Orion Oyj

OMXH:ORNBV

Earnings Call Transcript 2021-Q1

[Tuukka Hirvonen]

[Foreign Language] Good afternoon, everybody, and welcome to Orion's earnings conference call and webcast for the financial period of January-March 2021. My name is to Tuukka Hirvonen, and I'm the Head of IR here at Orion.In a few moments, our CEO, Timo Lappalainen, will present the results of the first quarter of the year, after which you will have the opportunity to ask questions either through the webcast chat below on your screen, or then if you're attending the teleconference then through the teleconference slides. We will first take the questions through the teleconference and then take remaining questions from the webcast chat. And currently, I remind you that please state your name and the organization you represent before asking your question.And before I let Timo to step in, I'd like to draw your attention to this disclaimer regarding any forward-looking statements here in this presentation. But now please, Timo, it's your turn.

[Timo Lappalainen]

Thank you very much, Tuukka. Again, it's my pleasure to give you some of the highlights for the first quarter '21. And if we start with the net sales, of course, the comparable period 2020, that had a material event, which was the emerge of COVID-19 and then the subsequent hoarding effect that we saw towards the end of first quarter and in the beginning of second quarter. So that made comparison period a tough one.Still, we are seeing that due to the pandemic, there is demand for certain products that is at the higher level than normally. On the other hand, then we also have much lower incidents of seasonal diseases such as flu here in the Northern Hemisphere. And also, there is a lower number of medical appointments and also traffic to pharmacies that has had an impact on pharmaceutical sales. Also, of course, because of the various restrictions, the operational expenses, reflecting how much actually the activity has also been brought down in certain aspects or moved to virtual environment, the operating expenses have been clearly lower than last year.Now with regard to the COVID, Orion has been able to continue the operations without interruption, also to provide products to the marketplace. And this has been able to do only by putting major efforts in securing the health and safety of our employees. Putting the patients in ongoing clinical trials, of course, as a priority throughout the pandemic.So far, there has been no material disruptions on the availability of products, raw materials, or materials that we use in our operations or in our capital expenditure programs. But of course, as the pandemic continues, and we see the uneven growth pattern through the globe with all the potential stress on supply chains that one cannot count that this such a good performance is able to continue throughout the year.So the numbers for the net sales, we were able to mark not far from the net sales last year when we enjoyed the good sales due to the pandemic hoarding effect. But we're 4% shy of that. In the operating profit, that is more clearly so because the last year, of course, there was the product mix. And also, the loading of the plants was very high during that period. Operating margin, we were able to pass our target of 25%. Cash flow for the period was certainly lower than last year.And then if we look at the waterfall for the period, so the Easyhaler, certainly has an entire category of dry powder inhalers, has suffered due to the pandemic. And if we look at the overall category, we are pretty much along the lines with the category of dry powder inhalers, when we look at the proportion of how much we have come down. And that certainly, of course, is something that we are working on.Nubeqa, our new introduction to the market, is performing as it should at this stage.Dexdor, that's a tough one to forecast at this point because of the COVID situation, of course, because there is a very much dynamic also in the marketplace due to the number of entrants in the generic form in the area.With regard to Simdax, we certainly had a decline there as we had anticipated for the year.The reference price products, a small decline there, and we'll have to see how that will pan out as the year moves on.And then some other items that then resulted to EUR 269 million for the quarter. In terms of the operating profit, of course, having the lower product sales, that certainly ate into our margin as well as the product mix, those jointly were the main reasons. Then we had some positive gains on the exchange rate and milestones. However, of course, due to the lower activity, the fixed costs, the operating expenses, those were lower and we'll come back to that a little bit later on because there is 1 larger item that one should note in that package.No major changes in the geographical breakdown and the development of the sales. Finland continues to be the largest single country market. Scandinavia, the important part. And of course, the large European markets continue to be very important ones. And now subsequently with Nubeqa, of course, then in North America, is growing as well.In Finland, we certainly saw a decline in sales. Scandinavia, that was mainly a result due to the lost tenders in biosimilars. Other parts of Europe and then North America, the business did fairly well.And then when we look at the business broken down by different