Jefferies London Healthcare Conference
KRKA is one of the leading generic pharmaceutical companies with 65 years of experience in the industry.
21st November 2019 History and Development Committed to Growth with In-House Knowledge and Dedicated to R&D
Development Phase Growth Phase (1985–ongoing) 1954–1984
First thirty years Continuous investments Modern Krka (new markets and therapeutic classes)
Growth on the basis of Establishment of subsidiaries and Expansion of marketing and sales network to numerous in-licensed representative offices abroad Western European markets by acquiring TAD products from leading US, Pharma in Germany EU and Japanese Accelerated development of own originators branded generic medicines and Fixed-dose combinations, unique strengths, cooperation with leading international unconventional FDFs and new therapeutic classes Construction of the first API pharmaceutical companies (including biosimilars) production plant and production site for solid Top-ranked in Central, Eastern Entry into the Chinese market through dosage forms and South-Eastern Europe, and establishment of a joint venture – Ningbo Krka penetrating Western European Menovo – with a local partner Bridge to Eastern Europe markets
FDA registration for production of antibiotics
1984: 85% In-licensed products 2001: 21% Current: 3% 1984: 15% Own products 2001: 79% Current: 97%
www.krka.biz 2 World Generic Market
11.000 Generics/Biosimilars/OTC sales in 10.000 million USD in 2018 9.000 8.000 7.000 6.000 5.000 th 4.000 19 3.000 2.000 1.000 0
www.krka.biz 3 Source: Adopted from Generics Bulletin, July 2019. European Generic Market
5.000 Ranking by 2018 generic sales ($ MM)
4.000
3.000
2.000
1.000
0
Sun
GSK
Intas
Teva
Novo
Pfizer
Stada Bayer
Mylan
KRKA
Sanofi
Servier Richter
Torrent
Zentiva
Novartis
Menarini
Fresenius Aurobindo Source: Morgan Stanley, IMS Health, Polpharma IQVIA KGaA Merck Countries include UK, Russia, Spain, Turkey, Switzerland, Romania, Sweden, Slovakia, Slovenia, Germany, France, Italy, Poland, Netherlands, Austria, Belgium, Portugal, www.krka.biz 4 Hungary, Greece, Czech Republic, Finland, Ireland, Bulgaria, Norway, Croatia. Richter was added afterwards. Well-Diversified Activities Present in More than 70 Markets Across Europe and Central Asia
28 subsidiaries and 20 representative Manufacturing sites in Slovenia, offices Croatia, Poland, Russia and Germany
6 sales regions and more than 70 markets Each day 50 million patients use Krka medicines. www.krka.biz 5 Vertically Integrated Model Advantageous and Effective Business Model
Quality management and quality control at all stages Following patient and client requirements
Developing APIs, pharmaceutical forms and analytical methods
Producing APIs
Producing pharmaceutical forms
Packaging, warehousing, distribution
Marketing and sales
Monitoring patient and client satisfaction www.krka.biz 6 Stable Sales Development
1.600 16 Compound Annual Growth Rate (2009–2019) 6.5% 1.400 14
1.200 12
1.000 10
800 8
million
€
600 6
400 4
200 2
0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Sales revenue Pieces manufactured (billion) * Estimate www.krka.biz 7 Krka Group Sales by Regions Growth in All Regions and Most Markets
Jan–Sept 2019: €1,087.6 million Krka Group sales of products and Overseas Markets services amounted to €1,087.6 Slovenia €37.3 million million, up €118.7 million or 12% €69.9 million (+€4.7 million or (+€3.2 million or +5%) compared to the same period last +14%) West Europe year. €243.1 million 3.4% 6.4% South-East Europe (+€33.1 million or €145.6 million 94% of overall sales of products and +16%) (+€13.3 million or 13.4% services in the Krka Group were 23.2% +10%) generated on foreign markets.
