Orion Group Interim Report January-June 2010
(Thomson Reuters ONE) -
ORION CORPORATION / INTERIM REPORT JANUARY-JUNE 2010 / 10 August 2010
at 12:00 EEST
Orion's net sales for January-June 2010 totalled EUR 422 million (EUR 386
million for January-June 2009), up by 9% on the comparative period last year.
* Operating profit was EUR 131 (107) million.
* Profit before taxes was EUR 130 (106) million.
* Equity ratio was 59% (56%).
* ROCE before taxes was 50% (40%).
* ROE after taxes was 47% (40%).
* Diluted earnings per share were EUR 0.68 (0.55).
* Cash flow per share before financial items was EUR 0.48 (0.35).
ORION'S KEY FIGURES FOR THE REVIEW PERIOD
Q2/10 Q2/09 Change % Q1-Q2/10 Q1-Q2/09 Change % 2009
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Net sales, EUR million 207.4 196.4 +5.6% 421.9 386.4 +9.2% 771.5
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International operations,
EUR million 153.7 141.4 +8.7% 311.2 277.9 +12.0% 548.2
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% of net sales 74.1% 72.0% 73.8% 71.9% 71.1%
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Operating profit, EUR
million 60.0 50.4 +18.9% 131.0 107.3 +22.1% 207.0
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% of net sales 28.9% 25.7% 31.1% 27.8% 26.8%
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Profit before taxes, EUR
million 59.4 49.0 +21.2% 130.2 105.6 +23.3% 203.7
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% of net sales 28.6% 25.0% 30.9% 27.3% 26.4%
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Income tax expense, EUR
million 15.4 12.8 +20.1% 33.9 27.6 +22.8% 52.3
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R&D expenses, EUR million 20.2 25.0 -19.1% 39.4 49.1 -19.7% 95.2
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% of net sales 9.7% 12.7% 9.3% 12.7% 12.3%
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Capital expenditure, EUR
million 9.7 34.4 -71.7% 17.8 40.0 -55.7% 60.4
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% of net sales 4.7% 17.5% 4.2% 10.4% 7.8%
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Assets total, EUR million 655.5 656.0 -0.1% 727.1
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Equity ratio, % 58.7% 55.5% 60.6%
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Gearing, % 12.6% 14.7% -8.9%
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Interest-bearing
liabilities, EUR million 127.0 164.1 -22.7% 131.5
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Non-interest-bearing
liabilities, EUR million 146.0 127.5 +14.5% 156.5
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Cash and cash equivalents,
EUR million 78.9 110.7 -28.7% 170.5
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ROCE (before taxes), % 49.5% 40.4% 37.4%
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ROE (after taxes), % 46.9% 39.9% 35.3%
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Basic earnings per share,
EUR 0.31 0.26 +21.5% 0.68 0.55 +23.4% 1.07
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Diluted earnings per
share, EUR 0.31 0.26 +21.5% 0.68 0.55 +23.4% 1.07
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Cash flow per share before
financial items, EUR 0.25 0.10 +144.7% 0.48 0.35 +35.0% 1.03
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Equity per share, EUR 2.71 2.58 +4.9% 3.11
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Personnel at the end of
the period 3,228 3,284 -1.7% 3,147
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Average personnel during
the period 3,135 3,232 -3.0% 3,192
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Personnel expenses, EUR
million 84.6 86.4 -2.1% 171.4
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President and CEO Timo Lappalainen's review
"Solid growth continued"
"Our net sales and operating profit in the first half of the year were clearly
higher than a year ago.
"In Orion's key markets in Europe, the prices of drugs reimbursed under the
healthcare systems of many countries have already decreased or will clearly
decrease during the current year. However, we performed well in this very
challenging market situation. Sales of our Parkinson's drugs continued to grow
slightly, and we are especially pleased that sales from our other product
portfolios grew well throughout the first half of the year. We were able to
maintain and to some extent strengthen our market position in Finland. Our
growth in Scandinavia and Eastern Europe also continued.
"As anticipated, investments in new markets increased our sales and marketing
expenses. In particular, costs increased in Southern Europe, where a year ago we
did not yet have our own operations. Costs were also increased by royalties
payable to Abbott for its sale of Simdax and higher distribution costs due to
volume growth in business operations. Research and development expenses
decreased, mainly because of the timing of our research programmes. Trials with
the intensive care sedative dexmedetomidine have finished, and the focus of
research is on many early-phase projects and expansion of the Easyhaler product
family. Administrative expenses were again lower as litigation costs in the
United States decreased.
"A challenging period for Orion ended when we reached an agreement with the Sun
Group to the patent litigation in the United States concerning Parkinson's drugs
and thereby ended these lawsuits. We settled our patent disputes with the
Wockhardt companies concerning Parkinson's drugs already last year. The
settlement now agreed has clarified the schedule for starting generic
competition in the United States and our planning for the future.
"The key themes of our strategy remain the same following the review in June.
Orion's strategic focus remains on growth of business operations through a
competitive product portfolio, strengthening the market position in Europe and
improving the flexibility and efficiency of operations. One key prerequisite for
achieving this is continuous enhancement of our capability to network and
collaborate with partners at all stages of the value chain.
"This year proved better in terms of growth in net sales and operating profit
than we had anticipated earlier this year when the Financial Statements and the
first quarter Interim Report were published, so we upgraded our full-year
outlook for 2010 in June. We estimate that net sales and operating profit will
be higher than in 2009. More information about the outlook estimate and the
basis for it can be found on pages 6-7 of this Interim Report."
