Unaudited Interim Report for the Krka Group and Krka, d. d. for the First Quarter of 2018

Novo mesto, May 2018

Introduction 3
Business Performance Highlights for the First Quarter of 2018 3
Financial Highlights of the Krka Group and Krka, d. d. 4
Information on the Controlling Company 5
ID Card of the Krka Group 5
Profile of the Krka Group 6
Krka Group Development Strategy 7
Business Report 9
Financial Risk 9
Investor and Share Information 10
Business Operations Analysis 12
Marketing and Sales 14
Research and Development 26
Investments 27
Employees 29
Condensed consolidated financial statements of the Krka Group with notes 31
Consolidated statement of financial position of the Krka Group 31
Consolidated income statement of the Krka Group 32
Consolidated statement of other comprehensive income of the Krka Group 33
Consolidated statement of changes in equity of the Krka Group 34
Consolidated statement of cash flows of the Krka Group 36
Segment reporting of the Krka Group 37
Notes to the consolidated financial statements of the Krka Group 38
Condensed financial statements of Krka, d. d., Novo mesto with notes 45
Statement of financial position of Krka, d. d., Novo mesto 45
Income statement of Krka, d. d., Novo mesto 46
Statement of other comprehensive income of Krka, d. d., Novo mesto 46
Statement of changes in equity of Krka, d. d., Novo mesto 47
Statement of cash flows of Krka, d. d., Novo mesto 49
Segment reporting of Krka, d. d., Novo mesto 50
Notes to the financial statements of Krka, d. d., Novo mesto 51
Statement of compliance 58

INTRODUCTION

The condensed financial statements of the Krka Group and the condensed financial statements of Krka, d. d., Novo mesto (the Company) for the first quarters of 2018 and the first quarter of 2017 are unaudited, while the financial statements for the full 2017 business year are audited. Krka, d. d., Novo mesto has no authorised capital and has not made any conditional share capital increase.

The Company promptly announces all significant changes of the data in its listing prospectus in the Ljubljana Stock Exchange electronic information dissemination system (SEOnet), in the Polish Financial Supervision Authority electronic information dissemination system (ESPI), and/or in the Delo daily newspaper. Reports on the performance of the Krka Group and the Company are available on the Krka website www.krka.si.

At its regular meeting of 22 May 2018, the Company's supervisory board discussed the unaudited report for the first quarter of 2018 of the Krka Group and the Company.

Business Performance Highlights for the First Quarter of 2018

The Krka Group sold €338.3 million worth of products and services, and the Company's sales amounted to €329.3 million. This has been Krka's highest sales figure for the first quarter of a year since the company was founded.
The Krka Group generated sales of products and services in the amount of €17.2 million, or 5% more than in the same period of the previous year.
The Krka Group generated 94% and the Company 96% of revenues in the markets outside Slovenia.
All sales regions recorded increase in sales.
Region South-East Europe recorded the highest absolute sales growth (by €5.5 million) and the highest relative sales growth (14%).
Accounting for a 31.4% share in total sales, the Company's largest sales region was Region East Europe.
The Krka Group generated operating profit in

total of €61.9 million, or 51% more than in the same period last year. The Company's operating profit amounted to €63.2 million.

The Krka Group generated net profit in total of €49.4 million or 16% more than in the same period last year, while the Company generated net profit in total of €52.1 million.
As at 31 March 2018, the Company's share traded at €57.00 on the Ljubljana Stock Exchange, a 1% decrease compared to the year-end of 2017. The Company's market capitalisation amounted to €1.9 million.
The Krka Group allocated €19.3 million to investments, of that €16.3 million to the controlling company and €3.0 million to subsidiaries.
At the end of March, the Krka Group had 10,963 regularly employed persons on payroll, or 131 (1%) more than at the end of 2017. Together with persons employed through agencies, the Krka Group employed 12,238 people.

Financial Highlights of the Krka Group and Krka, d. d.

