U.S. Markets open in 7 hrs 20 mins

Edited Transcript of ORNBV.HE earnings conference call or presentation 5-Feb-20 11:30am GMT

Q4 2019 Orion Corp (finland) Earnings Call

Espoo Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Orion Corp (finland) earnings conference call or presentation Wednesday, February 5, 2020 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jari Karlson

Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board

* Timo Lappalainen

Orion Oyj - CEO, President & Chairman of the Executive Management Board

* Tuukka Hirvonen

Orion Oyj - IR & Financial Communications Officer

================================================================================

Conference Call Participants

================================================================================

* Dominic Lunn

Crédit Suisse AG, Research Division - Research Analyst

* Harry Thomas d'Alton Sephton

Jefferies LLC, Research Division - Equity Analyst

* Iiris Theman

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Sami Sarkamies

Nordea Markets, Research Division - Senior Analyst of TMT

================================================================================

Presentation

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

Tuukka Hirvonen, Orion Oyj - IR & Financial Communications Officer [1]

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

(foreign language)

Good afternoon, everybody, and welcome to Orion's Earnings Conference for the Financial Period of 2019. My name is Tuukka Hirvonen, and I'm the Head of Investor Relations here at Orion. In a few moments, our CEO, Timo Lappalainen, will present the result from 2019, after which you will have the possibility to ask questions either from him or from our CFO, Jari Karlson. We will be first take questions here from the live audience, after which we will then turn to the conference call lines. (Operator Instructions) And just before I let Timo to step in to the stage, I'd like to draw your attention to this disclaimer about the forward-looking statements.

But without any further delays, I'd like to invite Timo on the stage. Timo, please.

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [2]

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

Thank you, Tuukka. Welcome, everyone, also on the conference call lines. And let me first share some of the highlights for 2019 and, of course, darolutamide, the new invention by Orion developed and to be commercialized jointly with Bayer, that dominated the news flow of 2019.

We know that the darolutamide had to receive the NDA already in the U.S. and has been subsequently launched in the U.S. The approval has also been granted in Brazil. And then after the period, in January, we learned that the marketing authorization had been issued in Japan. Also the most latest news was that in Europe, the CHMP recommended to the European Commission for the approval of darolutamide. Also, we shared with the markets a brief note that darolutamide showed significant improvement in overall survival in the ARAMIS setting of patients. And these data will be shared then in more detail in forthcoming scientific conference.

On the more financial side, the net sales and operating profit, those developed very much as expected. And also, we realized quite a few of the planned growth investments, and those, of course, reflected in our operating profit because of the increased cost burden. All our business units, they reported growth in sales. And as we have reported earlier, REFALS, that is our late-stage Stage III (sic) [Phase III] clinical trial for ALS patients, that is -- recruitment is completed, and we expect the top line results in the second half of this year. The board has also today proposed or will propose to the AGM a dividend proposal of EUR 1.50 a share.

So then the hard facts and key numbers. The net sales, there was a growth of 8%. So we were topping the EUR 1 billion again after the last year. And in operating profit, as we guided the market that the profits will be at the same level, on a similar level. So we hit that pretty accurately. Operating profit margin, out here, our target is 25%. And last year, we were a little bit shy of that target. Cash flow from last year was very good. So the per share cash flow before the financial items, as we report those, was a little bit shy of EUR 1.70 compared to the last year. Of course, then the drop is significant, but then we had the sales proceeds from the sale of Orion Diagnostica. So that's the only number where we would have -- that's still reflected in the comparable period.

Then the waterfall. How did we come about that? And the -- in terms of the net sales, we -- as we have reported then, especially in the fourth quarter, we saw the decline of Dexdor sales, that is the sedative agent that Orion markets in Europe. Also, the royalty income and the shipments of API to our partner, Pfizer, in terms of the Precedex, those were lower than in the comparable period. Reference pricing, that still continues to eat into our sales, though at a much slower pace, what we've seen in earlier years. Of course, last year, the milestones and royalties, they were substantially higher than in earlier periods. And this was due to the first launch of the darolutamide product, Nubeqa, in the U.S. market. Easyhaler had a strong growth, also with our growth in other products, including Simdax. Biosimilars had a strong growth last year. And here, we always want to remind everybody that the profitability of biosimilars is lower than on the average. So one should treat this number with caution. Also the exchange rate. This time, we had a little bit of tailwind compared to last year. And that's how we arrived to the EUR 1.051 billion.

