Orion Group Interim Report 1-3/2022

Orion Group Interim Report January–March 2022	3
Key figures	3
President and CEO Timo Lappalainen: Nubeqa spearheads Orion's growth - war and ever more stressed supply chains causing concerns	4
Outlook for 2022 (provided on 10 February 2022)	5
Impacts of the war in Ukraine on Orion	5
Financial review for 1 January–31 March 2022	6
Key business targets and key performance indicators in 2022	8
Business review	9
Research and development	13
Personnel	14
Changes in Executive Management	14
Significant legal proceedings	15
Decisions by the Annual General Meeting	15
Key events in January–March 2022	16
Key events after the reporting period	16
Shares and shareholders	16
Orion's dividend distribution policy	18
Financial objectives	18
Outlook for 2022 (provided on 10 February 2022)	19
Basis for outlook in more detail	19
Near-term risks and uncertainties	21
Upcoming events	22
Tables	23
Appendices	27

Orion Group Interim Report January–March 2022

Net sales totalled EUR 271 million (EUR 269 million in 2021).
Operating profit was EUR 71 (75) million.
Profit before taxes was EUR 72 (75) million.
Equity ratio was 53% (54%).
Return on capital employed before taxes (ROCE) was 36% (38%).
Return on equity after taxes (ROE) was 33% (35%).
Basic earnings per share were EUR 0.41 (0.42).
Cash flow per share before financial items was EUR 0.23 (0.19).
The outlook for 2022 remains unchanged. Orion estimates that net sales in 2022 will be at a similar level as in 2021 (net sales in 2021 were EUR 1,041 million). Operating profit is estimated to be at a similar level as in 2021 (operating profit in 2021 was EUR 243 million).

Key figures

	1-3/22	1-3/21	Change %	1-12/21
Net sales, EUR million	270.6	268.7	+0.7%	1,041.0
EBITDA, EUR million	83.0	86.0	-3.5%	289.1
% of net sales	30.7%	32.0%		27.8%
Operating profit, EUR million	71.5	75.0	-4.7%	243.3
% of net sales	26.4%	27.9%		23.4%
Profit before taxes, EUR million	72.1	74.8	-3.6%	242.3
% of net sales	26.7%	27.8%		23.3%
Profit for the period, EUR million	57.3	59.6	-3.7%	193.8
% of net sales	21.2%	22.2%		18.6%
Research and development expenses, EUR million	32.1	25.1	+27.9%	117.7
% of net sales	11.9%	9.3%		11.3%
Capital expenditure, EUR million	11.1	12.0	-7.4%	85.4
% of net sales	4.1%	4.5%		8.2%
Interest-bearing net liabilities, EUR million	-126.8	-214.9	-41.0%	-108.3
Basic earnings per share, EUR million	0.41	0.42	-3.8%	1.38
Cash flow per share before financial items, EUR	0.23	0.19	+21.4%	0.96
Equity ratio, %	52.9%	53.8%		68.1%
Gearing, %	-19.8%	-34.2%		-14.5%
Return on capital employed (before taxes), %	35.7%	38.2%		28.8%
Return on equity (after taxes), %	33.1%	35.0%		26.2%
Average personnel during the period	3,358	3,328	+0.9%	3,364

President and CEO Timo Lappalainen: Nubeqa spearheads Orion's growth - war and ever more stressed supply chains causing concerns

"The year 2022 for Orion has started with mixed feelings. On the one hand, we have had positive news flow from darolutamide and the overall business has developed well. At the same time, however, the war in Ukraine has caused a great deal of concern and our thoughts are with our employees in Ukraine and everyone suffering from this situation. Also, the effects of the COVID-19 pandemic are not over yet. Global supply chains remain under high stress and cost inflation has accelerated faster than anticipated. For Orion, the increase in costs is particularly challenging, as raising the prices of prescription medicines for human use in Orion's markets is often not an option. We remain committed to looking after the health and safety of our employees, ensuring production continuity and product availability, and safeguarding patient safety in ongoing clinical trials.

