6. Di´ oxido de Nitr´ ogeno
7.8. Radical ani´ on nitrometano
The reporting according to secondary segments is based on the regional differentiation in national markets. In this context, in the individual national markets, all relevant net sales to third parties generated there by consolidated Group companies are reported.
1) Sales below € 0.05 million were rounded to € 0.0 million.
2) In some cases, figures were converted into local currency since the invoicing company’s reporting currency was Euros. 3) Including local sales from the Forum Bioscience acquisition consolidated since October 1, 2007.
4) Including local sales from the MAKIZ acquisition consolidated since September 1, 2007. 5) Local Swiss business consolidated until June 30, 2006.
6) Local US business consolidated until August 21, 2006.
7) Limited comparability due to initial consolidation of the Heomfarm Group in 2006. Sales by segments and national markets in € million1)
Group Total Total ±% Share of
Branded Commercial holdings/ sales sales ±% in local Group sales
Generics Products business other 2007 2006 in Euro currency2) 2007
Belgium 97.3 4.4 - 0.1 101.8 109.6 -7% 6% Bosnia-Herzegovina 9.7 0.9 6.8 2.5 19.9 9.3 +115%7) 1% Bulgaria 4.2 0.4 - - 4.6 2.7 +73% <1% China 3.9 0.2 4.0 - 8.0 5.5 +45% +59% 1% Denmark 4.4 0.3 17.2 0.1 22.0 23.6 -7% -7% 1% Germany 483.8 92.9 0.2 2.9 579.8 481.9 +20% 37% Finland 0.2 5.8 - 0.0 6.1 5.1 +19% <1% France 82.3 4.7 - 0.0 87.0 79.6 +9% 6% UK3) 31.7 21.8 - 22.1 75.7 40.1 +89% +90% 5% Ireland 11.6 5.9 1.4 4.6 23.5 16.9 +40% 1% Italy 70.0 45.0 2.2 0.0 117.2 109.0 +8% 7% Kazakhstan 1.8 3.6 - 0.0 5.4 4.5 +22% +30% <1% Lithuania 0.3 0.8 - - 1.1 0.9 +20% +20% <1% Macedonia 2.5 - - 0.4 2.9 1.6 +90%7) <1% Montenegro 6.9 0.4 1.1 0.9 9.4 2.9 +226%7) 1% The Netherlands 25.1 12.8 2.7 0.0 40.7 38.9 +5% 3% Austria 11.3 1.8 - - 13.1 11.3 +16% 1% The Philippines 0.6 - 9.1 - 9.8 7.4 +32% +29% 1% Poland 2.9 2.3 - 0.0 5.2 2.7 +88% <1% Portugal 10.1 2.2 - - 12.3 10.3 +19% 1% Romania 5.5 1.2 - 0.0 6.7 5.8 +15%7) <1% Russia4) 72.6 59.1 0.1 2.0 133.8 87.5 +53% +57% 9% Sweden 1.9 0.5 - 0.1 2.5 1.9 +32% +32% <1% Serbia 108.6 10.7 23.1 2.6 145.1 46.1 +215%7) 9% Slovakia 2.1 1.7 - - 3.8 2.5 +48% <1% Spain 55.9 6.7 - 0.1 62.7 61.1 +3% 4% Thailand 1.9 0.4 0.9 - 3.1 2.0 +54% +43% <1% Czech Republic 7.0 1.9 - 0.0 8.9 8.3 +7% +5% 1% Ukraine 4.1 8.9 - - 13.0 9.4 +38% +51% 1% Vietnam 5.6 2.1 0.1 - 7.9 18.4 -57% -52% 1% Other countries 28.6 4.5 - 4.5 37.6 38.5 -2% 2% • thereof Switzerland5) 1.9 0.1 - 3.0 4.9 6.6 -25% -21% <1% • thereof USA6) 6.3 0.1 - 0.1 6.5 18.5 -65% -62% <1%
1) Data from IMS Health based on sales from manufacturers to the distribution channels. 2) In 2007, products with the indication focus diabetes were marketed under the STADA Medical label.