Then in terms of the operating profit. Product sales, those were higher. However, the margin and the product mix, due to the reference pricing, due to the decline of Dexdor business, I mean, those ate into our business almost at the same level as the product sales increased those. As said, exchange rate, a little bit of tailwind there; milestones, a substantial improvement there.

And then the fixed cost. I mean, these are the investments that we told everybody that -- last year that we are making the substantial investments to the -- speed up the growth of the company, and those were realized last year.

And part of that are our depreciation. That relates to the acquisition of Stalevo and Comtan rights here in Europe, which we are depreciating in 2 years' time, and about EUR 12 million a year and in the years of 2019 and 2020. And that's how we ended up with an even number compared to the last year.

And then when we look at the breakdown of our net sales. So Finland continues to be the largest single country market. Certainly, of course, the big European countries are very important for us and Mediterranean countries, doing very well these days. Scandinavia had a very strong growth last year as well. And then rest of the world and including the U.S. now where we would allocate the milestone related to the U.S. So in overall, a strong growth in -- across the board. Also, as said, the portfolio -- business portfolio that we had, had a growth across the board here as well.

Now the league table of the pharmaceutical products. Easyhaler, that continue to plow ahead with 16% growth and first time we broke the EUR 100 million mark there. Stalevo, almost at par with 2018, very close there. And of course, the acquisition of product rights to Orion played a role there. Simdax, our acute heart failure compound, strong growth there as well. Dexdor, having now experienced the generic competition, we certainly saw there the decline in sales. The biosimilar. This is the volatile part of the business. We had a strong growth there after a slower year of 2018. And then the animal sedatives in animal health, in totality, that was a good year for us.

Now if we switch gears to proprietary products. So there, the Easyhaler, that was really the driver of that business, Parkinson franchise, as said, at the par, and Dexdor now losing a little bit of ground to the generic competition due to the price erosion in that. And Simdax had a good year as well.

First time, as said, Easyhaler sales exceeded EUR 100 million. That was very much on the back of budesonide-formoterol Easyhaler. That's continued very strong growth there. Overall, of course, the product family had nice growth. And as we have flagged, the salmeterol-fluticasone combination product, that sales developed slower than what we had originally anticipated. And we continued the development of the seventh Easyhaler version for COPD, tiotropium.

And here, you see the change that has taken place in the Parkinson disease products, namely Stalevo and Comtan for the second -- starting maybe from the third and fourth quarter, where Orion own sales has increased in the -- in that bar quite a lot. And this is, obviously, due to the fact that we took the European sales from Novartis into Orion's -- under Orion's helm.

And then the sales of Dexdor. As we started to experience their generic competition in the first half and more predominantly in the second half, we certainly saw there the price erosion as well as, in some cases, we have lost a little bit of the volume, but this is mainly due to the price erosion. Overall market, of course, when we look at this at the list prices, and this is what the data is based on, we saw there the growth. But at least, our own numbers do not reflect the headline number.

Then the biggest business, what we have, is the Specialty Products business. And there, the single biggest market is Finland, close to EUR 300 million. That was very close to same level as 2018. Scandinavia had strong growth, also propelled by the biosimilars. And then also, we had growth in Eastern Europe and Russia. And again, a reminder for everyone that the prescription generic products, that is the bulk of the business that we have, then comes the self-care products, which some are pharmaceutical products, some are labeled as non-pharma products. And then the biosimilars is a smaller part of this business.

In Finland, as we have traditionally opened up that a little bit more because that's an important market. So the price competition continued. But certainly, also, we had our share of the delivery issues in the market. And when we look at the reference-priced product market, I mean that's one of the key markets for us, that declined as well by 4 percentage points. We are a strong player there, and we have the broadest portfolio. And we saw our development there, minus 6%, partly relating to the product shortages but also, of course, price erosion.

