Source : 'Generics Bulletin'
Latvia’s Olainfarm Group has outlined a clear vision for its future operations in the form of its “Forward 2020-2025” strategy, which will “place more emphasis on development of the core business, and supplementing and developing company’s product portfolio by both using internal expertise and acquiring new products.”
Jeroen Weites, chairperson of the management board said that “in accordance with the Olainfarm’s five-year strategy ‘Forward,’ in 2020 an unprecedented transformation of the company was initiated with the goal of making internal processes more effective for sustainable growth.”
“Moving towards strengthening and expansion characterizes Olainfarm’s approach for the year 2021 and beyond,” said Weites. “This will be based on significant investments in research and development, in particular – by fostering the development and acquisition of finished dosage forms.”
In line with the five-year strategy, Olainfarm is aiming to reach double-digit year-on-year growth and has forecasted revenue of €101m ($118m) for 2021 and consolidated revenue of €140m, which would represent an increase of 14% compared to 2020.
Olainfarm reported consolidated sales of €122m in 2020, representing a year-on-year drop of 11%. “Despite the global impact of the COVID-19 crisis, Olainfarm Group was able to ensure a continuous supply of goods in all of the Group’s operating markets throughout the year,” the firm commented. The company’s profit in 2020 reached €9.5m and the parent company closed the year 2020 with €11.5m profit.
As Latvia remained the company’s largest market in 2020 and showed “consistency in operations,” Olainfarm’s domestic sales improved by 1% in 2020 compared to 2019.
Olainfarm reported that its turnover in its main markets, except Russia, increased in 2020, compared to 2019. “At the end of 2019, additional emergency deliveries of €6m were made to Russia for consumption in 2020 which reduced sales in Russia in 2020 compared to 2019,” said Olainfarm.
Talking about its Ukraine market, Olainfarm noted that it had expanded its marketing team and renewed its business model in Ukraine, adding that “the revenue in Ukraine has increased by €746,000 when compared to 2019, and the overall share of Ukraine in the group’s revenue reached 9.4%.
According to Olainfarm, its cash flow from operational activities stood at €28.5m, which allowed it to significantly improve the group’s financial stability, including by securing loan repayments.
Olainfarm’s consolidated earnings before interest, tax, depreciation and amortization dropped 17% to €25m in 2020 compared to 2019. According to the company, “EBITDA has been affected by both sales revenue in certain markets and changes in operating models that result in a different cost structure than historically common.”
Olainfarm said that its financial results for 2020 were affected by several events in the Russian pharmaceutical market. “In 2020, a new medicine verification and traceability system was introduced in Russia, changing the usual delivery schedules,” noted Olainfarm. Meanwhile, “the Russian currency depreciated against the euro by 32%, which had an impact on the sales and net profit of Olainfarm.”
In addition, Olainfarm announced receiving the Russian certificate of good manufacturing practice in 2020, “which confirms the company’s efforts for maintaining the quality system and complying with the Russian market, including the requirements for production and quality control of medicines.”
Last year, Olainfarm established a subsidiary in Russia as a long-term investment for product promotion activities in the Russian pharmaceutical market. “It ensures an even more accurate insight into the Russian pharmaceutical market, adjusting the company’s supply according to customer demand,” Olainfarm said.
Furthermore, Olainfarm noted that a survey carried out in the Russian pharmaceutical market “confirms the effectiveness of the Olainfarm foreign market strategy,” and that the recognition of the Olainfarm brand has increased, thus providing a solid base for further development.
Olainfarm said that although the overall impact of COVID-19 on the company is small, some of its ongoing product development projects have been postponed to 2021.
The company noted that since clinical trials during COVID-19 are not recommended by the European Medicines Agency, the amount of the company’s capital investments in 2020 was €9.2m, not reaching the levels forecasted. “It should be emphasized that some of the projects are implemented with the co-financing of the EU,” said Olainfarm.
Weites added, “Despite the challenges caused by COVID-19 we have managed to build a strong foundation.”
“In 2020, we concentrated our resources on the implementation of the strategy and have been able to significantly improve the marketing approach in the company’s foreign markets,” said Weites. “This will allow us to provide effective and targeted product promotion activities, expand the range of products in existing markets and achieve the projected revenue this year.”
Olainfarm announced that it expects to close the 2021 with a profit of €6.5m and consolidated profit of €8.6m.
“Strengthening research and development areas is a strategic priority for 2021,” said Weites as he announced that the company will focus on two main directions:
R&D of new products, as well as the acquisition of already developed products,
Investments in the modernization and digitization of technology and production equipment.
According to the goals set within the new strategy, the forecasted R&D is “as much as 10%” of Olainfarm’s revenue in 2021. “Investments of €10.2m are planned for these areas and will be directed to creating a new work environment and purchasing equipment, as well as continuing investments in order to position the existing product portfolio in new foreign markets,” said Olainfarm.
“It is projected that not all R&D investments will be capitalized, so part of the research activities will have an impact on 2021 earnings.”
In 2021, operating investments for Olainfarm are planned at €13.8m. In addition to investments in technology and modernization of the manufacturing facilities, the company said that its priorities are to promote digitization and automation projects.
Olainfarm said that it plans to “introduce digital solutions for the improvement of customer service, as well as modernize and digitize core business processes.”
The company is also going to focus on introducing the laboratory information management system which will ensure efficiency of internal processes and compliance with the growing regulatory requirements.
By Akriti Seth