The highest absolute sales growth (by €52.1 million) as well as the highest relative sales growth (by 18%) was recorded in Region East 31.2% Europe. 22.4%
East Europe Krka's leading sales region is Central Europe €339.7 million Region East Europe, which €252.0 million (+€52.1 million or accounted for 31.2% of overall sales. (+€12.4 million or +5%) +18%)
www.krka.biz 8 (Growth compared to Jan–Sept 2018) Krka Group Sales by Product
and Service Groups
Jan–Sept 2019: €1,087.6 million Prescription Krka's most important pharmaceuticals group of products in €914,9 million (+€112.0 million or terms of sales value +14%) remain prescription pharmaceuticals. 84.1%
With prescription pharmaceuticals, we achieved the highest absolute sales growth (by €112.0 million) and the highest relative 2.8% Health resorts and tourist sales growth (by 14%). services 4.7% €29.9 million All product and service (+€1.6 million or +6%) 8.4% groups recorded an increase in sales. Non-prescription products Animal health products €91.7 million €51.1 million (+€4.4 million or +5%) (+€0.7 million or +1%)
www.krka.biz 9 (Growth compared to Jan–Sept 2018) Leading Products Diversified Product Portfolio
Krka’s Generic Therapeutic Jan-Sept 2019 Sales in € million Brand Name Group 1 VALSACOR valsartan Cardiovascular
2 PRENESSA perindopril Cardiovascular
3 LORISTA losartan Cardiovascular
4 ATORIS atorvastatin Cardiovascular Alimentary Tract 5 NOLPAZA pantoprazole and Metabolism 6 ROSWERA rosuvastatin Cardiovascular Alimentary Tract 7 EMANERA esomeprazole and Metabolism 8 ENAP enalapril Cardiovascular
9 ZYLLT clopidogrel Cardiovascular
10 DORETA tramadol Analgesic 0 25 50 75 100 125 www.krka.biz 10 Committed to Product Development
R&D spending in € million 700 scientists in
150 R&D € 100 50 170 products
0 milijonih V in pipeline
Sept Sept Sept
2018
– –
2018 2019
Jan Jan
23 MAs for new products in Innovative generic manufacturer (10% of sales allocated to R&D) 2018 First generic company in Europe to introduce various fixed-dose combinations 13 MAs for new products in Jan–Sept 2019 First to offer unique strengths on global pharma markets
Medicines available in variety of unconventional dosage forms Target: launching of 20+ new products per year Medicines clinically proven and made in EU
www.krka.biz 11 Krka's New Treatment Options Trailblazing to Accommodate Patient Needs
Krka was the first to offer unique strengths on the global pharma market:
Innovative generic manufacturer
rosuvastatin atorvastatin tramadol/paracetamol
Krka’s fixed-dose combinations (FDCs) of antihypertensives and statins allow for simultaneous treatment of two major risk factors for cardiovascular disease (hypertension and hyperlipidemia) with a single tablet and ensure better patient compliance.
Rosmela Atorcombo, Atoris Combi Ravalsyo, Ravalsya, rosuvastatin/amlodipine amlodipine/atorvastatin Valsaros rosuvastatin/valsartan
Please note that some products may not be available in all markets. www.krka.biz 12 Krka's New Treatment Options Trailblazing to Accommodate Patient Needs
Krka was the first generic manufacturer in the global pharma market to Co-Dalneva, Co-Dalnessa, offer the triple FDC of perindopril, indapamide and amlodipine. Amlewel, Tonanda perindopril/indapamide/amlodipine
Above 70 FDCs of different antihypertensives in various strengths
Co-Perineva, Telmista H, HD Canocombi, Valsaden, Valsacombi, Valodip, Wamlox, Prenewel telmisartan/hydrochlorothiazide Candecor H, HD Valsacor H, HD Amlo-Valsacor perindopril/indapamide candesartan/hydrochlorothiazide valsartan/hydrochlorothiazide valsartan/amlodipine
Krka was the first generic manufacturer in Europe to introduce perindopril/amlodipine, enalapril/lercanidipine, bisoprolol/amlodipine and many other FDCs.
Dalneva, Dalnessa, Elyrno Niperten Combi, Tonarssa enalapril/lercanidipine BisoDipin perindopril/amlodipine bisoprolol/amlodipine
Please note that some products may not be available in all markets.
www.krka.biz 13 Krka's New Treatment Options Trailblazing to Accommodate Patient Needs
• Diabetes continues to be a promising segment for innovative generic Krka products. Example: Krka was the first manufacturer in Europe to market 90 mg gliclazide prolonged-release tablets, which permit dose adjustment in patients with type-2 diabetes, and is among Europe’s leading generic manufacturers of gliclazide prolonged-release tablets.