	Krka Group	Company
In € thousand	1–3/2018	1–3/2017	1–3/2018		1–3/2017
Revenues	338,290	321,048	329,284		312,151
Operating profit (EBIT)1	61,920	40,967	63,169		45,726
EBITDA	90,408	69,524		84,569	67,800
Net profit	49,398	42,694		52,123	45,276
R&D expenses	31,871	31,551		33,595	32,956
Investments	19,262	21,406		16,288	18,047
	31 March 2018	31 Dec 2017 31 March 2018			31 Dec 2017
Non-current assets	1,025,175	1,033,008	1,033,343		1,032,595
Current assets	944,475	886,123	867,651		804,887
Equity	1,533,160	1,487,699	1,542,402		1,493,325
Non-current liabilities	122,045	121,182		88,918	87,911
Current liabilities	314,445	310,250	269,674		256,246
RATIOS	1–3/2018	1–3/2017		1–3/2018	1–3/2017
EBIT margin	18.3%	12.8%	19.2%		14.6%
EBITDA margin	26.7%	21.7%		25.7%	21.7%
Net profit margin	14.6%	13.3%	15.8%		14.5%
Return on equity (ROE)2	13.1%	11.6% 13.7%			12.4%
Return on assets (ROA)3	10.2%	8.9%		11.2%	9.7%
Liabilities/Equity	0.285	0.301	0.232		0.271
R&D expenses/Revenues	9.4%	9.8%	10.2%		10.6%
NUMBER OF EMPLOYEES	31 March 2018	31 Dec 2017	31 March 2018		31 Dec 2017
Balance as at	10,963	10,832	5,152		5,020
SHARE INFORMATION			1–3/2018		1–3/2017
Total number of shares issued			32,793,448		32,793,448
Earnings per share (EPS) in €4		6.18		5.29
Closing price at end of period in €		57.00		52.15
Price/Earnings ratio (P/E)		9.23			9.86
Book value in €6		46.75		45.63
Price/Book value (P/B)		1.22		1.14
Market capitalisation in € thousand (end of the period)			1,869,227		1,710,178

1 The difference between operating income and operating expenses

2 Net profit, annualised/Average shareholders' equity in the period

3 Net profit, annualised/Average total assets in the period

4 Net profit attributable to equity holders of the Group, annualised/Average number of shares issued in the period exclusive of treasury shares

5 Share price on the Ljubljana Stock Exchange

⁶ Equity at the end of the period/Total shares issued

Information on the Controlling Company

The controlling company in the Krka Group is Krka, tovarna zdravil, d. d., Novo mesto (Krka, d. d. or the Company).

Registered office Šmarješka cesta 6, 8501 Novo mesto, Slovenia Telephone ++386 (0) 7 331 21 11 Fax ++386 (0) 7 332 15 37 E-mail [email protected] Website www.krka.si Core business Production of pharmaceutical preparations Business classification code 21.200 Year established 1954 Registration entry 1/00097/00, Okrožno sodišče Novo mesto (District Court in Novo mesto) Tax number 82646716 VAT number SI82646716 Company ID number 5043611 Share capital €54,732,264.71 Total number of shares issued 32,793,448 ordinary registered no-par value shares, KRKG trading code. Krka has been listed on the Ljubljana Stock Exchange under KRKG trading code since 1997, and since April 2012

ID Card of the Krka Group

The Krka Group consists of the controlling company, Krka, d. d., Novo mesto, two subsidiaries in Slovenia, i.e. Terme Krka, d. o. o., Novo mesto and Farma GRS, d. o. o., and 29 subsidiaries outside Slovenia. The controlling company, Krka, d. d., Novo mesto, holds 100% interests in all subsidiaries stated above, except in Ningbo Krka Menovo (60%), Farma GRS (99.7%) and Krka Belgium (95%) – the remaining 5% in the latter is held by the subsidiary Krka France.

additionally on the Warsaw Stock Exchange under KRK trading code.

The Krka Group engages in development, production, marketing and sales of medicines for human use (prescription pharmaceuticals and nonprescription products), animal health products, and health resort and tourist services.

Production takes place in the controlling company in Slovenia and in Krka subsidiaries in the Russian Federation, Poland, Croatia, and Germany. In addition to production, these subsidiaries, apart from Krka-Rus in the Russian Federation, deal with marketing and sales. Other subsidiaries outside Slovenia deal with marketing and/or sales of Krka products, but do not have production capacities.

Terme Krka, d. o. o., Novo mesto deals with health resort and tourist services; and comprises the following branches: Terme Dolenjske Toplice, Terme Šmarješke Toplice, Hoteli Otočec, and Talaso Strunjan. Terme Krka is also the majority owner of Golf Grad Otočec, d. o. o.

Farma GRS, d. o. o. was established in partnership with companies from pharmaceutical and process manufacturing industries. The company develops new pharmaceutical products, new technological products for pharmaceutical production and contributes to more efficient pharmaceutical production in terms of energy, environment, and business operations. Farma GRS is the sole owner of six micro companies: GRS TEHFARMA, d. o. o., GRS VIZFARMA, d. o. o., GRS PREK FARMA, d. o. o., GRS EKO FARMA, d. o. o., GRS TREN FARMA, d. o. o., and GRS VRED FARMA, d. o. o.

Profile of the Krka Group

The EU project: research and development company

Krka Group Development Strategy

The Krka Group updates its development strategy every two years. In November 2017, the Management Board of Krka adopted the 2018–2022 development strategy for the Krka Group, and presented it to the Supervisory Board.

