2.0   -1.8

-------------------------------------------------------------------------------

Equity at 1 January 2013 92.2 0.5 0.8 0.2 -2.6 418.4 0.0 509.6

-------------------------------------------------------------------------------

Profit for the period           101.4   101.4

-------------------------------------------------------------------------------

Other comprehensive

income:

-------------------------------------------------------------------------------

Change in value of cash flow

hedges   0.1         0.1

-------------------------------------------------------------------------------

Translation differences       0.0 -1.8     -1.8

-------------------------------------------------------------------------------

Transactions with owners

-------------------------------------------------------------------------------

Dividend and capital

repayment           -183.4   -183.4

-------------------------------------------------------------------------------

Share-based incentive

plan
podstrony