businesses. So Specialty Products, which is mostly a business today in generics, prescription products as well as self-care products, some of them are considered pharmaceuticals, some are non pharmaceuticals, there we saw the decline of 8%, which we consider in the current environment, a fairly good result.And in Proprietary Products, we'll discuss that a little bit more. Animal Health, certainly, of course, took a hit, with the loss of 1 of the key distributor arrangements that was terminated towards the end of last year. And then in Fermion, the loading of all the plants in Fermion are at the very high level as we speak.Then when we look at the league table of the products, our Parkinson's franchise is doing well and is moving as we had originally planned pretty much. With Easyhaler, that certainly was a disappointment, I guess, for everybody who are operating in that market segment.With Simdax and Dexdor, those are, as we have indicated, the difficult ones to forecast for the year. And maybe it will be fair to say that Dexdor was performing a little bit better than we anticipated in the beginning of the year.Then the animal seductors, we had a lot of shipments for the quarter. And then, of course, the highlight is that Nubeqa is climbing up, up the lead table, as one would expect.Then if we turn firstly to proprietary products and look at their. So the Easyhaler, we already saw. The Simdax and Dexdor, those are a little bit the wildcards in terms of forecasting, Nubeqa doing well, and there are some other products as well.But if we start with the Easyhaler, and here, we see that of course, the -- we'd like to see the trend line to turn around and see the growth there. But still, if we look at the overall performance, and compare that to the first part of the first half of last year's second quarter, we are not all that much off. But as I said, the entire category of products have suffered from the pandemic.Then the Parkinson's franchise. Here, there are parts, as we have often said, there are deliveries to partners and then the timing effect of those is one part of the business, and of course, also, in certain cases, as we are -- how we are then providing products to our distributors. But basically, what we are seeing there is pretty flat line.Now turning to Dexdor. And this is a tough one. We certainly can see that there is a pattern as the second or third wave, depending how you count this. As that emerged, so the sales of Dexdor picked up as that is a product that is used in ICU setting. And there probably will be some left over for that. But this is a very, very dynamic market, and it's very, very difficult to forecast how that will evolve in terms of the volume share. And of course, the second part is the pricing of the product in that segment.Simdax, there, we have indicated that the loss of the IP coverage there, one should look at the declining trend line. There, the first generic in the marketplace has yet to be emerged. And now I'm talking about the true generic product that did not take place in the first quarter. We are expecting that to take place in the second quarter. However, that was probably one of the reasons that we did not lose volume share to generics. Of course, the price impact, just a mere threat of having a generic will have an impact or has had an impact on the pricing of the product.Then if we turn to Specialty Products. And here, if we look at the overall market performance, as I said, the Scandinavia suffered from the biosimilar tenders. Finland pretty much business as usual. And this reflects, especially our large exposure to self-care market where the traffic was lower in the pharmacies. Eastern Europe and the rest of the world pretty much at par. Of course, we have to look at the absolute size of the numbers as well here.And then when we look at the prescription products and the self-care products, certainly, the self-care products took proportionally a higher hit in the market, and that, in our understanding, is mainly due to the slower traffic in the pharmacies, which are our distributor channel or self-care products.So our largest single country market, Finland, and our large segment in that are the reference priced prescription products. And there, if we look at the entire market, declined by 10%. Orion sales certainly declined by the lower number, minus 7%. And by that, we did okay in that market. And when we look at the market shares, then we are at the par compared to the comparison period with a reference priced product. So 25 -- 24%, sorry. And the self-care products slightly lower, 25%, and the overall market share of 11%. And here you see also the breakdown, in the bar we've broken down the sales in these respective segments.Then moving to the research and development. There are no major updates in this table. So the ARASENS is continuing that study. And once we have enough events, then we will, of course, with Bayer, the trial will be stopped and then reported. But so far, there are no events that would satisfy that criteria.Then the ARANOTE, that was also a trial that we informed in the beginning of the year that has been initiated, and that has been kicked off. The next subsequent trials, those relate to the products that have not been partnered. And the -- those trials are currently recruiting.Then the Easyhaler tiotropium there, the development work is continuing. Then we took -- last year, we started to tell