Lek Business Results in 2005

Lek d.d. once again posted its highest sales figures in its pharmaceutical franchise (prescription medicines) at USD 529 m and in OTC medicines at USD 75.2 m. Lek’s other programs amounted to USD 52.3 m. Two factors influenced the result; the transfer of part of the activities of the Animal Health program to Novartis Animal Health and part of the activities to Lek Veterina d.o.o., and the termination of the cooperation agreement with the joint venture Sanofi-Synthélabo-Lek.

Among sales regions, sales in Slovenia accounted for 10.8%, Central and Eastern Europe for 53.1%, Western Europe, the USA and Overseas Countries accounted for 36.1% of total sales. The USA remained Lek’s leading market in 2005. The highest growth rates were recorded in the Russian Federation, at 40.8 percent.

The leading product in 2005 was once again the antibiotic Amoxiclav, which is a global product with respect to the number of markets and sales routes. It is followed by Omeprazole, Ketonal and Lisinopril.

Investments in development

The Lek Development Center makes a significant contribution to the success of the Sandoz Group, as it represents a quarter of all the development activities within the Group. Lek’s investments in research and development activities are growing and reached USD 71,8 m in 2005, which amounts to 10.6% of turnover. Lek’s development center for drugs and active pharmaceutical ingredients is one of Sandoz’s most important centers. It develops products for the entire world, including the European Union, the USA and other markets around the world. The number of projects involving both final dosage forms and active pharmaceutical ingredients is increasing continually and has more than doubled in the last two years. Lek is also increasing its level of investment in the new generation of generics – biopharmaceuticals. It is currently investing in development, and plans to begin manufacturing biopharmaceuticals in the near future.

Investments in fixed assets

The level of investments of Lek d.d. amounted to USD 59.7 m last year, or 8.8% of turnover. The majority of investments were made in Slovenia. In 2005 Lek opened a new manufacturing plant for hypolipemics in Mengeš. The new plant is an important link in the chain of production capacities of Sandoz’s global production of active pharmaceutical ingredients. It also opened a plant last year in Lendava for the final phases of isolation of potassium clavulanate, a key component of Amoxiclav, Lek’s leading product, which has also taken a leading position in Sandoz. In addition, in the last year Lek also invested in a new packaging line for final products and modernization of their facilities in Ljubljana as well as the modernization of packaging facilities for final products in the Prevalje site.

Employees

In the last year Lek initiated a company restructuring project in order to optimize its operations and to align its organizational structure with that of Sandoz. In order to maintain competitiveness in the future, it aims to achieve increased productivity and to acquire new knowledge. A significant part of the restructuring was already accomplished in 2005, and the company will continue to improve the next years always maintatining its high social standards.

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Lek, a Sandoz company, is one of the pillars of leading world generics company Sandoz. It operates as a global development center for products and technologies, as a global manufacturing center for active pharmaceutical ingredients and medicines, as a competence center for the development of vertically integrated products, as a Sandoz competence center in the field of development and manufacturing of biopharmaceutical products and as a supply center for the markets of CEE, SEE and CIS, sales Slovenia and sales services for Sandoz’s global markets. Lek d.d. employs about 2,850 people and achieved total sales of USD 656,5 million in 2005. For further information please consult http://www.lek.si

Sandoz, a Division of the Novartis group, is a global leader in the field of generic pharmaceuticals, offering a wide array of high-quality, affordable products that are no longer protected by patents. Sandoz has a portfolio of more than 600 active substances in over 5 000 forms worldwide. Key product groups include antibiotics, treatments for central nervous system disorders, gastrointestinal medicines, cardiovascular treatments and hormone therapies. Sandoz develops, produces and markets these drugs along with pharmaceutical and biotechnological active substances and anti-infectives. In addition to the strong organic growth in recent years, Sandoz has made a series of acquisitions including Lek (Slovenia), Sabex (Canada), Hexal (Germany) and EonLabs (U.S.) and sells its products in more than 110 countries. In 2005, Sandoz employed around 20,000 people worldwide and posted sales of USD 4.7 billion

Novartis AG (NYSE: NVS) is a world leader in offering medicines to protect health, cure disease and improve well-being. Our goal is to discover, develop and successfully market innovative products to treat patients, ease suffering and enhance the quality of life. Novartis is the only company with leadership positions in both patented and generic pharmaceuticals. We are strengthening our medicine-based portfolio, which is focused on strategic growth platforms in innovation-driven pharmaceuticals, high-quality and low-cost generics and leading self-medication OTC brands. In 2005, the Group’s businesses achieved net sales of USD 32.2 billion and net income of USD 6.1 billion. Approximately USD 4.8 billion was invested in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 91,000 people and operate in over 140 countries around the world. For more information, please visit http://www.novartis.com.