Orion's net sales in January-March 2022 grew by one per cent from the comparative period and the operating profit was slightly lower than in the comparative period. The sales of Dexdor® and Simdax® declined clearly as expected but, thanks to the strong sales development of Nubeqa® and Easyhaler® portfolio, net sales of the Proprietary Products unit increased slightly. Nubeqa® sales were further boosted by large product deliveries to our partner Bayer. These shipments can and will cause quarterly volatility to total Nubeqa® revenues booked by Orion. Net sales of the Specialty Products unit also increased slightly, due to for example strong sales of self-care products in Finland. Sales of the Animal Health unit declined due to the timing of deliveries to partners and also because of the termination of one distribution agreement in Finland. Fermion and Contract Manufacturing performed according to expectations in the first three months of the year.

In February 2022, detailed positive results from the Phase III ARASENS study with darolutamide were reported in the New England Journal of Medicine and at the 2022 ASCO GU Cancers Symposium. Orion's collaboration partner Bayer also upgraded its estimate on darolutamide's peak sales potential. In March, we published our plans to change and refocus the strategy of Orion's R&D function and started negotiations in accordance with the Act on Co-operation within Undertakings. Orion plans for R&D to focus on cancer and pain in future. The search continues for partners for the ODM-208 molecule and the digital therapy software solution for treating chronic pain.

We remain dedicated to our 2025 growth target and as part of that journey continue our efforts to find new cooperation opportunities and product and business acquisition targets.

Finally, I would like to express my warmest congratulations to Liisa Hurme, who was appointed as Orion's President and CEO as of 1 November 2022. I am convinced that Liisa, with her broad expertise and experience, is well placed to continue the work on Orion's growth strategy that we have developed together as colleagues. Collaborating together, we will ensure that the upcoming CEO transition goes smoothly."

Outlook for 2022 (provided on 10 February 2022)

Orion estimates that net sales in 2022 will be at a similar level as in 2021 (net sales in 2021 were EUR 1,041 million).

Operating profit is estimated to be at a similar level as in 2021 (operating profit in 2021 was EUR 243 million).

Basis for the outlook and an overview of near-term risks and uncertainties are provided on pages 19-22 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 purely sales operations and the Company does not have any proprietary fixed assets in these countries. Orion has about 25 people working for the company in Ukraine and about 100 in Russia. Due to patient safety and ethical reasons, Orion continues to deliver certain critical medicines to Ukraine and Russia, and to supply medicines to customers from local warehouses in these countries. However, the situation currently makes it very difficult to estimate the future development of the business.

In 2021, Orion's sales in Russia and in Ukraine accounted for less than 4% and less than 1% respectively of the Group's total net sales. In January–March 2022, the combined sales in these countries showed growth due to very strong sales in January and February before the war. In March, sales turned to a clear decline.

Due to the development of the Russian rouble exchange rate Orion made an impairment of its receivables in Russia, which had a EUR 3 million negative impact on net sales and operating profit in January-March 2022. At the end of March 2022, Orion's trade receivables in Russia amounted to EUR 12 million and the value of inventories was EUR 7 million. The future development of the Russian rouble exchange rate and its impact on Orion's receivables is currently very difficult to estimate.

Orion has procured energy, some raw and packaging materials and some chemicals needed in the manufacturing of pharmaceuticals or active pharmaceutical ingredients from Russia, albeit mostly indirectly. The company has either found an alternative source for these products or is in the process of finding an alternative source. However, supply chains are long and these are analysed together with Orion's suppliers to find possible other dependencies. The availability of natural gas and raw materials from Russia and Ukraine could cause potential risks to our supply chains.

Financial review for 1 January–31 March 2022

Net sales

Orion Group's net sales in January–March 2022 totalled EUR 271 (269) million, an increase of 1%. Exchange rate fluctuations impacted net sales negatively by EUR 4 million during the period. Net sales of Orion's top ten pharmaceuticals amounted to EUR 134 (121) million. They accounted for 49% (45%) of total net sales.