Events during the period
On 1 April 2010 Orion commented on the US Food and Drug Administration's release
published on 31 March 2010 concerning the ongoing review of the safety of
Orion's drug Stalevo.
On 20 April 2010 Orion announced that the initial results of the studies with
dexmedetomidine were positive, and the Company plans to submit an application
for marketing authorisation for the intensive care sedative to the European
Medicines Agency by the end of 2010.
On 18 May 2010 Orion announced that Pekka Kaivola, Senior Vice President
responsible for the Global Sales line function of the Orion Group, will retire
at the end of 2010. From 1 October 2010 until his retirement, he will be a
Senior Advisor. Satu Ahomäki has been appointed Senior Vice President
responsible for the Global Sales line function as of 1 October 2010.
On 18 May 2010 the Board of Directors of Orion Corporation decided to repurchase
shares as authorised by the Annual General Meeting on 24 March 2010. Orion
intends to acquire 300,000 B shares of Orion Corporation not earlier than 11
August 2010, which is the day after the Group's Interim Report for January-June
2010 is published.
On 14 June 2010 Orion upgraded its full-year outlook for 2010 because earnings
had continued to develop positively in the second quarter.
On 15 June 2010 the Board of Directors of Orion Corporation decided to appoint
Matti Kavetvuo and Heikki Westerlund as additional new members of the R&D
Committee as of 15 June 2010.
On 22 June 2010 Orion Corporation agreed a settlement with companies belonging
to the Sun Group to a dispute in which in order to defend its patents, Orion had
filed a lawsuit in the United States against Sun regarding Sun's submissions of
abbreviated new drug applications ("ANDAs") for generic versions of Orion's
Comtan and Stalevo drugs.
News conference and teleconference
A news conference and teleconference on the published results will be held
today, Tuesday 10 August 2010, at 14:30 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 atwww.orion.fi. After the
presentation, questions can be put to the Company's management by telephone in
Finnish and English.
The teleconference code is 869772 and to participate in the teleconference,
please call:
from the USA: +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 will be available later the
same day via a link on the Orion website. A recording of the presentation by the
President and CEO in Finnish will be available on the Orion website later on
same day.
Financial report material
Orion's financial reports and related presentation material are available on the
Group's website atwww.orion.fi/en/ promptly after publication. The website also
has a form for subscribing to Orion's publications for investors and releases.
Dates in Orion Calendar 2010 and 2011
Interim Report January-September 2010Tuesday 26 October 2010
Capital Markets Day in HelsinkiThursday 9 December 2010
Financial Statements 2010Wednesday 9 February 2011
Annual General Meeting 2011Thursday 31 March 2011
Interim Report January-March 2011Wednesday 27 April 2011
Interim Report January-June 2011Tuesday 2 August 2011
Interim Report January-September 2011Tuesday 25 October 2011
For additional information about the financial review:
Jari Karlson, CFO, tel. +358 10 426 2883
www.orion.fi/en
www.orion.fi/en/investors/
Financial review Q1-Q2/2010
Net sales
The Orion Group's net sales in January-June 2010 totalled EUR 422 million (EUR
386 million in January-June 2009), up by 9% on the comparative period of the
previous year. The net effect of currency exchange rates was plus EUR 4 million.
The Pharmaceuticals business's net sales were up by 9% at EUR 399 (365) million.
The products based on in-house R&D accounted for EUR 197 (176) million, or 49%
(48%) of the Pharmaceuticals business's net sales. Net sales of Orion's
Parkinson's drugs were up by 2% at EUR 126 (123) million, which was 31% (34%) of
the Pharmaceuticals business's net sales. The net sales of the other products in
the portfolio excluding Parkinson's drugs were up by 13% at EUR 274 (242)
million.
The Diagnostics business's net sales were up by 5% at EUR 24 (23) million.
Operating profit
The Orion Group's operating profit was up by 22% at EUR 131 (107) million.
The Pharmaceuticals business's operating profit was EUR 131 (109) million, up by
21% on the comparative period. The gross profit grew slightly faster than net
sales. However, operating profit improved clearly more because the fixed costs
of the business operations were slightly lower than in the previous year. Sales
and marketing expenses were as anticipated higher, but research and
administrative expenses lower than in the comparative period.
The Diagnostics business's operating profit was EUR 4 (3) million, up by 24% on
the comparative period. Net sales and gross profit were slightly higher but
fixed costs were similar to the comparative period.
Operating expenses
The Group's sales and marketing expenses at EUR 89 (75) million were as
anticipated clearly higher, up by 18%. The increase was mainly due to the launch
of operations in Southern Europe in the second half of 2009, EUR 4 (2) million
of royalties paid to Abbott following its sale of Simdax and increased
distribution costs due to volume growth in the business operations as a whole.
R&D expenses were down by 20% at EUR 39 (49) million and accounted for 9% (13%)
of the Group's net sales. Pharmaceutical R&D expenses amounted to EUR 37 (46)
million. The decrease was mainly due to the timing of the ongoing research
projects, especially as clinical trials of the intensive care sedative
dexmedetomidine with patients concluded at the turn of the year and the research
programme moved to the analysis phase. Ongoing research projects are reported in
more detail under Pharmaceuticals in the Business Reviews.
Administrative expenses were down by 25% at EUR 20 (27) million. The costs due
to patent litigation in the United States were EUR 2 (6) million. There is more
information on the legal proceedings in the section "Legal proceedings".
Other operating income and expenses decreased profit by EUR 5 million (profit
increase in comparative period EUR 2 million). These expenses include items
arising mainly from foreign exchange hedges.
Profit before taxes
Group profit before taxes totalled EUR 130 (106) million. Basic earnings per
share were EUR 0.68 (0.55) and diluted earnings per share were 0.68 (0.55).
