Orion Group Interim Report 1-3/2023

Orion Group Interim Report 1–3/2023	3
Key figures	3
President and CEO Liisa Hurme: Nubeqa® becomes Orion's best-selling product	4
Outlook for 2023	5
Impacts of the war in Ukraine on Orion	5
Financial review for 1 January–31 March 2023	6
Business review	9
Research and development	13
Personnel	14
Significant legal proceedings	14
Decisions by the Annual General Meeting	14
Key events in January–March 2023	16
Key events after the reporting period	16
Shares and shareholders	16
Orion's dividend distribution policy	17
Financial objectives	18
Possible transfer of pension insurance portfolio to a pension insurance company	18
Outlook for 2023	19
Basis for outlook in more detail	19
Near-term risks and uncertainties	20
Upcoming events	22
Tables	23
Appendices	27

Orion Group Interim Report 1–3/2023

Net sales totalled EUR 277.9 (1–3/2022: 270.6) million
Operating profit was EUR 55.5 (71.5) million
Profit before taxes was EUR 55.1 (72.1) million
Equity ratio was 56.9% (52.9%)
Return on capital employed before taxes (ROCE) was 22.0% (35.7%)
Return on equity after taxes (ROE) was 21.4% (33.1%)
Basic earnings per share were EUR 0.31 (0.41)
Cash flow from operating activities per share was EUR 0.03 (0.24)
Outlook for 2023 is unchanged, but with the addition of a note on the possible transfer of the Orion Pension Fund's B fund to a pension insurance company. Orion estimates that net sales in 2023 will be slightly higher than in 2022 without the EUR 228 million impact from the ODM-208 upfront payment (net sales in 2022 without the impact of the ODM-208 upfront payment were EUR 1,113 million). Operating profit is estimated to be slightly higher or higher than in 2022 without the EUR 208 million net impact from the ODM-208 upfront payment and without the possible transfer of the insurance portfolio of Orion Pension Fund's B fund

(operating profit in 2022 without the net impact of the ODM-208 upfront payment was EUR 232 million).

Key figures

	1–3/23	1–3/22	Change %	1–12/22
Net sales, EUR million	277.9	270.6	+2.7%	1,340.6
EBITDA, EUR million	67.7	83.0	-18.4%	487.1
% of net sales	24.4%	30.7%		36.3%
Operating profit, EUR million	55.5	71.5	-22.4%	439.6
% of net sales	20.0%	26.4%		32.8%
Profit before taxes, EUR million	55.1	72.1	-23.6%	440.3
% of net sales	19.8%	26.7%		32.8%
Profit for the period, EUR million	43.8	57.3	-23.6%	349.5
% of net sales	15.8%	21.2%		26.1%
Research and development expenses, EUR million	31.7	31.5	+0.6%	133.2
% of net sales	11.4%	11.6%		9.9%
Capital expenditure, excluding acquired in business combinations, EUR million	18.1	11.1	+62.8%	109.6
% of net sales	6.5%	4.1%		8.2%
Acquired in business combination, net of cash, EUR million	0.0			82.0
Interest-bearing net liabilities, EUR million	110.8	-126.8	-187.4%	-118.7
Basic earnings per share, EUR million	0.31	0.41	-23.4%	2.49
Cash flow from operating activities per share, EUR	0.03	0.24	-87.9%	3.09
Equity ratio, %	56.9%	52.9%		60.9%
Gearing, %	15.2%	-19.8%		-13.1%
Return on capital employed (before taxes), %	22.0%	35.7%		45.1%
Return on equity (after taxes), %	21.4%	33.1%		42.2%
Average personnel during the period	3,546	3,358	+5.6%	3,472

President and CEO Liisa Hurme:

Nubeqa® becomes Orion's best-selling product

"In January-March 2023, our net sales increased by 2.7% to EUR 277.9 million and our operating profit decreased by 22.4% to EUR 55.5 million. The operating profit decline from the comparative period was expected, and the year has started largely according to our plans.

The Innovative Medicines business division's revenue increased significantly thanks to the good performance of Nubeqa®, which topped the list of Orion's best-selling products for the first time. The net sales of the Branded Products business division, on the other hand, decreased clearly. The Easyhaler® product family continued to grow, but the timing of partner deliveries of Parkinson's medicines and lower sales of the Divina® series weighed on net sales. In Finland, sales of generics and OTC products increased due to strong volume growth. However, the overall sales of the Generics and Consumer Health division declined due to generic competition and declining prices of Simdax® and dexmedetomidine products for human use, together with the significant contraction of operations in Russia. Net sales of the Animal Health business division include the turnover of the animal health company VMD (Inovet), acquired in June 2022, which explains the strong increase from the comparative period.

The decline in operating profit is explained by lower gross profit and increase in fixed cost. The gross profit was depressed by cost inflation, price declines and product mix. The effect of the contraction of operations in Russia on the gross profit was approximately EUR 7 million negative. The impact of Nubeqa on gross profit was twofold compared to the comparative period. On the one hand, royalties increased significantly, on the other hand Orion supplied Nubeqa to Bayer at a lower price than in the comparative period. The lowered Nubeqa delivery price has only a temporary effect on the timing of Orion's profits, as it will correspondingly decrease the deductions from future royalties. Operating costs increased as expected. Sales and marketing expenses increased because in the comparative period COVID-19 still limited promotional activities in some areas. In addition, sales and marketing expenses as well as administrative expenses now also include the expenses of the acquired animal health company VMD (Inovet), which were absent in the comparative period.