• Proprietary capacities for oncology medicines in Croatia (EU). Already at the end of May 2017, we started transferring technologies and production of the first oncology medicines to the dedicated plant. In the future, oncology products will be supplemented with new molecules in parenteral and oral forms.
• As to similar biological medicines, focus is placed on evaluating and entry into projects for medicinal products for the treatment of diabetes and autoimmune diseases. Products will be developed in strategic cooperation with specialist partner companies. The role of Krka will be to provide know-how in the area of quality, clinical testing of efficacy and safety, preparing expert and regulatory documents, and marketing authorisations.
www.krka.biz 14
Research and Development
In the first nine months of 2019, we obtained marketing authorisations for 13 new products in 30 dosage forms and strenghts:
antiviral Atazanavir Krka (atazanavir) for the treatment of HIV infections;
Sidarso/Silbesan (silodosin) indicated for the treatment of symptoms of an enlarged prostate;
Tadusta intended for treatment of moderate to severe symptoms of benign prostatic hyperplasia;
cinacalcet for regulating levels of parathyroid hormone, calcium, and phosphorus in the body. It is used for the treatment of secondary hyperparathyroidism;
a new triple combination of perindopril, amlodipine and rosuvastatin;
nebivolol is used for the treatment of hypertension in adults;
Dasatinib Krka is used for to treat Philadelphia chromosome-positive (Ph+) acute lymphoblastic leukemia (ALL);
Paracetamol Krka 1000 is indicated for the symptomatic treatment of mild to moderate pain and fever;
non-prescription product Vitamin D3 Krka is indicated for prevention of vitamin D deficiency;
non-prescription product KontrDiar is used for treating acute diarrhoea if it is presumed to be of bacterial origin and is without complications;
non-prescription product Herbion Ivy (ivy leaf dry extract) lozenges, our new cough and cold product;
animal health product Awazom (amoxicillin) is indicated for the treatment of bacterial infections;
animal health product Milprazon/Milgusto/Mektix/Milpragold/Amcofen Chewable for treatment of mixed infections in cats. www.krka.biz 15 Investments
In the first nine months of 2019, the Krka Group allocated €81.1 million to investments. In October, Krka's key investment for the purposes of development and quality assurance in the following years, the €55.6 million product development and quality control facility, Razvojno-kontrolni center 4 (RKC 4), was opened at the production site in Novo mesto. In October 2017, Krka started building a multipurpose warehouse to ensure additional storage rooms for incoming materials and finished products. The entire transport system and warehouse are expected to become operational in January 2020. The entire investment is estimated at €36 million. In order to meet the increasing demand and manufacture of new products, Krka is purchasing additional technological equipment for Notol 2 plant. In 2019, this investment will total €16 million. When the plant is fully equipped, it will be able to operate at its planned volume, i.e. 5 billion tablets per year. In progress are preparations for the construction of a new hazardous materials warehouse in Krško. The new building will store raw materials for chemical and pharmaceutical production. The construction of the €8.2 million building will be finished in July 2020. In February 2019, the EU introduced new rules regarding the protection of public health by preventing the entry of falsified medicinal products into the pharmaceutical supply chain. The Directive introduces obligatory safety features on the outer packaging of medicines, which prevent falsified medicines from reaching patients. In accordance with these requirements, we upgraded the technological equipment and manufacturing procedures on many levels. Over the last three years, we allocated approximately €20 million for the new equipment and technology. Safety measures required by