the markets what are, from the inside out, how we look at the company, the performance of -- against the various metrics, but we changed a little bit of the color coding. And this is now our -- of course, our own estimate. Are we proceeding against the target for this year? Are we behind the target? Or is the situation such that today, we feel that, that target is not anymore achievable.So Nubeqa the key priority, of course, for the company, and we are working together with Bayer, and especially in Europe, we've already kicked off the co-promotion in most European countries.As I said, the outcome of ARASENS is still up in the air cause we don't have the completion of the trial. And then the ARANOTE trial has started out, and we are in the process of recruiting in that trial. Easyhaler, of course, we are looking forward to a growth that's a major franchise for the company, but the beginning of the year made that a little bit more challenging for the remaining part of the year.Then the development program for 208, we feel very strongly about that, and we want to move forward with that as expeditely as possible and hopefully, through the end of the year, we'd be able to tell more news about that.Then in Finland, our market position has been maintained. But the strengthening of the market position in the overall market that is -- has not taken place yet. Of course, just maintaining in the largest position in the market is an achievement by itself.In a similar fashion, then when we look at the performance of our Scandinavian operations, of course, when we look at the overall numbers, the biosimilars certainty ate into our performance but there are many other categories where we did well. We feel we have a good funnel of in-licensing opportunities that we feel could be of interest to us. But of course, once we have something to tell, then we will, but looks good so far. Also, of course, we are continuously evaluating inorganic growth, meaning acquiring portfolios, in some cases, also companies. And that work is going on. But so far, we have nothing to report on.Okay. Of course, what we are talking about everybody today is the ESG, carbon neutrality is one of those aspects. What we've been doing for years is, of course, first of all, identify our climate impact of the scope 1 and 2, which are on our own ramifications, what we do. We are working as we are energy-intensive industry in certain parts of our operations, especially in API side. There, we have taken a serious action here and through the energy efficiency programs. Also by converting to renewable energy, we've been able to reduce our greenhouse emissions substantially over the years. We continue that work by investing in renewable energy, both in terms of heat and steam.We are also -- we have done the first work to develop the entire life cycle assessment for scope 3. So that also our products across the life cycle, what is the impact of those products. And first one, we did for Easyhaler. And we expect that the remaining carbon footprint after what we've all done, that we will be able to compensate by 2030, and thus being carbon neutral by that time. That's a tough target but we have a good program, we have a good also track record in this regard. So we feel very strongly about this important matter.In our outlook, there are no changes. So we estimate that in '21, the net sales will be slightly lower than in our comparable period last year. And the operating profit is estimated to be lower or clearly lower than in 2020.And here are the key assumptions behind our outlook, there are no material changes in this, what we discussed in the fourth quarter earnings call. Of course, Nubeqa is one of the drivers here, and there are some other products as well, but not a single one that would be such an important across the year.Of course, on the negative side, we note that especially in the second quarter that we had the major milestone events last year. Dexdor was very strong through the first half last year as well Simdax with -- with Animal Health, and we lost an important distributorship arrangement and that eats in our sales in that regard.In the operating profit. And here is one important matter that relates also to our operating expenses for the quarter. We had roughly about EUR 1 million a month, so about EUR 3 million a quarter amortization relating to the Parkinson's franchise repatriation that we purchased back the park rights from Novartis. And those are now not anymore with us for 2021. So about EUR 3 million of the OpEx savings relate to that. Of course, the milestones, Dexdor or Simdax, as we said.And then the one question is -- that nobody has a very good answer is that when will the activities normalize. Subsequently then, of course, that would increase our OpEx. And we'll all have to see how that year will develop. So far, our plans are that, that will not take place in the first quarter, unlikely to take place in the third quarter either.And then the upcoming events, we are going to hold a virtual Capital Markets Day in May, on May 26. And of course, we'd welcome you all to join. And then the half year report is in July -- on July 19.With that, concludes my prepared remarks at this stage. At this stage, I'm happy to invite Jari Karlson, our CFO, to join me here at the podium, we are happy to take questions, and Tuukka will take the questions or we -- do we take the telephone lines first?

