Orion Oyj

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Orion Oyj

Espoo
FIN-02101
Finland
Telephone: ( + 358) 10 42 91
Fax: ( + 358) 10 429 2801
Web site: http://www.orion.fi

Public Company
Incorporated: 1917
Employees: 4,549
Sales: EUR 1.94 billion ($2.54 billion) (2004)
Stock Exchanges: Helsinki
Ticker Symbol: Orion
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 325413 In-Vitro Diagnostic Substance Manufacturing; 325620 Toilet Preparation Manufacturing; 334517 Irradiation Apparatus Manufacturing; 339114 Dental Equipment and Supplies Manufacturing; 424210 Drugs and Druggists' Sundries Merchant Wholesalers

Orion Oyj is one Finland's leading pharmaceutical companies, marketing some 250 products in Finland and claiming about a one-third share of the domestic market. Orion also develops and markets drugs for the global market, notably in the fields of Parkinson's Disease and heart disease treatment. Among the company's top-selling drugs are Comtess/Comtan and Stalevo (Parkinson's); Divina (menopausal symptoms); Burana (inflammatory pain); Enanton (prostate cancer); Easyhaler (asthma); Calcimago (osteoporosis), Fareston (breast cancer), and Simdax. This last drug, a treatment for severe heart failure, began undergoing Phase III Clinical trial testing in partnership with Abbott Laboratories in 2004. Orion operates through three primary divisions. Orion Pharma forms the core of the group's operations, representing the group's drug development wing, focusing on Proprietary Products, Specialty Products, Active Ingredients (through its Fermion unit), and Animal Health products. Forty percent of the drug technologies sold by Orion Pharma have been developed in-house, and in 2003 the company inaugurated a new research and development facility. Orion Pharma generates 26 percent of Orion's annual sales, and 78 percent of its net profits. The company's Wholesale and Distribution division is represented by Oriola in Finland and Kronans Drughandel (KD) in Sweden, which together account for 72 percent of the company's total revenues. Both companies focus on the Scandinavian and greater Nordic market, distributing Orion Pharma and other companies' products. Orion Diagnostica, the group's smallest unit at just 2 percent of sales, distributes diagnostic and imaging equipment to healthcare professionals in the Scandinavian market. Together, Orion's operations combined to produce EUR 1.94 billion ($2.54 billion) in sales in 2004. The company is listed on the Helsinki Stock Exchange.

Origins in the Early 20th Century

When Finland gained its independence from Russia following World War I, the country's new government put in place a policy of stimulating domestic infrastructure initiatives in order to enable the country to gain a degree of self-sufficiency. The period also marked one of opportunity for a number of Finnish entrepreneurs who were eager to be domestic players in a number of industries. The Finnish government's interest in developing a domestic chemicals industry, as well as the growing demand for new classes of medications and pharmaceutical compounds, inspired the creation of Osakaeyhtiö Orion in Helsinki in 1917. Production began in a former margarine factory that year.

The new company was led by Dr. Onni Turpeinen, pharmacist Emil Tuurala, and Wikki Walkama, who also held a degree in pharmacy. The partners' initial ambition for Orion was to develop a business producing and distributing chemicals, as well as medicines and other substances, such as cleaners. As such, Orion's initial production was somewhat eclectic, including rifle oil, artificial sugar, ammonia, and Lysol-branded cleaner.

Orion launched production of pharmaceuticals at the beginning of the 1920s. The company's early drug products included aspirin, eye ointments, and morphine. An early success was the group's iodine product, known as Jodlysin. Nonetheless, the early years proved extremely difficult for the company which struggled to maintain profitability. The company's difficulties were due in part to the fact that Finland's independence had also opened the market to foreign products. Orion now found itself forced to compete against well-established foreign brands. The company responded by boosting its marketing initiatives and succeeded in establishing Orion as the country's leading pharmaceuticals brand.

By the early 1930s, Orion's production facilities, originally contained in the 180-meter-square margarine plant, had grown too small. The company built a new plant for itself, in Vallila, Helsinki, launching production there in 1934. That move was also the impetus for the group to specialize in pharmaceuticals. In keeping with its new focus, the company changed its name, becoming Lääketehdas Orion Oy (Orion Pharmaceuticals). A major impetus behind the group's refocus was the naming of Erkki Leikola as managing director. Leikola remained as managing director until 1951 and continued to lead the company as chairman in the 1970s. Under Leikola, Orion grew steadily through the 1930s. The success of the group's pharmaceutical preparations led it to expand its production facilities several times.

