Sustainability Report 2012 Lek d.d.

Company Profile Sustainability Report 2012 – Lek d.d. 8 Dear Reader, Changes in demand on the market and increasingly diffi- cult operating conditions have become realities, leaving a strong mark on the year 2012. But according to an old saying, no one can ever take away your knowledge. Lek, a Sandoz company, has therefore focused all of its efforts on enhancing the development, quality and flexibility of its product mix. We reached several milestones of long-term significance. At all of the Slovenia-based sites of Sandoz, we again recorded strong growth in our production output, which was accompanied by intensive development activities and extremely active launching of new products. Net sa- les revenues were increased by 6%, whereas our pro- duction output rose by 14%. With a record total of 1,300 new products, our product launch volume achieved a 40% share of that of Sandoz. We completed the process of developing 26 novel products for some of the world’s most demanding markets, managing as many as 260 de- velopment projects at year end. Our investments and a number of future-oriented steps made us the holder of one third of Sandoz’ total develop- ment projects and the leading development center in the Group. This accomplishment, along with the many achieve- ments, findings and initiatives taken by our associates, are a source of great pride for Lek. It goes without saying that knowledge alone is not enough. The purpose and method of its application are equally im- portant. Our intention to operate in a responsible manner is proven by the company’s Eco-Management and Audit Scheme certification and the registration in the EMAS Register. We are the first EMAS-certified Slovenian phar- maceutical company, and we implemented EMAS requi- rements at all of our sites. The present report provides a detailed description of several significant achievements that made the year 2012 extremely successful for Lek also in terms of the company’s operational sustainability. The outstanding achievements include massive innovation efforts: the Slovenian Chamber of Commerce and Industry gave its Golden Innovation Award to two Lek associates, whose work was also recognized by the international scientific community through the publication of an article in several renowned scientific journals. Worth noting are Lek Open House Days organized at the Menge‰ and Lendava si- tes, and the Family Day held at all our sites: in Ljubljana, Menge‰, Lendava and Prevalje. Our business achievements were accompanied by thoro- ugh management of our economic, societal and environ- mental impacts. Due to expanding production capacities, we were able to employ 300 new associates, thereby increasing our workforce by 8%. In view of the unfavo- rable economic situation in Slovenia, hiring new people is particularly important. Furthermore, the proportion of labor costs in the Economic Value Distributed remained at 21%, its value increasing by a little over 10%. When reviewing Lek's environmental impacts, we wish to emphasize significant growth in parallel with a fluctuating production output and the introduction of numerous new products at the Menge‰ and Ljubljana sites. Improved environmental efficiency, the core of our environmental objectives, was the common thread of our endeavors, even in the situation described above. At this point, it sho- uld once again be emphasized that with our operations we have always striven to go beyond mere fulfillment of statutory requirements and regulations. We endeavor to propagate the best international corporate practice in the field of responsible environment management. Lek, a member of the Sandoz and Novartis Group, strives to minimize its impact on the natural environment, while maintaining focus on the key influences of our business. Through investments, implementation of various mea- sures, and a constant concern for improving production processes, in 2012 we cut back the use of water by 32%, and the use of energy by 24% over 2010, the baseline year. Compared to that same year, emissions of volatile halogenated and non-halogenated compounds into the air were reduced by as much as 45%. Numerous activi- ties were aimed at ensuring safety at work, which is also reflected in the low rate of sickness absence due to work- related injuries and illness maintained at a low level of 0.05. All the above-stated results constitute considerable improvements over the plan. The progress achieved results from the efforts of nume- rous teams, introduction of new technologies, and ad- justments made to the production processes at all of the sites: Ljubljana, Menge‰, Lendava and Prevalje. Invest- ments and process-related novelties introduced at the Lendava site not only increased production output but also 1.2 Letter from the President of the Board of Management