Apr 19, 2024

Interview of the CEO/MB President of Alkaloid AD Skopje, Zhivko Mukaetov, for Jutarnji

The CEO of the powerful pharmaceutical company in the region reveals: 'We are establishing another company in Croatia for our EU operations'

He shared insights into forthcoming investments plans for Macedonia and the region

The continuous growth over the past two decades, coupled with the necessity to align with emerging trends in the pharmaceutical sector, has prompted Macedonian Alkaloid to venture into investments over the past three years that will notably enhance its competitiveness and unlock new avenues for expansion. In 2024, the company, still owned by 5,500 small shareholders, introduced a new facility for manufacturing solid pharmaceutical forms. This investment of €19.4 million will allow Alkaloid to more than double its production of tablets and capsules, expand its product portfolio to include innovative offerings, and strengthen partnerships with global pharmaceutical companies. The press team toured the new Tablet Department 2 plant with its technical facilities, spanning 6,200 square meters at the company’s factory in Skopje, towards the end of March. This visit afforded us the opportunity to talk with Zhivko Mukaetov, who has held the position of Alkaloid’s Chief Executive Officer since 2006. In an exclusive for Jutarnji list, Mukaetov reveals how the investment in the Tablet Department 2 plant will enhance the company's competitiveness. He elaborates on the forthcoming investment plans for Macedonia and the region, including Croatia. Additionally, he addresses Alkaloid's strategies for tackling the widespread problem of low drug prices impacting all pharmaceutical manufacturers in the Old Continent.

What prompted Alkaloid to invest in solid form production and what are the benefits from such investment?

"Alkaloid has experienced consistent growth since 2005, with our capacities expanding accordingly. While we have made significant investments, we reached a point where we recognized the necessity for a new advancement to further broaden our portfolio and scale up operations. Alkaloid operates with two distinct business models. One involves our own portfolio, known as the business-to-customer segment, where we engage directly with customers through our dedicated teams. The second model is the business-to-business segment, where we engage in out licensing. This entails developing a molecule and selling a license to larger pharmaceutical companies such as Sandoz, Teva, Glenmark, and others. Since we develop the molecule, sell the rights and reserve the right to manufacture it for the mentioned partners, we require larger volumes, i.e. larger batches. Thus, it became evident that we could enhance our competitiveness by increasing volume and simultaneously conducting fewer analyses on each smaller batch. Furthermore, as part of this investment, we've installed equipment with smaller batches, which is more practical for catering to smaller markets. Therefore, we achieved an increase of over two-fold in volume along with enhancing flexibility.

We've acquired new technology that was previously unavailable to us. This technology enables our development team to create products containing two or more molecules in a single tablet, particularly beneficial for patients requiring multiple medications. These advancements provide us with greater flexibility in manufacturing solid forms.

Is Alkaloid still mainly a generic company?

Yes, although our goal is to differentiate ourselves by offering value-added products. We recently obtained our first international Value-Added Medicine (VAM) patent, specifically for our groundbreaking formulation of the world’s first ever liquid omeprazole, designed to treat reflux esophagitis and gastroesophageal reflux disease (GERD) in young children unable to swallow tablets as well as in adult patients who have difficulty swallowing. We have already introduced this product to the UK market through an out licensed deal with a local partner, and the initial quantities were delivered last December. We anticipate further placement in the EU soon, followed by the region. This VAM patent represents a significant achievement for our R&D Department, further motivating them as they continue working on another innovative formulation.

The importance of R&D grows alongside new investments. How strong is Alkaloid in this domain?

Our R&D Department has been steadily expanding. We established this segment precisely 15 years ago from the ground up, with the inauguration of our Research and Development Institute. Currently, it comprises a workforce of 170 individuals, with over 150 of them holding advanced degrees such as master's or doctorates. Multiple teams within our R&D Institute are working on developing different product groups whereby, alongside our in-house expertise, we also leverage the knowledge of external consultants.

What specific benefits do you anticipate from this investment, and within what timeframe?

Alkaloid ended last year with €268.3 million in revenues, marking a five-fold increase since 2005. Over the past five years, the company has experienced an average annual growth rate of 12.4%. The financial outcomes of this investment will be contingent upon the outcome of the auditing and certification processes. We have already secured the Macedonian GMP (Good Manufacturing Practice) certificate, and we soon expect to obtain certificates for all other markets where we operate, anticipating the possibility to accelerate our efforts towards new development opportunities by the end of the year.

What is your biggest export market?