[Tuukka Hirvonen]

Telephone lines.

[Timo Lappalainen]

Okay. We'll take the telephone lines first. So -- and as Tuukka said, kindly state your name and the organization you represent.

[Operator]

[Operator Instructions] Our first question comes from Jo Walton with Crédit Suisse.

[Jo Walton, Managing Director]

I'm Jo Walton from Crédit Suisse. I'm just going to ask about the cost lines, if I may, just to see how representative they are and whether there is a chance that you will be able to undershoot on your costs for the year?So I understand that COGS will depend on the level of sales. You had strong sales in the first quarter last year, slightly weaker sales this year because of COVID. But your sales and marketing expenses, excluding anything to do with your Parkinson's amortization, came down really quite markedly, EUR 6 million or so year-on-year in the quarter. And your R&D was also strongly down.Can you just tell us how much of that is better cost control than you were perhaps expecting? And how much is just timing and will definitely reverse in the second half of the year?And then just another one on ODM-203, you've done the partnering. There weren't any milestones. Can you tell us a little bit about any arrangement there? Could there be any income coming to you? And if so, when might that be? And I'll just ask the obligatory Nubeqa question just in terms of your investment there. Have you been doing any work marketing? Have you got involved yet? Or is this still really being led by Bayer from a marketing perspective in Europe?

[Timo Lappalainen]

Okay. How do we split? Maybe I'll start, and then Jari, you'll add on the cost side.Starting with the R&D. There, our current view is that the cost of the R&D would be weighted towards the second half or towards the remaining part of the year. So we would -- internally, we do not multiply this by 4, the first quarter, but would expect there to see an increase towards the second quarter when the activities, including the enrollment for the ongoing trials starts to pick up.In terms of the sales and marketing, that's a good question. I think it would be fair to say that for the first quarter, the saving that has been materialized, that probably has been materialized, and this -- we are unable to pick that up. But then have we done anything, special activities? No, we have not.On the other hand, not all the Nubeqa related co-promotion activities have all kicked in yet. So that we expect also to kick -- go upward a little bit. But that is a vvery good question, and we certainly do not have an exact answer to that question. As I mentioned, today, our view is that the first half will be slow. Whether third quarter will allow us more face-to-face marketing sales activities with customers or do we continue mostly virtually? Remains to be seen. Today, we expect that the fourth quarter would see the resume of that. I don't know if, Jari, you want to add anything?

[Jari Karlson]

[indiscernible] that level of activities. Once we assume that last year, the last 9 months, the COVID was going on all the time, and it might be that we actually will end up spending a little bit more than last year during this year, during the same time period, because today, as it is today, it might be that towards the end of the year, the situation is a little bit calmer about how much that will have a final impact. It's difficult to say, but I don't think we are talking about any really major numbers there.So it's quite likely that we will end up in the cost number, which is lower than last year. And then, of course, on top of that also then, the EUR 12 million from the amortization of the Novartis deal a few years back.And you were also asking about the Nubeqa role, so Orion definitely has been doing the co-promotion in Germany, but -- and in some other markets, but Germany perhaps by far been the most important. So it's not only Bayer anymore. So in Europe, as the launches proceed, Orion is also participating. But of course, U.S. clearly is the key market today and there Bayer continues to handle the matter on their own.

[Timo Lappalainen]

We're still -- there's no change in the plan that we would expect Europe launches for Nubeqa to take place throughout the year. So when we close the year, there should be very few countries, maybe 1 or 2, where the product would not have been launched.And there was a question on the ODM-203 and the deal terms thereof. We do not expect any material income from that this year. So that is not in our forecast and we would advise against putting anything in your spreadsheets on that.

[Jo Walton, Managing Director]

And is there opportunity, potentially as it progresses in other hands, for you to get some income? And can I just clarify what Jari said, is it possible that the marketing costs year-on-year will be lower because you have said that the operating expenses should be similar? So just checking that you think that the marketing costs can be lower despite your increased involvement with Nubeqa.

[Jari Karlson]

I mean the Nubeqa, we are not planning to really add any personnel on the overall number. But of course, I mean, promotion in the normal will require traveling and stuff like that, which will all have been on hold. So there definitely can be some, some impact on those, like, I mean, the travel costs, for example, during the first quarter were almost 0 in our numbers this year, which definitely is not a normal situation.

[Timo Lappalainen]

I think your question is good, but we just don't know the answer yet.

[Operator]

Our next question comes from KC Arikatla from Goldman Sachs.

[Krishna Chaitanya Arikatla, Research Analyst]

KC Arikatla from Goldman Sachs. I have 2, please. On Nubeqa, I appreciate that the commercial side of things are being led by Bayer. But maybe you could talk a little bit about the treatment side of things. If ARASENS trial meets your expectations, how should we think about the target patient population and the treatment duration in this new indication? And also on ARANOTE that you're recruiting currently, how does the target population here compared to ARASENS, please? That's the first one.The second question on M&A. Can you remind us where your key priorities are? Are you looking at transformative deals, your target therapeutic areas? And if you're looking at early stage or late stage assets?