3) Data from IMS Health based on sales from manufacturers to the distribution channels; however, based on sales from the distribution channels to patients, the German generics market, pursuant to data from IMS Health, grew by 1% in 2007. The difference is explained among other things by a reduction of inventories in the distribution channels after the adoption of a legal ban on the granting of discounts for prescription drugs from manufacturers in favor of the distribution channels in May 2006.
4) Data from IMS Health based on sales from manufacturers to the distribution channels.
Development of STADA’s ten largest national markets
Due to the clear focus of Group activities on Europe, all of STADA’s ten largest national markets are in Europe.
In Germany, which continues to be the largest national market for STADA, the Group achieved sales growth of 20%
to € 579.8 million in fiscal year 2007 (previous year: € 481.9 million). In 2007, too, operating profitability was there- by again within the scope of Group average.
Overall, in 2007, the STADA Group achieved a market share in the total German pharmaceutical market of 2.6% (previous year: 2.5%) in terms of sales, corresponding to position 10 (previous year: position 10) and a market share of 6.4% (previous year: 5.4%) in terms of units sold, corresponding to position 3 (previous year: position 3).1)STADA thus further improved its market position in the domestic market Germany in 2007.
Thereby, STADA, in 2007, operated with five different sales concepts, so-called labels in the German market: STADApharm GmbH, Bad Vilbel (including the sub-label STADA Medical GmbH, Bad Vilbel, which is focused on vaccines2), among other things) and ALIUD PHARMA GmbH & Co. KG, Laichingen, are full-line generics suppliers; cell pharm Gesellschaft für pharmazeutische und diagnostische Präparate mbH, Bad Vilbel, is a specialist supplier with a mainly generic product portfolio for oncology and since the beginning of 2008 also for nephrology and diabetes; Hemopharm GmbH Pharmazeutisches Unternehmen, Bad Homburg, mainly sells prescription-free generics and STADA GmbH, Bad Vilbel, is focused on the sale of the Group’s Branded Products in the German market. Also in 2007, the increase in the German Generics business, which, in the reporting year, rose to € 483.8 million (previous year: € 386.2 million) and thus by 25%, continued to be significantly responsible for growth in Germany – and this with a total decline of the German generics market of 3%.3)According to this data, the STADA Group thus increased the overall market share in the German generics market to 10.9% in 2007 (previous year: 9.3%), thereby reaching a peak market share of 11.2% in the fourth quarter of 2007 (fourth quarter of 2006: 9.8%).4)
1) Act for strengthening competition in public health insurance. 2) Total of publicly insured persons in Germany: approx. 70 million. In the course of fiscal year 2007 it turned out that in the German market, under the conditions of the GKV-WSG1), which has been in effect since April 1, 2007, the regulating instrument of discount agreements (direct contractual discount agreements between pharmaceutical companies, thereby in particular generics suppliers and health in- surance organizations) is of decisive importance for the market success of generics suppliers. Products prescribed by doctors without discount agreements must now be replaced when dispensed at the pharmacy by exchangeable competitive products which are covered by discount agreements and contain the same active ingredient (so-called substitution) if doctors do not explicitly rule this out in each case by marking it on the prescription.
STADA had initially responded by means of differentiated reactions from the Group’s various German generics sales lines to the GKV-WSG and its effects, which were still unclear in the first months of 2007.
In particular STADA’s generics sales label ALIUD PHARMA, which operates in the market without a sales force, based on mailing concepts and which thus, due to low-price cost structures, is able to pursue more price-aggres- sive sales strategies, concluded discount agreements early to great extent, thus having more than 85 discount agreements with a total of approx. 63 million publicly insured persons as of March 1, 2008.2)Through this sales strategy, ALIUD PHARMA took very successfully advantage of the current market changes, achieving a strong sales increase of 69% to € 204.5 million in fiscal year 2007 (previous year: € 120.7 million).