Our products are sold across nearly 50 global markets, with exports accounting for 69 percent of our revenues. Our largest export market is Serbia, where we maintain our own production facility with approximately 150 employees and placements totaling around 40 million euros. In Croatia, we serve as a reliable partner to the healthcare system, particularly by striving to supply molecules that are in limited availability. We maintain two entities in Croatia: one dedicated to Croatian operations with approximately 40 employees based in Zagreb, and another responsible for legal services across the European Union. Additionally, we anticipate the registration of a third company, alongside an existing office in Slovenia, to undertake specific operations within the EU. Alkaloid also has a laboratory in Slovenia for drug batch release, as well as a company in charge of all EU operations. Our presence extends across various EU markets, including Austria, Italy, Portugal, Poland, the Czech Republic, Romania, Bulgaria, and beyond.

What is the ratio of prescription drugs vs. over-the-counter products? What trends have you observed?

Over-the-counter products account for around 23%, with food supplements gaining strength, due to their versatility and the broadness they bring to our product range. Ninety percent of our production consists of pharmaceuticals, followed by cosmetics, chemicals, and botanical processing. We have strong cosmetic brands such as Becutan, which remains among the top 3 brands in the former Yugoslavian market. Furthermore, we have expanded this portfolio to include baby diapers, creams in various forms, and our own production of wet wipes.

Our teas sell relatively well on the US market. The Good Nature brand is available on Amazon, generating annual revenues of approximately $4 to $5 million. We also engage in contract manufacturing for the US market, namely for Aveda under Estee Lauder and Arbonne under the French Groupe Rocher. Our focus in this segment is on gluten-free and organic products which are a distinct niche where we have recognized particularities related to pharmaceutical expertise, allowing us to add further value to our offerings.

What investment plans are in store for the future?

Our next venture in the pharmaceutical field involves expanding the cephalosporin antibiotics segment. Being a substantial component of Alkaloid's operations, we are dedicating resources to bolster our antibiotic manufacturing capacities. We specialize in the production of the Cefixime antibiotic, ranking as the second-largest manufacturer in Europe. Our goal is to maintain a competitive edge backed by the requisite skill and expertise in this field. In the pharmaceutical industry, placements typically mirror investments, expertise, and knowledge, which we have directed towards developing a modern and competitive product portfolio for the last two decades. Over the past 15 years, we have undertaken various investment endeavors totaling €220 million, and we intend to continue along this trajectory in the future.

What is your workforce situation? We noticed a significant presence of young individuals at the new facility

In an era where technology and artificial intelligence are readily available, we have somehow come to recognize the importance of human potential even more. At Alkaloid, we have always prioritized this potential, striving to create a company where individuals feel fulfilled and are motivated to invest their talents for collective success. After all, the image, values, and credibility of any company reflect its organizational culture and its people above all. Alkaloid consistently invests in the education of its professional staff at all levels through a variety of training initiatives, in-house training and dual education programs. The young individuals you encountered in the new facilities are likely recipients of scholarships from our Trajche Mukaetov Foundation. Since its inception, the foundation has awarded scholarships to 659 medical and pharmacy students at the state university, with several hundreds of them beginning their careers in various departments at Alkaloid.

At present, Alkaloid boasts a workforce of 2,900 individuals across its Macedonian headquarters and its branches.

How is Alkaloid addressing the challenges faced by the generics industry in Europe? What is your take on this matter?

Alkaloid shares the same position as all other generic companies in Europe and the region, such as Teva, Pliva, Belupo... we have all felt the impact of inflation, military, energy and logistics influences over global trends. All of these companies, have been burdened with unexpected costs, compounded by strictly regulated product prices that did not permit adjustments. Numerous companies have exited European markets primarily due to the low prices, a situation that is far from ideal. Meanwhile, the supply chain from Asia poses significant challenges, characterized by constant and unpredictable situations beyond our control. In essence, the strategy advocated by the European Commission, to move the production of as many raw materials as possible to Europe is astute. However, there needs to be greater flexibility in allowing price adjustments, as investing in ventures subjected to substantial price pressures isn't viable. I believe it's imperative to incentivize generic companies, considering the significant capital investments and stringent industry standards – it makes no sense for a box of medicine to cost less than a pack of chewing gum. Generic pharmaceutical industries play a vital role as essential partners of healthcare systems, ensuring a consistent and sustainable supply of medicines.

Alkaloid remains under the ownership of small shareholders. Have there been any acquisition offers? Is there interest among global players to take over?

Alkaloid remains under the ownership of 5,500 shareholders, making it the company with the highest number of shareholders listed on the Macedonian Stock Exchange. Moreover, Alkaloid's stocks rank among the top 3 in terms of liquidity and trading volume on the exchange. We have a transparent dividend policy - approximately 50 percent of profits are allocated to shareholders, with the remaining 50 percent dedicated to investments - so shareholders know what to expect. For the eleventh consecutive time, Alkaloid was recognized as the most transparent company by the Macedonian Stock Exchange. Additionally, it received the Stock of the Year award in both 2022 and 2023.