1	Net sales in 1–3/2021	6	Animal Health and Fermion & Contract Manufacturing
2	Simdax® & Dexdor®	7	Exchange rates
3	Nubeqa® (product sales & royalty)	8	Royalties & milestones (without Nubeqa® royalties)
4	Easyhaler® product portfolio	9	Net sales in 1–3/2022
5	Other Proprietary Products and Specialty Products

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 5% at EUR 71 (75) million. EBITDA was down by 4% at EUR 83 (86) million.

Gross profit from sales in local currencies increased by EUR 11 million from the comparative period. Price, cost and product portfolio changes had a negative impact of EUR 3 million. Currency rate changes had a negative impact of EUR 4 million, of which EUR 3 million was due to a revaluation of receivables in Russia. With the combined impact of these items, the gross profit from product and service sales was EUR 4 million higher than in the comparative period.

Milestone payments accounted for EUR 1 (1) million and royalties for EUR 12 (5) million of net sales and operating profit. Other operating income and expenses accounted for EUR 0 (1) million of operating profit.

Operating expenses increased by EUR 14 million. A large part of the increase was due to higher R&D costs. Sales and marketing expenses were higher than in the comparative period, when COVID-19 clearly reduced costs.

1	Operating profit in 1–3/2021	5	Milestones & royalties
2	Product & service sales without sales margin and product mix change and exchange rate effect	6	Other operating income and expenses
3	Product sales margin and product mix change but without exchange rate effect	7	Fixed cost
4	Exchange rate effect on gross margin	8	Operating profit in 1–3/2022

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 9% and totalled EUR 48 (44) million. Research and development expenses increased by 28% mainly due to the timing of clinical development programs and totalled EUR 32 (25) million. They accounted for 12% (9%) of the Group's net sales. Administrative expenses were EUR 13 (10) million.

Group profit

Profit for the period was EUR 57 (60) million.

Basic earnings per share were EUR 0.41 (0.42). Equity per share was EUR 4.55 (4.47).

The return on capital employed before taxes (ROCE) was 36% (38%) and the return on equity after taxes (ROE) 33% (35%).

Financial position

The Group's gearing was -20% (-34%) and the equity ratio 53% (54%).

The Group's total liabilities as at 31 March 2022 were EUR 585 (557) million. At the end of the period, interest-bearing liabilities amounted to EUR 132 (108) million, including EUR 87 (105) million of long-term liabilities.

The Group had EUR 259 (323) million of cash and cash equivalents at the end of the reporting period.

Cash flow

Cash flow from operating activities was EUR 33 (44) million. Factors contributing to the decline in cash flow are a smaller profit than in the comparative period, a larger increase in working capital and the timing of income tax payments.

Cash flow from investing activities was 2 million lower than in the comparative period at EUR -15 (-17) million.

Cash flow from financing activities was EUR 23 (-1) million.

Capital expenditure

The Group's capital expenditure totalled EUR 11 (12) million. This comprised EUR 9 (9) million on property, plant and equipment and EUR 2 (3) million on intangible assets.

Key business targets and key performance indicators in 2022

TARGET	KPI's in 2022
Increasing the sales of the current product portfolio	Significant increase in sales of Nubeqa® booked by Orion
	Easyhaler® product portfolio sales increase by more than 5%
Building up long-term growth	In-licensing of new products
	Portfolio enhancement through product acquisitions and M&A
	Partner for ODM-208 development and commercialisation
	Launch of Phase III clinical trial on ODM-208
	At least one new project proceeds to clinical development
	Solidifying the R&D portfolio with new collaboration agreements

	= on target		= in progress		= target not attainable		= not known
--	-------------	--	---------------	--	-------------------------	--	-------------	--

Orion regularly monitors the progress of these goals in its financial reviews.