The STADA Group’s traditional generics sales label in Germany, STADApharm, had initially continued to place the sales focus on the established and until then successful service-oriented concept of support for doctors with a country-wide sales force. In the market, however, it became clear in the course of 2007 that prescribing doctors in the long term apparently only make little use of the possibility of ruling out the substitution despite relevant sales pitches, thus, in the clear majority of cases, giving away the decision on the final generics choice. As a result, STADApharm also accelerated the conclusion of such discount agreements and achieved the conclusion of 47 discount agreements with a total of approx. 39 million publicly insured persons as of March 1, 2008.2) Against this backdrop, sales supported by STADApharm (including STADA Medical) recorded a total increase of 4% to € 255.1 million in the reporting year (previous year: € 245.5 million).
The STADA Group’s two other sales labels active in the Generics segment achieved the following sales in 2007: cell pharm Gesellschaft für pharmazeutische und diagnostische Präparate mbH € 18.7 million (previous year: € 17.3 mil- lion, increase 8%) as well as Hemofarm € 1.4 million (previous year: € 2.2 million since consolidation into the Group as of August 1, 2006).
In the Executive Board’s assessment, these differing results from the different generics sales labels confirm that the GKV-WSG has led to sustained structural changes for prescription products in the German generics market: for busi-
1) In September 2007, the Allgemeinen Ortskrankenkassen (AOK) announced that they would complete discount agree- ments with various German STADA sales companies for a total of 23 active pharmaceutical ingredients (see the company’s Corporate News from September 17, 2007). Due to objections against this tender procedure, the AOK has, however, only been able to award discount agreements for six pharmaceutical active ingredients to STADA sales companies.
2) In accordance with IAS 19, reported below operating profit as a separate line in the income statement. 3) In the scope of the restructuring the sales responsibility for special sales activities in the indication area diabetes was transferred from STADA Medical to cell pharm Gesellschaft für pharmazeutische und diagnostische Präparate mbH. ness success and in particular growth opportunities in this market, the form and the scope of the discounts granted to the individual health insurance organizations and the selection of the pharmacy among competing products with a discount agreement are now increasingly playing the central role in sales, while the importance of the doctor’s pre- scription for the product selection and of the sales measures targeted toward this has strongly decreased. This assessment from the Executive Board is valid regardless of the legal difficulties in terms of the awarding of tenders which have arisen in individual tenders of discount agreements.1)
Against this backdrop, from the Executive Board’s perspective, the operating structures of German generics sales had to be quickly, i.e. still in the course of 2007, adapted to these serious market changes that were becoming evident. On September 28, 2007 the Executive Board therefore initiated a comprehensive restructuring of parts of its German generics sales. Within the scope of this restructuring, over 200 jobs in doctors-related sales forces and related sales functions in STADA’s two German sales companies, STADApharm and STADA Medical were eliminated by the end of the year 2007. STADA was thereby able to provide each employee affected by this with the offer to continue their employment in the sales force of an external service provider. For this, STADA reported one-time expenses in connection with personnel measures in the total amount of € 28.1 million before taxes2)or € 17.9 mil- lion after taxes (see “Earnings Situation – Development of Earnings“). Compared to the original expectations (burden totaling € 29.2 million before taxes or € 18.5 million after taxes pursuant to the company’s ad hoc release of September 28, 2007 and interim report for the first nine months of 2007) the final burdens thus slightly decreased. Furthermore, in the current first quarter of 2008 STADApharm and STADA Medical bundled their sales activities in the scope of the restructuring and conceptually reorganized them without own sales employees targeting doctors.3) To enable nevertheless direct sales contact from STADA with the prescribing doctors, STADA currently still makes use of leasing sales forces with a total of approx. 50 sales representatives. The own existing nationwide pharmacy sales force of the STADApharm label remain unchanged and, in accordance with the great importance of pharma- cies for the selection of generics in the scope of discount agreements, plays a central role in the current sales con- cept. Other sales labels of the Group, in particular also ALIUD PHARMA, were not significantly affected by the restructuring.