For the full year, we expect operating profit to be slightly higher or higher than in 2022. This estimate is based on assumptions including continued good performance of Nubeqa, easing of cost inflation in the second half of the year, levelling off of the decline in sales of Simdax and dexmedetomidine products for human use, and a EUR 30 million milestone payment related to the sales of Nubeqa.

Research & development pipeline is progressing according to our strategy. During the review period, we expanded our clinical development programme with our partner Bayer for darolutamide and initiated a new multi-year Phase III ARASTEP study in early-stage prostate cancer. Nubeqa also dominated Orion's news flow during the period with the approval of the product in Japan, the European Union and China for the treatment of metastatic hormone-sensitive prostate cancer (mHSPC). With our partner MSD, we plan to take the ODM-208 molecule into Phase III by the end of this year. The Phase II study with ODM-208 continues as planned. Our other active clinical phase development projects, namely the Phase III ARANOTE study with darolutamide in collaboration with Bayer and the Phase I study with ODM-111 for pain, have also continued as planned. We look forward to continuing all our R&D projects to develop new treatments for the benefit of patients who need them."

Outlook for 2023

Orion estimates that net sales in 2023 will be slightly higher than in 2022 without the EUR 228 million impact from the ODM-208 upfront payment

(net sales in 2022 without the impact of the ODM-208 upfront payment were EUR 1,113 million).

Operating profit is estimated to be slightly higher or higher than in 2022 without the EUR 208 million net impact from the ODM-208 upfront payment and without the possible transfer of the insurance portfolio of Orion Pension Fund's B fund

(operating profit in 2022 without the net impact of the ODM-208 upfront payment was EUR 232 million).

Basis for the outlook and an overview of near-term risks and uncertainties are provided on pages 19-21 of this review.

Impacts of the war in Ukraine on Orion

Financial risks for Orion caused by the war in Ukraine relate to net sales, receivables and inventories in Russia and Ukraine. Orion's operations in Russia and Ukraine are sales operations and the Company does not have any proprietary fixed assets in these countries.

Orion's operations in Russia have contracted significantly since the outbreak of the war and continue to do so. In 2023, Orion's sales in Russia will decrease significantly from 2022, when Russia accounted for approximately 3% of the Group's total product sales. To Ukraine Orion has exported commercial deliveries of medicines and donated medicines through charity organisations. The company will continue efforts to deliver medicines to Ukraine also going forward.

At the end of March 2023, Orion's trade receivables in Russia amounted to EUR 0.6 million and the value of inventories was EUR 3.6 million. Changes in the value of the Russian rouble may affect the value of trade receivables and inventories in euros, but the changes will not have a material impact on the Group due to the contracted operations in Russia.

Orion does not procure energy, raw materials, or other utilities from Russia. The availability of natural gas and raw materials from Russia and Ukraine could cause potential risks to Orion's suppliers. Together with its partners, Orion works to analyse and minimise possible risks.

Financial review for 1 January–31 March 2023

Change in reporting from 1 January 2023

Orion's new organisational structure entered into force on 1 January 2023, as a result of which, starting with the interim report 1–3/2023, Orion will report its net sales by business division in accordance with the new organisational structure. The business divisions are Innovative Medicines, Branded Products, Generics and Consumer Health, Animal Health, and Fermion.

In addition to the new organisational structure and how Orion itemises net sales, the company revised its accounting practice as of 1 January 2023 by re-assigning expenses associated with information management, previously reported as cost of goods sold, sales and marketing expenses or research and development expenses, to administrative expenses. The change does not affect the Group's reported key figures, operating profit or balance sheet, but it increases previously reported administrative expenses for 2022 by EUR 6.6 million and correspondingly decreases the cost of goods sold, sales and marketing expenses and research and development expenses. More information on the impact of the revision is provided in a stock exchange release published on 27 March 2023.

Net sales

Orion Group's net sales in January–March 2023 increased by 2.7% and totalled EUR 277.9 (270.6) million. Exchange rate fluctuations had an EUR 1.0 million positive impact on net sales during the period. Net sales of Orion's top ten pharmaceuticals amounted to EUR 138.1 (142.6) million. They accounted for 49.7% (52.7%) of total net sales.

1	Net sales in 1–3/2022	6	Other products and services (ex Animal Health & Fermion)
2	Nubeqa® (product sales & royalty)	7	Exchange rates
3	Dexmedetomidine for human use & Simdax®	8	Animal Health & Fermion
4	Entacapone products	9	Net sales in 1–3/2023
5	Russia

The figures in the chart are rounded, which is why the total sums of individual figures may differ from the total sums.

Operating profit

The Orion Group's operating profit was down by 22.4% at EUR 55.5 (71.5) million. The decline in operating profit is explained by lower gross profit and planned increase in fixed cost. The effect of the contraction of operations in Russia on the gross profit was EUR 7.3 million negative and on fixed costs EUR 0.7 million positive. Thus the impact on operating profit was EUR 6.6 million negative. EBITDA was down by 18.4% at EUR 67.7 (83.0) million.

