A year of positive development

2010 was a positive year for Orion: our net sales growth exceeded that of our main markets, while our operating profit (EBIT) improved significantly. It was particularly encouraging that all of our business units performed well.

Rapid change was again a feature of Europe's pharmaceutical markets last year, and the constant changes in drug reimbursement systems and pricing set challenges for players in this field. Since pharmaceutical research and development require lengthy periods of investment, it is vital that pharmaceutical policy embraces a long-term view and can be anticipated.

Net sales and operating profit increased

Orion's net sales and operating profit (EBIT) increased in 2010. Net sales went up by 10 per cent to EUR 850 million and the operating profit improved by 23 per cent to EUR 254 million. We achieved a good rate of growth in Scandinavia and Eastern Europe. In Finland, too, we succeeded in boosting our sales and market share, even though the market continued to be very challenging.

Sales of key products based on Orion's own research increased during the year. This was particularly true of the Simdax drug for heart failure and the Precedex intensive care sedative which, due to buoyant sales, were among our most important products for the year. Sales of Parkinson's drugs, which have traditionally been important for us, increased by eight per cent, but the net sales of pharmaceuticals other than the Parkinson's drugs increased even faster, by 12 per cent.

In generic drugs and self-care products we adjusted well to the fast-changing markets and had a successful year, with well over 100 new product and market launches. Orion Diagnostica and Fermion, a manufacturer of active pharmaceutical ingredients, also experienced a year of growth.

Behind the positive result was the hard work and dedication of all of our units. Orion's employees have shown that they can adapt very well to changing environments and new ways of working – such as the new R&D operating model that has been in use for the past two years.

Progress in research and development

A significant step forward has been made in our R&D projects, as we have succeeded in creating a new foundation for our future. The single most important achievement was the submission in October of a marketing authorisation application concerning the dexmedetomidine intensive care sedative for evaluation by the European Medicines Agency. Outside Europe, dexmedetomidine has proven to be a good alternative for sedation for intensive care patients.

The decrease in R&D expenses was due to the timing of several research projects, particularly clinical development projects. During 2011, R&D expenses will see a clear increase again, as many projects will reach the clinical phase.

Some concrete examples of the success of our R&D partnering strategy are a co-operation agreement signed with the Polish company Selvita in the summer of 2010, aimed at researching new drug treatments for Alzheimer's disease, and an extensive agreement signed early in 2011 with Endo Pharmaceuticals from the U.S., concerning the joint research, development and commercialisation of cancer drugs.

Strategy remains unchanged

The focal areas of the strategy for 2011–2015 approved by Orion's Board of Directors in June remained unchanged. Orion's strategic aims are profitable growth and increased shareholder value, while keeping business risks under control. The financial objectives are ensuring the Group´s financial stability and creating a foundation for long-term profitable growth.

We have prepared for the challenges that will arise in future years when the entacapone patents expire, by developing operations and increasing efficiency throughout the company. Return on fixed costs is continuously evaluated. In addition, it must not be forgotten that we will remain a strong supplier of Parkinson's drugs, even after the entacapone patents expire.

Our partners will also play a central role in Orion's business model. Our R&D, supply chain, sales network and many support functions are based on close partnerships. Without a wide-ranging and well-functioning network of partners the operations of a modern healthcare company would be challenging. Indeed, we have invested much in developing alliances with our partners.

Continuing to build well-being

We believe that favorable progress will continue in 2011 and we estimate that our net sales and operating profit excluding non-recurring items will be slightly higher than in 2010.

The number of Orion shareholders has continued to grow, and the company now has almost 60,000 shareholders with an interest in healthcare. I wish to thank our partners and all Orion employees, who have again done excellent work to ensure our success, showing their commitment to the company. Let's continue together on our mission to build well-being.

Timo Lappalainen