Oriola Oyj

Orionintie 5
Espoo, 02200
Finland
Telephone: (+358 10) 429 99
Fax: (+358 10) 429 4300
Web site: http://www.oriola.com

Public Company
Founded:
1948
Incorporated: 2006
Employees: 2,619
Sales: €1.53 billion ($1.7 billion) (2017)
Stock Exchanges: Helsinki
Ticker Symbol: OKDAV
NAICS: 424210 Drugs and Druggists' Sundries Merchant Wholesalers; 423450 Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers

Oriola Oyj (Oriola Corporation) is a leading distributor of pharmaceuticals in northern Europe, with operations in both the wholesale and retail sectors. Since 2017 the company has refocused its operations around its core businesses in Finland and Sweden, conducted through three business areas: Consumer, Services, and Healthcare. The Consumer division includes more than 325 pharmacies, operating in Sweden as the Kronans Apotek chain, and in Finland under the Hehku banner. This division contributed nearly 50 percent of group revenues in 2017.

The Services division spans a wide range of services, including pharmacy sourcing, supply chain, and pharmaceutical marketing services; market access services, including pricing and reimbursement applications, hospital tendering, and other strategic planning services; research and product development services, as well as regulatory drug life-cycle management services; and supply chain and logistics services. The Services division contributed 45.5 percent to group revenues in 2017.

Lastly, the company's smallest division, Healthcare, focuses primarily on dose-dispensing services for hospitals, health care centers, pharmacies, and other health care providers, including dentists and veterinary clinics. Oriola was spun off from the Finnish pharmaceuticals producer Orion Oyj in 2006, and continues to work in partnership with its former parent. Robert Andersson is president and CEO of Oriola.

FOUNDING: 1948

COMPANY PERSPECTIVES

Oriola unites consumers and pharmaceutical companies in a unique way. Oriola provides pharmaceutical companies an effective access to markets and improves consumers' wellbeing by ensuring that pharmaceuticals, health products and services are delivered in a safe and customer-friendly manner.

The growth of Orion's wholesale business, especially after the end of World War II, increasingly came into conflict with the company's own expanding pharmaceutical production. During the war, Orion had also served as a supplier to Finland's military, signing a contract that included the stipulation that the company would recover any surplus products after the war. As a result, Orion found itself saddled by a large stockpile of goods.

In response to the growing conflict between its distribution of its own products and those of its international partners, and the need to reduce its stockpile of surplus goods, Orion founded a dedicated wholesale distribution subsidiary, originally named Apteekkitavarakauppa Oriola Oy in 1948.

Oriola's early years were marked by steady losses. By the mid-1950s, however, with backing from its pharmaceutical parent company, Oriola had sold the rest of its surplus stock and at last turned a profit. The company renamed itself Oriola Oyj in 1954, and by 1956 had taken over most of Orion's import and distribution agreements, becoming a fully fledged wholesaler focused on selling to pharmacies, hospitals, and other health care suppliers. The company created a dedicated international division for its growing range of import and distribution agreements, emerging as the dominant player for pharmaceuticals companies seeking entry into the Finnish market. Oriola also expanded its own operations, opening its first branch office in Seinäjoki in 1956. This was followed by offices in Joensuu, Oulu, and Pori in the early 1960s.

EXPANSION BEYOND PHARMACEUTICALS

Oriola soon expanded its distribution beyond pharmaceuticals. In 1961, for example, the company added laboratory supplies to its catalog, following Orion's acquisition of Lyrra Oy that year. In 1970 the company launched a medical products distribution, then expanded its laboratory supplies business, establishing a dedicated Laboratory Supplies division in 1972. This division expanded again in 1978, through the purchase of Prolab Oy. In 1974 the company acquired Hammasväline Oy, adding its wholesale dental supply business. The company soon expanded this business as well, taking over the dental supplies operations of dental care specialist Soredex Oy, acquired by Orion in 1980, as well as Finndent Oy, a dental supplies wholesaler also acquired that year.

Oriola entered another new field, medical optics, starting with the purchase of 50 percent of Medivalmet Oy in 1979. This purchase led to the creation of a dedicated optical supplies division in 1982. By that time, Oriola had also begun export operations, bringing this business under Oriola SLG in 1981.

In the meantime, Oriola found itself suffering from its association with Orion, which had developed a poor reputation among the international pharmaceuticals industry. In order to disassociate itself from Orion, Oriola founded a new wholesale agency for its international import business, Panfarma Oy.