Business review

Review of the Finnish human pharmaceuticals market

Finland is the most important individual market for Orion, generating more than a quarter of the Group's net sales. According to Pharmarket statistics (1–3/2022), the total sales of Orion's human pharmaceuticals in January-March 2022, including both medicinal and non-medicinal products, grew by 7 per cent from the previous year.

Orion's biggest product group in Finland are reference-priced prescription drugs in the pharmacy channel. The sales of Orion's reference-priced prescription drugs increased by 1 per cent due to strong volume growth while the total market fell by 5 per cent from the comparative period. The average price of reference-priced drugs in the market declined by approximately 7 per cent from the comparative period (Source: Pharmarket). 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.

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

EUR million	1-3/22	1-3/21	Change %
Total sales of human pharmaceuticals (hospital and pharmacy channel)
Market	728	698	+4%
Orion	80	75	+7%
Prescription drugs total (pharmacy channel)
Market	397	378	+5%
Orion	44	43	+2%
Reference priced prescription drugs (pharmacy channel) *
Market	109	114	-5%
Orion	26	25	+1%
Self-care products (pharmacy channel)
Market	107	100	+8%
Orion	27	25	+10%

* 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 1-3/2022

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

Orion's market share, %	1-3/22	1-3/21
Human pharmaceuticals in total (hospital and pharmacy channel)	11%	11%
Prescription drugs total (pharmacy channel)	11%	11%
Reference priced prescription drugs (pharmacy channel) *	24%	22%
Self-care products (pharmacy channel)	25%	25%

Source: Pharmarket sales statistics 1-3/2022

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 in the Nordic countries and in parts of Eastern Europe.

Elsewhere, these products are sold by partners. The company is also engaged in the sale of Fermion and Contract Manufacturing products and services globally.

Proprietary Products

The product portfolio of the Proprietary Products unit consists of prescription products in three therapy areas: neurological disorders, oncology and critical care, and inhaled pulmonary drugs under the Easyhaler® product portfolio.

Net sales of the unit in January–March 2022 were up by 7% and totalled EUR 111 (103) million.

Net sales by product

1-3/22	1-3/21	Change %
31	26	+20%
30	29	+4%
20	8	+142%
12	15	-15%
7	12	-38%
9	14	-31%
111	103	+7%

* ) includes product sales to Bayer and royalties booked by Orion

** ) includes service sales, milestone payments and products such as Enanton®, Precedex® and pharmaceuticals sold for use in clinical trials. In January–March 2022, net sales of darolutamide sold for use in clinical trials were EUR 0 (5) million.

In January-March 2022, Orion booked a total of EUR 20 (8) million in product sales for deliveries of Nubeqa® (darolutamide) to Bayer and in royalties from the same product. A significant part of the growth is due to increased product sales to Bayer. Nubeqa® is indicated for the treatment of non-metastatic castration-resistant prostate cancer.

Bayer holds global commercial rights to darolutamide and Orion is entitled to receive annually tiered royalties on global darolutamide sales. The total annual royalty rate is approximately 20% including product sales to Bayer. Initially the total annual royalty rate will be slightly lower, and as sales increase, the total annual royalty rate will increase. Orion manufactures the product for global markets and copromotes the product in Europe with Bayer. 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.

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 20% and amounted to EUR 31 (26) million in January–March 2022. In the comparative period, the market for dry-powder pulmonary drugs and the demand for Easyhaler® products suffered from the reduced rate of doctors' appointments due to the COVID-19 pandemic. The growth was driven by the sales of the budesonide-formoterol combined formulation which increased by 22% to EUR 20 (16) million. The sales of other Easyhaler® products (beclometasone, budesonide, formoterol, salbutamol and salmeterol-fluticasone combined formulation) increased by 17% to EUR 12 (10) million.

