The Slovenia Times

Colarič explains Krka's results in 2016 for "Delo"


In an interview for Saturday's edition of the paper, Colarič noted that the analysis commissioned from the Hungarian branch of consultancy McKinsey ahead of Krka's AGM indeed covered a five-year and a ten-year period, but mostly focused on 2016.

Last year was extremely difficult for Krka, he said, adding that the main reason for the poor results in 2016 were pressure on the prices of pharmaceuticals on the Western European markets and the depreciating Russian rouble.

Colarič admitted that the competition had faced the same issue too, but added that the Novo mesto-based company had been more sensitive as it had launched a lot of new products that year.

The long-serving CEO believes that his position is secure, which is connected with the results, which according to him are "not only good, but excellent" in the first half of this year.

"Sales are higher, profit is higher, by as much as 30%. The performers of the analysis commissioned by SSH were focused on 2016, which was extremely difficult for us. And it seems to me that it does not make sense to rip one less successful year out of the context".

SSH commissioned the analysis as Krka share lost the most of its value in 2016 among all shares in its portfolio, and because the strategy for 2013 envisaged a 13.5% return on equity last year, while the actual return on equity was 7.6%.

Colarič rejected the criticism at the recent shareholders meeting, saying that certain changes to strategies were being made every two years. Changes will also be prepared this year, which will not be so "thorough that we will start sailing in a completely different direction".

He added that the production of prescription drugs would remain the principal activity, and that no major changes in non-prescription drugs are planned. Prices of the latter are not regulated, but are under strong pressure from the competition and much funds need to be invested in their advertising.

Antibiotics currently represent less than 9% of total sales, while medications for heart disease and cardiovascular conditions represent a 47% share, Colarič said, noting that it was the opposite 25 years ago.

Medications for the central nervous system are in second place, primarily because of high sales in Western Europe, while medications for the treatment of the digestive system are in third place, followed by oncologic drugs, diabetes drugs and HIV drugs.

"These are the segments of importance for the developed world, and what is current there now, will come to the other side of the world after a certain time. This is where we see a great opportunity for us".

He dismissed a majority of criticism as "making no sense", but not all. "We are aware that, for example, we have to do more regarding costs or develop the segment of biopharmaceuticals, which will become very important on our markets too".

Krka is not interested in expanding its tourism activity, for example by tying up with Terme Čatež, while it intends to ensure organic growth of its tourism arm Terme Krka, including with a facility in Strunjan on the coast.

Colaric also stressed that the results in the first half of 2017 were "not only good, but excellent".


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