Russian legislation as of 2020 are also included in this investment. The Krka-Rus plant, north-west of Moscow, is one of the key investments in Krka's subsidiaries. We are designing additional manufacturing and laboratory capacities, which will be important for the future business development in Russia. The investment is estimated at €33 million and will increase manufacturing capacities to 3 billion tablets per year. At the end of 2017, we established a joint venture Ningbo Krka Menovo with a local partner Menovo in the city of Ningbo, China. In 2018 we obtained a GMP certificate for leased production facilities. Commercial manufacture of the first product intended for markets outside China began at the end of 2018. At the same time, we filed all registration documents required to sell the product in China. In 2019, we will file registration documents for another five MAs for our products in China. www.krka.biz 16 Consolidated Income Statement
of the Krka Group
Jan–Sept Share Jan–Sept Share Index € thousand 2019 (%) 2018 (%) 2019/18 Revenue 1,090,721 100.0 971,570 100.0 112 Costs of goods sold 474,558 43.5 418,684 43.1 113 Gross profit 616,163 56.5 552,886 56.9 111 Other operating income 8,199 0.8 7,627 0.8 107 Selling and distribution expenses 261,423 24.0 244,223 25.1 107 R&D expenses 110,839 10.2 95,144 9.8 116 General and administrative expenses 60,520 5.5 57,325 5.9 106 Operating profit 191,580 17.6 163,821 16.9 117 Net financial result 9,961 0.9 -20,832 -2.1 Profit before tax 201,541 18.5 120,570 14.7 141 Income tax 29,611 2.7 22,228 2.3 133 Net profit 171,930 15.8 120,761 12.4 142 Basic earnings per share (in €) 5.50 3.77 146
www.krka.biz 17 Consolidated Statement Of Financial Position
of the Krka Group
Share Share Index € thousand 30 Sept 2019 (%) 31 Dec 2018 (%) 2019/18 ASSETS 2,129,863 100.0 1,985,069 100.0 107 Non-current assets 1,042,790 49.0 1,010,811 50.9 103 Current assets 1,087,073 51.0 974,258 49.1 112 Thereof: - Inventories 408,341 19.2 365,149 18.4 112 - Trade receivables 424,172 19.9 438,291 22.1 97 EQUITY AND LIABILITIES 2,129,863 100.0 1,985,069 100.0 107 Equity 1,614,316 75.8 1,540,270 77.6 105 Non-current liabilities 153,600 7.2 123,058 6.2 125 Current liabilities 361,947 17.0 321,741 16.2 112
www.krka.biz 18 Krka Group Operating Results
Jan–Sept Jan–Sept amounts in EUR thousand 2019 2018 EBIT 191,580 163,821
- EBIT margin 17.6% 16.9%
EBITDA 274,233 246,434
- EBITDA margin 25.1% 25.4%
Net profit 171,930 120,761
- Profit margin 15.8% 12.4%
Return on equity (ROE) – annualised 14.5% 10.8%
Return on assets (ROA) – annualised 11.1% 8.4% www.krka.biz 19 Strong Long- Term Results In the last five years, Krka outperformed its peers.
30% Five-year average 25%
20%
15%
10%
5%
0% EBITDA Net margin ROE ROA Dividend yield Dividend -5% margin growth
-10% Krka Gedeon Richter Stada Pharma Industry
-15% Sources: Annual reports. Reuters stock-screener for dividend yield and growth as at 29 March 2019. www.krka.biz 20 Shareholder Structure
Ten largest shareholders as at 13 November 2019 Shares in 23.8% 23.5% 23.8% 23.2% 22.9% Shareholder equity (%) Kapitalska družba, d. d. 10.65 1.0% 1.5% 2.7% 2.1% 3.4% Slovenski državni holding, d. d. 9.00 11.0% 11.0% 11.0% 11.0% 11.0% Republic of Slovenia 7.21 16.2% 16.2% 16.2% 16.2% 16.2% OTP banka, d. d.* 4.70
8.2% 8.1% 7.7% 7.7% 7.7% Addiko Bank d. d.* 3.65 Clearstream Banking SA* 2.76
Unicredit Bank Austria AG* 1.86 39.8% 39.7% 39.2% 39.2% 38.8% Luka Koper d. d. 1.32
Zavarovalnica Triglav, d. d. 1.18
31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 13 Nov 2019 Smallcap World Fund Inc. 1.02 International investors Total 43.35 Treasury shares KAD and PPS funds SDH and Republic of Slovenia *fiduciary account Slovenian investment funds and companies Individual Slovenian investors As at 13 November 2019, Krka had 48,910 shareholders.
www.krka.biz 21
2019 and 2020 Guidelines
Plan adopted by the Management and Supervisory Boards on 20 November 2019.
www.krka.biz 22 2019 Guidelines
The Management Board updates the guidelines for the full 2019 business year.