[Timo Lappalainen]

Okay. On Nubeqa, the ARASENS and ARANOTE, the difference is that the -- basically in ARANOTE, the patient population has the -- they do not have chemo underlying treatment. They are only on a hormone suppressive treatment, whereas in ARASENS, they are on both. So that's the patient population difference.On the target, what we are currently targeting are, of course, patients who are on the label of -- based on ARAMIS trial, which are -- which is a narrower patient population than should then the ARASENS work out.And then when we currently look at these patients, all feedback that we get is that the tolerability aspect of the product seem to be real. Patients, including their caregivers or physicians, seem to appreciate that. The efficacy is there. As far as, of course, you can see in the wide patients, so in overall, whether -- how much of a conversion from the other treatments there have been, that then depends really on the market. And of course, in some markets, they are newly or recently launched products, which, however, may not have received the same favorable position from the reimbursement authorities when we are comparing that to Nubeqa. So maybe that is something that speaks also favorably for Nubeqa in Europe.In terms of the M&A, the target what we are looking for, they are -- that would be geographically, it will be Europe, firstly. Secondly, what we are looking for are areas that would fit in our footprint, commercial footprint in neurodegenerative products as we have the Parkinson's franchise there. So something towards the neurologist, of course, would be very much appreciated.The other side, what we are looking is in oncology, but we respect that in oncology, we probably have to be focusing there very much to narrower indications or, in some cases, even the rare indications, but the oncologists would be one target audience.And that then also leads to hospital care products because we have a very strong franchise in hospital care, especially in Continental Europe or in Southern Europe. And then sort of separate item there is our Animal Health franchise, where we have the strong position in the Nordic countries, in certain Eastern European countries, we have a good pipeline there as well as we are launching. But today, we're still missing our own sales operations in Europe.

[Jari Karlson]

Definitely, we are not talking about transformative deals in that sense. So we have, of course, certain loan facilities available. And now, of course, the AGM granted also the Board rights to issue some shares, but definitely, none of those rights or the available funds would allow us to make any kind of a transformative deal just to kind of give a description of what we are looking after. So the money is enough to make deals, which have good impact on the overall company, but definitely not enough to completely change the company. And at this stage, there are no plans to merge with anybody or anything like that, which would be called transformative. So they are normal add-on acquisitions we are targeting in the areas Timo just mentioned.

[Timo Lappalainen]

Thanks, Jari. That's a good addition.

[Operator]

Our next question comes from Sami Sarkamies from Nordea Markets.

[Sami Sarkamies, Senior Analyst of TMT]

I'll continue on Nubeqa. Firstly, coming back to the strong sales growth you did witness in Q1. You're saying that this was in line with your expectations. Do you anticipate a strong sequential sales growth also during the remainder of this year? Or was there something special in Q1?

[Timo Lappalainen]

No. We would expect a continuation of the strong sales of that. And that -- then you may recall how we booked the sales of Nubeqa. The number that we show, that is inclusive the product sales and the royalty. And the way it works is that the -- from the royalty are always deducted from the previous of the product. So there can be -- from our perspective, there can be quarter-to-quarter variations due to the shipments. But basically, from the marketplace, yes, we would certainly expect the sales to continue to climb up.

[Sami Sarkamies, Senior Analyst of TMT]

[indiscernible]

[Timo Lappalainen]

Yes.

[Sami Sarkamies, Senior Analyst of TMT]

Yes, and then further on Nubeqa because June has the most likely timing for headline data on the ARASENS study.

[Timo Lappalainen]

I'm sorry, I didn't hear the question. What was the ARASENS study? Was that on timing?

[Sami Sarkamies, Senior Analyst of TMT]

Yes. Sorry, is June still the most likely timing for ARASENS headline data?

[Timo Lappalainen]

Well, that's difficult to say because we don't have the events yet and the forecasting of events that's a tough science or art. So there's certainly -- we cannot promise it's a second quarter or even the third quarter. It really depends how we will see the events. So unfortunately, we don't have anything more to give on that at this time.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. And then finally on Simdax, it seems that you have become a bit more cautious regarding the outlook. You did earlier expect somewhat smaller decline this year, after 28% decline in Q4, but now it seems that this is no longer the case. What has surprised you here? And where do you see the decline on a full year level now?