Equity per share was EUR 2.71 (2.58). The return on capital employed before
taxes (ROCE) was 50% (40%) and the return on equity after taxes (ROE) 47% (40%).
Financial position
The Group's gearing was 13% (15%) and the equity ratio 59% (56%).
Total liabilities at 30 June 2010 were EUR 273 (292) million. At the end of the
period, interest-bearing liabilities amounted to EUR 127 (164) million,
including EUR 104 (123) million of long-term loans.
The Group had EUR 79 (111) million cash and cash equivalents at the end of the
period, which are invested in short-term interest-bearing instruments issued by
financially solid financial institutions and corporations.
Cash flow
Cash flow from operating activities was slightly down on the comparative period
at EUR 84 (91) million. Operating profit was clearly higher in the first half of
2010, but the amount tied up in working capital was EUR 39 million more than in
the comparative period. The rise in working capital was due to an increase in
trade receivables and a decrease in non-interest-bearing liabilities. The strong
growth in net sales and proportionally greater growth in countries where payment
times are typically longer than average for Orion led to the increase in trade
receivables. Orion's non-interest-bearing liabilities fluctuate quite a lot
during the year. The amount was exceptionally high at the turn of the year, and
the decrease to normal during the first half the year tied up working capital.
Cash flow from investing activities was EUR -17 (-42) million. Cash flow from
financing activities was EUR -160 (-116) million, due to loan repayments,
repayment of capital and higher dividends than in the previous year.
Capital expenditure
The Group's capital expenditure totalled EUR 18 (40) million. This comprised EUR
11 (9) million on property, plant and equipment and EUR 7 (31) million on
intangible assets.
Outlook for 2010
Net sales will be higher than in 2009.
Marketing expenditure will be higher due to the increased number of product
launches and expansion of operations into Southern Europe. Research expenditure
and the costs of patent litigation in the United States will be lower than in
2009.
Operating profit excluding non-recurring items will be higher than in 2009.
The Group's capital expenditure will be about EUR 40 million excluding
substantial corporate or product acquisitions.
The second paragraph of Outlook for 2010 was previously:
Marketing expenditure will be higher due to the increased number of product
launches and expansion of operations to Southern Europe. Research expenditure
will be lower than in 2009. The costs of ongoing patent litigation in the United
States are expected to be lower than in 2009.
Basis for outlook
The reference price system implemented in Finland in April 2009 increased price
competition in the category of substitutable products, which led to a clear
decrease in prices. During 2010 price competition has persisted. Product
launches will support Orion's position as market leader in 2010 too.
In-market sales of the Parkinson's drugs grew by just over 10% in 2009, as in
the previous year. However, the growth was faster than anticipated, and is
forecast to slow down slightly in 2010.
Repurchasing of the marketing rights to Simdax from Abbott in May 2009 will
increase sales compared with the previous year because in-market sales of the
product will appear as Orion's own sales throughout the year. During the first
four months of 2009, for Simdax Orion recorded in its own sales only sales of
the product to Abbott.
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 2010
were planned mainly during the previous year.
Research and development costs can be estimated quite accurately in advance.
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 2010 are either ongoing from the
previous year or at an advanced stage of planning, therefore their cost level
can be estimated rather accurately.
Orion Corporation and companies belonging to the Sun Group agreed a settlement
in June. The agreement ended the most important litigation proceedings for Orion
in the United States. As a result, the costs of patent lawsuits for the whole
year can be estimated better than before.
Near-term risks and uncertainties relating to the outlook
The Company is not aware of any significant risk factors relating to the
earnings outlook for 2010.
Sales of individual products and also Orion's sales in individual markets may
vary slightly 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 adjustments of
stock levels.
Most of the exchange rate risk relates to the US dollar. Typically, only less
than 15% of Orion's net sales come 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.
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.
Financial objectives
Orion's financial objectives are ensuring the Group's financial stability and
creating a foundation for long-term profitable growth.
The principal means of achieving these objectives are:
product, product portfolio and corporate acquisitions
Sales of Stalevo and Comtess/Comtan currently account for approximately
one-third of Orion's net sales. The key patents for these Parkinson's drugs in
Orion's main markets will expire in 2012-2013, which is why their sales are
expected to decline over the next few years. Orion is continuously bringing new
products to the market to replace this drop in net sales.
The development of Orion's net sales and profitability in the next few years
will depend on how fast the sales of Parkinson's drugs will decline and, on the
other hand, how the sales of other products will increase in the future. This
creates a point of discontinuity in the Group's operations.
Strategy
In June, Orion's Board of Directors confirmed that the strategic focus remains
the same for 2011-2015. Orion's strategic aims are profitable growth and
increased shareholder value, whilst keeping business risks under control.
Orion's strategic focus continues to be on:
* growth of business operations through a competitive product portfolio
* strengthening market position in Europe
* improving the flexibility and efficiency of operations.
All of Orion's business divisions have a major role in achieving the financial
objectives of the Group, but the two largest divisions, Proprietary Products and
Specialty Products, are crucial. Orion strives to enhance synergies between
patent-protected proprietary drugs, off-patent (i.e. generic) prescription drugs
and self-care products. The Animal Health, Fermion and Orion Diagnostica
divisions are also actively seeking new growth opportunities.
Competitive product portfolio
Growth is based on a competitive product portfolio developed through Orion's
in-house R&D, collaborative research and active product acquisition. Potential
corporate acquisitions are also continually evaluated.