Gross profit from sales in local currencies increased by EUR 4.1 million from the comparative period. Price, cost and product portfolio changes had a negative impact of EUR 27.1 million on gross profit, of which roughly EUR 10 million are due to cost increase and changes in the product mix, and roughly EUR 17 million due to price decreases. A significant part of the EUR 17 million is explained by the fact that Orion supplied Nubeqa® to Bayer at a lower price than in the comparative period. The impact of this price decrease on operating profit in Q1 is significant, but it is only a temporary effect on the timing of Orion's profits, as the lower supply price will correspondingly reduce the deductions from future royalties. In addition, in January– March 2023 Orion sold some of the remaining inventories in Russia at a clearly lower price than before. Currency rate changes had a positive impact of EUR 0.5 million. With the combined impact of these items, the gross profit from product and service sales was EUR 22.5 million lower than in the comparative period.

Milestone payments accounted for EUR 0.6 (0.6) million and royalties for EUR 25.1 (11.5) million of net sales and operating profit. Other operating income and expenses accounted for EUR 2.6 (0.4) million of operating profit.

Operating expenses increased by EUR 9.2 million.

1	Operating profit in 1–3/2022	6	Milestones
2	Product & service sales without sales margin and product mix change and exchange rate effect	7	Other operating income and expenses
3	Product sales margin and product mix change but without exchange rate effect	8	Fixed cost
4	Exchange rate effect on gross margin	9	Operating profit in 1–3/2023
5	Royalties

The figures in the chart are rounded, which is why the total sums of individual figures may differ from the total sums.

Operating expenses

The Group's sales and marketing expenses were up by 11.7% and totalled EUR 53.8 (48.1) million. Sales and marketing costs increased because in the comparative period COVID-19 still restricted promotional activities and because the costs now also include the sales and marketing costs of the acquired animal health company VMD, which were absent in the reference period. Research and development expenses increased by 0.6% and totalled EUR 31.7 (31.5) million. R&D costs accounted for 11.4% (11.6%) of the Group's net sales. Administrative expenses increased by 23.0% and were EUR 17.8 (14.5) million. The increase is explained partly by VMD and partly by the new organisational structure as the costs of the new group-level function Corporate Strategy and Program Management are included in administrative expenses.

Group profit

Profit for the period was EUR 43.8 (57.3) million. Basic earnings per share were EUR 0.31 (0.41). Equity per share was EUR 5.19 (4.55).

The return on capital employed before taxes (ROCE) was 22.0% (35.7%) and the return on equity after taxes (ROE) 21.4% (33.1%).

Financial position

The Group's gearing was 15.2% (-19.8%) and the equity ratio 56.9% (52.9%).

The Group's total liabilities as at 31 March 2023 were EUR 564.3 (584.8) million. At the end of the period, interest-bearing liabilities amounted to EUR 210.6 (131.9) million. Of the total interest-bearing liabilities, EUR 189.7 (86.6) million were long-term liabilities.

The Group had EUR 99.8 (258.7) million of cash and cash equivalents at the end of the reporting period. The difference with the comparative period is due to the timing of dividend payments. In 2022 dividends were paid in the second quarter and in 2023 in the first quarter.

Cash flow

The cash flow from operating activities was EUR 4.0 (33.4) million. The decrease is explained by the decline in operating profit and the fact that working capital increased more than in the comparative period.

The cash flow from investing activities was EUR -53.6 (-14.5) million. In January–March 2023, the cash flow impact from upfront payments to Amneal and Jemincare was EUR -33 million, which mostly explains the change from comparative period.

The cash flow from financing activities was EUR -187.1 (23.1) million. The difference is mainly explained by the timing of dividend payments.

Capital expenditure

The Group's capital expenditure totalled EUR 18.1 (11.1) million. This comprised EUR 13.8 (9.3) million on property, plant and equipment and EUR 4.3 (1.9) million on intangible assets.

Business review

Review of the Finnish human pharmaceuticals market

Finland is an important market for Orion, generating about a quarter of the Group's net sales. According to Pharmarket statistics (1–3/2023), the total sales of Orion's human pharmaceuticals in January–March 2023, including both medicinal and non-medicinal products, grew by 5.4% from the previous year.

A significant product group for Orion in Finland are reference-priced prescription drugs in the pharmacy channel. The sales of Orion's reference-priced prescription drugs increased by 8.3% while the total market fell by 11.7% from the comparative period. The increase in Orion's reference-priced prescription medicines in the statistics is explained by strong volume growth. The average price of Orion's reference-priced drugs were at a similar level to the comparative period. The average price of reference-priced drugs in the market declined by approximately 17% from the comparative period (Source: Pharmarket). The strong decrease in the overall market and the average price of reference-priced drugs is explained by the statistical method, which takes into account products that are reference-priced prescription medicines at the time the statistics are compiled. The statistics for January–March 2023 include several products that were priced significantly higher in the comparative period because they were not yet included in the reference price category. The impact of constant price competition on Orion has been significant due to the Company's broad product range and significant market share in Finland.

Despite the challenging operating environment, Orion has maintained its position as leader in marketing pharmaceuticals in Finland. Orion has a particularly strong position in reference-priced prescription drugs and self-care products, with its market share being a quarter of the market in each.