The achievement of strategic objectives is measured at three levels: i) the Krka Group, ii) product and service groups, and iii) business functions. The Group's performance criteria are

Key Strategic Objectives until 2022

To attain at least 5% average annual sales growth in terms of quantities/value.
To ensure in a timely manner through an efficient and optimised development-andproduction chain sufficient quantities of products in accordance with the required quality standards for attaining target sales growth in line with market sales requirements.
To focus on maximising long-term profitability of the products from development and production to finished product sales, including all other functions within the Krka Group.
To ensure growth, in addition to organic growth, with acquisitions and long-term partnerships (including joint ventures); The primary goals are to secure new products and/or markets.

Key Strategies until 2022

To give priority to the European, Chinese and Central Asian markets.
To maximise the sales potential in all sales regions (Slovenia, South-East Europe, East Europe, Central Europe, West Europe, Overseas Markets).
To focus especially on key markets (the Russian Federation, markets of Western Europe, Poland, Slovenia, Romania, Hungary, Ukraine, Czech Republic, and Croatia), with an emphasis on key customers and key products.
To include a few markets of the Region Overseas Markets among the key markets.
To establish and strengthen our presence in Western European markets by operating through our own marketing-and-sales

monitored by the Management Board, while criteria at the levels of product and service groups and business functions are monitored by the relevant committees. The guiding principle in managing the system of criteria is to increase the competitiveness of the Krka Group as a whole and also of individual companies within the Group.

The key Krka Group objectives and strategies until 2022 are set out below.

To maintain in addition to the range of products making up 'the gold standard' – the largest possible proportion of new products in total sales
To maintain the largest possible share of vertically integrated products.
To launch the selected product portfolio onto selected key target markets as the first generic pharmaceutical company.
To strengthen the competitive advantage of our product portfolio.
To improve cost effectiveness of assets use.
To increase the degree of innovation across all business functions.
To remain independent.

subsidiaries and by marketing products under our own brands (Krka and TAD Pharma).

To seek opportunities for acquisitions of local pharmaceutical companies, business acquisitions, and various types of long-term partnerships (joint ventures) in selected markets with the primary objective of attaining new products and thus entering new therapeutic areas and/or markets.
To strengthen the pharmaceutical and chemical industries and increase the range of medicines in three key therapeutic areas of prescription pharmaceuticals (medicines for the treatment of cardiovascular diseases, the central nervous system, and the alimentary tract and metabolism) as well as in other promising therapeutic areas (analgesics and oncology

medicines, antidiabetics, antivirals, and antibiotics) while entering new therapeutic areas. We intend to introduce innovative products in key therapeutic areas (innovative fixed-dose combinations of two or three substances, new strengths, pharmaceutical dosage forms, and new delivery systems).

To strengthen the range of non-prescription products and animal health products (primarily pet products) in selected therapeutic areas.
To enter the market of similar biological medicines.
To strengthen vertical integration from product development to manufacture.
To ensure a permanent supply of incoming materials and optimise supply. Our aim is the continuous reduction of purchase prices
To increase the proportions of research, development, and production of certain active ingredients and finished products outside Krka (outsourcing).
To develop generic medicines and prepare relevant marketing authorisation documents before the product patent on the original medicine expires.
To strengthen all types of connections in the field of development and other fields as well as with external institutions and companies.
To ensure functioning and continuous improvement of the integrated management and quality systems, which provide for the manufacture of safe, effective and quality products in accordance with cGXP guidelines and rules on quality in the pharmaceutical industry.
To invest in the production, development and infrastructure facilities in a stable and optimal manner.

2018 Krka Group Business Plan

Sales of products and services are estimated at €1.300 billion.
Sales outside Slovenia are expected to account for 93% of total sales.
Prescription pharmaceuticals remain the most important product group, comprising 81% of the overall sales.
We plan profit at €153 million.
To reduce the impact of financial risks on the operations of the Krka Group.
To pursue a stable dividend policy and also consider the Group's financial requirements for investments and acquisitions when determining the net profit share for dividend payout each year, and to allocate at least 50% of net profit of major shareholders for dividend payouts.
To introduce information technology and provide high availability and information security of implemented IT solutions effectively and in accordance with the regulatory standards.
To continue the digitisation of operations: introduce information (digital) technology in business processes due to automation and optimisation of processes and procedures, support or strengthen cooperation within the Krka Group and in the entire supply chain, and acquire relevant information for business decisions. Our aim is to offer customers added value.
To strengthen professional and cost synergies within the Krka Group, and maximise the utilisation of competitive advantages in the business environments of Krka's subsidiaries abroad.
To strengthen internationalisation within the Krka Group by managing employee potential in an international environment and ensure the activation of all human resource potential.
To meet our economic, social and environmental responsibilities to the environments in which we operate.
To strengthen corporate integrity and operate in accordance with legislation, rules, ethical principles and good practices.
To maintain the reputation of the Krka Group and emphasise zero tolerance for fraud and corruption.
We plan to increase the total number of employees in Slovenia and abroad by 2%. The total number of regular employees is projected to exceed 11,200.
According to the plan, €135 million will be allocated to investments, primarily for extension and modernisation of production, research-anddevelopment capacities and infrastructure.