Orion's core therapy areas are central nervous system drugs, oncology and
critical care drugs, and Easyhaler pulmonary drugs. Orion's R&D operations
concentrate on early-phase research. In addition to in-house research, Orion
invests in early-phase R&D jointly with universities and other pharmaceutical
companies. In the late phase of clinical development, Orion aims to share the
costs with other pharmaceutical companies. Orion generally seeks partnerships
for undertaking at least Phase III clinical studies, which are the final phase,
especially for projects outside Europe. Orion also seeks to purchase new product
candidates and further developed products to reinforce the research pipeline
based on its own research projects.
In recent years Orion has worked to build up a competitive product portfolio. In
specialised medical care, Orion's primary aim is to exploit all business
opportunities from the drugs in the current product portfolio, such as Stalevo,
Simdax and the Easyhaler product family. Secondly, Orion seeks to promote
late-phase research projects and secure rapid commercialisation of products
developed through them. Orion's next projects in late-phase development and
commercialisation are launching the intensive care sedative dexmedetomidine in
European markets, development of inhalable Easyhaler combined formulation
products and development of the Parkinson's drug Stalevo for Japanese markets.
Thirdly, Orion aims to ensure continuity of clinical studies through active
early-phase research.
To be successful in the generic (i.e. off-patent) prescription drug and
self-care product sector, it is especially important to have a broad and
continually renewed portfolio. Orion seeks to secure a continuous stream of
product launches through active product acquisition and its own development
work. Orion determines the product portfolios individually for each market. The
Company continues to strive for growth, especially through expanding the
self-care product portfolio in the Nordic countries. In Eastern Europe, for
example Russia, Orion's product portfolio focuses on generic prescription drugs
in certain therapy areas.
Strengthening market position in Europe
In 2009 Orion expanded its own sales network to cover nearly all the key
European markets except France. The objective is now to continue strengthening
the market position in all these markets.
In specialised medical care, especially critical care and urology, Orion
concentrates on certain customer groups through its own sales network throughout
Europe and through partners worldwide. Orion markets generic prescription drugs
and self-care products mainly in the Nordic countries and Eastern Europe through
its own sales network. Orion is committed to remaining the market leader in
Finland and making the Scandinavian countries a strong domestic market. Orion's
aim in all the Nordic countries is to have a presence with a broad product
range. In Central and Southern Europe the emphasis is on Proprietary Products
and in Eastern Europe on Specialty Products. Outside Europe, Orion operates
mainly with partners.
Flexible and efficient operations
Because the operating environment changes all the time, the agility and
flexibility of operations will in future be as crucial as a low cost base.
Efficiency improvement, cost control and diversity management are all essential
for systematic improvement of competitiveness throughout the value chain.
Orion's key projects to improve operating efficiency have been implementing a
new research and development model, building up partnership models for
early-phase research, increasing efficiency in the supply chain and improving
the competitiveness of sales operations.
Networking and seeking partners throughout the value chain will facilitate
improvements to competitiveness and establishing a foundation for profitable
future growth. R&D collaboration and active networking will enable Orion to
increase the number of new research projects and balance the risks of projects
in the research pipeline. Through partnerships in the supply chain, Orion will
improve the efficiency of its operations by determining which products it will
manufacture itself and to what extent products or semi-finished products will be
acquired from outside the Group. Partnerships in sales and marketing will ensure
a broad network of distribution channels through which proprietary drugs
developed by Orion will be distributed worldwide. Moreover, the product
portfolio can be expanded by selling the partners' products through Orion's own
sales network. In addition, outsourcing certain business support and
administrative functions will increase the flexibility of operations.
Through these strategic actions, Orion seeks to enhance its capability to
continue operating as a pharmaceuticals and diagnostics company that provides
new products and engages in R&D.
Orion's dividend 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.
As decided by the Annual General Meeting, Orion distributed a dividend of EUR
1.00 per share for 2009 (EUR 0.95 per share for 2008). In addition, EUR 0.10 per
share was paid as repayment of capital. The payment date for the dividend
distribution and repayment of capital was 7 April 2010.
Shares and shareholders
On 30 June 2010 Orion had a total of 141,257,828 shares, of which 48,320,530
were A shares and 92,937,298 B shares. The Group's share capital was EUR
92,238,541.46. At the end June 2010 Orion held 214,424 B shares as treasury
shares. On 30 June 2010 the aggregate number of votes conferred by the A and B
shares was 1,059,133,474 excluding treasury shares.
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 the General Meetings of Shareholders. In addition, Orion and
Orion Pension Fund do not have the right to vote at Orion Corporation's General
Meetings 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. In January-June 2010 a total of 3,020,138 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 2010 the market capitalisation of the Company's shares excluding
treasury shares was EUR 2,161 million.
Authorisations of the Board of Directors
Orion's Board of Directors was authorised by the Annual General Meeting on 24
March 2010 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 is valid for 18 months and the authorisation to issue shares for
five years from the respective decision taken by the Annual General Meeting.
The Board of Directors is authorised to decide on acquisition of no more than
300,000 Orion Corporation B shares. Such shares shall be acquired at the market
price at the time of acquisition quoted in public trading on NASDAQ OMX Helsinki
using funds in the Company's distributable equity. Such shares may be acquired
in public trading on the stock exchange in a proportion not corresponding to the
shareholders' holdings. The shares shall be acquired and paid for in accordance
with the rules of the stock exchange and Euroclear Finland. The shares acquired
can be kept, cancelled or further conveyed by the Company. The shares can be
acquired for the purpose of developing the capital structure of the Company, for
use in financing possible corporate acquisitions or other business arrangements
of the Company, for financing capital expenditure, as part of the Company's
incentive plan, or for otherwise conveying or cancelling them. The Board of
Directors shall decide on other matters related to the acquisition of shares in
the Company.