EUR million	1–3/23	1–3/22	Change %
Total sales of human pharmaceuticals (hospital and pharmacy channel)
Market	752.9	728.0	+3.4%
Orion	82.7	78.5	+5.4%
Prescription drugs total (pharmacy channel)
Market	411.1	397.1	+3.5%
Orion	45.6	42.5	+7.3%
Reference priced prescription drugs (pharmacy channel) *
Market	86.9	98.5	-11.7%
Orion	22.4	20.7	+8.3%
Self-care products (pharmacy channel)
Market	114.3	107.5	+6.3%
Orion	28.6	27.3	+4.7%

Sales of human pharmaceuticals in Finland (medicinal and non-medicinal products):

* The reference-priced prescription drugs group metric counts in products that were reference-priced prescription drugs at the time the statistics were compiled. For this reason, sales and market share figures in the comparative period may deviate from previously published data.

Source: Pharmarket sales statistics 1-3/2023

Orion's market share in the sales of human pharmaceuticals in Finland (medicinal and non-medicinal products):

Orion's market share, %	1–3/23	1–3/22
Human pharmaceuticals in total (hospital and pharmacy channel)	11.0%	10.8%
Prescription drugs total (pharmacy channel)	11.1%	10.7%
Reference priced prescription drugs (pharmacy channel) *	25.8%	21.0%
Self-care products (pharmacy channel)	25.1%	25.4%

Source: Pharmarket sales statistics 1-3/2023

Orion's sales network

Orion's products are sold globally in over one hundred countries through Orion's own sales network and by partners. Orion has its own sales network in Europe and five countries in the Asia-Pacific region. Elsewhere in the world, Orion's human pharmaceuticals are sold mainly by the company's partners. Orion is engaged in the sale of veterinary drugs through its own sales network in the Nordic countries, Belgium, France, some Eastern European countries and Vietnam. Elsewhere, these products are sold by partners. The company is also engaged in the sale of Fermion and Contract Manufacturing products and services globally. In addition, Orion markets and sells drugs and products manufactured by several other companies.

In January 2023, Orion announced it has signed a long-term license agreement with Amneal Pharmaceuticals, Inc. to commercialise Amneal's generic products in most parts of Europe as well as in Australia and New Zealand. The initial portfolio will include a mix of generic products commercially available in the U.S. today, as well as selected pipeline products currently under development. Initial products will be registered throughout Europe, Australia and New Zealand starting in 2023, with launches expected over the coming years.

milj. EUR	1	1–3/23	1–3/22	Change %	1–12/22
Nubeqa® (prostate cancer)	A	38.2	19.8	+93.0%	88.4
Easyhaler® product portfolio (asthma, COPD)	B	32.2	31.2	+3.3%	129.7
Entacapone products2 (Parkinson's disease)	B	21.5	34.1	-37.1%	113.4
Simdax® (acute decompensated heart failure)	C	8.1	12.4	-34.6%	42.9
Dexdomitor®, Domitor®, Domosedan® and Antisedan® (animal sedatives)	D	8.0	5.7	+41.8%	36.3
Trexan® (rheumatoid arthritis, cancer)	C	7.6	3.7	+104.5%	15.2
Dexmedetomidine products for human use3	C	7.1	13.5	-47.2%	37.3
Burana® (inflammatory pain)	C	5.9	5.9	-0.2%	26.7
Divina series (menopausal symptoms)	B	4.9	6.8	-27.5%	27.6
Solomet® (inflammatory diseases, among others)	C	4.5	9.5	-52.2%	23.2
Total		138.1	142.6	-3.1%	540.8
Share of net sales, %		49.7%	52.7%		40.3%

Top ten best-selling pharmaceutical products

¹ Business division, A = Innovative Medicines, B = Branded Products, C = Generics & Consumer Health, D = Animal Health

² Entacapone products include Stalevo®, Comtess®, Comtan® and all other products including entacapone.

3 Includes Dexdor®, Precedex® and other dexmedetomidine products for human use

Innovative Medicines

The Innovative Medicines business division includes medicines with patent or other product protection. In addition to the sales and royalties on these products, any milestone payments or other income related to the products or research and development projects of the business division are included in its net sales. Net sales of the unit in January–March 2023 were up by 89.0% and totalled EUR 41.8 (22.1) million. Currently, the net sales of the business division are mainly generated by Orion's sales of Nubeqa® (darolutamide).

Orion's sales of Nubeqa® in January–March 2023 increased by 93.0% and totalled EUR 38.2 (19.8) million, of which royalties were EUR 23.5 (8.5) million and product sales, i.e., deliveries to Bayer, EUR 14.7 (11.3) million.

Nubeqa® is approved in more than 80 countries around the world for the treatment of patients with nonmetastatic castration-resistant prostate cancer (nmCRPC), who are at high risk of developing metastatic disease. It is also approved for the treatment of patients with metastatic hormone-sensitive prostate cancer (mHSPC) in combination with chemotherapy in a number of markets including the U.S., Japan, EU and China. Filings in other regions are underway or planned by Bayer.