INTERNATIONAL EXPANSION: 1990

By the beginning of the 1990s Oriola had grown into Finland's leading wholesale supplier of pharmaceuticals and other medical supplies. With growth in Finland limited by the country's relatively small population, the company began exploring expansion into other markets in the region. The Baltic markets held particular promise, as these countries emerged from decades of Soviet domination. Oriola became one of the first Western businesses, and the first in the Finnish pharmaceuticals industry, to enter the region, setting up a wholesaling business in Estonia in 1990.

The company initially operated on a limited basis in Estonia, until it received authorization to operate as a full-scale wholesaler in 1993. The company then used its position in Estonia as the springboard for an entry into Lithuania in 1994, and Latvia in 1995. One year later, Oriola crossed the border into Russia, acquiring a stake in a newly established wholesale pharmaceuticals distribution business in the region around Saint Petersburg operating under the name OOO Moron. Oriola also expanded into its neighboring Scandinavian markets.

KEY DATES
1948:
The company is founded as a subsidiary of Orion under the name Apteekkitavarakauppa Oriola Oy.
1954:
The company changes its name to Oriola Oyj.
2006:
The company is spun off from Orion as Oriola-KD.
2017:
The company is renamed Oriola Oyj.
2018:
The first Hehku retail health care stores open in Finland as part of the company's joint venture with Kesko.

Orion's growing clout benefited Oriola as well. In 2000, for example, Orion acquired Sirona Dental Systems Inc., operator of a dental equipment supply business in Sweden, from its German parent. During 1999 Oriola had already acquired the rights to distribute Sirona's products in Finland, where it claimed 50 percent of the country's dental supply market. The acquisition of the Swedish company enabled Oriola to become a major player in Sweden's dental supply market as well.

ACQUISITION OF MAJORITY SHARE OF KRONANS DROGHANDEL: 2003

Oriola continued developing new partnerships into the turn of the century. These included a partnership with Aventis in February 2002 to distribute its products in the Saint Petersburg and Moscow regions in Russia, and a partnership in May of that year with AstraZeneca to distribute its products in Finland. In 2003 Oriola teamed up with Amgen, taking over distribution of that company's hematology, oncology, inflammation, neurology, and metabolic disorder product lines in Finland.

The year 2002 marked a major milestone in Oriola's development, when Orion acquired 58.3 percent of Kronans Droghandel (KD), then the second-largest pharmaceuticals distributor in Sweden. KD traced its own history to an apothecary founded in Gotëborg as early as the 18th century, which had become known as Kronans Apotek when it was acquired by Gustaf Bernström in 1907. During the post–World War II period, Kronans developed its own wholesale operations, notably becoming a major supplier to state-owned pharmacy operator Apotek AB. By the 1960s KD's wholesale business had become the largest part of its operations. This shift enabled the company to survive the Swedish government's decision to nationalize the country's pharmacies and create a pharmacy monopoly in 1971. That monopoly was to remain in place until 2009. In the meantime, KD expanded into the Finnish market, through KD Tukku Oy.

Following the acquisition, Oriola absorbed KD Tukku, while KD continued to operate as a separate wholesale company focused on the Swedish market. Oriola also negotiated new distribution contracts with a number of KD Tukku's former clients, including Merck & Co. in 2004. In 2005 Oriola took a step into Denmark with the acquisition of wholesaler Rusch Danmark ApS. Oriola also added the contract to provide warehousing, distribution, and pharmaceutical marketing services for Paranova Oy and its affiliate Alternova in Finland

SPIN-OFF: 2006

The purchase of KD represented a major change in Orion's balance sheet, as pharmaceutical distribution rose to represent 72 percent of the company's total revenues. Nonetheless, Orion's own pharmaceuticals production remained its most profitable, generating 78 percent of the company's net profits in 2004. In 2006, therefore, Orion decided to split into two separate companies, spinning off its distribution operations, including the KD operations in Sweden, into a new company, Oriola-KD Oyj.

In 2007 Oriola-KD teamed up with Sweden's Lifco AB, which took more than 70 percent of Oriola-KD's dental supply business in Sweden. Also that year, the company combined its Medical Products and X-Ray divisions to form a new division, Healthcare Trade. The company expanded its operations in Russia as well, entering the retail pharmacy market, and acquiring full control of Moron Ltd., as well as another company, Vitim & Co., in 2008. Both companies were later renamed under the Oriola banner.

In the meantime, the demerger from Orion had positioned Oriola-KD ahead of the dismantling of the Swedish pharmacy monopoly. As a result, the company was able to acquire a major share of the former Apoteket retail network, paying SEK 5.9 billion (approximately $600 million) for 171 pharmacies in November 2009. These were regrouped into subsidiary Kronans Droghandel Retail, held at 80 percent by Oriola, with Kooperativa Forbundet holding the remaining 20 percent.