In the home market here in Finland, which -- where the market -- pharma market is a little bit less than EUR 3 billion, Orion is a large player. We continue to command about 11% market share in the human pharmaceuticals. In reference-priced products, there we are a strong player with more than 1/4 market share. And then in the self-care products, we have about 25% market share. And about every third pack out of the pharmacy here in Finland is an Orion pack.

Then what's going on in our future. So the R&D, as mentioned, the tiotropium development, that is going on. Darolutamide, approved as Nubeqa in the U.S., has been launched in the U.S., is in the regulatory phase in several countries also outside Europe, Brazil and Japan. And we expect, of course, further approvals in the course of the year, including then the final approvals and launches here in Europe. And as we mentioned, we have also a second indication for the same compound that we are studying jointly with Bayer, and that study has been fully recruited already some time.

Then ALS program, which is in Phase III, fully recruited. And there, we expect to have the headline results in the second half of this year. And that may have also -- maybe also a trigger for Orion to enter in the U.S. in the commercial sense. Then we have other early stage compounds as well, where we said that we probably will prioritize our own resources in developing the 208, 209 family, which are the CYP11 inhibitors, and then seek partners for some of these other mechanisms, and that work is ongoing.

And as we initiated or started the practice last year, we want to continue and share with you what we internally think are important business targets for us this year. And of course, the darolutamide, commercializing that is one of the drivers there. And as mentioned, we have received already numerous marketing approvals and expect it to continue on that trail. And then the new indication, I mean, that still waits for the data. And as we've said, it's still some years to wait that. Then the ALS program, that is, as said, fully recruited. And here, we are assessing opportunity should we commercialize the product by ourselves in the U.S., and this assessment is ongoing as we speak.

And then prioritizing our resources. We've made a decision that we would be seeking partners for our earlier oncology stage programs, 203 and 207.

Then, of course, as said, Finland continues to be an important market for us, and we want to be the clear leader in the reference pricing prescription category here in Finland. That's an important part of the business. We are an important player in the health care market here in Finland. Also in the self-care products, that's an important business that what we have, and we think it's an important element also for our partners here in Finland.

Then the Easyhaler. Today, the flagship of the company in terms of the sales. We continue, of course, to push those sales not only in terms of the sales but also that we will have follow-up products there, and that tiotropium is one of those.

And then we have a very strong balance sheet. And of course, we want to utilize that if the right opportunity should arise. So the money is not burning a hole in our pockets, but we are actively pursuing and looking for opportunities in in-licensing front as part of our toolbox.

Sustainability is, of course, very important for any health care company and pharma, and it all starts before having safety and efficacious supply of medicines to the market. And of course, we have also the responsibility for the environment for our colleagues here in Orion and operating ethically and transparently. And here are some of the numbers, what we recorded last year. And we always publish our sustainability report in the beginning of May, and this is sort of a snapshot of that. But some of the data in terms of the product complaints, audits, we do these almost daily everywhere around the globe. Greenhouse emissions, we are reporting this. We have a very stringent energy savings target for us for 2025, and we are well in that track as well.

Now unfortunately, I have to report that the injury rate, as we've reported last year, that went up, and that certainly is not a good thing, and we are working on that.

Then the financial outlook for the ongoing year. We estimate that this year, the net sales would be at a similar level as 2019. And because of the substantial investments that we are continuing to make, the operating profit would be lower than in 2019. Also, we flagged that the Nubeqa sales as well as the ALS sales, should those materialize, those will not have a material effect still this year but will be in the later reporting periods.

And the next event in the company is our Annual General Meeting, which is to be held on March 25, in the afternoon. And of course, all the shareholders are more than welcome to join the meeting.

That was a rundown of the key highlights for last year. At this stage, I invite our CFO, Jari Karlson, here to the podium to join me, and we are happy to take any questions. And as -- typically, we'll start here in the live audience in Espoo, should we have any questions here.

================================================================================

Questions and Answers

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [1]

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

Seems like, at least at this time, we would not have. So now we turn to the telephone lines, please.

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

Operator [2]

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

(Operator Instructions)

And our first question comes from Dominic Lunn of Crédit Suisse.