Bayer holds global commercial rights to darolutamide, and Orion is entitled to receive annually tiered royalties on global darolutamide sales. The average annual royalty rate is initially approximately 20% including product sales to Bayer. As the annual global sales increase, the average annual royalty rate will increase. If the annual global darolutamide sales were EUR 3 billion, Orion's average annual royalty rate would be slightly above 25%. Orion manufactures the product for global markets and co-promotes the product in Europe with Bayer. Orion incurs front-end costs due to the structure of Nubeqa® sales recorded

by the company. Manufacturing costs are recognised at the time of delivery of the products, but royalty income is only recognised when the product is sold on the market and Orion receives royalties from Bayer. This timing difference has a material impact on the profitability of the Nubeqa® sales recorded by Orion, especially in the early stages of the product life cycle, when the relative share of product sales in the total sales recorded by Orion is high. In addition to royalties, Orion is entitled to receive progressive one-off milestone payments from Bayer that may total EUR 280 million, depending on the future sales development of Nubeqa.

Branded Products

The Branded Products business division includes products that have a strong brand name which provides a competitive advantage. Currently, most of the business division's products are products developed by Orion. Key products are the Easyhaler® product portfolio, the entacapone products and the Divina® series. The combined turnover of the Branded Products business division for January–March 2023 was EUR 59.5 (73.3) million (-18.8%).

Orion's Easyhaler® is a dry-powder inhaler developed in-house, for which Orion has developed Easyhaler® adapted dry-powder formulations of several well-known generic active pharmaceutical ingredients (salbutamol, beclometasone, budesonide, formoterol, salmeterol and fluticasone). Total net sales of the Easyhaler® product portfolio for the treatment of asthma and chronic obstructive pulmonary disease increased by 3.3% and amounted to EUR 32.2 (31.2) million in January–March 2023. The sales of the budesonide-formoterol combined formulation decreased by 1.4% to EUR 19.3 (19.6) million. The sales of other Easyhaler® products (beclometasone, budesonide, formoterol, salbutamol and salmeterol-fluticasone combined formulation) increased by 11.1% to EUR 12.9 (11.6) million.

Orion's entacapone products for the treatment of Parkinson's disease are Stalevo®, Comtess®, Comtan® and other entacapone-containing products. Their total net sales in January–March 2023 decreased by 37.1% and amounted to EUR 21.5 (34.1) million. The decrease is mainly due to the timing of deliveries to partners. Orion markets entacapone products in Europe and in some countries in the Asia-Pacific region. Elsewhere, the products are sold by partners. The most important individual market for Orion's entacapone products is currently Japan, where Orion has a distribution agreement with Novartis.

Sales of the Divina® series of hormone replacement products decreased by 27.5% to EUR 4.9 (6.8) million. The decrease is due to Russia, where the product was not sold in the first quarter of 2023.

Generics and Consumer Health

Net sales of the Generics and Consumer Health business division, comprising generic (off-patent) prescription drugs (including biosimilars) and self-care products, decreased by 7.9% in January–March 2023 and amounted to EUR 133.7 (145.2) million. The decline is mainly explained by the declining sales of Simdax®, dexmedetomidine products for human use, and the significant contraction of operations in Russia, where sales were strong in the comparison period before the outbreak of the war. Generic prescription drugs accounted for 76% (76%) and self-care products for 24% (24%) of the business division's net sales. The net sales of generic prescription drugs were EUR 101.1 (109.7) million (-7.8%) and the net sales of self-care products were EUR 32.5 (35.5) million (-8.6%)

The Generics and Consumer Health business division has four geographic regions, which are Finland and Baltics, Scandinavia, Eastern Europe, and Rest of the World (ROW). The unit's sales in Finland and Baltics in January–March 2023 amounted to EUR 74.3 (71.2) million. The increase came from both generic prescription drugs and self-care products. The general decline in the prices of reference-priced generic drugs due to price competition continued, but Orion was able to increase sales with strong volume development.

In Scandinavia, the division's sales declined by 7.6% and totalled EUR 18.9 (20.5) million.

In Eastern Europe, the division's sales amounted to EUR 11.6 (12.1) million.

Sales in ROW declined by 30.7% and stood at EUR 28.8 (41.5) million. The decline is mostly due to the generic competition and declining prices of Simdax® and dexmedetomidine products for human use, together with the significant contraction of operations in Russia where sales were strong in the comparative period before the outbreak of the war.

Animal Health

In the Nordic countries, Belgium, France, some Eastern European markets and Vietnam, Orion sells veterinary drugs itself, while the Company operates through partners in other markets. In addition, Orion markets and sells veterinary drugs manufactured by several other companies.

Net sales of the Animal Health business division in January–March 2023 were up by 103.4% and amounted to EUR 26.9 (13.2) million. Sales include the turnover of the animal health company VMD (Inovet), acquired in June 2022, which explains the increase from the comparative period. The timing of deliveries to partners also increased net sales from the comparative period. The integration of VMD to Orion's Animal Health business division is ongoing.

Sales of animal sedative products accounted for 29.8% (42.8%), or EUR 8.0 (5.7) million, of the unit's total net sales. The animal sedative product family comprises Orion's animal sedatives Dexdomitor® (dexmedetomidine), Domitor® (medetomidine) and Domosedan® (detomidine), and antagonist Antisedan® (atipamezole), which reverses the effects of the sedatives.

Fermion

Fermion manufactures active pharmaceutical ingredients for Orion and other pharmaceutical companies. Its product range comprises nearly 30 pharmaceutical ingredients. It produces active pharmaceutical ingredients for Orion's proprietary drugs developed in-house as well as for certain generic drugs. Fermion manufactures generic pharmaceutical ingredients for other pharmaceutical companies and offers contract manufacturing services for the development and manufacturing of new active pharmaceutical ingredients.