BUSINESS REPORT

Financial Risk

Foreign Exchange Risk

The Krka Group operates in diverse international markets and is exposed to foreign exchange risks in certain markets. Currency exposure arises from a surplus of assets over liabilities in a particular currency in the financial position statement of the Group.

We aim to mitigate foreign currency risk exposure primarily by natural hedging. We also use derivative financial instruments, however, only to a limited extent. Krka intends to continue its policy of partial hedging against the Russian rouble-related risk in 2018.

The value of the rouble expressed in euros dropped by 2.1% in the first quarter of 2018, but increased when expressed in the US dollars. A decrease of the value of the rouble expressed in euros was primarily caused by strengthening of the euro against the US dollar.

Also in 2018, the US Central Bank has been increasing the interest rate, while due to the low inflation rate the European Central Bank (ECB) has postponed the expected increase in the interest rate to the future. This decreases the risk of further strengthening of the euro against the US dollar. Due to a low inflation rate, the Russian central bank has been decreasing the key interest rate, which presents a risk to the rouble.

The oil price has impacted the Russian rouble less than it used to, but has reached a high level due to favourable global demand and limited production by OPEC and the Russian Federation. The increased oil production in the US has had only a limited impact on the oil price.

In the first quarter of 2018, we recorded no particularities in the currency exposure of the Krka Group to other currencies.

In the first quarter of 2018, in consideration of net foreign exchange gains or losses; net proceeds or expenses relating to derivative financial instruments; interest rate gains or losses; and other financial revenues and expenses, net financial result totalled €-4.8 million.

Interest Rate Risk

In the first quarter of 2018, the Krka Group was not exposed to changes in reference interest rates, because the Group had no non-current loans.

Credit Risk

The key credit risk of the Krka Group is related to receivables payable by buyers. This means that they clients might fail to settle them by maturity dates.

The Krka Group has introduced a centralised credit control process for all clients to whom Krka sells products and services in total exceeding €100,000. At the end of the first quarter of 2018, trade receivables included in the credit control process accounted for more than 90% of total trade receivables, and involved more than 400 clients.

The Krka Group recorded a low value of receivable write-offs and impairments also because receivables are dispersed across a large number of clients and sales markets, and the majority of outstanding receivables are payable by clients with whom Krka has been doing business for years.

Our credit risk management policy remained unchanged in the first quarter of 2018. We closely monitored and insured trade receivables from markets with a poor macroeconomic environment and markets in which we detected increased risks in distribution of medicines.

At the end of the first quarter of 2018, more than 60% of trade receivables were insured with an

insurance company, while only a minor part of trade receivables was secured with banking instruments.

At the end of the first quarter of the year, the total value of trade receivables in euros was lower than the total value at the beginning of the year.

Liquidity Risk

In the first quarter of 2018, risks related to the Krka Group's liquidity were managed by effective shortterm cash flow planning. Short-term liquidity was ensured by a stable cash flow, pre-agreed shortterm revolving and fixed borrowings from banks, and the daily, rolling weekly, monthly and longerThe maturity structure of receivables remained stable. The percentage of past due receivables compared to total trade receivables remained low also at the end of the first quarter of the year.

term planning and monitoring of cash inflows and outflows. We also optimised cash balances on subsidiaries' bank accounts.

Liquidity risk is estimated to be low. In the period, all our liabilities were settled regularly and on time.

Property, Liability and Business Interruption Insurance

In the first quarter of 2018, Krka concluded new 2018 insurance agreements. An increase in fire insurance premium lagged behind the increase in property value. As far as other premiums are concerned, they are lower than last year due to successful arrangements with insurance companies

and optimisations of insurance policies. Complete termination of the comprehensive car insurance in the controlling company and certain subsidiaries generated savings, and also simplified organisational and technical arrangements.

Investor and Share Information

In the first three months of 2018, the price of Krka's share on the Ljubljana Stock Exchange declined by 0.9%. In the same period, the proportion of treasury shares increased; Slovenian natural persons slightly decreased their holdings, while the stakes of the international investors and Slovenian legal entities remained unchanged. At the end of March 2018, Krka had a total of 51.324 shareholders.

	31 March 2018	31 Dec 2017
Individual Slovenian investors	39.0	39.2
Slovenian Sovereign Holding (Slovenski državni holding)	16.2	16.2
KAD fund and PPS	11.0	11.0
Slovenian companies and funds	7.7	7.7
International investors	23.8	23.8
Treasury shares	2.3	2.1
Total	100.0	100.0

Shareholder structure (%)

In the first quarter of 2018, Krka acquired 67,017 treasury shares totalling €3,871,222.

