Good Quarter for PGF; Pharmena Shares on the Stock Exchange
Polska Grupa Farmaceutyczna ended the first quarter of 2008 with a consolidated net profit of PLN 19.4m and record-high revenues in excess of PLN 1.3bn. These are the best quarterly sales results in the Company’s history. Year on year, they rose by 20.7%.
“Historically, this was our best quarter in terms of sales volumes. We also recorded an improvement in the net profit, which – though lower than expected – was better than the figure posted in Q1 2007,” says Jacek Szwajcowski, PGF’s President. “Following the completion of our investment programme in 2007, the Group’s potential is enormous. However, to leverage that potential to our best advantage, we need to work on the Group’s internal organisation and streamline its processes. Similar efforts were undertaken seven years ago, after we effected a series of mergers and acquisitions,” adds Jacek Szwajcowski.
In the second and third quarters, PGF intends to take a number of steps towards the Group’s reorganisation, planned since the beginning of the year. The first stage, completed by the end of March, involved several personnel changes - namely the leaders of individual business lines were selected. Four new persons were appointed by the Management Board of PGF to the following key positions:
General Director, responsible for the development of the PGF Group’s wholesale business,
President of DOZ S.A., responsible for the “APTEKI dbam o zdrowie” programme and for optimising the retail business,
Management Board Proxy for hospital sales,
President of CEPD, responsible for international expansion.
The second stage involves reorganisation of the Group into wholesale and retail divisions, while improving the operational efficiency after the development period in 2007. As a result of the large takeovers made by PGF, its headcount rose by almost 1,700 employees, to the record-high level of 6,800. “We have experience, unrivalled by the industry, in quick offsetting of the effects of takeovers. To efficiently run such an organisation as ours, we had to streamline its structure, but also reduce the workforce by 300 full-job equivalents,” says Jacek Szwajcowski. “Development comes at a price, not only in terms of investment outlays and a temporary increase in debt, but also in the sense that the effects of development projects become visible only after some time. That is why we plan to generate savings to add to the expected financial benefits and prepare for our envisaged expansion in Central Europe.” After the retail and wholesale segments are separated, the Management Board expects that the synergy effect connected with the vertical integration will be exploited even better.
Furthermore, in the second quarter, PGF intends to implement its plans and introduce Pharmena, in which it holds a 47.64% interest, to the New Connect market. Proceeds from the issue, expected to amount to several million dollars, will be used to finance the next stage of the clinical trials on an innovative anti-sclerosis drug, carried out in USA and Canada. The trials are conducted by Pharmena North America (PNA), under Pharmena’s licence. Among the project’s participants is the American fund Domain Associates, one of the world’s largest organisations specialising in investment in new promising pharmaceutical enterprises. The fund manages assets worth USD 2bn.
If the results of the trials are successful, the drug will be the first drug developed by Polish scientists to be registered in the USA. “The product has obtained patent protection in all the important countries of the world. Once the research work is completed, we may launch the drug on the market worth some USD 40bn ourselves. This is the largest and the fastest growing segment of the pharmaceutical industry,” explains Konrad Palka, President of Pharmena. Alternatively, the company may sell the patent to a drug manufacturer.
In 2006, Kos Pharmaceutical was taken over by Abbot for USD 3.7bn. The product portfolio of Kos Pharmaceutical includes Naispann, a drug which is a direct competitor to the substance currently being tested in the USA. “The competitive advantage of our drug is that it has an additional effect of protecting blood vessels,” explains Konrad Palka. The results of the clinical trials conducted by PNA will be released in Canada – by the end of 2008 and in USA – by mid-2009. The product is expected to be commercially launched in 2010.