Menarini, an Italian pharmaceuticals company, has exclusive marketing rights to Orion's budesonideformoterol combined formulation in France and also serves as a co-marketing partner in a few Southern European countries. In addition, Menarini is responsible for the sales of the budesonide-formoterol combined formulation in the Asia–Pacific region. Another company, Hikma Pharmaceuticals PLC, is responsible for selling the budesonide-formoterol combined formulation in the Middle East and North Africa.

Orion's drugs for treatment of Parkinson's disease are Stalevo® (active pharmaceutical ingredients carbidopa, levodopa and entacapone) and Comtess®/Comtan® (entacapone). Their total net sales in January–March 2022 increased by 4% and amounted to EUR 30 (29) million. Orion markets its own Parkinson's drugs in Europe and in some countries in the Asia-Pacific area. Elsewhere, the products are sold by partners. The most important single market for Orion's Parkinson's drugs is currently Japan, where Orion has a distribution agreement with Novartis. During the review period Orion was informed that significant mandatory price reductions have taken effect in Japan in the beginning of 2022.

Net sales of Orion's Dexdor® intensive care sedative (dexmedetomidine), a product sold in Europe, were at EUR 7 (12) million, down by 38%. The expected decline in sales was due to generic competition and a strong comparative period owing to demand caused by the COVID-19 pandemic, despite the launch of generic competition.

Simdax® (levosimendan), a drug for treatment of acute decompensated heart failure is sold in some 60 countries worldwide. Net sales of the product in January-March 2022 were down by 15% at EUR 12 (15) million. Sales declined from the comparative period mainly due to falling prices in some markets. Direct generic competition with a similar formulation did not yet have a material impact on Simdax® sales in the first quarter of 2022.

Specialty Products

Net sales of the Specialty Products unit, comprising generic (off-patent) prescription drugs (including biosimilars) and self-care products, increased by 5% in January-March 2022 and amounted to EUR 130 (124) million. Prices of reference priced prescription drugs have continued to decline especially in Finland, but Orion has been able to compensate the impact of decreasing prices through increased sales volumes. Owing to the COVID-19 pandemic and related restrictions implemented in various countries, the prevalence of seasonal illnesses, such as common respiratory tract infections, was lower than normal in the comparative period. This led to a decline in non-critical medical appointments and therefore in the number of prescriptions issued. Generic prescription drugs accounted for 73% (75%) and self-care products for 27% (25%) of Specialty Products' net sales.

Breakdown of Specialty Products' net sales by product group 1–3/2022:

EUR million	1-3/22	1-3/21	Change %	Share of unit's net sales 1-3/22	Share of unit's net sales 1-3/21
Generic prescription drugs	95	92	+2%	73%	75%
Self-care products	36	31	+14%	27%	25%
Total	130	124	+5%

The Specialty Products unit's most important market areas are Finland, Scandinavia and Eastern Europe and Russia. The unit's sales in Finland in January–March 2022 amounted to EUR 68 (65) million. The increase of 4% came mostly from self-care products. The general decline in the prices of reference-priced generic drugs due to price competition continued but Orion was able to compensate this impact with strong volume development.

In Scandinavia, Specialty Products' sales totalled EUR 20 (19) million, up by 2%. In Eastern Europe and Russia, they were up by 17% and amounted to EUR 26 (22) million. Before the war in Ukraine, the business developed well in this region but in March sales turned to a clear decline. Specialty Products' sales in regions other than Finland, Scandinavia and Eastern Europe and Russia stood at EUR 17 (17) million.

Animal Health

In the Nordic countries and some Eastern European markets, 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 in the Nordic countries.