On 31 March 2018, Krka held 758,734 treasury shares, or 2.314% of the share capital.

Krka's ten largest shareholders as at 31 March 2018

		Number of	Proportion in	Voting rights
	Country	shares	equity (%)	(%)
KAPITALSKA DRUŽBA, D. D.	Slovenia	3,493,030	10.65	10.90
SLOVENSKI DRŽAVNI HOLDING, D. D.	Slovenia	2,949,876	9.00	9.21
REPUBLIC OF SLOVENIA	Slovenia	2,365,126	7.21	7.38
SPLITSKA BANKA, D. D.	Croatia	1,662,968	5.07	5.19
ADDIKO BANK, D. D.	Croatia	1,218,978	3.72	3.81
CLEARSTREAM BANKING SA	Luxembourg	593,704	1.81	1.85
KDPW	Poland	466,344	1.42	1.46
LUKA KOPER, D. D.	Slovenia	433,970	1.32	1.35
UNICREDIT BANK AUSTRIA AG	Austria	432,527	1.32	1.35
ZAVAROVALNICA TRIGLAV, D. D.	Slovenia	388,300	1.18	1.21
Total		14,004,823	42.71	43.72

As at 31 March 2018, Krka's ten largest shareholders held 14,004,823 shares, or 42.71% of all issued shares, and represented 43.72% of voting rights.

As at 31 March 2018, members of the Krka Management Board and Supervisory Board held a total of 39,170 Krka shares, or 0.12% of all issued shares. Since the end of 2017, their shareholdings had not changed.

Proportion in equity and voting rights of the Krka Management and Supervisory Board members as at 31 March 2018

		Proportion in equity
	Number of shares	(%)	Voting rights (%)
Members of the Management Board
Jože Colarič	22,500	0.069	0.070
David Bratož	0	0	0
Aleš Rotar	13,915	0.042	0.043
Vinko Zupančič	120	0	0
Milena Kastelic	505	0.002	0.002
Total Members of the Management Board	37,040	0.113	0.115
Members of the Supervisory Board
Jože Mermal	0	0	0
Hans-Helmut Fabry	0	0	0
Borut Jamnik	0	0	0
Julijana Kristl	230	0.001	0.001
Andrej Slapar	0	0	0
Boris Žnidarič	0	0	0
Tomaž Sever	500	0.002	0.002
Franc Šašek	1,400	0.004	0.004
Mateja Vrečer	0	0	0
Total Members of the Supervisory Board	2,130	0.006	0.007

Share trading in the first half of 2018

In the first quarter of the year, Krka's share price on the Ljubljana Stock Exchange peaked at the end of January, when it traded at €59.00, and reached its low at the beginning of January, when it amounted to €55.80. On 31 March 2018, Krka's share was worth €57.00.

Krka's market capitalisation on the Ljubljana Stock Exchange as at 31 March 2018 totalled €1.9 billion. In that period, deals in Krka's share generated an average daily trading volume of €0.3 million. Since April 2012, Krka shares have been listed on the Warsaw Stock Exchange as well.

Business Operations Analysis

The business operations analysis includes data for the Krka Group and the Company, whereas the notes relate primarily to the Krka Group.

Revenues

Compared to the same period last year, Krka's revenues at the Group level went up by 5%. The Company sold €329.3 million worth of prescription pharmaceuticals, non-prescription products and animal health products, while the Krka Group generated revenues in total of €338.3 million from sales of the said products and health resort and tourist services. The Group generated 94% of its revenues in markets outside Slovenia.

Taking into account other operating and financial income, the Krka Group generated total revenues in the amount of €344.7 million, and the Company €332.9 million.

See chapter 'Marketing and Sales' for a more detailed analysis of sales results by individual markets and groups of products and services.

Expenses

Total Krka Group expenses amounted to €287.5 million, or 3% less than in the same period last year.

The Krka Group incurred operating expenses in total of €279.6 million, or 1% less than in the same period last year, which included: €143.3 million for costs of goods sold; €84.9 million for selling and distribution expenses; €31.9 million for R&D expenses; and €19.6 million for general and administrative expenses.

Operating Results

Assets

The Krka Group assets accounted for €1,969.7 million at the end of March 2018, a 3% increase compared to the end of 2017.

Non-current assets represented 52% of total assets, down by 1.8 of a percentage point from the beginning of the year. Non-current assets totalled €1,025.2 million. The largest item under non-current assets was property, plant and equipment in total of €855.4 million, a 1% drop compared to 2017 yearend, and accounted for 43.4% of total Krka Group assets.