On 18 May 2010 the Board of Directors of Orion Corporation decided to repurchase
shares as authorised by the Annual General Meeting on 24 March 2010. Orion
intends to acquire 300,000 B shares of Orion Corporation not earlier than 11
August 2010, which is the day after the Group's Interim Report for January-June
2010 is published. The shares will be acquired in accordance with the terms of
the authorisation by the Annual General Meeting. The shares will be acquired for
use as part of the 2010 long-term incentive plan for the Orion Group's key
persons.
The Board of Directors is authorised to decide on conveyance of no more than
500,000 Orion Corporation B shares held by the Company. Such shares held by the
Company can be conveyed either against or without payment. Such shares held by
the Company can be conveyed by selling them in public trading on NASDAQ OMX
Helsinki; in a share issue placement to the Company's shareholders in proportion
to their holdings at the time of the conveyance regardless of whether they own A
or B shares; or ?in a share issue placement deviating from shareholders'
pre-emptive rights if there is a weighty financial reason, such as the
development of the capital structure of the Company, using the shares to finance
possible corporate acquisitions or other business arrangements of the Company,
financing capital expenditure or as part of the Company's incentive plan. The
share issue placement can be without payment only if there is an especially
weighty financial reason in the view of the Company and to the benefit of all
its shareholders. The amounts paid for shares in the Company conveyed shall be
recorded in a distributable equity fund. The Board of Directors shall decide on
other matters related to the conveyance of shares held by the Company.
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 Plan
Altogether 65,606 Orion Corporation B shares held by the Company were
transferred at the beginning of March 2010 as a share bonus for 2009 to key
persons employed by the Group and belonging to the Share-based Incentive Plan of
the Orion Group. The price per share of the transferred shares was EUR 16.47,
which was the volume weighted average quotation of Orion Corporation B shares on
1 March 2010. The total transaction price of the transferred shares was
therefore EUR 1,080,564.
In February 2010 the Board of Directors of Orion Corporation decided on a new
share-based incentive plan for the Group key persons. The Plan includes earning
periods and the Board of Directors will annually decide on the beginning and
duration of the earning periods in 2010, 2011 and 2012. The Board of Directors
will decide on the earnings criteria and on targets to be established for them
at the beginning of each earning period. The target group of the Plan consists
of approximately 30 people. The total maximum amount of rewards to be paid on
the basis of the Plan is 500,000 Orion Corporation B shares and a cash payment
corresponding to the value of the shares.
Share ownership
At the end of June 2010 Orion had a total of 56,615 (47,239) registered
shareholders, of whom 95% (94%) were private individuals holding 52% (50%) of
the entire share stock and 64% (60%) of the total votes. There were altogether
37 (31) million nominee-registered shares, which is 26% (22%) of all shares, and
they conferred entitlement to 5% (5%) of the votes.
At the end of June 2010 Orion held 214,424 (280,030) B shares as treasury
shares, which is 0.2% (0.2%) of the Company's total share stock and 0.02%
(0.02%) of the total votes.
No new transactions exceeding the notification threshold set in the Finnish
Securities Markets Act were brought to the attention of the Company during the
first quarter of 2010.
Personnel
The average number of employees in the Orion Group in January-June 2010 was
3,135 (3,232). At the end of June 2010 the Group had a total of 3,228 (3,284)
employees, of whom 2,599 (2,712) worked in Finland and 629 (572) outside
Finland.
Salaries and other personnel expenses in January-June 2010 totalled EUR 85 (86)
million.
Legal proceedings
Lawsuits against Sun companies ended in settlement
Orion Corporation, and Sun Pharmaceutical Industries Limited and certain other
companies belonging to the Sun Group of companies (together "Sun") have agreed a
settlement to lawsuits filed by Orion in the United States against Sun regarding
Sun's submissions of abbreviated new drug applications ("ANDAs") for generic
versions of Orion's Comtan® and Stalevo®.
Litigations against Sun by Orion have been ongoing in the United States since
2007. The settlement agreement covers all these lawsuits. Under the terms of the
settlement agreement, Sun will be able to launch generic versions of Stalevo
tablets with strengths 25/100/200 mg and 37.5/150/200 mg (active ingredients
carbidopa, levodopa, entacapone) in the United States on 1 April 2012. In
addition to these strengths, Sun will be able to launch generic versions of
Stalevo tablets with other strengths on 2 October 2012 and generic versions of
Comtan on 1 April 2013 unless certain conditions relating to the launch are
fulfilled even earlier. The parties have agreed that Orion will supply the
generic versions of these products to Sun. The parties will not disclose the
terms of the settlement agreement in other respects.
As a consequence of this settlement, Wockhardt, with which Orion executed a
patent dispute settlement on 29 April 2009, can launch other generic versions of
Stalevo except the strengths 25/100/200 mg and 37.5/150/200 mg in the United
States already on 1 April 2012, and tablets with the strengths 25/100/200 mg and
37.5/150/200 mg approximately six months after Sun is allowed to market them
under the licence from Orion unless certain conditions relating to the launch
are fulfilled even earlier.
The settlement agreement ended the lawsuits and Orion's US Patents No.
5,446,194 and No. 6,500,867, which were challenged, remain in force.
In compliance with the applicable US laws, Orion has filed all of the agreements
related to the settlement with the United States Federal Trade Commission and
the United States Department of Justice.