The 2019 plan projects:
• sales at €1.430 billion (+4%*);
• net profit at over €200 million (+16%*);
• we intend to allocate €114 million to investment projects, primarily to increase and upgrade production facilities and the infrastructure;
• 10% of our revenue is allocated to research and development.
*compared to initial 2019 guidelines (sales €1.375 million and net profit €173 million)
www.krka.biz 23 Guidelines for Krka′s 2020 performance Management Committed to Growth
Sales in € million The 2020 plan projects: 1.600 1.200 • sales at €1,520 million (+6%); 1.430 1.520 800 1.266 1.331 • net profit at over €210 million; 400 0
• CAPEX at €134 million.
2017 2018 2020F The Management Board remains committed to pursuing 2019E stable dividend policy and intends to allocate at least 50% of Net income in € million net profit for dividends considering also financial needs, 250 investments and acquisitions. 200 150 100 210 The 2020 business plan is based on the Krka Group development 153 174 200 strategy for the period 2020–2024, which is based on the 50 0 expectations, estimates and forecasts, and other information
available to the Management Board. The management believes that
2017 2018 2020F expectations are reasonable. If the operating conditions deviate 2019E significantly more than expected in 2020, the operating results may also deviate from the projections.
www.krka.biz 24 2019=estimated, 2020=planed
2020–2024 Strategy
Krka updates its Strategy biennially.
Strategy adopted by the Management and Supervisory Boards on 20 November 2019.
www.krka.biz 25
Industry Trends Solid growth expected in Krka′s generic markets in the next three to five years
Germany Poland LEGEND (83 million citizens) (38 million citizens) €12.3 billion Russia In the next five years, generic markets €5.7 billion Market +2.3% (149 million citizens) are expected to grow at: +9.5% (population) among top 10 Gx €10.3 billion mkt. value (2022) 4th foreign +7.2% - 5% worldwide; mkt. growth (2022) 3rd foreign Krka‘s position - 6% Europe; Slovakia Ukraine (6 million citizens) (42 million citizens) - 9% Asia and Latin America; €1.0 billion €1.9 billion - 1% North America; +4.2% +10.5% 3rd overall among mkt. leaders - 8–10% MENA. Uzbekistan Croatia Czech r. (33 million citizens) (11 million citizens) Key drivers: (4 million citizens) €0.6 billion Slovenia €0.9 billion €1.1 billion +15.4% (domestic mkt.) +6.9% +7.4% among mkt. leaders - increase in standard of living; EUR 0.3 billion 2nd foreign 3rd foreign +4.2% - population growth; 1st overall China - higher availability of medicines; Romania Hungary (1,385 million citizens) €114.4 billion - new & niche products (mature (20 million citizens) (10 million citizens) €1.6 billion €1.3 billion +10.6% markets); +7.4% +4.5% established a joint-venture - life expectancy increase; 1st foreign 2nd foreign - increase of medicine use per capita.
Krka is among generic market leaders in many important and growing markets.
www.krka.biz 26 Source: Worldwide Generic Drug Market, and Krka‘s research. Industry Trends Fewer patents expiring in the next five years put a greater emphasis on life-cycle management
Having always emphasized new From 2020 to 2024, patents for original products worth a total of launches as well as managing the life-cycle of an existing portfolio, $159 billion at originator prices will expire: this is approximately a Krka is well positioned to benefit quarter less than over the past five years. from existing and new products in the next five years due to key The cost of discovering a new medicine has increased to $2.2 billion advantages in the fields of: per medicine, almost double from $1.2 billion in 2010, while sales of NEW LAUNCHES new original products are decreasing in terms of value. Ability to - Krka′s strong in-house R&D and manage existing portfolio is thus becoming more important for the regulatory teams; industry as a whole. - good track-record of first-to-file and
first-to-market; Originators continue to extend the life cycle of products by changing - Krka′s R&D, API and FDF vertical the existing products, by introducing new pharmaceutical forms, by integration. providing additional concentrations of active ingredients, and by ensuring additional indications and advanced delivery systems. LIFE-CYCLE OF EXISTING PRODUCTS - Krka′s recognition and experience in new fixed dosages, unique delivery Vertical integration allows for better management of development and systems, additional concentrations; production stages, and thus more successful product lifecycle - strong M&S and brand awareness on management. traditional markets; - vertical integration. www.krka.biz 27 Industry Trends Quality, Compliance and Vertical Integration Becoming Key Advantages
Many companies are facing challenges in launching new Krka as a vertically integrated company products after they have already obtained all the necessary will benefit from producing APIs and FDFs in-house, as well as from having a approvals. very strong QA/QC.
