Novo mesto, 26 July 2012 – The Management Board of Krka, d. d. held a press conference today presenting to the public the results of the Krka Group and Krka Company for the first half of 2012, which the Krka Supervisory Board had discussed at its yesterday's meeting. The Group sold EUR 565.3 million worth of products and services in the six months to June, up 7% compared to the same period last year, and generated EUR 90.1 million of profit. The Krka Company sold EUR 521.3 million worth of products (up 7%) and generated EUR 82.9 million of profit.
Sales
The Group sold EUR 565.3 million worth of products and services in the first half of 2012, up EUR 36.5 million, or 7%, compared to the same period last year. Sales in markets outside Slovenia, which represent 92% of the Group's total sales, were up EUR 41.1 million, or 9%, compared to the same period last year.
The Krka Company sales amounted to EUR 521.3 million, up EUR 32.6 million, or 7%, compared to the same period last year.
Krka Group sales by Region
Krka's leading sales region is Region East Europe, where Krka generated 30% of its total sales. The highest relative as well as absolute sales growth among all Krka regions was recorded in this region, where sales in the first half of the year amounted to EUR 167.9 million, an increase by 25%. Region East Europe includes Krka's largest individual market, the Russian Federation, where sales amounted to EUR 114.9 million, up 24% compared to the same period last year.
With EUR 138.6 million of sales, which is one quarter of total sales, the second largest sales region is Region West Europe and Overseas Markets, where sales were up 23%. Contributing EUR 137.9 million, which is 24% of overall sales, Region Central Europe is third in terms of sales value. Sales there decreased by 12%, compared to the same period last year. Region South-East Europe contributed a further 13% of total Group sales. Having amounted to EUR 73.8 million, sales there remained on the same level as in the comparable period last year. In Krka’s domestic market, sales were down 9% compared to the same period last year, to EUR 47 million, which is slightly over than 8% of total Krka Group sales.
Krka Group sales by product and service group
The Krka Group sold EUR 473.7 million worth of prescription pharmaceuticals in the first half of 2012, 8% more than in the same period last year. Prescription pharmaceuticals represent 84% of total Krka Group sales. Sales of prescription pharmaceuticals increased the most in Region East Europe (up 30%), Region West Europe and Overseas Markets (up 24%) and Region South-East Europe (up 6%), while in Region Central Europe and Region Slovenia sales were down compared to the same period last year.
With respect to larger individual markets, the sale of prescription pharmaceuticals increased the most in the Russian Federation (up 31%), Germany (up 16%) and the Czech Republic (up 6%). The top 10 best-selling prescription pharmaceuticals are Enap (enalapril), Atoris (atorvastatin), Lorista (losartan), Prenessa (perindopril), Nolpaza (pantoprazole), Zyllt (clopidogrel), Emozul/Emanera (esomeprazole), Valsacor (valsartan), Lanzul (lansoprazole) and Zalasta (olanzapine).
The sale of non-prescription products was down 3% compared to the first six months last year, to EUR 52.4 million, which represents a solid 9% of total Group sales. Animal health products generated EUR 22.7 million of sales, up 14%, while the sale of health resort and tourist services generated EUR 16 million, which is a decrease by 6% compared to the same period last year and represents 3% of total Krka Group sales.
Operating results
The Group recorded EUR 117.1 million of operating profit, down 5% compared to the same period last year. Pre-tax profit amounted to EUR 108.5 million, down 8% compared to the same period last year. The Group generated EUR 90.1 million of profit after tax in the first half of the year, down barely 3% from last year's profit for the period. The Krka Company generated EUR 82.9 million of profit, down one tenth.
The Group’s profit margin was 15.9% (Krka Company 15.9%), the EBIT margin 20.7% (19.6%) and the EBITDA margin 28.5% (26.2%). ROE at Group level was 15.2% (Krka Company 14.1%), with ROA at 11.4% (11.0%).
Research and development
In the first half of 2012 Krka acquired first marketing authorisations for five new products in 13 dosage forms and strengths, and obtained 320 marketing authorisations for 64 products in different markets.
They obtained marketing authorisations for four new prescription pharmaceuticals in 12 pharmaceutical dosage forms and strengths. The product portfolio for the treatment of high blood pressure was expanded with the new combination of olmesartan and the diuretic hydrochlorothiazide. In 17 European countries they obtained marketing authorisations for candesartan (Karbis) in tablet form in four strengths, and an additional marketing authorisation was obtained for valsartan film-coated tablets in four strengths. Additional marketing authorisations were acquired in 12 European countries for Krka's well established product for the treatment of cardiovascular diseases, atorvastatin (Atoris), in the form of film-coated tablets in three strengths, and perindopril (Prenessa Q-Tab) in the new patient-friendly form of orodispersible tablets in two strengths was authorised in nine European countries.
Having obtained marketing authorisations for the new medicine capecitabine, Krka entered the field of oncology medications. Capecitabine in the form of film-coated tablets in three strengths is a substance treating different kinds of cancer: colon and stomach cancer, and breast cancer. The oral form of the medicine is patient friendly and easy to use, allowing for home therapy. Capecitabine was approved in 29 countries.