Net sales of Fermion and Contract Manufacturing in January–March 2023, excluding deliveries for Orion's own use, decreased by 10.6% from a strong comparative period and totalled EUR 18.1 (20.2) million. The decline from the comparative period is partly explained by the three-day strike that interrupted Fermion's production for more than a week in January and February, and partly by the fact that more production capacity has been allocated to the manufacturing of Orion's active pharmaceutical ingredients. In recent years, order cycles in the trade in pharmaceutical raw materials have become increasingly shorter. This has led to clearly greater fluctuation in business volumes than before, both within each annual period and between different years. Demand for Fermion products has been good and production capacity has been nearly fully utilised.

Research and development

The Group's R&D expenses in January–March 2023 totalled EUR 31.7 (31.5) million, up by 0.6%. They accounted for 11.4% (11.6%) of the Group's net sales. The core therapy areas of Orion's pharmaceutical research are oncology and pain. Orion also develops veterinary drugs and selected generic drugs.

Project	Indication		PHASE		Registration
Darolutamide ARASENS1	Prostate cancer (mHSPC)	I	II	III	Registration
Darolutamide ARANOTE1	Prostate cancer (mHSPC)	I	II	III
Darolutamide ARASTEP1	Prostate cancer (BCR)	I	III	III
ODM-208 (CYP11A1 inhibitor) 2	Prostate cancer (mCRPC)	I	II
ODM-105 (tasipimidine)	Psychiatric disorders	I
ODM-111 (NaV 1.8 blocker)	Pain	I
1 In collaboration with Bayer		=Phase	completed		=Status changed

Key clinical development projects

2 In collaboration with MSD =Phase ongoing

During the review period, darolutamide was approved for the treatment of metastatic hormone-sensitive prostate cancer in Japan, the European Union and China. The approvals are based on data from the Phase III ARASENS trial by Orion and Bayer. Filings in other regions are underway or planned by Bayer. In the ARASENS trial, darolutamide in combination with docetaxel and androgen deprivation therapy (ADT) significantly increased overall survival (OS) compared to placebo, docetaxel and ADT. The overall incidence of reported adverse events was similar between treatment arms. Consistent benefits were also seen across secondary endpoints.

Orion and Bayer have an ongoing Phase III ARANOTE clinical trial, which investigates the efficacy and safety of darolutamide in combination with androgen deprivation therapy (ADT) versus placebo plus ADT in patients with metastatic hormone-sensitive prostate cancer (mHSPC).

During the review period, Orion and Bayer initiated a new Phase III ARASTEP clinical trial which investigates the efficacy of darolutamide plus androgen deprivation therapy (ADT) versus ADT alone in hormone-sensitive prostate cancer, in patients with high-risk biochemical recurrence (BCR) who have no evidence of metastatic disease by conventional imaging and a positive PSMA PET/CT at baseline.

Orion and MSD are co-developing ODM-208 molecule, a novel selective hormone synthesis inhibitor (CYP11A1 inhibitor). Orion has an ongoing Phase II CYPIDES trial with ODM-208 for the treatment of patients with metastatic castration-resistant prostate cancer (mCRPC). The plan is to take the ODM-208 molecule into Phase III by the end of 2023.

Orion has completed Phase I clinical trial investigating the tolerability and safety of tasipimidine (ODM-105), an alpha 2 adrenoceptor agonist in healthy volunteers. Orion is preparing to start a Phase II clinical trial to investigate the efficacy and safety of ODM-105 in psychiatric disorders.

Orion has an ongoing Phase I clinical trial with ODM-111, a NaV 1.8 channel blocker, aimed for the treatment of acute and chronic pain. The study will investigate the tolerability and safety of the drug candidate in healthy volunteers.

Orion together with Propeller Health has an ongoing development project in which the Easyhaler® device is equipped with a sensor that monitors the use of the device.

Orion has two ongoing clinical projects in the field of digital therapies. The VIRPI (Pilot Study of a Virtual Reality Software for Chronic Pain) trial investigated the impacts of using virtual reality software in treating chronic low back pain. The results of this trial were positive, and Orion is currently looking for a partner for further development and commercialisation of a digital therapy software solution for treatment of chronic

pain. The ODD-402 project in collaboration with Healthware Group investigates how the care of Parkinson's patients could be developed, personalised and improved using a digital tool that collects data from patients.

Orion has several projects in the early research phase, investigating cancer and pain. Additionally, Orion has projects underway to develop new veterinary drugs and selected generic drugs.

Personnel

The average number of employees in the Orion Group in January–March 2023 was 3,546 (3,358). At the end of March 2023 the Group had a total of 3,564 (3,381) employees, of whom 2,687 (2,649) worked in Finland and 877 (732) outside Finland. The increase in personnel is mainly due to VMD, acquired in June 2022, employees being included in the Orion Group.

Salaries and other personnel expenses in January–March 2023 totalled EUR 67.4 (61.2) million.

Significant legal proceedings

Companies belonging to the Orion Group are parties to various legal disputes, which are not, however, considered to be significant legal proceedings for the Group.

Decisions by the Annual General Meeting

The Annual General Meeting of the Shareholders of Orion Corporation was held on 22 March 2023 in Helsinki. The following matters, among others, were handled at the Annual General Meeting:

Adoption of the Financial Statements for 1 January - 31 December 2022

The AGM confirmed the Financial Statements of the parent company and the Group as per 31 December 2022.

