Krka presented its operating results for the period January–September 2017

Krka Group sales by Region

Krka’s largest sales region was Region East Europe, where sales totalled €271.4 million, which is 29.2% of overall sales. It was in this Region that Krka recorded the highest sales growth compared to the same period last year, both in absolute (up €41.4 million) and relative (up 18%) terms. The key factor was successful operations in the key market, the Russian Federation, with good results reported by the majority of the Region’s remaining markets of Eastern Europe and Central Asia.

In Region Central Europe, consisting of the Visegrad countries and the Baltic countries Lithuania, Latvia and Estonia, Krka sold €226 million worth of products, which is 24.4% of overall Krka Group sales, making this Krka’s second largest sales region. Sales there were up 8% compared to the same period last year. The Region’s leading market was Poland, and sales growth was recorded in all markets in the Region.

Region West Europe followed with €217.7 million of sales, which represents 23.5% of total sales. Compared to the same period last year, sales were up 3%. The most sales were generated in Germany, France and Spain.

Product sales in Region South-East Europe amounted to €116.3 million, up 4% compared to the same period last year and representing 12.5% of overall Krka Group sales. The leading market in the Region was Romania, a key market, while the other principal drivers of sales growth among markets were Croatia, Serbia, Macedonia and Bulgaria.

In Slovenia Krka sold €66.7 million worth of products, which is 7.2% of total Group sales. Sales revenues increased by 4%. With a 9% market share, Krka has remained the leading pharmaceutical company in Slovenia.

Product sales in Region Overseas Markets totalled €30.1 million (12% increase), a 3.2% share of overall Krka Group sales. The majority came from prescription pharmaceuticals, which are sold as Krka brand products in most of the Region’s markets.

Krka Group sales by product and service group

The Krka Group sold €768.2 million worth of prescription pharmaceuticals, up one tenth compared to the same period last year, which represents 82.8% of overall Group sales. Sales increased in all regions, the most in East Europe (by 18%), Overseas Markets (by 10%), Central Europe (by 9%) and West Europe (by 6%).

The leading ten prescription pharmaceuticals in terms of sales have included Atoris (atorvastatin), Lorista (losartan) and its combination with a diuretic, Nolpaza (pantoprazole), Prenessa (perindopril) and its combination with a diuretic, Valsacor (valsartan) and its combination with a diuretic, Emanera (esomeprazole), Roswera (rosuvastatin), Enap (enalapril) and its combination with a diuretic, Zyllt (clopidogrel), and Amlessa (perindopril and amlodipine) together with its combination with a diuretic. These products may have different brand names in individual markets.

For non-prescription products, sales were up one tenth to €82.9 million (8.9% of overall sales). The sales of animal health products were down 4% to €48.4 million, which is 5.2% of overall Krka Group sales. Health resort and tourist service sales totalled €27.2 million, up 8% from the same period last year (2.9% of overall sales).

Research and development

In the first nine months of 2017 Krka obtained marketing authorisations for 14 new products in 25 dosage forms and strengths, and acquired 385 new marketing authorisations for 99 products in different markets in this period.

Investments

In the first nine months of 2017 the Krka Group allocated €75.2 million to investments, of which the controlling company invested €62 million and subsidiaries €13.2 million. Krka Group investments for the full year 2017 have been planned to amount to just over €120 million, which is less than planned and less than last year. The estimated amount is the result of the good prices negotiated with contractors and equipment suppliers.

Employees

At the end of September the Krka Group had 10,733 employees. Krka’s subsidiaries and representation offices outside Slovenia employed 53% of the Group’s employees, and 56% of the entire Krka team had at least a university level degree.

Estimated realisation of Krka Group business objectives for 2017

Annual product and service sales are projected to amount to €1.240 billion, thus exceeding the annual plan of €1.220 billion. The projected sales growth in 2017 will exceed that of 2016 by around 6%. Sales in markets outside Slovenia are expected to account for 93% of total sales. Full-year profit for 2017 is projected to total approximately €140 million and will exceed that of 2016 in the amount of €108.5 million.

Just over €120 million will be invested in Krka’s proprietary development, production and infrastructure capacities in 2017, which is less than the year before, when it was €132 million. According to projections, the Krka Group will have 11,000 employees at the year-end of 2017, 53% of them abroad.

Krka Group plans for 2018

Krka plans for Group sales next year to total €1.3 billion and profit to amount to €153 million. €135 million will be earmarked for investments, primarily increasing and modernising their production capacities and infrastructure. The number of employees is planned to increase in 2018 both in Slovenia and abroad, by a total of 2%, with the total number of full time employees in the Krka Group exceeding 11,200.

The 2018 operations plan derives from the Krka Group development strategy for the period 2018–2022.

Establishment of a joint venture in China

In recent years China has witnessed significant changes in terms of promoting the use of modern pharmaceutical products and, at the same time, tightening legislation regulating the pharmaceutical market as standards from the EU and US legislations are being introduced. This means that only products meeting the highest standards of efficacy, safety and quality are allowed on the market. This is an opportunity for Krka to enter this large market with its products, which meet the highest standards.

Krka established a joint venture company together with the Chinese partner Ningbo Menovo Pharmaceutical. Krka holds a 60% share and the partner a 40% share in the joint venture. The joint venture will initially focus on obtaining marketing authorisations for Krka products in China. The Chinese partner has some capacities and human resources in this area, which will be engaged in the new company. Obtaining authorisations to market products is a prerequisite for selling products in the Chinese market.

Krka Group development strategy 2018–2022

In the new five-year strategic period, sales are projected to grow by at least 5% per annum on average in terms of volume/value.

Carefully thought-out investments and an increased scope of contract manufacturing will drive down the value of the Group’s investments, which will amount to an average of €136 million per year in the coming five-year period. In addition to organic growth, Krka intends to expand by means of acquisitions and long-term business combinations, including joint ventures in case of commercially appealing and available acquisition targets. The primary objectives are to acquire new products and enter to new markets.

In addition to the existing product range, which represents the so-called gold standard, Krka will maintain the largest possible share of new products in overall sales and of vertically integrated products. It will continue launching products on selected markets as one of the first generic pharmaceutical companies. It will strengthen the pharmaceutical and chemical industry and in this respect expand its range of prescription pharmaceuticals for key therapeutic areas – particularly medicines for cardiovascular diseases, medicines for diseases of the central nervous system, and medicines for diseases of the alimentary tract and metabolism – as well as those for high-potential areas – such as analgesics and oncology medications, antidiabetics, anti-virus medicines and antibiotics – while also entering new areas. Innovative generic products will be introduced in key therapeutic areas, such as fixed-dose combinations of two or three substances, new strengths, pharmaceutical forms, and new delivery systems. Krka will also embark on the area of similar biological medicines, placing priority focus on treatments for autoimmune diseases and diabetes. Krka will also strengthen selected therapeutic areas of non-prescription products and animal health products, particularly products for companion animals. R&D expenditure will account for up to 10% of sales in the strategic period.

Krka will focus on European markets, the Chinese market and the markets of Central Asia, striving to better utilise the sales potential of all sales regions. It will strengthen the professional and cost synergies within the Krka Group, maximising the utilisation of competitive advantages of the business environments of Krka companies abroad.