The Krka Group recorded a 1% decrease in costs of goods sold, accounting for 42.3% of revenues. Selling and distribution expenses remained the same as in the same period last year, and accounted for 25.1% of revenues. Group R&D expenses increased by 1%, and accounted for 9.4% of revenues. R&D expenses are recognised as expenses for the period in full as the Group does not capitalise them. General and administrative expenses decreased by 8%, and accounted for 5.8% of revenues.

The Krka Group recorded €61.9 million of operating profit, a 51% rise compared to the same period last year.

The Krka Group profit before tax amounted to €57.1 million, a 24% increase compared to the same period last year. Income tax totalled €7.7 million, and the effective tax rate was 13.5%.

The Krka Group recorded net profit in total of €49.4 million, a 16% increase compared to the same period of 2017.

Intangible assets amounted to €109.5 million, a 1% decrease compared to the 2017 year-end.

Current assets increased by 7% in the first half of the year, to €944.5 million. Inventories saw a 6% increase, reaching €330.3 million in the first quarter of the year. Receivables went down by 3% to €510.2 million, (of that trade receivables amounted to €480.3 million, down 4% compared to the 2017 year-end).

Equity and Liabilities

The Krka Group's equity increased by 3% compared to the end of 2017, to €1,533.2 million, and accounted for 77.8% of total equity and liabilities.

Amounting to €122.0 million, non-current liabilities accounted for 6.2% of the Krka Group's balance sheet total. At the end of the period, provisions amounted to €99.3 million (of that €93.8 million for provisions for post-employment benefits and other non-current employee benefits, €4.5 for provisions

Performance Ratios

for lawsuits, and €1.0 million for other provisions), which was 1% higher than at the 2017 year-end.

Current liabilities increased by 1% compared to the end of 2017 and totalled €314.4 million, or 16.0% of the Krka Group's balance sheet total. Among current liabilities of the Krka Group, trade payables amounted to €120.0 million, an 11% increase over the 2017 year-end, while other current liabilities decreased by 7% to €172.5 million.

All performance ratios improved in the first quarter of 2018 over the same period last year.

The Krka Group net profit margin for the first quarter of 2018 was 14.6% (the Company 15.8%), its EBIT margin 18.3% (the Company 19.2%), and its EBITDA margin 26.7% (the Company 25.7%).

ROE at the level of the Krka Group was 13.1% (the Company 13.7%), with ROA at 10.2% (the Company 11.2%).

Marketing and Sales

In the first quarter of 2018, Krka Group sales amounted to €338.3 million, up €17.2 million, or 5% more than in the same period last year. Sales in markets outside Slovenia reached €316.5 million and accounted for 94% of Krka Group total sales. In

Sales by Region

Region East Europe reached the highest sales figure in the Krka Group, i.e. €106.2 million or 31.4% of total group sales. The next largest region in terms of sales was Region Central Europe. It generated sales revenues of €81.2 million, or 24.0% of total Krka Group sales. The third largest area in terms of sales was Region West Europe, generating sales in total of €74.0 million, or 21.9% of total Krka terms of quantity, we increased sales by 10% compared to the same period last year. In the same period, the Company generated €329.3 million from sales, a 5% increase.

Group sales. Sales in Region South-East Europe totalled €44.2 million (13.1%), and in Overseas Markets €11.0 million (3.2%). Sales in Slovenia amounted to €21.7 million, or 6.4% of total Krka Group sales.

All regions recorded growth in sales.

	Krka Group			Company
In € thousand	1–3/2018	1–3/2017	Index	1–3/2018	1–3/2017	Index
Slovenia	21,745	21,090	103	14,167	13,888	102
South-East Europe	44,174	38,674	114	43,547	38,682	113
East Europe	106,213	101,795	104	104,050	111,262	94
Central Europe	81,160	76,919	106	84,452	76,644	110
West Europe	74,037	71,668	103	72,517	61,833	117
Overseas Markets	10,961	10,902	101	10,551	9,842	107
Total	338,290	321,048	105	329,284	312,151	105

Krka Group sales by Region First quarter of 2018

Krka Group sales by Region First quarters of 2017 and 2018

Slovenia

In Slovenia, one of Krka's key markets, sales of products and services reached €21.7 million, a 3% increase compared to the same period last year. Sales of prescription pharmaceuticals totalled €13.1 million and contributed the most to product sales. They accounted for 73% of total product sales, and their sales value amounted to €9.6 million. Sales of non-prescription products amounted to €2.8 million, and animal health products €0.7 million. Sales value saw a 2% increase, while sales volume went up by 5% compared to the same period last year. With a 9.1% market share, Krka has remained the leading pharmaceutical company in Slovenia.

Sales of health resort and tourist services amounted to €8.0 million.