Diversification in the Post-World War II Era

Orion's growing market position opened new opportunities for importing and marketing foreign products to its Finnish customers. In 1934, the company reached an agreement with Denmark's Novo Terapeutisk Laboratorium to act as an importer and distributor for its insulin and blood serum products. World War II interrupted imports of Novo's products. In 1947, however, Orion once again began distributing Novo's insulin and blood serum. The company quickly extended its import operation to include other drugs and medicines that it did not manufacture itself and which were considered important to the Finnish healthcare market in the postwar years.

Yet Orion, which already distributed its own products directly to the country's pharmacies, hospitals, and other healthcare facilities, soon ran into a potential conflict of interests. In 1948, therefore, Orion established a dedicated wholesale and distribution subsidiary, Apteekkitavarakauppa Oriola Oy (simplified to Oriola Oy in 1954). In addition to direct distribution operations, Oriola also launched a wholesale business. This was based in part on Orion's support of the Finnish defense effort during World War II, when the company received a contract to supply field medical supplies to the army. Part of that contract stipulated that Orion repurchase any surplus following the war. This stockpile served as the basis for the launch of Oriola's wholesale business.

Oriola at first operated at a loss. By the mid-1950s, however, the subsidiary had become profitable, and by 1956 had become a full-fledged pharmaceutical wholesaler. As part of this effort, Oriola began opening local branch offices, with the first opened in Seinäjoki in 1956. A second office opened in Joensu in 1960, with offices opening in Oulu and Pori in 1962. By then, Oriola had also launched an international division in order to build its business acting as a Finnish partner for foreign pharmaceutical companies.

Orion acquired laboratory supplies business Lyrra Oy in 1961, placing this new operation under Oriola. The following year, Orion itself exited the distribution business, transferring its activities in this area to Oriola, which in the same year also took over the distribution operations of another pharmaceutical business, Albin Koponen.

Meanwhile, Orion had also been expanding, particularly following its decision to establish a committee for scientific research in 1956. Nonetheless, the company sales remained based on third-party formulations and molecules for some time. Sales of the company's product continued to grow strongly through the 1950s, and by the end of the decade the company was forced to expand its production capacity again. In 1962, Orion inaugurated the first phase of a new, modern facility in Mankkaa, Espoo. The company then began transferring its production operations, a process completed before the end of the decade, with the transfer of Oriola to Mankkaa in 1968. In 1970, the company changed its name to Orion-yhtymä (Orion Corporation).

Orion continued to seek new areas for expansion. In 1970, this search took the company into two directions. The first was the creation of a joint venture for the production of bulk active ingredients, launched as Fermion in 1970. Kemira, the top Finnish chemicals group, was Orion's partner in the Fermion joint venture. In 1980, however, Orion bought out Kemira and took full control of Fermion. The other direction brought Orion into the manufacture of cosmetics and other beauty products when it took over the operations of Noira, founded in 1948. Noira also added its production of detergents and cleansers to the Orion's business.

At the same time that Orion was expanding, Oriola had been adding to its range of operations. In 1970, the company launched a medical products distribution business, followed by the addition of laboratory supplies in 1972. In 1974, Oriola had also added a dental care division as well. Oriola made a number of acquisitions later in the decade in order to boost these operations. In 1978, for example, the company acquired laboratory supplies specialist Prolab Oy. That purchase was followed in 1979 by an entry into X-ray supplies with the acquisition of a 50 percent stake in Medivalmet Oy. In 1980, Orion acquired dental care business Soredex Oy, while Oriola acquired another dental supplies business that year, Finndent Oy. Oriola also added a new optical supplies business in 1982. A year earlier, the company had created a new division focused on the export market, Oriola SLG. In the meantime, Oriola had established a new wholesale agency for its pharmaceutical imports, Panfarma Oy.

Company Perspectives:

Values: mutual trust and respect customer focus, innovation, achievement, and quality, reliability and safety. Our values express how we can and want to commit ourselves to the things we do. With these values we have jointly defined what we desire from Orion as a working community. They are also very personal in respect of our individual relation to work and the colleagues. Although Orion's values are equally important, we emphasise Mutual Trust and Respect. This value is the cornerstone of our attitudes, whatever we are engaged in. Our values are meant to be part of our daily life, and we are doing our best to work and live up to them.

This move was made in part to counter Orion's poor reputation in the international pharmaceutical market. As Paavp Ruttu, who had served as Oriola's managing director since 1952, reported in Oriola's own corporate history: "Oriola started to have problems with many foreign manufacturers, as we always had to explain who is the owner of Oriola. This raised suspicion; the drug manufacturer Orion was a terrible monster abroad, because 'they will steal all the ideas and products and no one wants to be involved with them.' I started to push the idea of transforming Oriola's pharmaceutical agency department into a separate company. We had to find a name that does not directly resemble Orion. We arranged a name competition. The name Panfarma was invented by the doctor Samuli Sarajas."

