Oncology Pipeline And Decarbonization Efforts Will Support A Fairly Valued Outlook

Catalysts

About Orion Oyj

Orion Oyj is a Finnish pharmaceutical company with businesses in oncology, generic medicines, branded products, animal health and pharmaceutical ingredients.

What are the underlying business or industry changes driving this perspective?

• Expanding use of Nubeqa with additional indications such as metastatic hormone sensitive prostate cancer, combined with an already reached higher royalty rate and all time high royalties and product deliveries to Bayer in Q3 2025, can support Orion's share of product economics and help drive revenue and operating profit.
• A clear shift of the clinical pipeline toward oncology, including opevesostat Phase III OMAHA studies with survival focused endpoints and the planned Phase II program for TEAD inhibitor ODM-212, places Orion in areas of sustained demand for cancer treatments. This can influence long term revenue mix and earnings potential.
• Healthy growth in the base business, where net sales reached €1.2b for the first nine months of 2025 and operating profit and cash flow also rose, together with balanced division contributions from Innovative Medicines, Generics, Branded Products and Animal Health, can support more resilient earnings and net margins.
• Generics and Consumer Health performance, supported by good product availability in key Nordic markets and successful launches such as Apixaban in Finland, shows Orion's ability to compete in tender driven markets and offset pressure from products facing generic competition. This matters for sustaining revenue and protecting margins.
• Ongoing decarbonization projects across manufacturing sites, such as electrifying steam production and switching to biofuels, plus tighter supplier emissions targets, respond to long term environmental and regulatory pressures. These developments can influence Orion's cost base, capital allocation and ultimately operating margins over time.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Orion Oyj's revenue will grow by 13.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.2% today to 26.3% in 3 years time.
• Analysts expect earnings to reach €617.0 million (and earnings per share of €4.38) by about January 2029, up from €313.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 19.1x on those 2029 earnings, down from 30.8x today. This future PE is lower than the current PE for the GB Pharmaceuticals industry at 30.8x.
• Analysts expect the number of shares outstanding to grow by 0.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.67%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Nubeqa is already delivering all time high royalties and product deliveries and has reached a higher royalty rate, so if volume growth in current and new indications stays strong or accelerates, that could lift net sales and operating profit enough to move the share price meaningfully rather than keeping it flat.
• The clinical pipeline is now clearly oncology focused, with multiple Phase III OMAHA studies for opevesostat and a planned Phase II program for TEAD inhibitor ODM-212. If any of these programs read out positively and progress toward commercialization, they could reshape long term earnings and the company’s valuation profile.
• Base business growth of 22% in the first nine months of 2025, supported by a 71% increase in underlying Innovative Medicines sales and strong Generics and Consumer Health performance, suggests that if this momentum continues it could push revenue and operating profit higher than implied by a flat share price view.
• Decarbonization projects such as electrifying steam production and switching to biofuels, along with tighter supplier emissions targets, could improve Orion’s cost structure and appeal to long term focused investors. This could potentially support better net margins and a higher market multiple.
• If Orion secures the €180 million Nubeqa milestone earlier than management currently plans or achieves additional milestones with partners like MSD and Tenax, these lump sum inflows could lift earnings and cash flow in specific years and challenge the idea that the share price will remain unchanged.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €70.83 for Orion Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €79.0, and the most bearish reporting a price target of just €46.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be €2.3 billion, earnings will come to €617.0 million, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 5.7%.
  
• Given the current share price of €68.55, the analyst price target of €70.83 is 3.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.