Krka presented its operating results for the first half of 2013

Sales

Krka Group sales amounted to EUR 597.1 million in the first half of 2013, up EUR 31.8 million, or 6%, compared to the same period last year. Sales in markets outside Slovenia, which represent 93% of the Krka Group’s total sales, were up EUR 35.5 million, or 7%, compared to the same period last year.

Krka Company sales amounted to EUR 587.4 million, up EUR 66.2 million, or 13%, compared to the same period last year.

Krka Group sales by Region

The leading sales region is Region East Europe, where Krka generated 35% of its total sales. This is where they recorded the highest relative as well as absolute sales growth among all regions (up EUR 43.3 million, or 26%). Sales there amounted to EUR 211.2 million. Region East Europe includes Krka’s largest individual market, the Russian Federation, where sales in the period amounted to EUR 149.1 million, up 30% compared to the same period last year.

With EUR 139.7 million of sales, which is more than 23% of total sales, the second largest sales region is Region West Europe and Overseas Markets. Sales there were up 1% compared to the same period last year. Contributing EUR 134.9 million, or 23%, of overall sales, Region Central Europe is the third in terms of sales value, sales there were down 2% compared to the same period last year. Sales in Region South-East Europe amounted to EUR 68.0 million, which represented 11% of Krka Group sales, a decrease of 8% compared to the same period last year. Sales in the domestic market also decreased by 8% to EUR 43.3 million, representing just over 7% of total Krka Group sales.

Krka Group sales by product and service group

The Krka Group sold EUR 495.7 million worth of prescription pharmaceuticals, 5% more than in the same period last year. Prescription pharmaceuticals represent 83% of Krka Group sales.

With respect to large markets, the sales of prescription pharmaceuticals increased the most in the Russian Federation (up 34%) and Poland (up 7%). The ten leading prescription pharmaceuticals in terms of sales are Lorista/Lavestra (losartan), Atoris (atorvastatin), Enap (enalapril), Prenessa/Perineva (perindopril), Zyllt (clopidogrel), Nolpaza (pantoprazole), Emozul/Emanera (esomeprazole), Valsacor (valsartan), Roswera/Roxera (rosuvastatin) and Karbis/Candecor (candesartan).

Non-prescription products, the sales of which increased by 23% compared to the same period last year, generated EUR 64.7 million, which represented almost 11% of Krka Group sales. Animal health products contributed EUR 22.0 million of sales, which is 3% less than in the same period last year. Health resort and tourist services contributed EUR 14.2 million, a decrease of 11% compared to the same period last year, and represented just over 2% of total Krka Group sales.

Operating result

The Krka Group recorded EUR 132.8 million of operating profit, an increase of 15% compared to the same period last year. Profit before tax amounted to EUR 117.6 million, up 8%.

The Krka Group reported EUR 100.3 million of profit for the first half of 2013, up 11% compared to the same period last year, and the Krka Company generated EUR 93.2 million of profit for the period, up 13%.

The Krka Group profit margin for the period was 16.8% (Krka Company 15.9%), its EBIT margin 22.2% (Krka Company 20.7%), and its EBITDA margin 29.9% (Krka Company 26.8%).

ROE at the Krka Group level was 15.6% (Krka Company 14.6%), with ROA at 11.9% (Krka Company 11.5%).

Research and development

In the first half of 2013 Krka received first marketing authorisations for eight new products in 15 different dosage forms and strengths, and one certificate of the first notification for a new biocidal animal health product. They obtained a total of 294 new marketing authorisations for 83 products in different markets.

Approvals were obtained for seven new prescription pharmaceuticals by applying EU and national procedures. In the area of treatments for cardiovascular diseases Krka obtained marketing authorisations for their new product Amaloris (combination of atorvastatin and amlodipine) in the form of film-coated tablets, which contain 10 mg of each of the two active substances. Krka’s range of products used to lower blood pressure was supplemented with the new product Tolucombi (combination of telmisartan and hydrochlorothiazide) in the form of tablets, for which approvals were granted in all European countries. By having obtained approvals for Tolucombi, Krka successfully completed the development of their first product in the form of bilayer tablets. Bilayer tabletting enables the incorporation of several active substances into one tablet.

In 15 European countries they obtained marketing authorisations for Elenarp (combination of enalapril and lercanidipine) in the form of tablets in two strengths. The product is indicated in the treatment of essential hypertension in cases when monotherapy with lercanidipine proves insufficient and does not give the adequate results for high blood pressure.

They also obtained approvals for memantine film-coated tablets in two strengths, used to treat patients with mild to moderate Alzheimer’s disease.

Krka’s range of products for the treatment of the central nervous system was supplemented with the antidepressant Elicea Q-Tab (escitalopram) in the form of orodispersible tablets in four strengths, which was approved in nine European countries. The new form of the medication eases administration for the patient.

In the Russian Federation they obtained marketing authorisations for the new product Naklofen Protect dual pack, which contains 75 mg diclofenac capsules and 15 mg lansoprazole capsules in the same pack. It is used to alleviate pain and treat all forms of rheumatic diseases that require long-term treatment with diclofenac.

In the area of oncology medications Krka introduced two new products, Meaxin (imatinib) film-coated tablets, which were approved in nine European countries, and the Tolnexa (docetaxel) concentrate for solution for infusion, approved in 12 European countries. Krka has also entered the area of oncology medications in the Russian Federation, where they were granted a marketing authorisation for their new product Neopax (imatinib) in the form of hard gelatin capsules, and in Croatia, where in addition to Neopax (imatinib) they also obtained approvals for Lortanda (letrozole), Etadron (exemestane) and Cansata (capecitabine).