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

Dominic Lunn, Crédit Suisse AG, Research Division - Research Analyst [3]

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

Dominic Lunn from Crédit Suisse. So last time, you said EBIT was lower. This ended up being about 10%. So I'm just wondering if you could give any more detail as to what lower actually means this time. And then secondly, could you clarify your role with Nubeqa in Europe again? And actually, when do you expect to see an impact on the P&L in terms of costs?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [4]

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

Okay. Well, in terms of the EBIT-lower term, that is the term that we use at this stage. We have not given out a numeric guidance on that. But I think if you look at some of the historical -- how the company has performed and what type of wordings we've used, this is the best that we have come up today, actually. And of course, there are numerous uncertainties ongoing for this year, including how the 109 and the U.S. thing will evolve here.

In terms of the Nubeqa European sales, there is some P&L effect this year in terms of the -- our own cost, but that is not material in the overall context. And the -- when we see actually the positive P&L effect, we are probably going to have to wait until '21, '22 when we see substantial -- of course, the European sales will, as typical, initiate gradually, country-by-country, depending on the reimbursement steps that different countries require.

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

Operator [5]

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

Our next question comes from the line of Harry Sephton of Jefferies.

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

Harry Thomas d'Alton Sephton, Jefferies LLC, Research Division - Equity Analyst [6]

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

So my first question is on the dividend. Now that you're above that 100% payout ratio, is that something that we can expect over the next few years, as you've guided that profitability is likely to be impacted prior to darolutamide and potentially ODM-109 becoming more material? My second question is on darolutamide. Can you give us an indication as to how that's progressing in the U.S.? Some of the data we're getting through tends to indicate that that's particularly slow at the moment and then also, I mean, the timing around the Japan and European launches. I also noticed that -- in that waterfall chart that you disclosed, there was a EUR 46 million (sic) [EUR 45 million] benefit from the milestones and royalties but only a EUR 40 million benefit to EBIT. So I'd just like if you could clarify what that EUR 8 million -- sorry, that EUR 6 million cost is associated with?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [7]

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

Okay. Let me start maybe -- or do I take the dividend? I'll just take the dividend. Okay. So the payout ratio, what we have said that the divestment of Orion Diagnostica and then subsequently when we launched our growth plan, we said that we are prepared to invest in the future. And that means higher cost burden, upfront cost to that and then subsequently lower profitability. Yet because of the strong balance sheet that the company has, also coming from the divestment, Orion Diagnostica, we are able to maintain also high dividend payout. So that is -- we expect, of course, dividend to be a meaningful component of Orion's total shareholder return. And I think company is well known for that, that we have actually high dividend payout. So -- and of course, giving any prognosis of future dividends, but maybe this sort of qualitative statement gives you a little bit flavor on our thinking here. So today, we are not restricted either by balance sheet and, of course, have not been restricted from the cash flow either on the dividend payout.

The second question related to the darolutamide, the U.S. progress, here, of course, I hope that you appreciate that we are not there at the -- facing the customer. But the -- all the data reports that we get is that the progress is according to the plan. It's a good progress. And one should be somewhat careful in the early months when one looks at script data or other sources of data because we are in the start-up phases. So you may not capture all the sales. And of course, also, there is the trial program that Bayer have launched, which gives the free access to qualified patients to participate in the darolutamide treatment. So at least from our perspective, it seems like that things are moving very much along the plan that we originally had.

Then the Japanese/European launches of darolutamide, I think a good educated guess is that the first half, we should see the -- both launches, at least in Japan, as we have the marketing approval there. Of course, in Europe, we still don't have. But should things proceed as planned, I think the first half of this year would be a good educated guess here.

Then there was the milestone question. Anything on that that you want to add?

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [8]

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

Yes. Actually, it's basically more related to the fact that there's a little bit small space in the category. So the EUR 46 million includes also the service sales. So it's basically all the sales not related to products, which is included in the EUR 46 million. So it's milestones, royalties and service sales. While in the other picture, it's actually only the royalties and services, including in the EUR 40 million. So the difference is roughly EUR 6 million of the service sales.

