Sustainability Report 2012 Lek d.d.

13 Company Profile 1.3.1 Key customers and markets 8 In accordance with the Group’s strategic orientations and organizational structure, Sandoz Group companies are the key buyers of Lek products and active pharmaceutical ingre- dients. In 2012, the shares in the company's net sale held by the leading three buyers amounted to 24.56%, 7.93% and 4.93%. Lek sells its own products and the products of other Sandoz companies. Our major external direct sales markets for Lek and Sandoz products include Central and Eastern Europe with 84%, and Slovenia with 6%. The majority of sales (86%, v 2011 85%) are realized by pharmaceutical products, whereas APIs and biopharmaceuticals account for the remai- ning 14% (15% in 2011). The drop in the proportion of sales realized in Slovenia was mainly due to a 4% decrease in the total value of the Slove- nian pharmaceutical market. The market for generic pharma- ceutical manufacturers such as Lek shrunk by 6%. The main contributors to the market shrinkage were measures taken by the Ministry of Health to curb spending on medicinal pro- ducts reimbursed by health insurance. Reduced reference drug price levels, resulting in a lower drug sales value affected both generic and originator pharmaceutical companies. The non-prescription drug market recorded no growth either, as a consequence of the country’s deteriorating economic situation and the impaired purchasing power of the population. As an amendment to the Consolidation of Public Finance Act, the foundations were laid for introducing reference drug prices at the level of therapeutic groups. Rules providing a new re- gulatory basis for drug classification are to be adopted in the first half of 2013. 1.3.2 Major groups of products and brands 9 The key therapeutic groups of medicinal products develo- ped, manufactured and marketed by Lek include: • Cardiovascular drugs, • Antiinfectives, • Gastrointestinal drugs, • Other prescription drugs dispensed in pharmacies, and covering a broad spectrum of therapeutic groups for the treatment of various diseases, and • Self-medication drugs. The Sandoz Development Center in Ljubljana develops medicinal products, with special focus on technologically complex products. We act as the Sandoz Center of Excel- lence for nasal sprays, for example. We develop products for the entire Sandoz, and the majority of novel products are manufactured in Ljubljana. The production function consists of the production units for solid and sterile dosage forms. On this location, manufactu- ring activities started in 1975 and expanded significantly in 1992 by the opening of a new tablet production plant which was further expanded in 2004. In the years that followed, the growth and modernization of the manufacturing proces- ses continued. The same trend could also be observed in 2012. The year 2012 was marked by a number of activities in the field of quality and investments. We successfully pas- sed several inspections, and completed a significant number of capital projects aimed at upgrading production capacities. Solid dosage forms With about 80 APIs and more than 200 formulations manu- factured and packaged, Lek Ljubljana is the leading Sandoz organization in terms of product range size. Manufacturing which is mostly highly automated and centrally computer- -controlled, takes place on multi-purpose production lines. In 2012, we posted a record production volume for the third year running. For the first time in the company’s history, our tablet plant manufactured more than 6 billion units of solid dosage forms. The highest growth was recorded for film-co- ated tablets where above 30% growth was achieved over the year before. Growth was recorded both with existing pro- ducts and novel ones the number of which rose by 40. With more than 340 million units packaged in 2012, the Packa- ging Center posted a record as well. The 855 new product launches rank us to the top of all the Sandoz companies. Sterile dosage forms The main contribution to sterile production growth comes from ampoules for which we are the Novartis center of excellence. This means that we obtain products from other Novartis pro- duction plants as well. Our sterile production output in 2012 was 15% higher than the year before. At the start of the year, we renovated and modernized the Steriles Packaging unit, thereby increasing its capacity. Company headquarters The Ljubljana site also features the company headquarters with administrative services, the Health, Safety and Enviro- nment head office, the Patent head office, the Quality and Quality Management units, and others. Our leading brands in Slovenia include Lekadol ® , Amoksi- klav ® , Tulip ® , Linex ® , Coupet ® , and in our export markets omeprazol, tacrolimus and Ketonal ® . 1.3.3 Lek production sites and processes 10 1.3.3.1 Ljubljana production site The industrial zone of north-western part of Ljubljana is the location of the Sandoz' leading development center and one of the Sandoz' major global production plants, and the lar- gest in Slovenia. 8 Disclosure GRI 2.7 9 Disclosure GRI 2.2 10 Disclosure GRI 2.6