Legal proceedings against the Sandoz companies
On 4 September 2009 Orion Corporation and Hospira, Inc. filed together a patent
infringement lawsuit in the United States against Sandoz International GmbH and
Sandoz Inc. to enforce their patents valid in the United States. Sandoz Canada
Inc. has since been added as a defendant in the lawsuit. The legal proceedings
concern Orion's US Patent No. 4,910,214 and Orion's and Hospira's commonly owned
US Patent No. 6,716,867.
Sandoz Inc. has sought authorisation to produce and market in the United States
a generic version of Orion's proprietary drug Precedex® (dexmedetomidine
hydrochloride 100 ?g/ml), which is marketed in the United States by Orion's
licensee Hospira.
Orion expects the costs of the legal proceedings against the Sandoz companies to
be substantially less than the costs of the settled entacapone patent litigation
in the United States.
Business Reviews
Pharmaceuticals
Review of human pharmaceuticals market
According to statistics collected by Finnish Pharmaceutical Data Ltd, Finnish
wholesale of human pharmaceuticals in January-June 2010 totalled EUR 937 (960)
million, down by 3% on the comparative period of the previous year. The market
as a whole decreased most in pharmaceuticals covered by the reference price
system, which has been in force since the beginning of April 2009.
Finland is the most important individual market for Orion, generating
one-quarter of the Group's net sales.
Orion continued to strengthen its position as leader in marketing
pharmaceuticals in Finland. According to statistics collected by Finnish
Pharmaceutical Data Ltd, Orion's wholesale of human pharmaceuticals in Finland
in January-June 2010 amounted to EUR 92 (91) million, up by one per cent on the
comparative period. Orion's market share was 10% (10%), which was nearly four
percentage points higher than for the second-largest company.
According to IMS Health pharmaceutical sales statistics, in the 12-month period
ending in March 2010 the total sales of Parkinson's drugs in the United States
were up by 6% at USD 1,026 million (USD 966 million in the previous 12-month
period). The five largest European markets for Parkinson's drugs were Germany,
the United Kingdom, France, Spain and Italy. In these countries, the combined
sales of Parkinson's drugs in the 12-month period ending in March 2010 totalled
EUR 937 (877) million, and the average market growth was 7%.
The most important individual therapy area for Orion is the treatment of
Parkinson's disease. Orion's Parkinson's drugs account for just under one-third
of the Group's net sales. Sales of Orion's Parkinson's drugs continued to grow
and clearly faster than the market as a whole in the United States and Japan.
According to IMS Health pharmaceutical sales statistics, in the 12-month period
ending March 2010, total sales of Orion's Parkinson's drugs were up by 10% at
EUR 179 (163) million in the United States, up by 6% at a total of EUR 152 (143)
million in the five largest Parkinson's drugs markets in Europe, and up by 48%
at EUR 35 (24) million in Japan. The market share of Orion's Parkinson's drugs
was 17% in the United States, on average 16% in the five largest European
markets and 9% in Japan.
According to IMS Health pharmaceutical sales statistics, sales of the intensive
care sedative Precedex (dexmedetomidine), which is becoming increasingly
important for Orion, were up by 55% at USD 101 million in 2009 (USD 65 million
in 2008); 85% of the sales were in the United States, where Precedex sales grew
by 62% to USD 85 (53) million.
Net sales and operating profit of the Pharmaceuticals business
Net sales of the Pharmaceuticals business in January-June 2010 were up by 9% at
EUR 399 (365) million. The operating profit of the Pharmaceuticals business was
up by 21% at EUR 131 (109) million. The operating profit of the Pharmaceuticals
business was 33% (30%) of the segment's net sales.
Net sales of Orion's top ten pharmaceuticals in January-June 2010 were up by
12% at EUR 220 (196) million. They accounted for 55% (54%) of the total net
sales of the Pharmaceuticals business. Among these best-sellers, the
fastest-growing products were Precedex sedative for patients in intensive care
and Simdax heart failure drug.
Net sales of the products based on own in-house R&D in January-June 2010 were up
by 12% at EUR 197 (176) million. These products accounted for about 49% (48%) of
the net sales of the Pharmaceuticals business.
Proprietary Products
The product portfolio of Proprietary Products consists of patented prescription
drugs in three therapy areas: central nervous system drugs; oncology and
critical care drugs; and Easyhaler® pulmonary drugs.
Net sales of Proprietary Products in January-June 2010 were EUR 184 (166)
million, up by 11% on the comparative period of the previous year.
Orion's drugs for treatment of Parkinson's disease are Stalevo® (active
ingredients carbidopa, levodopa, entacapone) and Comtess/Comtan® (entacapone),
and their net sales in January-June 2010 totalled EUR 126 (123) million. The net
sales were up by 2% and accounted for 31% (34%) of the total net sales of the
Pharmaceuticals business. Net sales from deliveries of Parkinson's drugs to
Novartis totalled EUR 77 (76) million, up by about one per cent. Deliveries of
Stalevo to Novartis were similar to the comparative period, but deliveries of
Comtan increased by 3%. Total net sales generated by Parkinson's drugs in
Orion's own sales organisation were up by 3% at EUR 49 (47) million. Net sales
of Stalevo through Orion's own sales network were up by 9% at EUR 40 (37)
million.
Patent litigation in the United States against the Sun companies was ended by a
settlement agreement in June. Patent litigation against Sandoz companies
continues. The Sandoz companies intend to launch in the United States a generic
version of Precedex (active ingredient dexmedetomidine) developed by Orion.
Net sales of Simdax® for acute decompensated heart failure (active ingredient
levosimendan) intravenous drug in January-June 2010 were up by 77% at EUR 20
(11) million.
Net sales of the Easyhaler® product family for asthma and chronic obstructive
pulmonary disease in January-June 2010 were up by 16% at a total of EUR 15 (13)
million. The largest markets for the product family are Germany, Turkey and
Finland.