In all the markets of Western Europe Krka obtained marketing authorisations for sildenafil orodispersible tablets in three strengths, which treat erectile dysfunction. As to antidiabetics, they obtained new marketing authorisations in the countries of Western Europe for pioglitazone, which treats type-2 diabetes, and with respect to antipsychotics, ziprasidone in capsule form in four strengths was additionally approved in seven European countries.
New marketing authorisations were acquired for key Krka non-prescription brands: for Bilobil 120 mg capsules in Estonia, for herbal Palprostes soft gel capsules in the Russian Federation, for Herbion ivy syrup in Ukraine, Kazakhstan, Macedonia, Bosnia and Herzegovina, Belarus and Moldova, for the analgesic Nalgesin in six countries of Western Europe and in Croatia, Albania, Moldova and Serbia, for Septolete plus spray in Belarus, and for Septolete plus honey and lime lozenges in the Russian Federation, Ukraine, Turkmenistan, Armenia and Romania.
With respect to animal health products, they obtained a first marketing authorisation for the new product doxycycline (Misoxin) in the form of oral powder, which was approved in the Russian Federation. In 27 European countries they acquired marketing authorisations for the probiotic product Animavit in the form of water soluble granules, and in 11 countries of Western Europe marketing authorisations were obtained for the fipronil spot-on solution in five strengths. In Azerbaijan they authorised Giraxa (colistin), a water soluble powder for the preparation of oral solution, treating bacterial infections in farm animals, and in Serbia they obtained a new marketing authorisation for Rycarfa (carprofen), used as a pain reliever after operations and in degenerative changes of the musculoskeletal system.
Investments
In the first six months of 2012 the Krka Group allocated EUR 58 million for investments, of which the controlling company invested EUR 26.4 million and subsidiaries EUR 31.6 million. Krka has set aside EUR 200 million for investments in 2012, however, investment spending will probably in fact be lower as a result of good pricing conditions negotiated with suppliers and contractors.
In June work started on the new oral solid dosage pharmaceutical production plant Notol 2, which is being built at Krka's central location in Novo mesto, Slovenia. The plant with the target capacity of 4.5 billion finished products per year is worth EUR 200 million.
Also ongoing is the investment into Krka's subsidiary Farma GRS, d. o. o., which Krka founded together with partners. New research, development and production capacity is being set up at Krka's location in Ločna in Novo mesto, Slovenia, in a project worth EUR 45 million. Project is co-funded by the European Union with slightly more than EUR 10 million.
In Krško, Slovenia, they began constructing an API production plant. The plant called Sinteza 1 will provide for maximum production flexibility and foster the transition to large scale production of complex APIs and intermediates in a controlled environment, consistent with the European Community Regulation on chemicals and their safe use (REACH).
In the Russian Federation the new production and distribution centre, worth an estimated EUR 135 million, is under construction. Its target capacity is 1.8 billion tablets and capsules per year, and the construction is planned to finish in 2013.
Employees
At the end of June 2012, the Krka Group had 9,209 employees, which is 261, or 3%, more than at the beginning of the year. The number of Krka employees increased in the first half of the year by 99 in Slovenia and by 162 abroad. Krka's subsidiaries and representation offices outside Slovenia employ 49% of the Group’s employees, with 51% of the Group's team having university or higher academic degrees.
Currently there are 58 employees enrolled into postgraduate studies with Krka's support, towards obtaining a specialisation, master's degree or doctoral degree, and 304 are enrolled into part time graduate studies. 21 employees completed their studies in the first half of the year, and in autumn an additional 45 are enrolling into various study programmes towards obtaining higher academic degrees.
Investor information
At the end of June 2012, Krka had a total of 70,061 shareholders. International investors increased their shareholdings the most (by 0.7 of a percentage point from the beginning of the year), reaching 16.7% of ownership. Individual domestic investors, investment companies, investment funds and other domestic companies, on the other hand, have decreased their holdings in the reported period.
In the first half of 2012, Krka repurchased 108,813 treasury shares via the Ljubljana Stock Exchange, worth a total of EUR 5.2 million. At the end of June 2012 it thus held 2,133,930 treasury shares, which is 6.0% of its share capital.
On 30 June 2012 Krka's share traded at EUR 42.00, having decreased almost 21% since the beginning of the year. The Slovenian blue chip index SBI TOP lost almost 12% over the same period. Krka's market capitalisation on 30 June 2012 amounted to EUR 1.5 billion. Deals in Krka generated an average daily trading volume of EUR 0.6 million in the first half of 2012, making Krka the most traded security on the Ljubljana Stock Exchange.
The Procedure of the European Commission
In November 2008, Krka informed public that it had been visited by the representatives of the European Commission, who were collecting data within the scope of the sector analysis of pharmaceutical market and competitiveness on the aforesaid market.
The Commission has been investigating the alleged violation of the competition law in sales of perindopril medicinal product on markets of the European Union.
Within the scope of its investigation, the Commission informed Krka that due to the alleged violation of rules on the prevention of competition in the European Union, the Commission would continue the procedure and would investigate Krka as well as all other companies involved in the investigation since 2008, but the continuation of the procedure does not prejudice the final decision. Krka has not yet received the Statement of Objections, i.e the findings of the Commission during investigation which is expected shortly.
Krka believes that it has not violated the EU competition rules in sales of perindopril.