Net sales of the Animal Health unit in January–March 2022 were down by 31% and amounted to EUR 13 (19) million. The decline is due to the timing of deliveries to partners as well as the termination of one distribution agreement in Finland. Sales of animal sedative products accounted for 43% (50%), or EUR 6 (10) 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 and Contract Manufacturing

Fermion manufactures active pharmaceutical ingredients for Orion and other pharmaceutical companies. Its product range comprises nearly 30 pharmaceutical ingredients. It produces the active pharmaceutical ingredients for Orion's proprietary drugs developed in house. 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 excluding deliveries for Orion's own use, totalled EUR 20 (21) million. 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 2022 totalled EUR 32 (25) million, up by 28%. They accounted for 12% (9%) of the Group's net sales. R&D expenses also include expenses related to the development of the current portfolio. The core therapy areas of Orion's pharmaceutical R&D currently are neurological disorders, oncology and respiratory diseases, for which Orion develops inhaled pulmonary drugs. Orion also develops veterinary drugs and selected generic drugs.

Orion has focused on managing the safety and continued treatment of patients involved in clinical trials during the COVID-19 pandemic. However, the exceptional circumstances may cause delays in ongoing projects due to, for example, slower than anticipated patient recruitment.

Orion is planning to refocus its R&D

Orion announced in March that Orion's R&D function is planning to refocus its efforts on the development of new proprietary products from several therapy areas to two, cancer diseases and pain. The plan is to gradually phase out investment in the research of neurodegenerative diseases such as Parkinson's and Alzheimer's diseases and rare diseases by autumn 2022. In addition, the company will evaluate the commercial potential of inhaled pulmonary drugs that are in the early phase of development. Development of generic pharmaceuticals as well as research and development of veterinary drugs would continue unchanged. The planned refocusing of research and product development of new proprietary products would not impact on the current portfolio of products that are on sale.

The company believes that by concentrating its resources, it would be able to develop new treatments for patients' needs and gain the most effective return for its R&D efforts. Cancer diseases have long been one of the three core therapy areas of Orion's pharmaceutical research, and the company has also conducted R&D projects associated with pain management in the therapy area of neurological diseases. Pain is one of the most common reasons for seeking medical attention and is a significant burden on society because it drains healthcare resources and results in productivity losses. Hence, there is great demand for new effective and safe treatment alternatives that do not cause dependence. At present, many of Orion's latestage discovery projects deal with pain.

The possible changes planned would target the therapy and research areas in which Orion would no longer invest in the future. The company has started negotiations in accordance with the Act on Co-operation within Undertakings concerning these functions in Finland. The refocus of the R&D areas and the reorganisation are expected to be completed by summer.

Project	Indication	PHASE		Registration
Darolutamide ARASENS1	Prostate cancer (mHSPC)	I	II	III	Registration
Darolutamide ARANOTE1	Prostate cancer (mHSPC)	I II III
ODM-208 (CYP11A1 inhibitor)	Prostate cancer (CRPC)	I II
ODM-105 (tasipimidine)	Treatment of psychiatric disorders	I
Easyhaler® tiotropium	COPD	Bioequivalence study
Easyhaler® indacaterol-glycopyrronium	COPD	Bioequivalence study
1 In collaboration with Bayer			=Phase completed		=Status changed
			=Phase ongoing

Key clinical development projects

The detailed results from Orion's and Bayer's Phase III ARASENS trial investigating the use of the oral androgen receptor inhibitor (ARi) darolutamide in metastatic hormone-sensitive prostate cancer (mHSPC) were published in February in the New England Journal of Medicine and at the 2022 ASCO GU Cancers Symposium. 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. During the reporting period, Bayer submitted applications for

additional indication of darolutamide in the United States, the EU and Japan and after the reporting period in China.

In addition, 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).

Orion has an ongoing Phase II CYPIDES clinical trial on the ODM-208 molecule, a novel selective hormone synthesis inhibitor (CYP11A1 inhibitor). Data from the Phase I trial, published at the American Society of Clinical Oncology Genitourinary Cancers Symposium (ASCO GU) in February, showed that ODM-208 effectively blocked the production of all steroid hormones in men with metastatic castration-resistant prostate cancer (mCRPC) and showed promising anti-tumour activity in men progressing despite extensive prior treatment with both novel hormonal therapies (NHT's) and taxanes. Treatment responses to ODM-208 especially occurred in men with activating androgen receptor (AR) mutations. Orion is the first pharmaceutical company to develop a drug with this mechanism of action. Orion is also looking for a collaboration partner for the development and commercialisation of the molecule and is preparing to launch a Phase III clinical trial with prostate cancer patients.