Research Driven for the 21st Century

In the 1980s, Orion began to take steps to reinvent itself as a internationally focused, research-driven pharmaceutical company. In 1977, the company acquired its first foreign business, Ercopharm A/S, in Denmark. The acquisition of full control of Fermion also gave the company its own bulk actives unit, supporting both its own production as well as that of the international pharmaceutical industry.

Orion had also launched a fully fledged research and development program, resulting in the release of its first proprietary molecule in 1983, Domosedan, an animal sedative destined for the veterinary care industry. Orion remained focused on the animal care market through the 1980s, releasing Domitor in 1987 and its antagonist Antisedan in 1989. The success of these formulations also enabled Orion to begin building an international market for these drugs by the beginning of the 1990s.

Despite its success in the veterinary field, Orion's research program had also begun developing drugs for human application. The company's first successful drug formulation for human use was approved by the Finnish government in 1988. The drug, antiestrogen toremifen, a treatment for advanced hormonal breast cancer marketed under the Fareston brand, became the company's first drug to receive approval by the European Union, which came about in 1996. Japan also permitted sale of the drug in 1996, followed by the United States in 1997.

Orion boosted its pharmaceutical operations through the acquisition of another major pharmaceuticals group, Farmos Corporation, in 1988. That company was merged into Orion in 1990. During the ensuing decade, Orion continued to build its international focus, a move aided by its decision to go public in 1995 with a listing on the Helsinki Stock Exchange. This coincided with Orion's decision to become a focused research-driven pharmaceuticals group. The company began divesting a number of operations, including an engineering business, originally acquired in the 1970s, in 1999, followed by the sale of the Soredex medical supplies operation that same year. In 2003, the company completed its streamlining, selling off its Noiro cosmetics business.

These moves came amidst the launch of a number of successful proprietary pharmaceutical molecules and preparations, including 1998's entacapone, marketed as Comtess, as a treatment for Parkinson's Disease symptoms. That drug rapidly received international approval. Orion continued to release new proprietary molecules into the 2000s, including the heart failure drug levosimendan, and Stalevo, a new Parkinson's Disease therapy. By the mid-2000s, Orion boasted seven proprietary drugs on the international market.

The company's transformation into a research-driven group had also enabled it to establish a new reputation for itself in the international drug industry. Orion began a series of drug-development and marketing partnerships and alliances, such as its 2002 agreement with Quintiles Transnational Corp to form a joint venture into order to develop certain new Orion molecules through Phase III clinical trials. This followed a collaboration agreement with Pharmacia Corp. in 2001 and a marketing alliance with Abbott Laboratories, later strengthened in 2004.

Orion continued to strengthen its wholesale and distribution wing as well. In 2002, that operation became Scandinavia's largest when Orion acquired Sweden's Kronans Droghandel (KD). That company remained separate from Oriola. However, in 2003 Oriola acquired KD's Finnish operation, KD Tukku Oy. The addition of KD helped boost the company's distribution wing to represent some 72 percent of Orion's total revenues. Oriola grew again, buying up Rusch Danmark A/S, a healthcare supplies marketer, from the U.S.-based company Teleflex Medical.

Nonetheless, Orion Pharma remained the company's core operation, despite accounting for just 26 percent of the group's total sales of EUR 1.9 billion ($2.5 billion) in 2004, while the company's pharmaceutical operation represented some 78 percent of its net profits. Orion, which formally simplified its name to Orion Oyj in 2004, had successfully established itself as a Finland's leading research-driven pharmaceuticals group in the new century.

Key Dates:

1917:: Orion is founded as a company manufacturing a diverse range of chemicals and cleaners.
1920:: The company launches its first pharmaceutical products, including aspirin, morphine, and eye ointments.
1934:: Orion moves to a larger production site in Helsinki, Vallila and begins importing insulin and blood serum from Denmark.
1948:: A dedicated wholesale and distribution business, Oriola, is created.
1962:: The company moves to a new modern production facility in Mankkaa, Espoo.
1970:: The company enters into Fermion joint venture with Kemira; full control is acquired in 1981.
1983:: The company releases Domosedan, part of an effort to develop proprietary pharmaceutical molecules and preparations.
1988:: Farmos Corporation is acquired and merged into Orion in 1990.
1995:: Orion goes public on the Helsinki Stock Exchange.
2002:: Konans Droghandel in Sweden is acquired.
2005:: Rusch Danmark, a healthcare supplies marketer, is acquired.

Principal Subsidiaries

Kronans Droghandel; Orioala; Orion Diagnostica; Orion Pharma.

Principal Competitors

Abbott Laboratories; Bristol-Myers Squibb Company; Dow Europe GmbH; AstraZeneca plc; L'Oreal SA; Mitsubishi Chemical Corporation; Wyeth; GlaxoSmithKline; Degussa AG; Eli Lilly and Co.