Dividend EUR 1.60 per share

The AGM resolved, in accordance with the proposal by the Board of Directors, that a dividend of EUR 1.60 per share will be paid on the basis of the Balance Sheet confirmed for the financial year that ended on 31 December 2023. The record date for the dividend payment was 24 March 2023 and the payment date was 31 March 2023.

Discharge from liability

The members of the Board of Directors and the President and CEO were discharged from liability for the financial period of 1 January - 31 December 2022.

Remuneration Report

The AGM adopted the Remuneration Report for the Company's governing bodies for 2022. The resolution is advisory in accordance with the Finnish Companies Act.

Remunerations to be paid to the Board of Directors

The AGM decided that the following remunerations will be paid to the Board of Directors:

As an annual fee, the Chairman shall receive EUR 100,000, the Vice Chairman shall receive EUR 61,000 and the other members shall receive EUR 50,000 each. However, if a member of the Board acts as the Chairman of the Audit Committee or the R&D Committee, her/his annual fee shall be EUR 61,000.

In addition, as a fee for each meeting attended, the Chairman shall receive EUR 1,200, the Vice Chairman shall receive EUR 900 and the other members shall receive EUR 600 each. The travel expenses of the Board members shall be paid in accordance with the previously adopted practice. The aforementioned meeting attendance fees shall also be paid to the Chairmen and to the members of the committees established by the Board. The meeting attendance fees of Board members permanently resident outside Finland shall be doubled if the meeting is held outside the country of residence of such a member and the person attended the meeting at the place of the meeting.

Of the above-mentioned annual fee, 60 percent shall be paid in cash and 40 percent in Orion Corporation Bshares, which shall be acquired for the members over the period 28 April - 5 May 2023 from the stock exchange in amounts corresponding to EUR 40,000 for the Chairman, EUR 24,400 for the Vice Chairman and for the Board members acting as the Chairmen of the Audit Committee and the R&D Committee and EUR 20,000 for each of the other members. The part of the annual fee that is to be paid in cash corresponds to the approximate sum necessary for the payment of the income taxes on the fees and shall be paid no later than 31 May 2023. The annual fees shall encompass the full term of office of the Board of Directors.

In addition, the AGM decided that the Company shall pay the transfer tax related to the part of the annual fee of the Board of Directors paid in shares. Potential statutory social security and pension costs incurring to Board members having permanent residence outside Finland shall be borne by Orion Corporation as required by the applicable national legislation.

Board members are required to retain ownership of the Orion Corporation B shares paid as fees for a period of two years from the date of payment of the fees. However, if the person's membership of the Board of Directors of the Company were to end before the expiry of the restriction on transfer, the restriction on transfer shall expire at the end of the membership of the Board of Directors.

Composition of the Board of Directors

The number of members of the Board of Directors was confirmed to be eight. Kari Jussi Aho, Maziar Mike Doustdar, Ari Lehtoranta, Veli-Matti Mattila, Hilpi Rautelin, Eija Ronkainen, Mikael Silvennoinen and Karen Lykke Sørensen were re-elected as members to the Board of Directors for the next term of office. Mikael Silvennoinen was re-elected as Chairman.

Auditor and their remuneration

Authorised Public Accountants KPMG Oy Ab were elected as the Company's auditor. The remunerations to the Auditor shall be paid on the basis of invoicing approved by the Company.

Amendment to Article 10 of the Articles of Association

The AGM rejected the proposal to amend Article 10 of the Articles of Association.

According to the proposal, the first paragraph of Article 10 of the company's Articles of Association would have been amended to enable holding a general meeting entirely without a meeting venue as a so-called remote meeting in addition to Espoo and Helsinki.

Authorising the Board of Directors to decide on a share issue by issuing new shares

The Board of Directors was authorised by the AGM to decide on a share issue by issuing new shares. On the basis of the authorisation, the Board of Directors shall be entitled to decide on the issuance of no more than 14,000,000 new Class B shares. The share issue authorisation shall be valid until the next Annual General Meeting of the Company. The terms are reported in more detail in a stock exchange release on 22 March 2023.

Organisation of the Board of Directors

In its constitutive meeting following the AGM, the Board of Directors elected Hilpi Rautelin to serve as Vice Chair.

Key events in January–March 2023

27 Jan 2023 Positive CHMP opinion for darolutamide in combination with docetaxel for the treatment of metastatic hormone-sensitive prostate cancer.
27 Feb 2023 Darolutamide receives approval for additional prostate cancer indication in Japan.
1 Mar 2023 Darolutamide receives EU approval for additional indication in prostate cancer.
20 Mar 2023 Darolutamide approved for additional prostate cancer indication in China.
22 Mar 2023 Orion Corporation's Annual General Meeting was held in Helsinki.
23 Mar 2023 Orion and Bayer announced that the companies will expand clinical development program for darolutamide in prostate cancer.

Key events after the reporting period

There were no key events after the reporting period.

Shares and shareholders

On 31 March 2023 Orion had a total of 141,134,278 (141,134,278) shares, of which 34,032,382 (34,774,986) were A shares and 107,101,896 (106,359,292) B shares. The Group's share capital is EUR 92,238,541.46 (92,238,541.46). At the end of March 2023, Orion held 782,973 (532,771) B shares as treasury shares. On 31 March 2023 the aggregate number of votes conferred by the A and B shares was 786,966,563 (801,326,241) excluding treasury shares.

