Olainfarm plans to expand production

Jeroen Weites, Chairman of the Management Board of JSC Olainfarm, answers Neatkarīgā’s questions.

How do you assess the year 2020, what are the results of this year? What were the main directions of investment and development?

The year 2020 has shown us that change is an integral part of life, that we have to be ready to adapt and evolve in the direction necessary to continue to be successful in our work, life and our contribution to our team and society. We are all busy in our daily routine, still, it is worth to take a pause and to reflect on how we are doing, where we are and what to do better to improve our results.

This has been a big year for Olainfarm and the Group of companies, as the new 5-year strategy Forward is in place and despite the risks of the current global situation we are maintaining our overall goals and growth plans for time to come. We are sure of where we want to be, and how to get there.

This year's results were in general influenced by Covid-19 pandemic leading to an economic crisis and a decrease of customer buying power. Our nine months financial results are stable despite these influences and a sharp decline of the Rouble to Euro exchange rate. Despite serious headwinds Olainfarm Group was facing in 2020, the company is financially stable and strong. Firstly, we were able to accumulate funds, which is a significant precondition to limit the effect of uncertainty within the markets we are operating in. Secondly, we were able to safeguard the supply of raw materials, maintaining stable production effectiveness and being able to provide our products to our customers around the world. We are confident in the future and ready to deliver our 5-year strategic ambition. When it comes to the people working at Olainfarm our message is clear: we are building the future together as a team!

What are the main achievements and what has not been achieved?

We have a strong team and we are following our investment plan in three main directions:

1. We are strengthening our commercial operational footprint: we have just successfully set up our daughter company in Russia. Some other markets will follow in the coming months.

2. We are investing in R&D to fuel the pipeline and in business development to acquire new products, that is a significant part of our 5-year strategy.

3. We are expanding on our manufacturing footprint as well as reducing our environmental footprint with energy-saving or waste reducing projects.

How did the Covid-19 pandemic and the restrictive measures affect the company’s work organization, sales, product demand and international cooperation?

The first wave of the pandemic, when there was almost a complete lockdown, created a lot of challenges for us. Now we are more used to the ‘new normal’ and have all kind of precaution measures in place at our premises to secure our production and to deliver our products around the world. Usually, our commercial people in the field visit family doctors, pharmacists and physicians at hospitals, but Covid-19 restrictions made this more or less impossible. Covid-19 alerted us to go faster in the direction of digital channel development as it did for a lot of industries. This changed how we currently work at Olainfarm Group ‒ using different digital channels to connect with medical doctors and pharmacies to discuss our products, the diseases our products are prescribed for and the e-commerce platform that is used to sell our non-prescription products.

Another challenge is a decrease in consumer purchasing power directly affecting prescription products with co-payment and the purchase of over-the-counter or non-prescription products as well as the sales of compression materials due to significant decrease of medical procedures in hospitals. Decrease of consumer purchasing power is one of the key factors we are facing this year. During nine months of 2020, the Group’s sales reached EUR 88,9 million, which is 10% less than the same period of last year.

Our main business segment is medicine production and despite the pandemic, we have been able to continue to secure full presence and accessibility of our products for the patients across markets. This is an important commitment of Olainfarm in 2020 because most of our medicines are prescribed to treat chronic diseases.

What measures have been taken this year to improve the company’s safety in relation to Covid-19?

This year has changed how we work and lead our everyday life. We’ve put the structure in place to allow employees to work from home. However, when it comes to production, the physical presence of employees is needed. We put all kinds of precaution measurements in place to stay as safe as possible. Our employees have access to masks, disinfection materials, additional busses are organized for bringing employees to work and back to home to secure the 2m distance and furthermore, if there are concerns or even the slightest possibility of being infected or even being a contact person, we test our employees within 24 hours and act accordingly. We have been fortunate enough to keep our production going and our employees secure.

How would you outline the direction of Olainfarm’s development next year and in the perspective of the next five years?

Our main focus is our own R&D for developing new products besides the acquisition of products or any co-development opportunities. Secondly, we need to strengthen and expand our Consumer Health Care business. A critical strength is our vertical integration and the full control of the production cycle, that is the main driver of sustainable growth. Besides the above our (future) manufactory premises allow us to expand on our contract manufacturing operations. Our vision is to become one of the Top 10 Central and Eastern Europe manufacturing companies sustainably delivering healthcare products and services in specific therapeutic disease areas. Currently, we are in 14th place. Our ambition is strong and despite the pandemic we see no reason to change our vision.

We see that we can successfully compete with other international pharmaceutical companies. Our goal is to strengthen our position in the central nervous system, cardiology, urinary tract infection, allergies, and alimentary therapeutic areas, as well as in certain disease categories in Consumer Health Care. Besides the above, Olainfarm Group includes several other companies each strong in specific areas such as our pharmacy chain Latvijas Aptieka, our bandage and compression materials company Tonus Elast, our organic food supplement products developed and produced by Silvanols and our diagnostic and health care centres Diamed and Olainmed.

Unfortunately, traditional year-end events are not possible this year. What will be your wishes at the virtual year-end corporate event for the company’s employees, partners, and customers?

I believe in building a sustainable future together with the employees of Olainfarm, the customers we serve, our stakeholders and our shareholders. In 2020 we have set the first step towards growth and I am confident in the future. Good health, prosperity and happiness ‒ that is what I wish to all of you!

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