[Timo Lappalainen]

Well, the positive one was for the first quarter that we did not see any true generics in the marketplace yet. So that is still to become -- we actually expected that we would have seen somebody, but we haven't seen that. We still expect in the first half, so in this quarter, that there would be, but of course, we don't have insight what other companies are doing.So I don't think anything really has changed from that perspective. We are seeing that there is a price pressure. We saw that already. But of course, the volume, at least for the first quarter was all with us, which is money in the bank so far. So I don't think there has not been any material changes in our line of thinking. So if I represented that in my opening remarks, in my tone differently then that's an error, on me.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. And do you expect decline to ramp up from the Q1 level during the remainder of the year?

[Timo Lappalainen]

That's tough to see, but it really depends how the competition would work. It depends how many competitors we see. Of course, when we look at the opening up the new contracts, we have been -- we are trying, of course, to secure the volume. And in some cases, then the contracts are such that the purchasing organization has the right to open them as far as the pricing goes, but we would still have always the matching right for the volume.So it's fairly dynamic today when we look at the situation, but how this will evolve, it's really -- it's a tough one. I cannot give you much more guidance than it certainly will be a negative this year. Whether the first quarter would be the right then slope as we are moving forward, it's probably in the neighborhood there, but don't hold me to the last number.

[Jari Karlson]

But I guess it's quite clear that prices will not go up. And if we lose any volume, it means more decline for us and also are very difficult to forecast.

[Operator]

Our next question comes from James Vane-Tempest from Jefferies.

[James Alexander Stewart Vane-Tempest]

Just 2, please. Just on the ARASENS trial. Can you just remind us on the timing of that, when you expect that to read out? And also how you think that could change the commercial opportunity?And then the second question is just on the Specialty business. There's sort of been this bifurcation of performance between Finland, Scandinavia and some of the other regions. So I was just curious why that is also given in one of the slides, you say how Finland and Scandinavia are performing behind your expectations for this year. So what was it that transpired that wasn't in your expectations at the start of the year?

[Timo Lappalainen]

Okay. With regard to the ARASENS trial, because that's an event-driven trial. That's really difficult to estimate as we are approaching then to the end of the trial when we will have the last events which are death in this trial. So that's a tough one. We -- of course, we expect that this year, it will be there. But which is the actual month, we just don't know that yet, unfortunately, for that.In terms of the SPB, or the generic business, there are 2 aspects to that here. One is the biosimilars effect that we saw in Scandinavia, and that resulted in this big decline there. We also saw last year, the effect of certain countries in Scandinavia, building up our stockpiling product. And of course, this was absent this year.But maybe the -- something that we've seen a development throughout the pandemic, but has -- we've been affected by that because of our broad portfolio, especially when we look at the -- some of the seasonal flus or other infective diseases that are typical in the Northern Hemisphere. And those we have been missing, as we are all sanitizing our hands all the time, wearing the masks. So we just don't have the infections as much as we typically would have had throughout the -- also the early part of the year.Also, the traffic to pharmacies, which are the main distributors for our products, has been, in many cases, much lower than in the pre-pandemic. So that probably has taken us not that we probably should have seen that, but it got verified through the first quarter.

[James Alexander Stewart Vane-Tempest]

That's great. And just a follow-up on the first part of my question. So if ARASENS is positive then. I mean, how do you think it will change the commercial opportunity for the product?

[Timo Lappalainen]

Thank you, I'm sorry. Of course, that would make us in par with competition. So that would be the first answer to that. We would be, I guess, from the perspective that we have is what we believe is a very strong data on the tolerability of the product. And then subsequently, we could also then meet the competition and in, of course, a little bit different setting for the trial, but we could also have the efficacy point there as well. But as of today, we are with a narrower indication compared to the competition.

[Operator]

[Operator Instructions] Okay. There appears to be no further registered questions at this moment. So I'll hand back to the speakers.

[Tuukka Hirvonen]

Okay. Thank you. I have a few questions coming from the webcast chat. Let's start with the first ones coming from Peter Smith of Bank of America. First one is about Nubeqa, surprise. So Nubeqa royalty looks good, but small number. Is this a clean number to project from no one-offs or anything else skewing it? I guess that you already addressed this, but do you want to add something, Timo?

