Hemofarm will celebrate its 42nd anniversary in June this year. What were the main stages of the company's development that you have been through?
I often compare Hemofarm with a lady in mature years but still beautiful. We had an exciting past and we are working on a book that will describe our experience during these years. If we look at our history, there were many things that influenced our development. There was a lot of courage in some moments when we had chosen our roads, resisting to various pressures and negative influences. We can say with pride that we succeeded in staying apart from the ideology and politics. We forced our own ideology: the development of a company that is working in a very sensitive area. We were working in the Serbian health care in times of the Tito's regime, in the time of the falling apart of former Yugoslavia and during the sanctions and the embargo. The loss of our markets has greatly affected us as a very advanced company that was very strong both in the markets of Slovenia and Croatia. We didn't let ourselves to various influences and remained on our own ground, avoiding the politics as a marketing tool, which some took advantage of. We have found our road and compensated the loss with the new successes. Although it was the more difficult road to follow, actually it has strengthened Hemofarm. It has strengthened our credibility in domestic and foreign markets. Sometimes we were the cause of envy. In such context we have been provocative but always with the quality and the results. That is why today we can face anybody, after all those years of wondering. As one of the well-known poets said "the years that grasshoppers have eaten" in our case turned to be something completely different: we grew in those years. After 10 years, comparing to 1990, we have almost tripled our production.
There is a chart I would like to show you as an illustration of my words. This is the number of packs and those are the years. In 1990 and 1991 we recorded a growth. Everybody was preparing for the war and they were making contingencies. In 1993 we recorded a drop. We lost Slovenian and Croatian markets that were the 40% of our sales. The inflation was the biggest of all times in the world and in the end it was 6% per hour. We decide to compensate for the lost markets by expanding our product's range and introducing new products. As we weren't able to sell our products in Slovenia and Croatia, they weren't able to sell their products here as well. It was the only reasonable decision in order to return our position. Further on, in 1994, 1995 and 1996 we came on the sales level from 1991 and exceeded it, in spite of the fact that in the meantime were given the embargo and the sanctions, being banned to export. In 1998 with abandoning of the sanctions and the growth of the domestic market and the export, our sales continued to grow. Again, in 1999 there was a slight growth. In the year 2000 there was a small drop, primarily in the domestic market, because the prices were disastrous. They were controlled by the state. We were selling more than 80% of our medicaments under prices that were below the direct costs of the production. That is the best demonstration how a Government can be unreasonable and poor in business.
The changes came in October 2000. With a lot of efforts from our side and a lot of understanding from the side of the Government the prices have been corrected. Of course, even today the prices are inadequate, comparing with the prices in the surroundings. But, we cannot be unreasonable and ignore the difficult social state that is present on the sight. But the recent events gave the stimulus to our production and through that to the supply of the market with our drugs. That is why in this year, 2001 we broke the record. We made 91 million packs. It is almost three times more than in 1991. I have been on the head of this company for 20 years and the jubilee I mentioned is not a small thing for me. In those 20 years I witnessed the presence of many alternatives and making many decisions that could determinate which way we will take. We have tried to fulfill all the aspects in the best manner of our mission. We are talking about the quality that is the key word and although the circumstances were against the new management we managed to stay on the top and to be the number one.
How are you going to preserve that quality in the future? What is your development plan?
We run an ambitious and innovative company and we are realistic in understanding the circumstances we are working in. But we are also aware of the challenges that go with all those difficulties. To us it is a challenge to win. This sportsman spirit meant a lot to us in those difficult years. It affirms our belief that the company will always have the right solution in the right moment. Of course, the future is to be projected and managed. It is not true that it is not possible. Of course, you cannot foresee everything. But you have to get ready for the surprises as well. We studied the experiences of the ones that had free hands in times when ours were tied, noticing at which points they made mistakes. So, we will not repeat them. We are trying to project the development of the events in our circumstances. The experiences from the surrounding countries are precious to us, particularly the experiences from the former Yugoslavian republics. It is mostly concerning Slovenia and partially Croatia. We know that the market is going to change substantially in the demand and we are making efforts to be prepared for that. We have undertaken some measures to strengthen Hemofarm particularly in the exporting markets. The direct export is 25% of the total income of the company. We established local productions in other countries and that is not taken into account. Our goal is to make the balance between the local market sales and direct export from Yugoslavia, as soon as possible. We are now close to level the export and import which is significant for settling the exchange rate differences. So, with the total growth increasing the export will increase too. This is our projection for this and the next four years.