The goal of the restructuring was, by adapting the sales structures to the changed demand mechanisms, to con- sistently reduce the fixed sales costs of the German generics business in the STADA Group. Regardless of the expected burdens on the sales-related gross margin through existing and future discount agreements, the German generics business should, also in the future, be able to contribute its significant share to the operating profit of the STADA Group.
1) Based on pharmacy retail price including VAT (AVP); based on ex-factory prices clearly higher discounts in terms of percentage points are partly required for achieving a certain reduction of the AVP in the scope of the German drug price regulation for prescription drugs.
2) Inhalation spray for the treatment of acute inflammatory diseases of the upper airways. 3) Data from IMS Health based on ex-factory prices.
4) STADA estimate at pharmacy retail prices based on data provided by IMS Health.
5) In fiscal year 2006, Hemofarm in Serbia achieved – partly under its former owners and adjusted for disposals carried out since then – sales in the amount of RSD 8,843.9 million.
The far-reaching changes in the structure of the German generics market will thus, from today’s perspective, not lastingly burden STADA’s position in the German generics market. For 2008, the Executive Board expects a further improvement of the Group’s market share in this market segment.
However, the establishment of new reference prices and, as a result of this, the also possible establishment of new co-payment exemption limits for numerous active pharmaceutical ingredients expected as of June 1, 2008 could distinctly affect sales and earnings of the German generics business if STADA’s sales companies did not only have to reduce the prices of the products concerned – as planned by the sales companies based on an assessment of the current competitive situation – to the area of the new reference prices, but beyond that, due to competitive pressure, largely or entirely to the area of possible new, then at least 30%1)lower co-payment exemption limits. Such a – from today’s perspective not planned – price reduction for possible new co-payment exemption limits would probably clearly exceed the annual price erosion usually expected by STADA for the German market. Sales in Germany in the Group’s second core segment, Branded Products, with € 92.9 million, were slightly above the prior year level in fiscal year 2007 (previous year: € 89.8 million). Weaker seasonal sales of individual branded products of the sales label STADA GmbH in 2007 (for Ladival®among others) were offset through sales from product launches, in particular also through the launch of the branded product Locabiosol®2)which was licensed on October 1, 2007 and thereby subject to a new sales positioning through STADA GmbH.
STADA’s important branded products nevertheless continued to be market leaders in their respective segments in the German pharmacy market. Examples of this are: Grippostad®C (local sales in 2007: € 21.1 million, previous year: € 15.7 million) with a market share of approx. 32% in the market for flu drugs3), Kamistad®(local sales in 2007 € 6.2 million, previous year: € 6.7 million) with a market share of approx. 22% in the market for prescription- free stomatoligical products3), Hoggar®(local sales in 2007: € 6.2 million, previous year: € 6.0 million) with a market share of approx. 36% in the market for prescription-free chemical sleep aids and relaxants3)as well as STADA’s sunscreen portfolio under the brand Ladival®(local sales in 2007: € 12.4 million, previous year: € 16.9 million) which, with a market share of approx. 43%, clearly remains market leader in the market for sunscreens sold in pharmacies.4)
Overall, from today’s perspective the Executive Board expects once again sales growth in Germany in 2008, with an operating profitability which continues to be within Group average.
With sales in the amount of RSD5)11,588.7 million or € 145.1 million,Serbiawas the second largest national mar- ket for STADA in 2007 after local sales were, for the first time, consolidated in the Group over a whole year. In the previous year, after the acquisition of the Serbian Hemofarm Group, Serbian sales since the initial consolidation as of August 1, 2006 were included in Group sales, subsequently achieving a total of RSD 3,882.5 million or € 46.1 mil- lion in the remaining five months of fiscal year 2006.
1) STADA estimate based on data from IMS Health at ex-factory prices.
2) Up to the date of sale at the end of May 2007, Multivita sales in the total amount of € 2.0 million, thereof approx. € 1.8 million in Serbia, were generated within the STADA Group in fiscal year 2007.