The majority of Krka's best-selling products are prescription pharmaceuticals, with leaders Prenessa (perindopril), Prenewel (perindopril/indapamide), Sorvasta (rosuvastatin), Nolpaza (pantoprazole), and Doreta (tramadol/paracetamol). Our best-selling non-prescription products were Nalgesin S (naproxen), the Septolete brand products and Septabene (benzydamine chloride/cetylpyridinium chloride), and Daleron (paracetamol). Among animal health products, Amatib (amoxicillin), Grovit and Fypryst (fipronil) were the leaders.

Marketing and sales activities focused on the leading products from Krka's key therapeutic groups. Prenessa (perindopril), Prenewel (perindopril/indapamide), Amlessa (perindopril/ amlodipine), and Amlewel (perindopril/amlodipine/ indapamide) were among key brands of medicines for the treatment of cardiovascular diseases, and we earned further recognition with them in the market of antihypertensive agents. We also strengthened our position of the leading supplier of statins, above all with rosuvastatin, the active ingredient in Sorvasta. Among the medicines for the

treatment of pain, we focused on our new antiinflammatory medicine, Roticox (etoricoxib), and on an analgesic, Doreta (tramadol/paracetamol). We added a new strength of antidepressant Dulsevia (duloxetine) 90 mg to our medicines for the treatment of the central nervous system, and

South-East Europe

Region East Europe recorded a 14% growth and was among Krka's fastest growing markets. In accordance with our expectations, the region's key markets were Romania and Croatia, which contributed €44.2 million to total sales. Croatia, Serbia, and Bosnia and Herzegovina recorded the highest absolute sales growth figures. Only Albania recorded lower sales than in the same period last year.

We recorded the highest (15%) sales growth in prescription pharmaceuticals, and they accounted for 85% of total sales. Non-prescription products followed with an 11% increase and a 12% share in regional total sales. Animal health products recorded a 3% increase, and accounted for 3% of total sales.

Romania remained Krka's key and largest regional market. Sales amounted to €12.5 million, a 4% increase, so Krka won a 2.6% market share and leadership among primarily foreign suppliers of generic medicines in the Romanian market.

In the leading group of prescription pharmaceuticals (a 7.6% sales volume in the Romanian market), the most important contributors were Atoris (atorvastatin), Co-Prenessa (perindopril/ indapamide), Ciprinol (ciprofloxacin), Karbis (candesartan), Nolpaza (pantoprazole), Doreta (tramadol/paracetamol), Oprymea (pramipexole), and Roswera (rosuvastatin). Non-prescription products saw a 23% rise. Herbion brand products sold the best, while Nalgesin (naproxen) and Septolete brands grew the fastest. Sales of Septolete also increased because we launched a new flavour, elder and lime. Sales of animal health products saw a slight decrease in comparison to the same period last year primarily due to a drop in sales of products for farm animals, and even though sales of products for companion animals went up, the increase could not fill the gap. Milprazon (milbemycin oxime/praziquantel), Fypryst (fipronil), and fixed-dose combinations Fypryst Combo (fipronil/S-methoprene), and Ataxxa (imidacloprid/ strengthened brand awareness of Betaklav (amoxicillin/clavulanic acid), our medicine from the group of antiinfectives. We added Flebaven (diosmin) to our range of non-prescription products, and entered a new therapeutic area of chronic venous insufficiency tratment.

permethrin) presented most notable sales growth among products for companion animals.

Sales of products in Croatia, the second largest Krka's key market in the region, reached €9.3 million. We recorded a 17% sales growth, which was more than the average growth recorded in the market, strengthened our market share, and placed fourth among all manufacturers of generic medicines. We are also the second largest manufacturer of animal health products in that market. All three product groups recorded growth.

Atoris (atorvastatin), Co-Perineva (perindopril/ indapamide), Helex (alprazolam), Emanera (esomeprazole) and Roswera (rosuvastatin) contributed most to the increase in sales value of prescription pharmaceuticals. At the beginning of 2018, we added an important medicine to our range of prescription pharmaceuticals, i.e. Co-Dalneva (perindopril/amlodipine/indapamide). The leading non-prescription products in terms of sales were products of Septolete and Nalgesin (naproxen) brands. Sales of the oral antiseptic Septolete Duo (benzydamine/cetylpyridinium) made a considerable contribution to the sales growth of non-prescription products. Our most successful animal health product was Fypryst (fipronil).

Sales in Macedonia amounted to €5.2 million, up by 8% compared to the same period last year. Krka has therefore retained the first place among foreign suppliers of generic medicines. Prescription pharmaceuticals contributed most to the growth and accounted for 88% of sales. Enap (enalapril), Roswera (rosuvastatin), Atoris (atorvastatin), Tanyz (tamsulosin), and Nolpaza (pantoprazole) were also sales leaders. Our two new medicines are Dutrys (dutasteride) and Betaklav (amoxicillin/clavulanic acid) and were launched in February. The Group recorded a 6-percent growth in sales of nonprescription products.