At the end of March 2023, Orion had 81,619 (79,637) registered shareholders.

Voting rights conferred by shares

Each A share entitles its holder to twenty (20) votes at General Meetings of Shareholders and each B share to 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 a General Meeting of Shareholders. The Company itself and Orion Pension Fund do not have the right to vote at an Orion Corporation General Meeting 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 within the limitation on the maximum number of shares of a class. A total of 154,112 A shares were converted into B shares in January–March 2023.

Trading in Orion's shares

Orion's A shares and B shares are quoted on Nasdaq 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 that date. On 31 March 2023, the market capitalisation of the Company's shares, excluding treasury shares, was EUR 5,825.7 million.

Orion shares are also traded on various alternative trading platforms in addition to Nasdaq Helsinki.

Authorisations of the Board of Directors

On 22 March 2023, the Annual General Meeting of Orion Corporation authorised the Board of Directors to decide on a share issue by issuing new shares. The Board of Directors shall be entitled to decide on the issuance of no more than 14,000,000 new Class B shares. The share issue authorisation shall be valid until the next Annual General Meeting of the Company. The terms of the authorisation are reported in more detail in a stock exchange release on 22 March 2023.

On 23 March 2022, the Annual General Meeting authorised the Board of Directors to decide on the acquisition of the Company's own shares and to decide on a share issue by conveying own shares. The Board of Directors shall be entitled to decide on the acquisition of no more than 500,000 class B shares of the Company and to decide on the conveyance of no more than 1,000,000 own Class B shares held by the Company. The authorisation to acquire own shares shall be valid for 18 months and the authorisation to convey own shares shall be valid for five years from the decision of the Annual General Meeting. The terms of the authorisations are reported in more detail in a stock exchange release on 23 March 2022.

The Board of Directors of Orion Corporation decided on 25 August 2022 on a share acquisition based on the authorisation by the Annual General Meeting on 23 March 2022. Between 1 September and 19 September and 26 October and 4 November, Orion acquired a total of 400,000 class B shares. After the acquisition, the Board of Directors is still authorised to decide on the acquisition of no more than 100,000 class B shares.

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 plans

The Group has two currently operating share-based incentive plans for key persons of the Group: Orion Group's Long-Term Incentive Plan 2019, announced in a stock exchange release published on 6 February 2019, and Orion Group's Long-Term Incentive Plan 2022, announced in a stock exchange release published on 10 February 2022.

Share ownership

Orion's shares are in the book-entry system maintained by Euroclear Finland, and Euroclear Finland maintains Orion's official shareholder register.

At the end of March 2023, Orion had a total of 81,619 (79,637) registered shareholders, of whom 96% (96%) were private individuals. They held 39% (39%) of the entire share stock and had 61% (61%) of the total votes. There were 55 (57) million nominee-registered and foreign-owned shares, which was 39% (40%) of all shares, and they conferred entitlement to 9% (10%) of the total votes.

At the end of March 2023, Orion held 782,973 (532,771) B shares as treasury shares, which is 0.6% (0.4%) of the Company's total share stock and 0.10% (0.07%) of the total votes.

Flagging notifications

In January–March 2023, Orion Corporation did not receive flagging notifications.

Flagging notifications published by Orion are available at www.orion.fi/en/flaggings.

Orion's dividend distribution 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.

Financial objectives

Through the financial objectives, Orion aims to develop the Group's shareholder value and ensure financial stability and profitable growth. Orion's financial objectives are:

Growing net sales more rapidly than growth of the pharmaceuticals market. Achievement of this objective requires continuous investment in development of the product portfolio.
Maintaining profitability at a good level. The aim is operating profit that exceeds 25% of net sales.
Keeping the equity ratio at least 50%.
Distributing an annual dividend that in the next few years will be at least EUR 1.30 per share, and increasing the dividend in the long term.

In the short term what actually happens may deviate from the objectives.

Possible transfer of pension insurance portfolio to a pension insurance company

Orion is exploring the possibility of transferring the insurance portfolio of the Orion Pension Fund's B fund to an external pension insurance company at the end of 2023. The transfer would have a one-off impact on profit and cash flow. The magnitude of these impacts would be determined at the time of the transfer, which would be estimated to take place on 31 December 2023.

The impact of the possible transfer on profit or loss will depend in particular on the development of discount rate used when calculating the value of the pension liability during 2023. As an indicative benchmark, the positive impact of the transfer on the result, calculated at current interest rates, would be around EUR 20 million. The profit will increase when discount rate decreases and decrease when discount rate increases.

The cash flow impact of a possible transfer will depend in particular on the return on investment assets during 2023. As an indicative benchmark, based on the investment portfolio at the end of 2022, the cash-flow impact of the transfer would be positive for the company of around EUR 60 million, calculated at current valuation levels.

The objective would be to transfer the portfolio to a pension insurance company by the end of 2023, so the decisive date for the valuation and therefore for the profit and cash flow impact would be 31 December 2023. There is currently no certainty that the transfer will take place.

In view of its one-off nature, administrative nature, uncertainty and valuation linked to the transfer date, the impact of a possible portfolio transfer is not included in Orion's outlook for 2023, and the outlook continues to be presented without it.