Galenika’s 2011 Loss Widens as It Awaits State Backing

Galenika AD, Serbia’s state-run drugmaker, says its 2011 loss probably widened to 20 million euros ($26.6 million) as a lack of cash hurt operations and sales dwindled while the company awaited a bailout.

The expected loss for last year would compare with a loss of 14 million euros in 2010. Revenue fell to about 50 million euros from 90 million euros a year earlier, acting General Manager Zivomir Novakovic said in an interview in Belgrade today. Official results are due in the second quarter.

The company, the second-biggest pharmaceutical maker in the Balkan country, is looking to Parliament for approval of a state guarantee for a 70 million-euro loan from four banks. The seven- year loan, with a two-year grace period, was negotiated with the local units of Erste Group Bank AG (EBS), Societe Generale SA (GLE), UniCredit SpA (UCG) and AIK Banka AD (AIKB),

“Banks are getting nervous, details have been agreed, we just need the green light from Parliament” or face a bigger halt in production, Novakovic said. Talks on the bailout package began in June last year.

Bank Support

Erste would provide 30 million euros, Societe General and UniCredit would each provide 10 million euros and AIK would participate with 20 million euros.

Galenika needs the loan to service 63 million euros of short-term debt to 18 banks, including units of Societe Generale, Raiffeisen Bank (RBI) and to AIK Banka, and to pay almost 26 million euros owed to suppliers, Novakovic said. At the same time, the company claims some 90 million euros from wholesalers and the state-run health insurance fund for drugs delivered, after collecting 20 million euros from them since mid-2011.

The loan agreement includes a reduction of Galenika’s workforce to 1,500 by 2018 from 2,300 now, and direct sales to pharmacies and hospitals, eliminating wholesalers, he said, speaking to reporters at a separate news conference.

The efforts should help Galenika return to profit next year, with earnings seen at 6.2 million euros in 2013, while also improving market share, currently at just over 20 percent of the $1.2 billion Serbian market for medicines, he said.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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