2019 Annual Report and €274.2 Million Its Constituent Parts (Index 2019/18: 118) Committed to Quality

Committed 2019 to Quality The Krka Group recorded a significant increase in Annual sales revenue and profit. Pages 1–5 Report Statement by the President of the Management Financial Board Report Pages 9–11 Pages 181–319 Contents 1 Introduction 1–5 Committed to Quality 6 Krka in Global Markets 8 Financial Highlights 9 Statement by the President of the Management Board 12 2019 Supervisory Board Report 22 At a Glance 23 Krka Group Business Model 24 Krka Group Organisational Chart 25 2019 Highlights 29 Business Report 29 Corporate Governance Statement 44 Corporate Governance Code Compliance Statement 46 Non-Financial Statement 48 Development Strategy 57 Macroeconomic Forecast for 2020 61 Risk Management 77 Investor and Share Information 80 Business Performance 86 Marketing and Sales 100 Product and Service Groups 121 Research and Development 129 Production and Supply Chain 132 Investments 135 Integrated Management System and Quality The Krka Group business 144 Sustainable Development operations were profitable. 146 Employees 154 Investors 155 Customers Revenue 158 Equipment Suppliers and Contractors 159 Suppliers of Raw and Base Materials €1,493.4 million (Index 2019/18: 112) 160 Corporate Social Responsibility 165 Natural Environment 178 Krka's Sustainable Development Indicators for 2019 320 Who is Who 321 GRI Content Index According to GRI GS EBITDA (Global Standards) €385.4 million (Index 2019/18: 112) 181 Financial Report 182 Introduction to Financial Statements 183 Statement of Compliance 184 Consolidated Financial Statements of the Krka Group Operating profit (EBIT) 250 Financial Statements of Krka, d. d., Novo mesto 319 Signing of the 2019 Annual Report and €274.2 million Its Constituent Parts (Index 2019/18: 118) Committed to Quality Exceptional Year for Krka Krka is an innovative generic company An outstanding year for the Krka Group, 2019 proved that fosters vertical integration in all one of the best in its 65 years of operation. its business processes, including pharmaceutical development. We are among the leading generic pharmaceutical companies in the world. Our indicators show that Our organisational units are staffed we managed risks effectively and significantly increased with large numbers of researchers. sales revenue and profit. They work closely together, contributing greatly to the success of our complex See section ‘Financial Higlights of the Krka Group’ development process. for details We develop and manufacture our own The demand for our generic pharmaceuticals has been products of the same therapeutic value as the growing primarily because our products are innovative, high originators. Our innovative procedures warrant quality, and accessibly priced, and we are able to rapidly advanced products that meet the strictest adapt to individual market situations. The development quality standards at affordable prices. potentials of generic pharmaceutical markets were also favourable, as they are also key to improving access to therapy and sustainability of national health systems. See section ‘Production and Supply Chain’ for details 1 Krka 2019 Annual Report Introduction Commited to Quality Contents Sharing Our Knowledge Delivering Professionals at Krka have adopted an interdisciplinary Top Quality through approach to work. They work closely together, from choosing a molecule through to product launch. They Our Business Model receive a comprehensive training and track developments in pharmaceutics, chemistry, technology, medicine, Again it was confirmed that top quality of our medicinal biology, and physics – vital to maintaining the high quality products is the most important and decisive for creating of our medicinal products. marketing opportunities. They employ digital technologies to increase the number We kept supply fluctuations in individual markets in check of tests and collect reliable data on all significant medicinal on several occasions last year thanks to safety and product properties. They incorporate the latest knowledge efficacy of our medicinal products. In-house analyses and scientific findings into our products based on show that our business model delivers high quality systematic research and targeted development. medicinal products. Quality underpins our business model. Vertically integrated processes ensure comprehensive control over the quality of each product throughout the Krka’s Integrated Knowledge production cycle, from an API and pharmaceutical form development to API and finished product manufacturing. Knowledge about active pharmaceutical ingredients Trust in Krka’s medicinal products starts at our laboratories and their evaluation and manufacturing plants in daily production. Knowledge about pharmaceutical forms Knowledge about Research-and-development processes patent evaluation involve comprehensive and demanding technological, analytical, pre-clinical, Knowledge about clinical, and bioequivalence studies pharmaceutical development and procedures. Knowledge about They warrant production of innovative pharmaceutical manufacturing pharmaceutical forms for new therapeutic uses. Powerful marketing When developing a new product, authorisation network our researchers employ the most advanced analytical methods to produce and evaluate Effective marketing-and-sales more than 100 prototypes before they network approve the final composition for clinical or bioequivalence testing. Vertical Integration for Outstanding Quality and Innovation Confirmed advantages of Krka’s vertically integrated business model Quality control at all stages of the production cycle Coordinated research and development, and production and control High degree of innovation Early market entry High adaptability to specific local demands and patients’ needs Interdisciplinary expert teams Multidirectional transfer of knowledge Innovative high quality generic medicinal products Reducing risk and dependence on third parties We stay abreast of rapid advances in science and technology. We successfully introduce new, supplementary, and improved pharmaceutical development approaches and methods and upgrade them continually. We successfully cooperate with external research-and-development institutions and together build up our know-how, and upgrade development results. As a result, we develop medicinal products in complex pharmaceutical forms with added value for patients and are the first to make them available on markets. In the past decade, Krka placed more than 40 products on the market as the first generic pharmaceutical A Pioneer in company. Combination Therapy • In-depth knowledge and We were quick to recognise the importance of advanced skills pharmaceutical forms by sharing expertise. We provide • Analytical study of various forms, strengths, and combinations of active developments in the ingredients to make doctors’ decisions on the most suitable therapies easy. Our achievements stand out. Our industry combination therapies and prolonged-release medicinal • Foresight ability products allow for better patient compliance as they reduce the number of doses taken. Some of them even • In-house development and allow for concomitant treatment of two diseases. integration of know-how in After one year on the market, Krka remains the only development of an API and pharmaceutical company in Europe that produces pharmaceutical form a single-pill combination of perindopril, indapamide and rosuvastatin allowing for concomitant treatment of • Advanced evaluation hypertension and hyperlipidemia. When the new 2018 methods European guidelines recommended combination therapy as the first choice treatment for hypertension, Krka had • Accurate trial planning already placed 22 combination medicines in 76 strengths • Well-designed on the market. registration strategy See section ‘Research and Development’ for details 4 Krka 2019 Annual Report Contents Introduction Commited to Quality Research and 350 Patent-Protected Development at the Core Innovations Extended of Our Business Model by New Ones We are an innovative generic pharmaceutical company with a Effective marketing authorisation procedures and early business model geared towards vertical integration in research market entry are the two major advantages of our business and development. In 2019, Research-and-Control Centre 4, process vertical integration. We have more than 350 patent- our new state-of-the-art laboratory building designed for protected innovations in European, American and Asian research and development and quality assurance, further countries. With another 170 development projects in the boosted our research and development capacities. pipeline this number is set to rise in the future. We monitor quality and safety of medicinal products Research-and-Control Centre 4 facility doubled our throughout their lifecycle, and not just after their placement capacities for research, development, and analytics. on the market. Their therapeutic safety and efficacy are The building also houses our state-of-the-art Pilot Plant demonstrated in clinical trials adding value to Krka’s essential for accelerating market entries. medicinal products. Sometimes we do research on The plant is designed to handle the most advanced interactions of individual medicinal products and on the research-and-development tests and prompt monitoring impact of molecules on the environment. We monitor of pharmaceutical development and production. and evaluate the side effects of each medicinal product. Our researchers can now determine key properties Labelling ensures full traceability of the

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