Hemofarm is a group of companies that have a very diverse range of products. Drugs are our core business. We are very famous also for our dialysis and infusion therapies. We are selling less than a half of our production, i.e. 43% of the total dialysis production on the domestic markets, covering the 73% of that market. The rest is exported in the world, as well as it is exported in Western Europe's market. We have a CE mark and we were the first to be certified in Yugoslavia, four years ago. We got the CE mark even before some Western European companies got it. We engaged the most rigorous British agency authorized for certifying companies. Also, 15 days ago we received an MCA approval from the British Health Ministry. Those are the proofs of the quality to which we pay the greatest attention, although in parallel we have to invest largely in equipment and environmental conditions. This is not easy in these times of modest living in this country. That was the achievement of the young people to who we are paying great attention. We are also paying the close attention to the education of our personnel. We try to select the best students in the faculties and hold them through their studies. After that we solve their existential problems such as the houses and the flats. In that way we are making powerful teams of young people, which are continually upgrading their knowledge about technology and drug production. They often participate in various experts' gatherings and seminars organized in UK, Belgium, Germany and USA. And often they are the only representatives from this region. In parallel with investments in our working conditions we are investing in these forces. Now, the Hemofarm is consisted of young and ambitious people that will make no compromise. That is, otherwise, the general problem after all those years. Partially because of the situation here and partially because of the external influences, people lost confidence in themselves and their possibilities. We are working on that problem. The people that represent this company anywhere have the full confidence in their attitude because they know what strength is backing them.
Definitively, in this country there is a big potential. I would like to focus on the future markets. In the Western markets your presence apart from Italy and Switzerland is not strong enough, comparing to your presence in Eastern European markets.
Our company has established its presence in Italy, Germany, Switzerland and Netherlands. How can our influence be strong when we were outside of the whole world for five years? I am very satisfied for the beginning. We just established our presence of our drugs in German pharmacies. I believe in our associates both in Yugoslavia and in Germany and I am sure that it will be the success. Likewise we have just started in Switzerland where we have recently registered our drugs. We cooperate with British companies and we are going to introduce two drugs into their market. Taking all into the consideration it is very good.
| And the future prospects in new markets in Western Europe?
On the basis of those experiences we are going to go further and we are sure that you are going to see more of us there. I have no feeling that we are worse than any other company. On the contrary, we just have to jump certain obstacles. That's why we are trying to have all those Certificates and we are accepting the rules of the game although we know it is sometimes a perfidious way to close their markets. But I think we both overcame the obstacles and learnt the rules we accepted. We hope there will be no new obstacles ahead.
You have established your presence in China. Could you tell us more about that?
We have a factory there, in Shandong province. It is a new experience for us, not very easy one. But we are persistent enough to succeed. This was the first full year of the operation of that factory. It is producing infusion solutions. From that factory we are not supplying the Chinese market but also the markets in the surrounding countries. That is all so far, but it will be more to come.
And between those huge markets is Russia…
The Russian market is our biggest market. We have been traditionally present in Russia. After the crisis in August 1998 when all of us were in temptation whether to stay or to leave that market, we made a very good choice and stayed. Now our business is going well and we even cooperate with some Western companies in their promotion in the Russian market. The foreigners often do not understand the mentality of those people and they are having difficulties in adapting to them. They realize the Hemofarm could do that better than they can. In that purposes we have 50 people there from which only 8 are Yugoslavs. The rest of the stuff consists of locals, i.e. Russians. They are good qualified people and well educated. Luckily we still use Internet connections so we still got them under control. They are spread all the way, from Novosibirsk to the Black Sea.