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

Harry Thomas d'Alton Sephton, Jefferies LLC, Research Division - Equity Analyst [9]

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

Okay. No, that's helpful. Just a few follow-ups, if I may. On Simdax, that seems to be trending particularly positively at the moment. And you've mentioned generic competition on this product for a while. From your understanding, are most of the generics currently being prevented from launching due to that formulation pattern that expires later this year? Or have you seen some generic competition and actually the impact just hasn't been as much as you expected?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [10]

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

In -- yes, we actually believe that the Simdax formulations, as our Simdax days, there is a patent that is valid, and that prevents anybody from commercializing the product as we speak until end of this year. There are -- we understand that there are approvals, either pending or to be approved. However, should we see any generic competition this year, our estimate is that that would not have a material impact in terms of our sales or profitability this year.

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

Operator [11]

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

Our next question comes from the line of Sami Sarkamies of Nordea.

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

Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [12]

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

I have a couple of questions. Starting from darolutamide, you did recently flag positive overall survival data. How do you think this will benefit you in gaining market share for the product going forward?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [13]

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

Well, of course, we believe that this is a strong signal for the patients. We think it's an important element also for the physicians, when they are making a best possible choice of treatment for their patients. And then thirdly, as we are able to share these data in scientific forum and potentially thereafter also in scientific literature, I think this will give confidence also for the pricing authorities. But of course, you have to -- I think we all have to respect that today, what we have is basically a two-liner on this and have not shared in more depth in -- this data. But of course, this is -- it's a significant piece of news in the community also compared to the -- our competitors. So that's pretty much a qualitative statement that we can make at this stage.

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

Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [14]

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

Okay. Then I would continue on milestones. Is it correct to assume that in Q4, you did book EUR 4.5 million in milestones? And can you elaborate on which areas those were related to?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [15]

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

Do you want to take this one?

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [16]

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

Yes. I mean, of course, we, all the time, have some smaller, lower milestones, the one slightly larger one of those costs is related to sale, sale or licensing of products to partners in new territories. So we have had those type of milestones, of course, throughout the year. But typically, they are smaller ones. So this is certainly a little bit more significant one.

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

Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [17]

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

Okay. And then regarding -- yes, regarding outlook for this year, you're assuming a EUR 35 million in milestone payments, including EUR 28 million from darolutamide. From which areas are you expecting the additional EUR 7 million to come from? And should we regard these milestones as highly certain?

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [18]

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

Yes. I mean, these are also related to the licensing the rights of existing products. So it's basically not related at this stage to any licensing of products under development.

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

Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [19]

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

Okay. And then finally, on the pipeline, you said that you'll continue the existing Phase I studies on ODM-208 and [209]. When do you think you'll have enough data to communicate something this front? And how do you see the next steps for these programs?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [20]

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

Well, the next stage would obviously be Phase II. At this stage, we are still gathering data from the right dosing regime to move forward. Because we are, of course -- we are dealing here with patient population, which are -- these patients are sick patients, very severely. So we want to have a high confidence when we move on. But we hope that -- if at the end of the year or early part of next year, we would have a news to share on this.

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

Operator [21]

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

Our next question comes from the line of Dominic Lunn of Crédit Suisse.

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

Dominic Lunn, Crédit Suisse AG, Research Division - Research Analyst [22]

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

Could you just outline perhaps and a tiny bit more clarity why you'd not expect some meaningful Nubeqa revenue until 2021 onwards? And then I know you just touched on the ARAMIS OS data. But do you have any speculative reasons as to why you were able to hit OS earlier than competitors despite starting the trial 1 year later? Were your patients sicker? Or how do you explain that?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [23]

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

Okay. I'll start with the easier one, where we don't have an answer, as your number 2 question, of course, because not all the data has been published. So this would be purely speculative. And I think that will be, to an extent, unprofessional for me to give any thoughts on the other -- on the data that has not been even published yet. So no, we don't have that.

On the Nubeqa revenue, one has to remember that the arrangement that we have is that, first of all, we only get roughly 20% cut of the business on the top line revenue. And as said, the European sales, they will start only this year. And before we have ramped up and launched the product in -- even in all key markets in Europe, it is not going to be this year. It's going to be -- take us to the next year. Furthermore, in the U.S., this will be the first full year of launching the product. And also in the U.S., you have to get into the payment systems. And Bayer has been very successful in getting access to the payer systems but we are not there completely yet. And of course, we start at a level we came as a third in the market. So we have to be patient here. We are very strong believers on the quality of the product, of the profile of the product that the data strongly supports.

