Sustainability Report 2013 Lek d.d.

Company Profile Sustainability Report 2013 – Lek d.d. 12 With the Wink at the Sun campaign we also concluded more than a month of activities marking the Novartis Glo- bal Volunteer Day. They included various activities on the occasion of the Novartis Community Partnership Day in May. Again we dedicated a lot of attention to children, youth and the elderly. More than 250 Lek volunteers donated blood or lent a helping hand to individuals and organiza- tions in the local community. We also visited Mala Hi‰a in Pil‰tanj in the Kozjansko area, which is committed to caring for children and families in need. Lek has been supporting its activities since 2007. Lek Corporate Communication is the owner and implemen- ter of all initiatives in the field of corporate volunteerism. As declared the Head of Corporate Communication, Katarina Klemenc, the special value of corporate volunteering lies in forging close ties between the company and the local community which benefits everyone. A part of a 12-member Lek team that helped the Slovenian Friends of Youth Association raise funds for the operation and development of the TOM telephone help line for children and youth. 1.3.1 Key customers and markets 10 In accordance with the Group’s strategic orientation and or- ganizational structure, Sandoz Group companies are the key buyers of Lek products and active pharmaceutical ingredi- ents. In 2013, the leading three buyers accounted for 27%, 9% and 5% of net sales. Lek as a part of the global company Sandoz sells its own products and the products of other Sandoz companies. Our major external direct sales markets include Central and Eas- tern Europe with 88%, and Slovenia with 5%. The majority of sales (84%) are realized by pharmaceutical products (86% in 2012), whereas APIs and biopharmaceuticals account for the remaining 16% (14% in 2012). The total value of the Slovenian pharmaceutical market increased by 0.4%. A reduction in generic drug price levels by 7.1% resulted in a 3.2% reduction in the generic market value. The main contributors to the market shrinkage were measures taken by the Ministry of Health to curb spending on medicinal products reimbursed by the Health Insurance Institute of Slovenia. In October the Health Insurance Institute of Slovenia introduced the first therapeutic group of medicines that included medicinal products for treatment of excessive ga- stric acid secretion (proton pump inhibitors). Reduced reference drug price levels, resulting in a lower sales volume of these drugs, affected both generic as well as innovative pharmaceutical companies. The non-prescription drug market grew by 2.3%. 1.3.2 Major groups of products and brands 11 The key therapeutic groups of medicinal products developed, manufactured and marketed by Lek, a Sandoz company, include the following: • cardiovascular drugs, • antiinfectives, • gastrointestinal drugs, • other prescription drugs dispensed in pharmacies and covering a broad spectrum of therapeutic groups of drugs for the treatment of various diseases, and • self-medication drugs. Our leading brands in Slovenia include Lekadol ® , Amoksi- klav ® , Coupet, Tulip ® , Linex ® , and in our export markets drugs with amoxicillin-clavulanic acid, atorvastatin and ome- prazol APIs. 1.3.3 Development and production sites and processes 12 1.3.3.1 Ljubljana site The ·i‰ka industrial zone on Verov‰kova road in Ljubljana is the location of Sandoz’s leading development center and one of Sandoz's major global production plants, and the larg- est in Slovenia. The Development Center in Ljubljana develops medicinal products for the entire Sandoz with special focus on tech- nologically complex products. We act as a Sandoz Center of Excellence for nasal sprays, for example, 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, manufac- turing activities started in 1975 and expanded significan- tly in 1992 through the opening of a new tablet production plant which was further expanded in 2004, and the growth and modernization trend continues. The year 2013 was also marked by a number of investments aimed at upgrading pro- duction capacities and activities in the field of quality, and we successfully passed various inspections. Solid dosage forms (SDF) With about 90 molecules (active ingredients) in about 500 so- lid dosage forms manufactured and packaged, Lek Ljubljana offers the broadest range of solid dosage forms in one place within Sandoz. Manufacturing, which is mostly highly automa- ted and centrally computer-controlled, takes place on multi-pur- pose production lines. Our portfolio includes more than 2,700 finished products sold in more than 70 countries around the world. In 2013, our ta- blet manufacturing plant produced over 6 billion pcs, which is similar in scope to the previous year. We packaged more than 400 million units in more than 160 million packages. We remain the leading Sandoz location for launching new products, 700 of which were launched in 2013, and in the period 2010–2013 as many as 2,300 were launched (40% of all Sandoz launches). 10 GRI Disclosure G4-8 11 GRI Disclosure G4-4 12 GRI Disclosures G4-4, G4-13