3) Up to the date of sale on September 25, 2007, Symbiofarm sales in the total amount of € 2.3 million were generated in Serbia within the STADA Group in fiscal year 2007.
4) With contract from December 28, 2007, the Serbian Hemofarm sold the subsidiary Hemomont d.o.o., Podgorica, Montenegro, as per March 30, 2008; this sale will therefore only have an effect in the first quarter of 2008.
5) The subgroup essentially comprises the former structure of the Hemofarm Group which STADA acquired in 2006. 6) Initially consolidated sales in Russia 2007: for January to July: € 21.0 million Hemofarm sales, for September to December: € 19.0 million MAKIZ sales.
7) The biggest local Nizhpharm product Chondroxide has, as is known, no longer been part of the Russian reimbursement program (DLO) since June 1, 2006; in fiscal year 2006, approx. € 5.8 million were still achieved for this product in the scope of this program.
The local sales company there, Hemofarm A.D., Vrsac, with a market share of approx. 22.2% (previous year: approx. 25.0%) continues to be the clear market leader in the overall Serbian pharmaceutical market.1)
The administrative integration of the Hemofarm Group was successfully completed in fiscal year 2007. Thus, for the further integration the focus is now placed on medium and long-term transfer processes of production and develop- ment activities, which have so far been awarded to external third parties, into existing Hemofarm production units, which should lead to further cost optimizations in the current fiscal year 2008 as well as in 2009, in particular. In the course of a focusing on the core business, Hemofarm sold its subsidiary Multivita d.o.o.2), which is mainly active in Serbia in the area of nutritional supplements, in the second quarter of 2007 as well as its subsidiary Symbiofarm d.o.o.3), which is active in Serbia in the area of herbicide, in the third quarter of 2007 (for both see “Business and General Conditions – Acquisitions and Disposals“). Also in 2008, further disposals appear possible for Hemofarm if attractive offers are made by interested parties for business units which are not part of the core business.4)
In view of the clear market leadership of STADA’s Serbian sales companies, the Group, in Serbia, too, is dependent on the structural market environment and regulatory influences there. Regardless of the current difficult international political situation for Serbia, the local Hemofarm management as well as STADA’s Executive Board assume, from today’s perspective, nationally, on a Serbian level, a stable health care environment which is not essentially affected by this and thus a further positive development of local sales in 2008.
Overall, the subsidiaries taken together with the local Serbian Hemofarm in the internal reporting entity of a sub- group5)(including the local Group companies in Bosnia-Herzegovina, Montenegro and Macedonia as well as one of the Russian Group companies), all of which are also managed by the Serbian Hemofarm management, reported overall operating profitability above Group average in 2007. Here, the Hemofarm management as well as STADA’s Executive Board do, on the Subgroup level, not expect changes in the favorable margin situation.
In Russia, which, after the successful acquisition of the Russian MAKIZ group in the third quarter of 2007 and its
initial consolidation as of September 1, 2007 (see “Business and General Conditions – Acquisitions and Disposals“) now is STADA’s third largest national market, overall sales generated by the Group there – partly also due to the initial inclusion of acquired sales6)– but also regardless of a high sales level in the relevant previous year7)– increased by 53% to € 133.8 million (previous year: € 87.5 million).
1) STADA estimate based on data from RMBC (Research Marketing Business Consulting, local Russian market research institute) at ex-factory prices.
2) STADA estimate based on data from IMS Health at ex-factory prices.
STADA now operates with three local labels in Russia: JSC Nizhpharm, Nizhny Novgorod, is focused on branded products, but also sells some generics, mainly for self-pay patients; the portfolio of Hemofarm’s local Russian sales unit is primarily composed of generics, also mainly for self-pay patients; the products of the newly acquired MAKIZ group with the individual companies active in sales CJSC Makiz-Pharma, Moscow and CJSC Skopinpharm, Rya- zanskaya obl., are composed at about one half of branded products and one half of generics and are additionally focused both on self-pay patients as well as on sales in the scope of the Russian state health care program for selected circles of population (DLO program). The coordination of these local labels is carried out in the scope of a