Oriola-KD followed up that acquisition with the purchase of OOO 03 Apteka, operator of a chain of pharmacies in the Moscow region in Russia. Oriola-KD then refocused more tightly around its core retail and wholesale distribution businesses, selling its remaining stake in its Swedish dental supply operations to Lifco, and divesting the Healthcare Trade division to Mediq NV in 2010.

EXPANSION OPPORTUNITIES

The company remained on the lookout for new opportunities to expand its retail operations. In 2013, for example, the company acquired the Swedish Medstop pharmacy chain, which had been acquired by private equity group Segulah Advisor AB during the breakup of the Apoteket monopoly in 2009. Oriola-KD paid $225.69 million for the Medstop chain, which added more than 60 pharmacies and nearly 600 employees to the company's Swedish retail business. Following the acquisition, the Medstop pharmacies were rebranded under the KD banner.

Oriola-KD made a new attempt to expand into the Baltic markets, notably through the creation of online pharmacies, operating as InternetAptieka in Latvia and elsewhere. In 2013 the company formed a partnership with Merck Sharp & Dohme to market and distribute the U.S. company's products from Oriola-KD's Vilnius, Lithuania, warehouse. The company also made a direct entry into the online market, acquiring the SIA Rigas Elizabetes Aptieka pharmacy in Riga, Latvia, in December 2014. This pharmacy was subsequently renamed under the InternetAptieka brand.

Nonetheless, Oriola-KD had already begun to refocus around its main Finnish and Swedish operations, selling its Russian retail and wholesale operations to Russia's Apteka 36.6 in December 2014. In January 2015 the company announced a new sourcing services agreement signed with Swedish pharmacy chains Apoteksgruppen and Lloyds Apotek. Orion also remained a major client for Oriola-KD as well. In June 2015 the two companies signed a new multiyear cooperation agreement.

JOINT VENTURE WITH KESKO: 2017

Oriola-KD changed its name to Oriola Oyj (Oriola Corporation) in 2017. By that time, the company had completed several acquisitions, including that of Svensk Dos AB, a pharmacy company specializing in pharmaceutical dose-dispensing services. Oriola boosted this new business line the following year through the acquisition of Pharmaservice Oy, adding its specialty of automated dose-dispensing services. Oriola continued to expand its Services division through that year, adding a 70.9 percent stake in pharmaceutical services provider Farenta. This purchase included an option for Oriola to acquire full control of Farenta in the future. Another acquisition came in 2017 with the purchase of ICTHS Health Support, a provider of support services to pharmacies, hospitals, pharmaceutical manufacturers, and other health care–industry companies.

Oriola marked a new milestone in 2017 when the company formed a 50-50 joint venture with Kesko, part of K Group, the third-largest retail operator in the Nordic and northern European region, to operate a chain of retail health, beauty, and well-being centers in Finland. That chain launched in January 2018 under the Hehku brand name, with plans to open 30 stores throughout Finland during the year, as well as an online store. Oriola hoped to expand the Hehku chain to 100 locations into the next decade.

In the meantime, Oriola had completed its refocusing, selling its Baltic region operations in 2017. The company continued to build its Finnish operations, expanding its cooperation agreement with Orion in January 2018 to take over the distribution of a broader range of Orion's products. In May of that year, the company added to its Swedish operations as well, providing a capital investment of nearly $15 million to Doktor.se, a Sweden start-up developing an online platform to provide medical services to the corporate market. With total revenues of €1.53 billion ($1.7 billion), Oriola had become a major player in the Finnish and Swedish pharmaceutical distribution and services industry in the early 21st century.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Oriola Finland Oy; Oriola Sweden AB; Kronans Droghandel Apotek AB (Sweden); Svensk Dos AB (Sweden); Pharmaservice Oy; Farenta Oy (70.9%); ICTHS Health Support AB (Sweden); Farenta Polska Sp. z.o.o. (Poland).

PRINCIPAL DIVISIONS

Consumer; Healthcare; Services.

PRINCIPAL COMPETITORS

Apoteket AB; Meda AB; Oy Transmeri AB; Tamro AB; Yliopiston Apteekki AB.

FURTHER READING

https://nordic9.com/news/doktor-se-secures-14-7m-in-strategic-investment-from-finnish-oriola-news2852500496 .

“The Establishment of Oriola and Kesko's Joint Venture Has Been Finalised.” Global Data Point, July 1, 2017.

“Oriola Distributes MSD Pharmaceutical in the Baltic States.” Chemical Business Newsbase, May 31, 2013.

“Oriola-KD Renews Centralized Sourcing Service Agreement for Pharmacy Chains in Sweden.” Thomson Reuters ONE, January 20, 2015.

“Oriola-KD Signs Agreement to Acquire Pharmacy in Riga City Center.” Mena Report, December 2, 2014.