2023 has just begun. CEO of JSC Grindeks Ph. D. Juris Hmelnickis looks back at the company’s achievements last year and confidently talks about the intentions to be realized this year. Expanding the product range, operating in new countries – these are just some of the questions discussed in the interview.
What has been the work and performance of Grindeks during 2022?
The year 2022 certainly cannot be called simple, although I assess the work done last year positively. After successfully overcoming the Covid-19 pandemic, we faced new challenges. The geopolitical situation was rapidly changing, to which we, as a pharmaceutical manufacturing company, had to adapt without delay. In changing conditions, decision-making takes place faster and faster, it helps the company to adapt and be more flexible. At the same time, you must be able to concentrate and focus on the main things. There is no more time to plan for months because you must react without delay.
I think we are handling this very well as well. In addition, I would like to emphasize that we are not deviating from the strategy developed in 2020, will still want to reach those goals and expand our export.
What has had the biggest impact on Grindeks growth?
Realizing that we must constantly change and continue what we have started. Successful cooperation between the Grindeks council and the board is of great importance. Here I would like to say a big thank you to the Grindeks council, especially the chairman Kirovs Lipmans, for his foresight, long-term vision, and support for the board and the entire Grindeks team.
Well, I can safely say that any obstacle can be overcome if it is accompanied by healthy defiance and the desire to achieve the goals. I have no doubt that last year, under different external conditions, Grindeks development would have been even faster, and the success would have been even greater, because a lot of attention had to be paid to various emergency situations and solving non-routine issues. Nevertheless, we have built very solid foundations for the further global expansion of Grindeks.
Which medicines were in the greatest demand?
Healthcare professionals evaluate the medicines we offer for the treatment of central nervous system (CNS) diseases, anticancer medicines. In 2022, there was stable demand for Mildronate® and other cardiovascular medicines. There is a growing demand for our new therapeutic group – diabetes medicines, such as Sitagliptin-Grindeks.
Step by step, we are expanding our product portfolio, while also reviewing the entire product range and ceasing to produce drugs with low profitability and demand indicators.
What changes are planned in the Grindeks product range? Which therapeutic groups or directions will be the focus?
We have clearly defined the therapeutic groups – cardiology, CNS, oncology, diabetes. In 2023, dermatology joins our strategic direction. Research and development of dermatology products is ongoing – last year we submitted five products for registration, we will submit five more in 2023. The subsidiary company Kalceks continues to focus on medicines for hospital needs, expanding the offer of antibiotics and ophthalmology drugs.
In 2023, we will devote a lot of attention to the development of new active pharmaceutical ingredients, which will later be used to produce our final dosage forms.
How can the situation in the pharmaceutical and medicine production sector in Latvia and globally be described in general?
Grindeks is rightly one of the most successful Latvian companies and leaders of the development of the pharmaceutical sector. Therefore, it also creates a high value for the economy of Latvia as a whole, both in terms of taxes paid, in promoting education and science, and in providing well-paid jobs.
We also feel the impact of overall economic situation, such as rising inflation and declining purchasing power. Like every family, when we receive a new bill, we as a company are faced with an increase in the cost of gas and electricity. Although Latvia has one of the highest inflation rates, unfavourable inflation spread is also found elsewhere. We export medicines to more than 100 countries of the world, and the slowdown in economic development is felt everywhere, including in the big European countries – Germany, France, and Great Britain. Manufacturers of patent free medicines, including Grindeks, are under a lot of pressure. It is difficult to fulfil the previously assumed obligations for the supply of state-reimbursed medicines due to the rapid increase in energy, transport and other costs. The procedure for revising drug prices in each country does not happen quickly, but the impact of gas and electricity costs on drug production is immediate.
How is the strategy of Grindeks Group implemented for 2025?
Grindeks Group’s factories in Latvia, Estonia and Slovakia are working successfully, making maximum use of production capacity for the needs of the group, namely, to produce Grindeks and Kalceks products. We are gradually abandoning the provision of contract manufacturing services to other pharmaceutical companies, as the demand for our own medicines is growing every year.