[Timo Lappalainen]

No, Nubeqa, as for any product where there are substantial partner business involved, be that Stalevo, be that then Nubeqa, be that our Animal Health sedatives, there the quarter-to-quarter variation can be quite volatile. And the reason is just the how the shipment takes place. In the case of Nubeqa, as I explained, the shipments, product shipments, commercial product shipments are then deducted from the royalty. So it lacks that.So having said that, there are nothing special in that. But of course, we are still in the early phases of the launch of the product. So there are, in certain countries, certainly there are pipeline filling, you would see that. And the -- just the demand is fairly volatile at this early days of the launch because we are practically just launching in some countries.

[Tuukka Hirvonen]

Thanks, Timo. Then another one from Peter. This regards the business targets for this year. And do the line which is covering the M&A opportunities. So we are stating that it is behind target. So Peter wants to know, is this due to elevated valuations in the market? And then again, what's the outlook for this? Is it likely to turn rate and be unattainable for this year?

[Timo Lappalainen]

Well, it takes 2 to tango. So that's, that's a tough one. We have in our evaluation funnel, of course, we are monitoring and quite extensively, the marketplace. But that is true that the valuations, we've seen a quite high valuation inflation in the sector and in some subsegments of that. And that, of course, makes the case tough for companies such as Orion, which has to also secure and guard the bottom line, not only to the EBITDA level, but we have to also secure the EPS. So that makes or pushes us to find real synergies that can -- are something beyond the cost side.With the cost side alone, you can never justify a transaction with current prices. So you have to see something else. We are working very hard on that. And I can only say that once we have something closed or something signed, we certainly will let the market know, but I think it's premature, and it would be not fair to discuss further on any prospects in this regard.

[Tuukka Hirvonen]

The next one goes to Jari, this is about balance sheet and from Willis Hu from Sio Capital. Can you please add some color to the big step-up in the other current liabilities, which jumped to EUR 323.8 million in Q1 from EUR 109.8 million from last year. Do you expect it to return to historical level?

[Jari Karlson]

Yes, that actually is an event which happens almost every year with the exception of last year. And the reason is very simple that we had our AGM in March, which means that the dividends were taking out of the equity and booked as liability but they were paid only in April. So at the end of March, they showed up as a liability.Last year, the AGM was held only in May and the dividends were also paid in May, which explains that last year we didn't have this type of an item in our balance sheet at the end of Q1.

[Tuukka Hirvonen]

Thanks, Jari. Then the final one from the webcast comes from [ Al Siraosi ] from [ O.P. Markets ], and it's about the outlook. If we think about Nubeqa sales growth, possibly Easyhaler sales rebound later this year. Year-on-year, lower sales and marketing costs and all the other things together, your guidance starts to seem a bit cautious. Is there something we should consider in addition to this EUR 28 million milestone bridge from 2020?

[Timo Lappalainen]

Of course, if we -- all we had was tailwind, that would be great, but we also need to plan for the lower number on Dexdor as we have flagged throughout also the first quarter. Also, Simdax, we expect there not only to have price pressure, but also as Jari said, we expect there to have generic competition, which would mean a loss of volume as well. Certainly, Easyhaler, first quarter, makes the -- this year a little bit tougher for us.On the cost side, I think the question is valid as we discussed in the early part of the Q&A, that's a tough one to have -- or nobody has a very clear vision on that for the year, how that will work out. I still would caution to draw too much conclusions from the first quarter as there is a hazy still outlook as we move forward for quite a number of products when -- which are important products for Orion and how the market and the competition especially will evolve in those.

[Jari Karlson]

And also I'd like to add that the total milestone number for last year of more than EUR 40 million. And this year, the outlook is less than EUR 5 million. So the EUR 28 million were only the Nubeqa-related milestones from Bayer, but we also had more than EUR 10 million of other milestones last year, mostly related to the new distribution rights of Stalevo around the world.So the headwind compared to last year, during the last 9 months of this year from milestones is roughly EUR 40 million rather than the EUR 28 million only.

[Tuukka Hirvonen]

Thank you. Now we have exhausted all the questions from the chat. Maybe we'll turn once more to the operator. Do we have any follow-ups on the conference call lines?

[Operator]

There appears to be no registered questions at the moment.

[Tuukka Hirvonen]

Thank you. So it's then time about to wrap up.

[Timo Lappalainen]

Okay. Thank you very much. Thanks, everybody, for joining the earnings call. And I hope to see most of you, as many as you can, you're all welcome to join our CMD. That's virtual this year, so no excuses for missing that. Thanks. Stay safe. Wear a mask and get vaccinated, if possible.