Up to 40% of delays are attributed to issues with supplies of Due to fully compliant products, Krka raw materials. was able to offset market shortages following certain product recalls. Following a number of product recalls, safety and quality
assurance are becoming decisive competitive advantages. Krka was one of the first producers to fully prepare for FMD and has FMD is also challenging for many producers, causing delays, established strong in-house teams with and significantly lower output. Hardware and software upgrades solid know-how. Similar projects are alone have cost those present in the EU market more than already under way in Krka for the €1 billion. Russian Federation.
The Russian Federation has already been preparing to introduce a similar system to FMD, but with more stringent requirements.
www.krka.biz 28 Key Strategic Guidelines 2020–2024 Sales, CAPEX, R&D Expenditure, M&A
Sales growth of at least 5% annually on average in terms of volume/value
Investments to amount to an average of €136 million per year
39% for FDF production; 37% for API and raw materials production; 24% for infrastructure, IT, and other.
Mergers & acquisitions, joint ventures
In addition to organic growth, Krka intends to expand through acquisitions and long-term business partnerships, including joint ventures, in case of commercially appealing and available projects. The primary objectives are to acquire new products and new markets.
R&D expenditure up to 10% of sales
www.krka.biz 29 Key Strategic Guidelines 2020–2024 Performance, Margins
Process efficacy Production processes to be additionally optimised (organisation, training) to gain as much output and flexibility from existing production capacities as possible. Similarly also development. Further digitalisation with new projects (G&A, M&S, laboratories, production, supply chain). If needed (patent reasons, regulatory restrictions, large-scale products, niche technologies and also greater cost-effectiveness), an increase in collaboration with outside partners in the field of development and production. Krka′s overall cost efficiency to be continued. Performance objectives
The projected average EBITDA margin is between 21% and 25%. The projected ROE is between 9% and 12%.
Stable dividend policy
When determining dividend payout each year, the Group financial needs for investments and acquisitions will be taken into account, with at least 50% of net profit of the majority owners being allocated for dividends. www.krka.biz 30 Key Strategic Guidelines 2020–2024 Markets
Focus on European markets, Central Asia and China
In traditional markets of EE, CEE and SEE, Krka is one of the leading suppliers of Rx products for CVS, gastrointestinal and CNS diseases. We plan also to increase sales of painkillers. A strong M&S team for all mentioned segments in most cases enables Krka to grow faster than market. In four key markets, due to the localization of production, Krka is recognized as a domestic manufacturer, which is a particularly significant market advantage in the Russian Federation (note: Krka-Rus plant to be significantly expanded) . Key to successful sales in the highly diverse markets of Western Europe are competitiveness and pharmacies (consultants). Krka will further increase sales through own M&S network and within own product brands.
Increased focus on China
Increasing the use of modern generic medicines and changes in the regulatory environment in China. At the beginning of 2018, a joint venture with a majority stake of Krka started operating in China. €25 million of CAPEX in 2020.
www.krka.biz 31 Key Strategic Guidelines 2020–2024 Products
Product portfolio
Strengthening the existing, golden standard product range in key therapeutic areas – CVS, CNS and medicines for diseases of the alimentary tract and metabolism – while also entering new therapeutic areas. Entry into biosimilars and complex peptides with partners. Due to the scale and complexity, a separate team has been set up.
Innovative generic products and product life-cycle management
New innovative generic products will be introduced in key and other therapeutic areas. Existing product range will be supported by M&S activities and by introducing new combinations, strengths, forms and delivery systems.
Launching products on selected markets as one of the first generic suppliers
Maintaining the largest possible share of new products in overall sales
Maintaining the largest possible share of vertically integrated products www.krka.biz 32