Croatia’s Pliva, the largest pharmaceutical company in Eastern Europe, reported a hike in sales but lower profits in the first quarter, as the costs of a restructuring programme aimed at alleviating the impact of forthcoming patent protection loss on its biggest product, azithromycin, took their toll.

Pliva’s revenues rose 23% to $348 million dollars, but restructuring costs relating to the sale of its headquarters building in Zagreb, the closure of manufacturing facilities, as well as a re-alignment of its pharmaceuticals business into generic and proprietary medicine divisions, caused it to post earnings before interest and taxes (EBIT) down 7% at $59 million.

Sales rose 13% to $266 million, driven by a 78% increase in royalties to $71 million from an increase in sales of the antibiotic Zithromax (azithromycin) in the USA, where it is sold by Pfizer. But with the patent protection on azithromycin in the USA due to expire in November, the bulk price of the active ingredient is expected to fall dramatically, affecting both Pliva’s royalty stream and its pharmachemicals unit. The latter reported 30% growth to $48 million in the first quarter, with azithromycin itself up 23% to $38 million.

Generics sales rose 13% to $192 million, although Pliva’s proprietary business saw a 27% decline in turnover to $21 million, which it attributed to its recent marketing focus on recently acquired overactive bladder treatment Sanctura (trospium) at the expense of its other products [[08/04/04g]].

Aside from Sanctura, Pliva is staking its future growth on pipeline drugs for cancer, asthma and fungal infections, as well as its strategic move into the promising area of ‘biogeneric’ drugs – known as biosimilars in Europe and follow-on biologics in the USA. With preliminary signs that the regulatory obstacles to approval of biosimilars may be falling, Pliva has staked a claim to the new territory through product development agreements with Barr Laboratories and Mayne Pharma.