Today, Bayer’s results are finally out, so a couple of observations about Nubeqa:
The first observation is that Orion’s reported Nubeqa royalties for Q4 were surprisingly high relative to Bayer’s corresponding Q4 sales, which is both positive (good royalty %) and negative news (no huge sales)
Q3 2024:
Bayer Nubeqa sales: €417m
Orion adjusted royalty: €89m
→ Adjusted royalty-%: 21.3%
Q4 2024:
Bayer Nubeqa sales: €443m
Orion adjusted royalty: €141m
→ Adjusted royalty-%: 31.8% (In the calculation, I note that royalties are adjusted by subtracting the previous quarter’s product sales from the current quarter’s total royalty (product sales + so-called pure royalty)
This would suggest that some tiered royalty-% has been strongly activated during Q4. For the full year, Orion’s royalty-% remained between 23–24%, which I consider high compared to previous guidance for Nubeqa royalties:
“Initially royalties are approximately 20%… if annual sales EUR 3 billion, Orion’s average royalty is slightly above 25%.”
So, even €1.5bn in Nubeqa sales is enough to reach close to a 25% royalty level, nice!
The second observation relates to Bayer’s joint 2025 guidance for Nubeqa and Kerendia (there doesn’t seem to be separate Nubeqa guidance so we’ll go with this)€2.5bn+ seems very cautious, especially since Bayer mentions not taking potential Trump tariffs into account in the guidance.
In 2024, Nubeqa + Kerendia sales were already practically €2bn, and y/y growth was 75%.
To reach the guidance, a mere ~26% growth would suffice! Even though both drugs are still patent-protected and there is no information about significant new competitors.
For example, even if growth dropped from 75% to 50%, sales would be €3bn.
This suggests that Bayer might be intentionally conservative, but of course, the upper range is missing. (Similar caution was also observed in Orion’s guidance.)
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Sighs of relief were heard overnight when Trump’s tariffs on medicines didn’t materialize. It was only because the preparation of medicine tariffs is still underway and an attack is coming soon:
Here are the calculations and tables showing the potential impact of the pharmaceutical tariffs under preparation on the industry’s products exported to the USA (cf. Nubeqa):
Update: Oops, apparently a paywall, so here is the core essence of the article on the impact of different tariff sizes as an image:
Mr. Siltanen’s pre-earnings report, as Orion publishes its Q1 report on Wednesday.
We expect earnings to be growing again, supported by Nubeqa and the Easyhaler product family. However, Orion’s operating environment has weakened in the United States, likely due to impending tariffs and a weakening dollar. The outlook for the rest of the year and possibly the coming years has thus slightly weakened, and the stock’s risk level has increased. We are moderately cutting our forecasts and raising the cost of capital in line with the increased risk level. We reiterate our ‘reduce’ recommendation and lower the target price to 50 euros (previously 55).
Apparently, with this seemingly competent forecast, Orion’s stock price has slid almost -5% today. Of course, it was gradually doing so before too, but now significantly.
And this intention by Trump & co to tackle drug prices is probably also in the background:
There’s a double risk at hand, as in addition to Trump, various things can be expected from his Secretary of Health in the coming years. Fortunately, the company’s otherwise strong situation acts as a safety cushion.
If traditional CEO interviews are coming from @Antti_Siltanen@Verneri_Pulkkinen, then in addition to tariffs, product development, etc., I would be interested to hear more about the Orion laboratory opened in Cambridge. What exactly are they aiming for?
Net sales were EUR 354.6 million (EUR 308.5 million Jan–Mar 2024)
Operating profit was EUR 77.9 (56.0) million
Undiluted earnings per share were EUR 0.44 (0.31)
Cash flow from operations per share was EUR 0.55 (0.78)
Outlook for 2025 remains unchanged. Net sales are estimated to be EUR 1,550–1,650 million. Operating profit is estimated to be EUR 350–450 million.
U.S. import tariffs are a global hot topic, and there is a lot of uncertainty surrounding the issue at the moment. The United States is an important market for Orion, and we are, of course, closely monitoring the situation.
Today, the stock price also jumped back up by about five percent. And no wonder, as only Trump’s antics seem to overshadow what is likely the most robust earnings report on the entire Helsinki stock exchange.
Trump has promised drug tariffs in a week and a half at the latest. The basic idea is that pharmaceutical companies will be made to pay for tax cuts, and there are also hints in the air about (mandatory) drug price reductions.
Here’s the latest situation update. It gives the impression that even a slight panic is setting in among pharmaceutical companies.
Although it directly concerns Novo, take a look at what Santeri Korpinen from Sifter says around the 25-minute mark. Chilling speech. This is what we’ve come to. Finland is politically firmly on the same playing field as Denmark. The formulation was a completely clear decision not to invest due to strategic risk.
Now it’s starting to be full-blown chaos. So Trump is threatening a forced price reduction of up to 80% for medicines in the US market, additional tariffs on medicine imports from the EU area, and additionally intends to interfere with medicine pricing also in European markets. Nubeqa, in particular, is in the middle of this mess.
Bayer’s Q1 report mentions Nubeqa’s triumph: “Our launch assets Nubeqa™ and Kerendia™ continued to perform particularly well, growing 80 percent year-on-year and reaching combined sales of 680 million euros.”
so we’ll go with this) €2.5bn+ seems very cautious, especially since Bayer mentions not taking potential Trump tariffs into account in the guidance.
