Krka Growth Well Below Regional Potential

BMI View: Despite its exposure to high-growth pharmaceutical markets, Slovenian drugmaker Krka has so far not achieved the pace of expansion expected. The company's 2010 and Q111 results were not particularly encouraging, with net profitability an ongoing concern. Furthermore, the continued strengthening of the euro will limit growth potential from the firm's main growth region, Eastern Europe (including Russia), throughout the rest of 2011. Despite limited expectations for 2011, BMI nevertheless believes exposure to the pharmaceutical markets of Central and Eastern Europe (CEE) will benefit Krka's long-term growth potential. The Slovenian company is well placed to take advantage of the region's strong growth potential, while avoiding some of the austerity measures and price controls currently characteristic of Western European markets. Furthermore, the company will benefit from the increasing uptake of generic medicines, partly driven by governments mandating their use as a substitute for more expensive medicines.

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