The rule of 'quality is more important than quantity' applies in pharmacy too
09. 01. 2023
FARMAK a.s. is one of the most important employers in the pharmaceutical industry in the Olomouc Region. In 2022, FARMAK a.s. celebrated its 30th anniversary since it was established, and overcame the aftermath of the coronavirus pandemic. In 2023 we have another challenge ahead of us. This time we face the continuing energy crisis. It has a major effect on production costs, which will continue to grow. "We are being proactive about the current situation. We want to focus on new projects with higher margins and we are looking into a gradual change in the product portfolio," says business director Mgr David Viktorín. What else has FARMAK a.s. planned and prepared for 2023? Find out more in the interview.
Sir, FARMAK a.s. recently celebrated its 30th anniversary. Can you briefly describe how the company started and how it is doing today?
Although in 2022 we celebrated 30 years since the founding of the company FARMAK a.s., it did not appear from nowhere. Chemical production in the same location goes much further into history, specifically to the 30s of the last century. From the 50s it was already known under the name Farmakon n. p., then in the same plant there was a large-scale production of active ingredients, vitamins and other substances. In the 90s, the state-owned company Farmakon, was privatised under the current name FARMAK a.s. and extensive restructuring of the company started as part of the transition from high-capacity production to small-volume but specialised production. All of this with a single goal - to become a major supplier of medicinal substances not only for the Czech market, but for the whole world. Currently, we supply our products to 150 of the world's most important pharmaceutical companies in 50 countries. I am pleased to say that we have succeeded in implementing our vision.
You are a sales director. You are mainly responsible for business, purchase and related finance. What do you generally consider to be the keys for business success, in your opinion?
Foremost it is the quality of the supplied products and services. This is especially important in pharmacy, as it is one of the most regulated industries and any mistake can have profound consequences for patients. From this point of view, the quality of FARMAK a.s. pharmaceutical supplies, or, for example, the timely delivery is absolutely crucial for building long-term trust in our products and services.
What is the position of FARMAK a.s. in our country (Czechia) and at the international market?
We managed to totally fulfil the vision that the owner of the company, Ing. Jiří Žák, specified after the privatisation of the company in 1996. We became an important supplier of high-quality medicinal products not only on the domestic but also on the international market. Exports currently account for about 90% of the entire company revenue. Because the manufacturers of pharmaceutical products do not mention the origin of their ingredients on the packaging of the final product (e.g. tablets, capsules etc.), many people may not know that the active substances contained in very common medicines such as cough syrup, drops for the treatment of glaucoma, medicines for blood pressure regulation etc. were made in our country, the Czech Republic, Olomouc.
We entered the new year 2023. Could I ask you to recap 2022, as well as the outlook and plans for 2023?
I will admit that I will be a little ambivalent about the evaluation of 2022. In business terms, we have experienced the most successful year in the last twenty years. As a result of entering new territories and acquiring new business in places where we have been active for some time, we have managed to significantly increase the company's sales relative to the business plan. Here we are coming back to quality and reliability. Many customers, who in the past moved to much cheaper (even cheaper) competition from mainly Indian manufacturers of medicinal products, return to us.
It turns out that quality is not just some advertising slogan, and it is often, ultimately, much cheaper to pay for quality raw materials with reliable supplies than to solve problems with cheaper suppliers.
On the other hand, like all other companies in the manufacturing sector, we have been significantly affected by a sharp surge in energy prices following the outbreak of the conflict in Ukraine, which has cut profits more than we would have liked. Unfortunately, to keep strictly controlled conditions (temperature, humidity, etc.) in 24/7 operation is costly.
Can we expect some major news in the upcoming year, or further ahead?
We have been working on a gradual renewal of our existing product portfolio for the last few years. Unfortunately, due to the high level of requirements from the state departments, every new project is a marathon, not sprint. We are talking about four to six years’ timeline before a new project can land – and that happens only if it is successful. However, we have managed to start a whole series of new projects, which we expect to become the key products for our company in the years to come.