Orion has an ongoing Phase I clinical trial on ODM-105 molecule (tasipimidine) that is based on its alpha 2 research, investigating the tolerability and safety of the drug candidate in healthy volunteers. The molecule is intended for the treatment of psychiatric disorders.

Orion is working on projects to expand the Easyhaler® product portfolio for the treatment of asthma and COPD. It is developing a tiotropium formulation for European markets and the bioequivalence study with the formulation is ongoing. Tiotropium is a long-acting anticholinergic bronchodilator used in the treatment of chronic obstructive pulmonary disease. In addition, Orion is developing an indacaterolglycopyrronium combined formulation indicated for the treatment of COPD. Glycopyrronium and indacaterol are long-acting bronchodilators.

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 published in June 2021 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, pain and various neurological diseases including rare ones, among others. 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 2022 was 3,358 (3,328). At the end of March 2022 the Group had a total of 3,381 (3,344) employees, of whom 2,649 (2,623) worked in Finland and 732 (721) outside Finland.

Salaries and other personnel expenses in January–March 2022 totalled EUR 61 (58) million.

Changes in Executive Management

After the review period on 20 April 2022, Orion Corporation's Board of Directors appointed Liisa Hurme as President and CEO of Orion Corporation as of 1 November 2022, until which her predecessor Timo Lappalainen will hold the position.

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 23 March 2022 in Helsinki. The following matters, among others, were handled at the Annual General Meeting:

Adoption of the Financial Statements for 1 January - 31 December 2021

The AGM confirmed the Financial Statements of the parent company and the Group as per 31 December 2021.

Dividend EUR 1.50 per share

The AGM resolved, in accordance with the proposal by the Board of Directors, that a dividend of EUR 1.50 per share will be paid on the basis of the Balance Sheet confirmed for the financial year that ended on 31 December 2021. The record date for the dividend payment was 25 March 2022 and the payment date was 1 April 2022.

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 2021.

Remuneration Report

The AGM approved the Remuneration Report for the Company's governing bodies for 2021. 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 90,000, the Vice Chairman shall receive EUR 55,000 and the other members shall receive EUR 45,000 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 55,000. 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 annual fee, 60% shall be paid in cash and 40% in Orion Corporation B-shares. 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, Ari Lehtoranta, Veli-Matti Mattila, Hilpi Rautelin, Eija Ronkainen and Mikael Silvennoinen were re-elected as members to the Board of Directors for the next term of office. Maziar Mike Doustdar and Karen Lykke Sørensen were elected as new members. 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.

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 23 March 2022.

Authorising the Board of Directors to decide to acquire the Company's own shares

The Board of Directors was authorised by the AGM to decide on the acquisition of no more than 500,000 Class B shares of the Company. The authorisation to acquire own shares shall be valid for 18 months from the decision of the Annual General Meeting. The terms are reported in more detail in a stock exchange release on 23 March 2022.

Authorising the Board of Directors to decide on a share issue by conveying own shares

The Board of Directors was authorised by the AGM to decide on the conveyance of no more than 1,000,000 own Class B shares held by the Company. The authorisation to convey own shares shall be valid for five years from the decision of the Annual General Meeting. The terms are reported in more detail in a stock exchange release on 23 March 2022.

Organisation of the Board of Directors

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

Key events in January–March 2022

17 Feb 2022 Detailed results of Phase III ARASENS study were published.
17 Feb 2022 Orion's collaboration partner Bayer upgraded estimate on Nubeqa®'s peak sales potential.
9 Mar 2022 Orion's collaboration partner Bayer announced submissions of applications in the U.S and EU for additional indication of darolutamide.
11 Mar 2022 Orion's collaboration partner Bayer announced submission of application for additional indication of darolutamide in Japan.
23 Mar 2022 Orion Corporation's Annual General Meeting was held in Helsinki.
24 Mar 2022 Orion announced that the Company is planning to refocus its R&D.