Consolidated financial results of Polska Grupa Farmaceutyczna
| Q1 2008 | Q1 2007 | Change |
| Sales revenue (PLN ‘000) | 1,352,749 | 1,120,512 | 20.73% |
| EBITDA (PLN ‘000) | 34,583 | 29,890 | 15.70% |
| EBITDA margin (%) | 2.56% | 2.67% | -0.11 p.p. |
| Operating profit (PLN ‘000) | 28,670 | 25,218 | 13.69% |
| Operating margin (%) | 2.12% | 2.25% | -0.13 p.p. |
| Net profit attributable to equity holders of the parent (PLN ‘000) | 19,386 | 19,162 | 1,17% |
| Net margin (%) | 1.43 % | 1.71 % | -0.28 p.p. |
For further information, please contact:
Micha³ John
Press Office of Polska Grupa Farmaceutyczna
Tel.: (+48 42) 61 33 594
Mobile:. (+48) 0 691 730 142
Fax: (+48 42) 61 33 535
E-mail: michal_john@pgf.com.pl
For many years now Polska Grupa Farmaceutyczna S.A. has been a leading distributor of pharmaceuticals and Poland’s first pharmaceutical company with an international footprint – apart from Poland, it also operates in Lithuania and the UK. In 1997, PGF became the first company in the industry to carry out a public offering and introduce its shares to trading on the Warsaw Stock Exchange. With the funds raised through the offering, it embarked on the process of consolidation of the Polish pharmaceuticals distribution sector. Following a number of mergers and acquisitions, the Company became the leader of the distribution and services market of the healthcare sector, a position it has maintained across all segments of the market. One out of every five medicines sold by Polish pharmacies comes from PGF warehouses. The Company is also the largest supplier of medicines to Polish hospitals. In 2001, PGF introduced a new distributor-pharmacy cooperation model, which was unique on the Polish market. The chief objective of the “APTEKI dbam o zdrowie” programme is to bring together a number of independent pharmacies under a single brand, while offering them support at various levels. The programme already involves the participation of 1,700 pharmaceutical outlets and 1.6 million patients, which makes the pharmacies participating in the programme the largest partnership retail group in Poland and one of the top three in Europe. The growth strategy for PGF involves intensive development of the comprehensive service platform supporting all participants of the distribution chain in the healthcare sector.
PHARMENA Sp. z o.o. was established in November 2002 on the initiative of scientists from the Technical University of £ód¼ and the Medical University of £ód¼. Under a licence agreement, the company obtained exclusive rights to market products. In January 2003, Pharmena started operating activities, and in May it marketed its first proprietary products – DERMENA, a shampoo preventing excessive hair loss, THERMI, a skin-care and soothing gel, and anti-acne gel ACCOS. The market launch of innovative preparations, that are patent-protected in about a dozen countries, is the crowning achievement of years of research carried out by theTechnical University of £ód¼ in association with the Medical Univeristy of £ód¼. In August 2003, Polska Grupa Farmaceutyczna acquired more than 47% of shares in Pharmena. A year later, in December, Pharmena started exporting its products to markets east of Poland (Lithuania and Latvia). In July 2005, it purchased patents and patent applications from the Technical University of £ód¼, and in August it established Pharmena North America Inc., headquartered in Boston, USA. The new company focuses on applications research and clinical trials in USA and Canada. In November 2006, Pharmena established another company in Boston, USA, namely DERMENA Inc., whose objective is to introduce Pharmena dermocosmetics to the American market. Between 2004 and 2007, the company extended its product range with new products from the Dermena, Accos and Allerco lines - a cream for sensitive skin, marketed since 2005.
The Domain Associates fund has been investing in new and promising companies from the pharmaceutical and medical services segments for years. It is one of the largest funds of this type in the world. Since its inception in 1985, Domain Associates has contributed to the growth and success of more than 180 companies. Today, the value of assets under its management, which comprise exclusively assets of companies operating in the healthcare sector, amounts to USD 2bn. The American investor’s strategy involves searching for technologically advanced companies which show strong growth potential and develop products and services designed to meet the demand from the broad market. The fund is usually one of the first funds to offer support to high-growth companies. After investing its assets in a company, Domain Associates advises its management staff on issues of strategic importance.
The MVM Life Science fund is a venture capital fund that invests in technologically advanced companies from the pharmaceutical and medical services markets. It was created in 1997 and now has assets worth more than USD 300m.
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