At the same time, we will ceremonially launch a new or completely renovated production unit. The investment costs of which amounted to approximately 200 million CZK. This unit will further increase our production capacity and especially the size of the batches produced, which will have a positive effect on the production costs of the active substances produced here.
What do you fear most in the following year or years, and what do you perceive as the biggest challenge for FARMAK a.s. in near future?
Of course, the biggest obstacle remains the energy crisis, which is increasing significantly and will increase our production costs next year. Naturally, we are not waiting for things to return 'back to normal' (which is unlikely to happen). We are actively trying to combat the current situation – whether by a number of austerity measures, searching for more efficient ways of producing or building a photovoltaic power plant, which should be in operation already in the second quarter of this year.
Among other things, you are also dealing with logistics. Do you expect any changes, or have everything crystallised during the pandemic of the coronavirus?
In the field of logistics, whether in the case of buying raw materials or exporting active substances, we do not plan any major changes in 2023, as it has proven that we are doing quite well here at the moment. After the outbreak of the COVID-19 pandemic, we risked a bit and went against the grain. Instead of reducing the stocks of raw materials and readily available medicines, we decided to go the opposite way because of lockdown concerns. Many of our competitors had empty warehouses and had nothing to produce, while we were able to fully cover the increased demand from our customers. We are going to continue this trend.
What are you looking forward to the most in trade?
Clearly, the personal meetings with our customers, especially with those, who we could not see in person since the outbreak of the COVID-19 pandemic until now. In 2023, we will traditionally participate in fairs and exhibitions (CPHI in Barcelona or DCAT in New York), but we also have a number of personal visits planned, e.g. in Japan, Mexico or Brazil.
Do you expect any significant changes due to inflation and rising prices?
Of course, the price increase hit us on all fronts. We felt the highest price increase at supplies of raw materials. Some grew by tens of percent year on year. Together with astronomical energy prices, the production costs of most manufactured products have thus increased significantly. As a result, we are forced to pass on some of these costs onto our customers by increasing our products’ prices. Taking the current situation into account, we are planning to continue this trend. Unfortunately, we are no longer talking about trying to maintain a set or planned margin, but whether it makes sense to continue production of some of the active ingredients from our portfolio.
For this reason, in some cases, the price increase will no longer be acceptable and we will be forced to stop the production of certain active ingredients. We realize, that at the end of the day, all the increased costs have to be covered by someone. If demand drops due to price increase, it will be much more efficient to stop such production on time and focus on new projects with higher margins. A gradual transformation of the product portfolio is therefore an absolute necessity for us to be able to increase the company's sales and profitability. As a result, we will be less affected by the turbulent situations we have been facing, and at the same time, we will be able to support our colleagues in the form of salary increases or bonuses.
What kind of employer is FARMAK a.s. at the current situation? And how long have you worked for the company?
I joined FARMAK a.s. in 2016, so I am currently starting my eighth year with the company.
If I must rate FARMAK a.s. as an employer by only a few words, I would highlight reliability and certainty. The clear vision, of the owner of the company, has always been to reinvest the vast majority of profits back into the company. FARMAK a.s. has enough own resources to overcome the crisis situations that we currently have to face. While many other companies have had or will have to consider redundancies in order to continue to function, we do not need to resort to a similar scenario at the moment. And this is a form of success at this day and age!
To sum up, what do you wish to FARMAK a.s. and its employees for the next decade?
For the next decade, I wish the company a turnover starting with a number one and ending with an extra zero at the end. Of course, our success will depend on many factors, but I believe, that we are heading in the right direction and thanks to the hard work of our colleagues, this will be an achievable goal.
Mgr David Viktorín
Business Director, Member of the Board of Directors
David Viktorín studied Clinical and Analytical Biochemistry at the Faculty of Science of Masaryk University in Brno. In the past, he worked in the Quality Control Department, directly in the laboratory and later in a managerial role. As a Business Director, he is responsible for business, marketing, purchasing and logistics.