Net sales of the Precedex® intensive care sedative (active ingredient
dexmedetomidine) in January-June 2010 were up by 91% at EUR 13 (7) million. In
markets outside Europe the sedative is sold by Orion's partner Hospira. In the
first half of the year Orion concluded its research programme for developing
dexmedetomidine for European markets and the Company plans to apply for European
marketing authorisation by the end of 2010.
Specialty Products
Net sales of the Specialty Products business division's off-patent, i.e.
generic, prescription drugs and self-care products were up by 7% at EUR 144
(134) million in January-June 2010. Net sales of Specialty Products in markets
outside Finland were up by 20% on the comparative period. Orion launched 59 (21)
generic prescription drugs and self-care products in the first half of 2010.
Net sales in Finland of Orion's human pharmaceuticals were up by one per cent at
EUR 101 (100) million in January-June 2010. Specialty Products accounted for
most of the sales. Orion has retained its position as clear market leader owing
above all to its competitive self-care product portfolio and its broad product
portfolio, particularly in substitutable prescription drugs. The implementation
of the reference price system in Finland in April 2009 and intense price
competition due to it continued to reduce the market as a whole. The reference
price system has further intensified price competition, but also expanded the
range of substitutable prescription drugs.
Net sales of Orion's human pharmaceuticals in Eastern Europe in January-June
2010 were up by 19% at EUR 22 (18) million. Specialty Products account for the
majority of sales in the region. The growth has been strong in many markets due
to the good performance of individual products.
Orion continued to develop its self-care product portfolio in Scandinavia. Orion
aims to make its domestic market all the Nordic countries, not just Finland.
Growth in net sales was strong in the first half of the year in Denmark, Sweden
and Norway due to new products. The markets in Sweden are being transformed by
the abolition of the national pharmacy monopoly. Orion has been able to
strengthen its market position despite the clearly intensified price competition
due to the change in the distribution channels.
US pharmaceutical company GTx undertook studies of the efficacy of 20 mg doses
of toremifene, a selective oestrogen modulator developed by Orion, in prevention
of prostate cancer in men. Orion originally developed toremifene for treatment
of breast cancer. Results published in May showed that there were fewer prostate
cancer cases with toremifene than with a placebo, but the difference was not
statistically significant. The study involved 1,600 men and a three-year
treatment period. GTx also announced that it would begin new clinical Phase III
trials on the use of 80 mg doses of toremifene for treating the side effects of
prostate cancer treatment.
Animal Health
Net sales of the Animal Health business division in January-June 2010 were up by
8% at EUR 33 (30) million. Net sales of the animal sedatives Dexdomitor®
(dexmedetomidine), Domitor® (medetomidine), Domosedan® (detomidine) and
Antisedan® (atipamezole) were up by 29% and accounted for 33% (28%) of the
division's net sales. Sedative sales in the period under review were
particularly strong in the United States and Japan.
Orion has been appointed as distributor of the Janssen Animal Health products
for pets in certain Eastern European countries.
Orion is the second-biggest marketer of veterinary drugs in the Finnish market
for veterinary drugs with a market share of 19% in January-June 2010, which is
three percentage points behind the market leader. The Finnish market for
veterinary drugs was up by 9% at about EUR 25 million in the first half of 2010.
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 2010 excluding pharmaceutical
ingredients supplied for Orion's own use were up by 18% at EUR 26 (22) million
and accounted for about two-thirds of Fermion's entire net sales. Orders for
many key products are still high, even though competition in the markets remains
intense.
Research and development projects
The Group's R&D expenses in January-June 2010 totalled EUR 39 (49) million, of
which the Pharmaceuticals business accounted for EUR 37 (46) million. The
Group's R&D expenses accounted for 9% (13%) of the Group's net sales. R&D
expenses also include expenses relating to development of the current portfolio.
Orion and Polish biotechnology company Selvita have agreed to collaborate on
further development and commercialisation of formulations of a drug for
treatment of Alzheimer's disease and other cognitive disturbances included in
Selvita's research programme. Selvita will be responsible for early-phase
research, following which Orion will undertake the development phases, including
pre-clinical and clinical trials, and commercialisation.
The initials results of studies with the sedative dexmedetomidine show that it
is as effective as the standard comparative products midazolam and propofol.
Compared with midazolam, dexmedetomidine also decreased the duration of
treatment in a ventilator. Based on these positive results, Orion plans to apply
for European marketing authorisation for dexmedetomidine by the end of 2010.
Orion has ongoing projects to broaden the range of the Easyhaler product family.
Orion's aim is not only to utilise Easyhaler technology in current products and
development projects, but also to develop new products. Orion is developing a
budesonide-formoterol formulation that combines budesonide as an
anti-inflammatory agent and formoterol as a long-acting bronchodilator. More
information on the research programme will be given during 2010.
Orion has a new Easyhaler research programme in progress to develop a
fluticasone-salmeterol formulation. In this formulation fluticasone acts as an
anti-inflammatory agent and salmeterol acts as a long-acting bronchodilator.
Orion is collaborating with Novartis to develop Stalevo for the Japanese market.
The aim is to submit a market authorisation application during 2011.
Orion has an alpha 2c receptor antagonist undergoing clinical Phase I studies.
In early research, this compound has been found to be possibly suitable for the
treatment of the symptoms of schizophrenia or Alzheimer's disease.
Orion has several projects in the early research phase investigating selective
androgen receptor modulators (SARM), prostate cancer, neuropathic pain,
Parkinson's disease and other possible indications within intensive care, among
others.