You said that you cooperate with foreign companies in Russia. Is there any cooperation in Serbia, now that the market is open?
We have very rich and long-standing cooperation with Western companies. Through this cooperation and joint ventures we had chances to learn a lot and apply good experiences of our partners. And sometimes they used something from us. Also, we learned quite well about marketing tools. But we always insisted on having distributed roles in order to enable everybody to be satisfied. We would not like to be classical distributors but we want to cooperate in production. Our factory of dialysis programs and the German company Fresenius, from Bad Homburg, near Frankfurt, are cooperating for 30 years. Otherwise, that company is the leader in the area of dialysis production. We are very proud because of that partnership that survived many temptations, on the both sides. Our partnership with American company "Upjoin" is lasting for 25 years. That company is now a part of a "Pharmacia Corporation". There are more such examples like "Goedecke Parke-Davis", which is now a part of "Pfizer". The cooperation with Parke-Davis is 35 years old. We also for more than 30 years cooperate with the company Leo from Denmark. It is a small but solid company with high quality products. It is telling you about our persistence and the mutual responsibility.
You are also on the head of the newly established lobby group called the Serbian Business Club. How are you going to defend the interests of the domestic investors? It is a very big issue now.
No double standards are allowed, although I see it as a favorite tool in the global politics. I would not like to see it here, not only because of my colleagues that are coming from abroad but also because of us. So, full safety and the full freedom for the business should be present here, if this country wishes to see happier times. Of course, we have to be aware of the influence that the economy has on politics. I mean the daily politics and the legislation that is adopted. Altogether, they determine the rules of the game. Mainly, the business people are the ones who want clear rules of the game. I used to say that even if some regulation is bad I want it to last. I love basketball. You can imagine how it will be in basketball if the rules would be changed during the course of the match? The environment of a dynamic and courageous economic game should be created, with the full responsibility for the tempo. In certain things the tempo should be very fast but in other things we have to measure what is gained and what is lost. In those cases the tempo should be adjusted to the mental possibilities of the local people's adaptation. I am talking about the various branches because the situation is not the same in all parts of the economy. Even within the same branch there are various subjects, which have various capabilities. Models should be made not taking into the consideration the worst, but also not the best participants on the market. Models should be made for the average. That is the big responsibility of the reformists both in the Federal and in Serbian Government. And the Serbian business club will make efforts to be a good partner in a dialogue. If our arguments are not accepted we will let the public be the judge who was right once the consequences appear.
How will you manage to be the President of the Hemofarm and the President of the Serbian Business Club at the same time? Both positions are very demanding.
Our headquarters are going to make the analysis and proposals. We are going to engage the institutions from the outside and independent experts. We are businessmen. We know that what is worth should be paid for. Of course, I have no intention to be professionally engaged in the Business Club because I have a lot of obligations here.
Could you give us your last message to the readers of the Forbes Global, who may also be presidents of pharmaceutical companies or may be interested in investing in Serbia?
Serbia is a big challenge. Reforms in Serbia are the big opportunity for all those who have participated in the transitions of the surrounding countries and who already had that kind of experience. But it is also a big opportunity for those who didn't have enough courage at that time to correct their misleading. However, I advise that in those projects they should find the support from good local partners. That is how they are going to facilitate their adaptation to Serbia. In that way they will have the full cooperation with the young, very ambitious and competent businessmen and our Government. The young associates that are going to gather around them are something that would really flatter the Government. Hemofarm itself wants to have new partners and new projects, or maybe a joint presence on a third market. We have negotiated with the European Bank. It was great and nice experience for us. For them, I believe, it was tough, but still we managed to finish it. We obtained a very significant loan that will enable us to develop even more our possibilities and our capacities, especially our export plans. As you know we are a completely privatized company. The first shares sold in the Belgrade's Stock Exchange were ours. We didn't sell many shares but it was the first experience both for the Stock Exchange and for us. It is a process that will be ongoing and the many other companies are going to take this road. We are aware of our additional mission to be a good example for the others. It is an additional responsibility.
Thank you very much for your comments, Mr. Babic
Thank you
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