Sustainability Report 2014 Lek d.d.

Company Profile Sustainability Report 2014 – Lek d.d. 12 • We helped to paint the rooms at the Institute for the blind and visually impaired children Ljubljana, brin- ging some freshness into their environment. • We prepared an exciting day for children with special needs in the swimming pool at Hotel Lek in Kranjska Gora. • We donated blood. • We helped raise donations for the humanitarian campaign Siti besed (Fed Up with Words) in a call center, as a part of the Stopimo skupaj (Let’s Stand together) program, in collaboration with the Slovenian Friends of Youth and TV Slovenia. 10 years of Community Partnership Day in numbers • 2,900 associates of Novartis Slovenia have contributed more than 23,000 hours of voluntary work. • They have helped out more than 10,000 people and 40 organisations. • They have donated more than 300 litres of blood. We organised a sports day for the children at the Lendava Bilingual Primary School II 1.3.1 Key customers and markets 11 In accordance with the Group’s strategic orientation and organizational structure, Sandoz Group companies are the key buyers of Lek products and active pharmaceutical ingredients. In 2014, the leading three buyers accounted for 75%, 9% and 4% of net sales. Lek sells its own products and the products of other Sandoz companies. Our major external direct sales markets include Central and Eastern Europe with 94% of products, and in Slovenia 5%. The majority of sales (87%) were realized by pharmaceutical products which is slightly more than in the previous year (2013: 84%), whereas APIs and biopharma- ceuticals account for the remaining 13% (2013: 18%). The total value of the Slovenian pharmaceutical market in- creased by 1.2% while a reduction in generic drug price levels resulted in a 3% 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 medici- nal products reimbursed by the Health Insurance Institute of Slovenia. In 2014, the Health Insurance Institute of Slovenia introduced six therapeutic groups of medicines. In addition to the first therapeutic group of medicines which was introdu- ced in October 2013 and included proton pump inhibitors, the Health Insurance Institute also introduced therapeutic groups of medicines for affecting the level of serum lipids, ACE inhibitors, medicines containing acetylsalicylic acid 100 mg, medicines containing imatinib, medicines containing tripta- nes and local action medicines for treatment of glaucoma. Reduced reference drug price levels, resulting in a lower sales volume of these drugs, affected both generic as well as innovative pharmaceutical companies. In 2014, the non-prescription drug market had negative growth of 2.4% by value and 5.5% by volume. 1.3.2 Major product groups and brands 12 The key therapeutic groups of medicinal products developed, manufactured and marketed by Lek, a Sandoz company, are: • cardiovascular drugs, • antiinfectives, • gastrointestinal drugs, • biosimilars for treatment of growth disorders, neutro- penia and anaemia, related to chronic kidney failure, • medicines for treatment and prevention of iron defici- ency and anaemia treatment, • oncologics, • 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 ® , Amo- ksiklav ® , Linex ® , Lekadol plus C ® , Coupet ® , Iroprem ® , Tulip ® and Operil, and in our export markets drugs with amoxicillin- -clavulanic acid, omeprazol, atorvastatin and tacrolimus. 1.3.3 Development and production sites and processes 13 1.3.3.1 Ljubljana site Verov‰kova road in Ljubljana is the location of Sandoz’s leading and largest development center and one of Sandoz's major production plants, which is also the largest of all Lek's plants in Slovenia. 11 GRI Disclosure G4-8 12 GRI Disclosure G4-4 13 GRI Disclosures G4-4, G4-13