Diagnostics
Orion Diagnostica manufactures easy-to-use, rapid in vitro diagnostic tests for
use externally on the body and test systems suitable for point-of-care testing.
Net sales of the Diagnostics business in January-June 2010 were up by 5% at EUR
24 (23) million.
Sales of QuikRead® infection tests remained strong. Sales of industrial hygiene
products also developed favourably. Sales continued to grow in China and the
Czech Republic, but in the Nordic countries more slowly than in the comparative
period.
QuikRead tests maintained their position as the main products and sales
continued to grow well. The tests are used in, for example, detecting infection
from the CRP level in a blood sample or streptococcus A in a pharyngeal sample.
The increasing selection of QuikRead products in doctors' surgeries and clinical
laboratories creates a firm basis for growth in future demand for reagents used
in tests.
The operating profit of the Diagnostics business was up by 24% at EUR 4 (3)
million and accounted for 17% (15%) of the segment's sales. R&D expenditure on
diagnostic tests and equipment totalled EUR 3 (3) million, which is 12% (14%) of
the business area's net sales.
In April Orion Diagnostica received the Innovation Award of Chemical Industry
Finland for Orion Clean Card PRO® for testing surface cleanliness. The chemical
test, manufactured by printing, was jointly developed by Orion Diagnostica and
VTT (Technical Research Centre of Finland). The test, which is quick and easy to
use, is for assessing and monitoring surface cleanliness. The test can be
utilised by, for example, the food and drinks industry and hospitals, as hygiene
requirements become more stringent.
Espoo, 10 August 2010
Board of Directors of Orion Corporation
Orion Corporation
Timo Lappalainen Jari Karlson
President and CEO CFO
Tables
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR million Q2/10 Q2/09 Change % Q1-Q2/10 Q1-Q2/09 Change % 2009
--------------------------------------------------------------------------------
Net sales 207.4 196.4 +5.6% 421.9 386.4 +9.2% 771.5
--------------------------------------------------------------------------------
Cost of goods sold -68.2 -68.1 +0.1% -137.8 -129.9 +6.1% -265.2
--------------------------------------------------------------------------------
Gross profit 139.2 128.3 +8.5% 284.0 256.5 +10.7% 506.3
--------------------------------------------------------------------------------
Other income and expenses -2.2 1.6 -240.3% -4.6 2.2 -307.6% 6.0
--------------------------------------------------------------------------------
Selling and marketing
expenses -44.8 -40.3 +11.2% -88.7 -75.3 +17.8% -160.0
--------------------------------------------------------------------------------
R&D expenses -20.2 -25.0 -19.1% -39.4 -49.1 -19.7% -95.2
--------------------------------------------------------------------------------
Administrative expenses -12.1 -14.2 -14.8% -20.3 -27.0 -24.9% -50.2
--------------------------------------------------------------------------------
Operating profit 60.0 50.4 +18.9% 131.0 107.3 +22.1% 207.0
--------------------------------------------------------------------------------
Finance income 1.7 1.0 +71.7% 2.7 3.1 -15.1% 5.1
--------------------------------------------------------------------------------
Finance expenses -2.2 -2.4 -7.7% -3.4 -4.8 -29.3% -8.4
--------------------------------------------------------------------------------
Profit before taxes 59.4 49.0 +21.2% 130.2 105.6 +23.3% 203.7
--------------------------------------------------------------------------------
Income tax expense -15.4 -12.8 +20.1% -33.9 -27.6 +22.8% -52.3
--------------------------------------------------------------------------------
Profit for the period 44.0 36.2 +21.6% 96.4 78.0 +23.5% 151.4
--------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME INCLUDING TAX EFFECTS
--------------------------------------------------------------------------------
Translation differences 1.7 0.9 +85.3% 2.1 1.1 +86.0% 1.3
--------------------------------------------------------------------------------
Cash flow hedges 0.3 0.5 -51.8% 0.0 0.2 -89.7% 0.9
--------------------------------------------------------------------------------
Other comprehensive
income net of tax 1.9 1.4 +35.0% 2.1 1.4 +56.2% 2.1
--------------------------------------------------------------------------------
Comprehensive income for
the period including tax
effects 45.9 37.6 +22.1% 98.5 79.4 +24.0% 153.5
--------------------------------------------------------------------------------
PROFIT ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Owners of the parent
company 44.0 36.2 +21.6% 96.4 78.0 +23.5% 151.4
--------------------------------------------------------------------------------
Non-controlling interests 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Owners of the parent
company 45.9 37.6 +22.1% 98.5 79.4 +24.0% 153.5
--------------------------------------------------------------------------------
Non-controlling interests 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Basic earnings per share,
EUR 1) 0.31 0.26 +21.5% 0.68 0.55 +23.4% 1.07
--------------------------------------------------------------------------------
Diluted earnings per
share, EUR 1) 0.31 0.26 +21.5% 0.68 0.55 +23.4% 1.07
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Depreciation and
amortisation 8.8 8.4 +4.6% 17.5 16.4 +6.3% 34.4
--------------------------------------------------------------------------------
Personnel expenses 44.5 44.6 -0.4% 84.6 86.4 -2.1% 171.4
--------------------------------------------------------------------------------
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 6/10 6/09 Change % 2009
---------------------------------------------------------
Property, plant and equipment 189.6 188.6 +0.6% 192.0
--------------------------------------Weitere Infos zu dieser Pressemeldung:
Unternehmensinformation / Kurzprofil:
Datum: 10.08.2010 - 11:01 Uhr
Sprache: Deutsch
News-ID 39294
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contact information:
Town:
Espoo
Kategorie:
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"Orion Group Interim Report January-June 2010"
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