During 2016, the Croatian pharmaceutical company made a step forward in implementing its strategy by focusing on key therapeutic areas; respiratory and ophthalmic
Rijeka, 28 April 2017 - The launch of 44 new products, signing of 12 new contracts, opening of six major foreign markets, a more intense focus on two key therapeutic areas - respiratory and ophthalmic, and the sale of several brands on the Russian market marked the business of JGL d.d. in 2016, during which the company realized a net profit in the amount of HRK 91,302,465.99.
This year was the 25th anniversary of business operation, the year in which JGL continued to successfully pursue its vision of becoming a global pharmaceutical company specialized in the development and production of value-added sterile products in ophthalmology and ENT and the leader in using the benefits of seawater for health purposes. On the other hand, the economic and geopolitical crisis continued to have a direct impact on business in the key markets of the CIS region, Russia and Ukraine, with a decrease in the value of the Russian currency due to the drop in oil prices.
Total revenues of the company increased by 5.87% to HRK 661,120,721.28, while total operating expenses amounted to HRK 585,047,501.57 and recorded a decrease of 3.12%. Operating revenues in 2016 increased by 11 percent compared to 2015, to HRK 595,025,846.75, with sales in Croatia at the same level as in 2015, with growth in the non-prescription drugs programme, while product sales abroad recorded a decrease of about 42%. The share of about 40% of business revenues is made up of revenues generated by the sale of the Russian product portfolio.
A new business model on the Russian market
As JGL d.d. announced in February 2017, one of the key moves in rearranging the portfolios in line with the vision of focusing on ENT and ophthalmic therapeutic areas was the sale of the Russian portfolio of D-Panthenol and Vagilac, Feminal and Folacin products from the female health segment to Egis Pharmaceuticalsu from Hungary. It is a step forward in the implementation of the company's strategy, as well as a stronger orientation towards key therapeutic areas, and it should also be emphasized that the business relationship involves continued production of all products under the contract in JGL's production plant in Rijeka.
The partnership with Egis is, therefore, an additional confirmation of the professional knowledge of JGL's employees and JGL's production whose quality, in addition to European and Russian GMP standards, results in new business success.
The Rijeka pharmaceutical company points out that, in line with the announcements during the issuance of corporate bonds in December 2015, in the part of the non-core asset activation, influx from the sale of the aforementioned brands will primarily be used to reduce the corporate debt. The total debt of the company will be reduced by slightly more than 40% (about HRK 300,000,000), in positions of short-term liabilities to banks, as well as the liabilities towards EBRD and corporate bonds maturing in December 2020. The aforementioned debt reduction will improve the company's financial indicators substantially, enable uninterrupted medium-term liquidity and open the potential for financing future growth and development of the company.
When considering the rearranging and the sale of a part of the portfolio on the Russian market, the share of exports in total revenues of JGL d.d. in 2016 was 80%. Meanwhile, Russia's market with a 37% share continues to be the largest market of the company, while the second largest market is the Croatian market with a 33% share in sales revenue.
It is important to emphasize that the decline in revenues abroad was primarily the result of Russia's market consolidation and the company's decision on market stabilization, which has led to a reduced sales revenue. Allocation of stocks to a minimum is part of a new business model on the Russian market, according to which the import and distribution of products to the Russian market is fully transferred to the newly founded daughter company Jadran LLC Moskva in 2017.
Despite the crisis, the decline in consumer purchasing power and the devaluation of the Russian currency, which also had a significant impact on the re-examination of business models and raising awareness of company's strengths and weaknesses, JGL managed to compete for an even better market share compared to the previous year, and moving up by five places, it is now the 43rd largest company in Russia. JGL's brands Aqua Maris and Dramina are still leaders in thenasal saline segment, or the area of antiemetics. The expected recovery of the Russian pharmaceutical market by nearly 8% in 2017 enables JGL to expect even better results in 2017.
The Croatian market, as the second largest, realized a 3.1% sales increase compared to last year, or HRK 114,911,890.51, which is also encouraging. The burden of the increased business operating costs stems primarily from the costs of net exchange rate differences in the amount of HRK 23,989,471 related to hedging against the unfavourable fluctuations of the Russian ruble.
At JGL Group level, total revenues increased by 6.02% to HRK 850,734,429.91 and expenses decreased by 2.11% to HRK 777,179,501.21, while profit amounted to HRK 88,151,404.06 in the end.
New products and new markets
In 2016, 44 new products were launched, including Clavius, Kandepres and Kandepres Plus, Rhinorelief, Alfabiotik and Alfabiotik Junior, Pantexol Repair, Aqua Maris Propolis, RefluSTAT, Trandolapril JGL and Nasoryl M in Croatia. JGL was also continuously working on formulations of new generations of prescription medicines, with sea water as an indispensable ingredient. Last year, the company developed the first generic drug for xylometazoline chloride and ipratropium bromide with sea water in its composition.
Within the ophthalmics portfolio, JGL has been working on preservative-free artificial tears (sodium hyaluronate) in a multi-dose packaging under the brand Vizol S, and prescription medicines - generic versions of leading anti-glaucoma drugs and anti-infectives. Investing in the development of its own value-added products in the field of technological innovation creates key conditions for continued growth and development of the company.
Sales has been realized on 32 foreign markets. With the aim of diversifying business operations within the internationalization strategy, JGL has expanded its business with partners in the markets of Italy, Spain, Poland, Thailand, Vietnam, Singapore and Malaysia through licensed and contract manufacturing related to the nasal decongestants and eye drops portfolio, thereby reducing its dependence on the CIS region.
In 2017, JGL continues to strengthen strategic segments where the company's competitiveness has already been proven. The orientation towards export, which is based on stable positions in the most important export markets, is still a cornerstone and premise for the realization of long-term plans for growth and development. The CIS region remains dominant in sales, while the markets of Russia and Croatia account for 71%. Through the installed technology platform of sterile sprays and eye drops and BoV technology within the Pharma Valley complex, JGL continues to realize its set goals of internationalization and, in certain segments, business globalization.