With respect to non-prescription products, Krka obtained marketing authorisations for their new product Nalgesin 220 mg (naproxen sodium) in seven European countries. Additionally marketing authorisations were obtained in different countries for the key brands Bilobil, Herbion and Septolete and for Septoaqua nasal spray for children and Septoaqua nasal spray for adults.

In Slovenia they obtained the certificate of the first notification for their new veterinary hygiene biocidal product Ecocid Advanced in the form of water-soluble powder. In different countries they obtained marketing authorisations for toltrazuril oral suspension, Marfloxin (marbofloxacin) solution for injection for calves and pigs and for the Fypryst spot on (fipronil) solution and for the Fypryst (fipronil) cutaneous spray.

Investments

In the first half of 2013 the Krka Group allocated EUR 70.6 million to investments, of which the controlling company invested EUR 44.9 million and subsidiaries EUR 25.7 million. Investments primarily aim to increase and modernise Krka’s production capacity, and research and development infrastructure.

In June 2012 construction works started at Krka’s central location at Ločna in Novo mesto, Slovenia for Notol 2, a production plant for solid dosage pharmaceuticals. This is the largest investment in the company’s history. The estimated investment value of the 55,000 square-metre plant is EUR 200 million, and its target production capacity is 4.5 billion of finished products per year. Production will start by the end of 2015.

Investment into Krka’s subsidiary Farma GRS, d. o. o., a company which they founded together with partners in a project aimed at advancing the pharmaceutical industry, is in its final stage. At the location in Ločna, Novo mesto, Slovenia they are setting up a new research and development and production capacity. The project’s investment value is EUR 45 million, and is co-funded by the European Union, contributing over EUR 10 million from the European Regional Development Fund. The newly-founded company will set up the conditions for developing new products and technologies related to pharmaceutical chemistry and technology.

The construction of a new complex for the production of active pharmaceutical ingredients in Krško, Slovenia began in July 2012. In the first stage they are building the Sinteza 1 production plant and the related infrastructure. The investment is estimated at EUR 85 million. The Sinteza 1 project substantiates the company’s philosophy of vertical integration, which keeps Krka in control of the entire product development and production process, from the production of APIs to the production of finished products, and to launching products on the market.

The Sterile product production plant is gradually increasing ampoule production to 130 million per year. The entire project’s estimated investment value is EUR 22 million.

Cogeneration, i.e. the simultaneous generation of useful heat and electricity, increases the recovery of energy conversion and enables an efficient use of primary energy. At Ločna in Novo mesto, Slovenia, Krka has set up a natural-gas-powered gas engine cogeneration system. The investment has increased the economic efficiency of their generation of electricity and utilisation of heat energy. The project’s investment value is EUR 1.7 million.

One of the most important investments of the Krka Group is Krka Rus 2, the construction of a new plant and expansion of their logistic centre in the Russian Federation. The plant, with the target production capacity of 1.8 billion tablets and capsules per year and a total plant surface of 36,000 square metres, will help consolidate Krka’s status of a domestic pharmaceutical producer there. Construction has been according to the plans. The logistic centre including the high-bay warehouse has been completed, system connections between the old and new warehouse were established in May, and the production plant is undergoing finishing works. The investment value of the entire project is estimated at EUR 135 million, with the first stage worth EUR 95 million, which is to be completed this year.

In April the subsidiary Terme Krka opened an adventure park in Otočec. It has diversified Krka’s tourist offer, increased the area’s tourist appeal, and provided an new form of recreation for the youth and families who wish to be active outdoors in their spare time. The project was partly co-funded by the European Agricultural Fund for Rural Development (EAFRD) under Axis 4: LEADER. In the Dolenjske Toplice health spa resort they are constructing a new geothermal well to supply sufficient thermal water and provide heating for the Balnea Wellness Centre building, and in autumn they plan to renovate the restaurant of another health spa resort, Šmarješke Toplice, and start with the construction of a small pool by the Hotel Šport in Otočec. 

Employees

At the end of June the Krka Group had 9,839 employees, an increase by 378, or 4%, compared to the beginning of the year. The number increased by 80 in Slovenia and by 298 abroad. Almost 51% of all Krka employees work outside Slovenia, and 53% of the Krka team have at least a university level education.

Currently 46 employees are enrolled in postgraduate studies of specialisation, master’s or doctoral study programmes, while 168 are enrolled in part-time graduate studies. In the first half of the year 16 Krka employees completed their studies, and in autumn another 45 are enrolling into various study programmes with the company’s support, including six employees from abroad.

Investor and share information

At the end of June 2013 Krka had a total of 65,574 shareholders. The shareholdings of international investors increased by 0.7 of a percentage point since the beginning of the year, to the current 19.5%, while the holdings of individual domestic investors as well as domestic investment companies, funds and other domestic companies were down.

In the first half of the year Krka’s share price on the Ljubljana Stock Exchange peaked at the beginning of January, when it traded at EUR 56.00, and reached its low at the end of March, when it stood at EUR 46.05. As at 30 June 2013, the closing price of Krka’s share on the Ljubljana Stock Exchange was EUR 51.00, and Krka’s market capitalisation totalled EUR 1.8 billion.

Consistent with the authorisation granted by the 16th Annual General Meeting and the valid regulations, Krka continues to repurchase treasury shares. In the first half of 2013 the company thus repurchased 115,920 treasury shares via the Ljubljana Stock Exchange, worth a total of EUR 5,926,571 (purchases registered in 2013). At the end of June 2013 Krka held 2,420,234 treasury shares, which represents 6.83% of the value of its share capital.