The construction project of the largest Innovation Centre in the Baltic region, for which we have completed the first stage of design, is very important for the development of Grindeks, however, considering the rapid rise in construction prices, the unclear economic and geopolitical situation, this huge investment project is temporary, no sooner than the first half of 2023, has been stopped. Our caution is based on rational decisions and cost calculations, because in the new centre we plan to install diverse technological equipment, introduce complicated production processes, as well as automated and energy-efficient technical solutions.
I want to mention that Grindeks is taking very important steps in the field of digitization. We have set a very high bar – to switch to digital operation in 2025 in every field and in every country where there are no national legislative restrictions. We started with a simple reduction in the number of printers, but we continue with the digitization of various processes in the field of personnel management, financial and other document flow. Last year, we introduced the digital HR management tool SAP Success Factors. So, wherever there is an opportunity to go digital, Grindeks will do it. This is a very significant change that affects every employee, so I am grateful to everyone for their understanding and interest in change. The progress is huge, and already in 2023, four Grindeks structural units will completely switch to a digital work approach.
What is currently happening in Grindeks export markets? How does Grindeks plan to diversify export markets?
In accordance with the long-term strategy, we establish new subsidiaries in countries where operations are more predictable and not exposed to high risks. These are the countries of the European Union, Switzerland, the USA, Canada, Japan, and South Korea. At the moment, the selection of leading employees is underway in many countries, and when it is completed, Country managers will start work in the respective countries, who will be responsible for business development, marketing and sales of Grindeks and Kalceks medicines in their country.
In each therapeutic group, we have a representative range of effective and modern medicines, not only one or a few products. This increases the confidence of patients and healthcare professionals, especially doctors, in our offer. In all countries where our subsidiary companies are already working or will start working, we make a selection of products. It is a complex and scrupulous work that is based on data analysis and patient needs in each individual country. As I already mentioned, our export scope is more than 100 countries, and our subsidiaries will soon work in 31 country. For us, this means a deeper understanding of each country’s health care and patient needs. Simply put, it means “developing and going deeper, more seriously”. Organizing activity or exporting with the help of cooperation partners is one model, but opening your own companies is a completely different approach. This is how we also avoid sudden changes in one country or another.
In which countries has Grindeks been able to start its operations quickly and efficiently?
There are no countries where everything is easy and simple. In pharmaceutical industry, nothing is ever simple. In the countries of the European Union, the market has been established for a long time, it is stable, and it takes effort for a new ‘player’ to enter it. There is a lot of competition and, frankly, we are not welcomed with open arms anywhere. You must do everything yourself. Maybe we look daring to someone, but the Grindeks team has confidence in its abilities and skills. Fear is not our ally. In addition, our shareholders encourage us to move towards the European Union, the United States, Japan and other economically developed countries.
Is Grindeks facing a labour shortage? What is the current labour market assessment?
Grindeks employs 770 employees in Latvia, the group has over 1500. This number has remained constant in recent years, despite the increase in the volume of operations. The turnover rate per employee increases, which indicates an increase in operational efficiency. This, in turn, allows the company to focus more on the expansion of the motivation and loyalty program. For the company to increase salary of employees, we need to work more efficiently, abandon functions or activities that are no longer needed.
Many chemistry specialists from various fields work in our company, here we face more challenges than in other professions, therefore the company is heavily involved in various projects promoting education. We are aware that as an employer we also compete globally. We are interested in Latvia being a prosperous, friendly, safe, and competitive country where young people want to live and build their careers and families. Grindeks has many bright examples of career growth. Sometimes I am surprised that there are very few applications for some promising positions with very interesting job content.
How can you describe the Grindeks team?
There is a belief that a team is only as strong as its weakest link. Here I would like to say that there has been a change in consciousness, which has affected the entire team of the company. No one wants to be the ‘weak link’ and this means that employees have more confidence in themselves and look for solutions to do things better. It is the first step in the growth of the company, which must be further strengthened. We are characterized by keeping promises and words followed by actions.
At the recent World Cup final, everyone could see for themselves the importance of willpower. Watching the final game, it felt like Argentina wanted to win much more than the France. Both teams have experienced and professional football players, but seeing how the Argentinians’ desire to win, we all understood how important it is to believe in winning.
