Croatia's JGL writes out a prescription for success

By bne IntelliNews July 10, 2014

Guy Norton in Zagreb -



Amid the economic doom and gloom that has gripped Croatia since it sank into recession in 2009, the upbeat performance of pharmaceuticals outfit Jadran-Galenski Laboratorij (JGL) stands out like a shining beacon of hope in the crisis-hit country.

While in recent years thousands of firms in Croatia have gone bankrupt as a result of the country’s recession, which has seen GDP fall by 13% and consumption levels plummet by over a third, JGL has successfully defied those negative economic trends at home and forged ahead with plans to become a force to be reckoned with in the global generic drugs market. As a result, its ever-expanding portfolio of more than 500 products continues to win over ever-greater number of loyal customers across the globe.

As well as researching and developing own brand its range of  sprays, creams, ointments and tablets, JGL has also successfully developed business partnerships with the likes of  Bristol-Myers Squibb, Krka, Christian Hansen and Zeta Pharmaceutici.

From humble origins as a small, privately-owned pharmaceutical laboratory founded at the time of Croatia’s independence from Yugoslavia in 1991, JGL has recorded average annual revenue growth of 22% since it was established in the port city of Rijeka, and last year became the second biggest drugs company in Croatia.

Over the last two decades, revenues have grown from a measly HRK1.5m (€200,000) to a highly respectable HRK877m (€115m) in 2013. A company which founder and chief executive Ivo Usmiani claims started life preparing its initial range of medicines using a food blender, now boasts state-of-the art production facilities that churn out millions of products meeting the highest global technical and quality standards.

As well as making strong progress on the financial front, the company has also raised the bar high when it comes to the export and employment sides of its business. Last year, some 77% of JGL’s production was exported, far exceeding the norm for Croatia, where exports as a percentage of GDP barely exceed the 20% mark.

Meanwhile, with a total of 660 employees at end of last year – up 10% on the figure for 2012 – the company has proved to be an important source of new jobs, both in terms of quantity and quality. With some 70% of its workers educated to at least degree level and 70% of them being women, JGL has become a go-to employer in Croatia for both the graduate and female sections of the population, whose employment prospects have been severely dented by Croatia’s near six-year economic recession. And with an average net salary of HRK9,178, JGL employees earn roughly twice the national average wage in Croatia.

Furthermore, JGL stands out as an all too rare example of a successful modern production company in its home region of Primorje-Gorski Kotar, whose largely outdated Yugoslav-era manufacturing base has collapsed since Croatia declared independence in 1991. 

Investor darling

JGL’s sterling performance amid recessionary conditions at home has seen the company become a firm favourite with domestic investors on Croatia’s otherwise largely moribund capital markets scene.

In April 2011, for example, at a time when concerns about the general health of the European economy were at their height and when investors were often fighting shy of taking on corporate assets, JGL launched a HRK140m, five-year bond to an enthusiastic audience of local pension funds, investment managers, banks and insurance companies. The unsecured floating rate note was priced at an initial yield of 5.7625%, a risk premium of just 225 basis points over Croatian Treasury notes – less than half the pick-up that most other Croatian corporates would have had to offer at the time.

By the time the bond issue has matured in 2016, JGL’s chief executive Usmiani  has said he hopes JGL will have reopened the IPO market in Croatia, which has been closed since 2009, and give both domestic and foreign investors the chance to share in JGL’s success.

Part of the proceeds of that debt issue have helped to finance the construction of a brand new production plant near Rijeka, which the company unveiled to the public last April.

Given the parlous state of the Croatian economy the opening ceremony for the Svilno 2 complex – popularly dubbed Pharma Valley and which at a cost of  €45m is the company’s largest investment project to date ­– was attended by no less than five ministers from the ruling centre-left coalition government, who all queued up to sing JGL’s praises as shining example of a successful hi-tech Croatian both willing and able to fund new investments so as to remain competitive on the global stage on a long-term basis.

As Branko Grcic, deputy prime minister and minister of regional development and EU funds, noted: “We are pleased to see that JGL is growing each year not just in terms of sales, but also in the number of employees... by around 100 people per year and HRK100m in revenue per year. This is an example for the development of industry in Croatia – we have to raise its technological level and the added value created in it. This is the only way to ensure economic growth.”

In addition to new investments at home, in October 2013 the firm took another important step in its international development with the takeover of BG Pharm in Serbia. The purchase marked the first time that JGL had established production outside of Croatia and as well as giving it an enhanced position in the Serbian drugs market which is worth and estimated €650m a year, it will also provide it with important tariff-free access to other member states of the Central European Free Trade Agreement area as well as countries such as Russia, Kazakhstan, Belarus and Turkey, which have signed preferential free trade agreements with Serbia.

Although the company admits that the politico-economic fallout from the crisis in Ukraine could impact the company’s bottom line in terms of sales in Russia and other members of the Commonwealth of Independent States, Jasmin Huljaj, executive director of operational activities at JGL says that it is looking to mitigate any financial impact by expanding its sales and marketing activities in Scandinavia, the Middle East, as well as North and South America.

So a company whose financial fortunes are partly based on the development of nasal sprays using from the pristine, mineral-rich sea water on Croatia’s  Adriatic coast, is looking to provide further evidence that the long-term success of its operations at home and abroad is not to be sniffed at. 


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