Key events after the reporting period

20 Apr 2022 Liisa Hurme was appointed President and CEO of Orion Corporation as of 1 November 2022.

Shares and shareholders

On 31 March 2022 Orion had a total of 141,134,278 (141,134,278) shares, of which 34,774,986 (35,039,407) were A shares and 106,359,292 (106,094,871) B shares. The Group's share capital is EUR 92,238,541.46 (92,238,541.46). At the end of March 2022 Orion held 532,771 (571,314) B shares as treasury shares. On 31 March 2022, the aggregate number of votes conferred by the A and B shares was 801,326,241 (806,311,697) excluding treasury shares.

At the end of March 2022, Orion had 79,637 (80,990) 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 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 38,220 A shares were converted into B shares in January–March 2022.

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 2022, the market capitalisation of the Company's shares, excluding treasury shares, was EUR 5,779 million.

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

Authorisations of the Board of Directors

On 23 March 2022, 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 Annual General Meeting authorised the Board of Directors also 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 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 2022, Orion had a total of 79,637 (80,990) registered shareholders, of whom 96% (96%) were private individuals. They held 39% (41%) of the entire share stock and had 61% (61%) of the total votes. There were 57 (55) million nominee-registered and foreign-owned shares, which was 40% (39%) of all shares, and they conferred entitlement to 10% (10%) of the total votes.

At the end of March 2022, Orion held 532,771 (571,314) B shares as treasury shares, which is 0.4% (0.5%) of the Company's total share stock and 0.07% (0.08%) of the total votes.

Flagging notifications

In January–March 2022 Orion Corporation received altogether 9 notifications pursuant to Chapter 9, Section 5 of the Securities Market Act. According to the notifications, the total number of Orion shares owned directly, indirectly or/and through financial instruments by BlackRock, Inc. and its funds either increased above five (5) per cent or decreased below five (5) per cent of Orion Corporation's total shares.

The details of the notifications 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.

Outlook for 2022 (provided on 10 February 2022)

Orion estimates that net sales in 2022 will be at a similar level as in 2021 (net sales in 2021 were EUR 1,041 million).

Operating profit is estimated to be at a similar level as in 2021 (operating profit in 2021 was EUR 243 million).

Basis for outlook in more detail

Collaboration agreements with other pharmaceutical companies are an important component of Orion's business model. Agreements often include payments recorded in net sales and operating profit that vary greatly from year to year. Forecasting the timing and amount of these payments is difficult. In some cases they are conditional on terms such as research outcomes which are not known until studies have been completed, the progress of research projects or the attainment of specified sales levels. On the other hand, neither the outcome nor the schedule of contract negotiations is generally known before the final signing of the agreement.

Milestone payments received by Orion in 2017–2021

The outlook for 2022 does not include any material milestones. Orion is currently looking for a partner for further development and commercialisation of its ODM-208 molecule research and a digital therapy software solution for treating chronic pain. The outlook does not contain any potential milestone payments associated with these projects, as the company does not yet have assurance of finding any partners or of the financial structure of any agreements to be made. Orion is entitled to receive milestone payments from Bayer for Nubeqa® sales when certain global annual sales thresholds are met for the first time. Such milestone payments are not included in the outlook for 2022, as Orion does not have the ability to accurately estimate or predict the timing when the sales thresholds potentially are met.

The outlook is based on the assumption that Orion's own production can continue to operate normally despite the COVID-19 pandemic and the challenges in the global supply chains. This requires, among other things, continued success in employee protection so that absence rates do not significantly increase, that personal protective equipment, supplies, equipment and spare parts needed in production as well as starting materials, intermediate products and materials are available and that there are no material disruptions in the logistics chains.

The outlook does not include any income or expenses associated with possible product or company acquisitions.