Slovenian pharmaceutical industry remains strong

Slovenian pharmaceutical industry remains to be one of the country's leading exporters. The main two pharma companies, Krka and Lek, are among the largest and most profitable Slovenian companies. The basis of their success: focus on generic drugs and strong R&D, closely cooperating with the leading scientific institutions in the country.

The Slovenian pharmaceutical industry is marked by the presence of two relatively strong players: Krka (Rank 5 on this year's edition of TOP300) and Lek (Rank 7). The two arch rivals in Slovenian pharmacy share a number of common characteristics: they are similar in size, financially very successful with strong R&D departments, both are generic drug producers with a global presence and special emphasis on Central and Eastern Europe, including Russia. In one aspect they significantly differ: while Krka is a stockholder company listed in Warsaw’s stock exchange, Lek is a part of global pharmaceutical giant Novartis, more precisely its generic drug group Sandoz.

Krka, located in Novo mesto (home town of another Slovenian exporting champion, Revoz), has for years been financially the most successful company in Slovenia. While its revenues reached 1.2 billion euros in 2014, the company posted net profits of 144 million euros – more than any other Slovenian business. No other Slovenian stock performs as well as Krka’s – its value grew steadily during the recent financial crisis. 94 percent of Krka’s sales are made outside of Slovenia. Krka’s largest single market is Russia (31 percent share of total revenues), yet growth is highest in Western Europe, in Germany in particular (55% revenue growth in 2014).

The value of Krka’s investments last year reached 14.6 percent of its total revenues. A significant part of the investments went into Krka’s own R&D, one of the strongest in Slovenia. In most of the areas Krka outperforms its Ljubljana based rival Lek. Yet R&D is the field where Krka could be behind Lek. Novartis invested heavily in its new Slovenian subsidiary, in particular in its laboratories and development centers. Only between 2003 and 2010 Novartis invested 900 million euros in Lek, and one half of the sum went into R&D. Lek’s role in the Sandoz group is, among others, to act as a global development center for technologically demanding products and technologies, and a Sandoz competence center in the field of biosimilar products. This field represents state of the art technology in the pharmaceutical industry. Sandoz is a global leader in biosimilar drugs and recently managed to get the very first approval for the biosimilar drug (filgastrim) from the US FDA agency. Lek’s researchers played a crucial role in developing the drug.

The background of the success of both Slovenian pharmaceutical companies is strong academic research, carried out by the country's two leading institutes (Institute Josef Stefan and the National Institute of Chemistry) and the University of Ljubljana. Both institutes have strong focus on biochemistry and biotechnology and work hand in hand with the industry. Strong academic research also creates fertile ground for small innovative companies – and also for foreign investment. Biogen Slovenia, for example, is a daughter company of leading global biotech company Biogen: the Slovenian subsidiary develops medicine to help people with multiple sclerosis. 

Overall, there are 24 pharmaceutical companies registered in Slovenia with Krka and Lek making over 95 percent of the total revenues in the industry. The rest of the companies are very small – most have less than 10 employees. Some, like Marifarm or Galex, are slightly larger with up to 50 employees and a small production focused mostly on generic drug and self-medication products. Among the micro companies, however, there are a few interesting start-ups. Just to give one example: young company Jafral develops bacteriophages – a potential major break-through in pharmacy. True, these companies are tiny and to a large degree unknown. But let’s not forget: 60 years ago Krka was nothing but a small lab with few employees and no revenues to speak of. 

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