The same in Japan. The experience that Orion have from our products in different therapeutic areas is that the uptake in Japan typically is very slow. Starting from the fact that typically, the patients, their prescriptions are initially for a very short period of time, not maybe as what we've seen in the Western Hemisphere. So it is -- it's not going to be something uptake that we will see from 0 to 100 in a few seconds. It will take some time, but all the signs are very strong there, strongly believe in product quality and the data that we are able to bring to the marketplace.

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

Operator [24]

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

Our next question comes from the line of Iiris Theman of Carnegie.

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

Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [25]

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

This is Iiris Theman from Carnegie. A few questions, please. You are planning to set up an own sales organization in Asia and preferably also in the U.S. How many salespeople would you need in the U.S. and Asia? And are the costs going to impact your 2020 numbers or more likely '21?

And secondly, what is the outlook for biosimilars in this year? Are you facing a sales decline there?

And thirdly, regarding Animal Health, do you expect anything or do you have anything in the pipeline that could boost the sales in the coming years?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [26]

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

Okay. Thank you. Very good questions. On the U.S. sales and Asian sales question, we have actually that in our outlook.

You want to comment on that?

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [27]

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

Yes. So we are setting them up. I mean, of course, like we have discussed, the U.S. is very dependent on the result of the REFALS study, which basically means that if we get the study results during the second half of this year, it means, of course, that we will initiate the operations. And then once we have the market approval, gradually, we will then increase the resourcing in the U.S. So definitely, it will have some negative impact on this year's numbers because the costs come first and the sales only are starting at some point next year.

The Asian operation is relatively small and will not have in the cost or the sales this year any real -- main impact. So it's more like a starting phase of looking at the new geographical region in the world. But gradually, of course, the idea is there also to launch more of our new products there. So the Asia will initially be a relatively small impact in both lines. And U.S., of course, is completely dependent on what happens in the REFALS study.

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [28]

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

But maybe as a working number, as you asked about the size of the organization, today, our working number in the U.S. would be less than 50 persons in totality. And much of that depends how we will structure that. Not all of them will be in our own payroll. So there would be also a contract sales force and consultants that will be used. And that's pretty typical Orion, very careful planning so we don't take fixed cost on board immediately.

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [29]

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

Yes. So initially, probably majority of the personnel will be third-party and then gradually when the product hopefully is in the margin -- market, then we start getting more experience. We might start kind of taking maybe a little bit more personnel in-house.

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [30]

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

Then the -- yes, please go ahead.

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

Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [31]

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

Just to clarify that, was it 50 or 15?

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [32]

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

5-0. In terms of the biosimilars, we expect the sales to decline this year because of the -- we have not been successful in winning the tenders. But as I cautioned in my opening remarks, one should be careful in drawing conclusions to the profitability because the biosimilar business' profitability is substantially lower than our average business. Then there was a question on animal...

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

Jari Karlson, Orion Oyj - CFO, Senior VP of Animal Health & Member of the Executive Management Board [33]

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

Yes, the Animal Health pipeline. So we are now finally in the process of launching our Clevor product for -- which has been approved already some time ago. But there have been certain technical reasons why it has not been yet in the market. So that will come this year. It definitely will not have any significant impact on this year's numbers but hopefully can grow, growing the coming years. And we also have some other ongoing projects which are getting in the final steps of the development program. So in the -- next year -- this year, hopefully, we can even maybe start some registration processes. But of course, it means that also in those cases, we are talking about '21 and beyond that before we can see launches. But definitely, there is a pipeline. But of course, in terms of Animal Health, those hopefully can be meaningful. But of course, for the total group point of view, the impact is relatively limited.

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

Operator [34]

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

(Operator Instructions) And there are no further questions at this time on the telephones. Please go ahead, speakers.

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

Timo Lappalainen, Orion Oyj - CEO, President & Chairman of the Executive Management Board [35]

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

Thank you very much. And last chance, last call here in Espoo, should anybody have any questions? If not, then I'll take the last opportunity to advertise our AGM on March 25. Please join us there. Thank you very much.