In Serbia, we retained unchanged dynamics of growth as last year, and generated €5.2 million from sales of products. The Serbian market is the fourth

largest market in the region. Sales of prescription pharmaceuticals were strong, grew by 34%, and contributed the most to a 28% sales increase. They accounted for more than 85% of total sales. Nolpaza (pantoprazole), Roxera (rosuvastatin), Atoris (atorvastatin), Valsacor (valsartan) and Ampril (ramipril) were top-selling medicines from this group. Our best-selling non-prescription product was Bilobil (ginkgo biloba), followed by Nalgesin (naproxen) and the Herbion brand products. Animal health products recorded a slight drop, while Fypryst (fipronil), Enroxil (enrofloxacin), and Floron (florfenicol) generated highest sales figures.

In Bosnia and Herzegovina sales of products totalled €5.1 million, and we maintained the leading position of a foreign supplier of generic medicines in this market. Total sales went up by 29% in that market. All three groups contributed to the rise. In terms of sales value, however, prescription pharmaceuticals led, above all Enap (enalapril), Enap H/HL (enalapril/hydrochlorothiazide), Roswera (rosuvastatin) and Atoris (atorvastatin). Key nonprescription products included Panatus (butamirate), Nalgesin (naproxen) and B-complex. Sales of our animal health products were higher this year than in the same period last year. Best-selling products

East Europe

Region East Europe generated product sales in the amount of €106.2 million, or 4% more than in the same period a year ago.

In order to strengthen sales and marketing activities in the regional markets, especially in the three largest ones (i.e. Belarus, Kazakhstan, and Uzbekistan), we divided the region into three main areas apart from the two key markets of the region. East Europe B includes Belarus, Azerbaijan, Armenia, and Mongolia. East Europe K comprises Kazakhstan, Moldova, and Kyrgyzstan. East Europe U consists of Uzbekistan, Georgia, Turkmenistan, and Tajikistan.

The Russian Federation is Krka's key market and its largest individual market. Sales of products reached €74.5 million, a 1% increase compared to the same period in 2017. Increase in sales, expressed in roubles, reached 13%, and sales volume grew by 17%. This was more than the average growth recorded in the market, and we also strengthened Krka's market share. Prescription pharmaceuticals remained most important in terms included Fypryst (fipronil), Enroxil (enrofloxacin) and Floron (florfenicol).

We recorded an 18% increase in Bulgaria. Prescription pharmaceuticals constituted the largest part of total sales with €3.5 million, in particular Roswera (rosuvastatin), Emanera (esomeprazole), Co-Valsacor (valsartan/ hydrochlorothiazide), Flosteron (betamethasone), Nolpaza (pantoprazole), and Co-Prenessa (perindopril/indapamide). Emanera (esomeprazole) presented the highest growth among all prescription pharmaceuticals. Compared to the same period last year, non-prescription medicines saw a 2% decline, and animal health product sales dropped by one quarter.

In Kosovo, sales of products generated €1.8 million (up by 5%), so Krka continued to rank among the leading suppliers of medicines in that market. Only Albania recorded slightly lower sales than in the same period last year. Sales value totalled €0.9 million and was primarily generated by prescription pharmaceuticals, among them Atoris (atorvastatin), Ciprinol (ciprofloxacin), Lorista (losartan) and Ultop (omeprazole). Sales volume and value also increased in the smallest market of the region, Montenegro.

of sales, above all Lorista (losartan), Lorista H/ Lorista HD (losartan/hydrochlorothiazide), Nolpaza (pantoprazole), Atoris (atorvastatin), Valsacor (valsartan), Vamloset (valsartan/amlodipine), Enap H/HL (enalapril/hydrochlorothiazide) and Co-Perineva (perindopril/indapamide). We also increased brand awareness of products launched onto the market in the past few years, above all of Dalneva (perindopril/amlodipine), Co-Dalneva (perindopril/amlodipine/indapamide), Dilaxa (celecoxib), Lortenza (losartan/amlodipine), and Telmista (telmisartan), which was launched in 2017.

Total sales of non-prescription products saw an 11% rise. Our most successful products in terms of sales were the Herbion and Septolete Total (benzydamine/cetylpyridinium) brand products. The products that were successfully launched in the last three years included Flebaven (diosmin/hesperidin) and Ulcavis (bismuth). Sales of our animal health products were lower this year than in the same period last year. Our most important product was Enroxil (enrofloxacin).

The production share of Krka Rus, our subsidiary, accounted for 61% of total Krka sales in the Russian Federation.

In the second largest Krka's key market Ukraine, the market of pharmaceuticals first recorded growth last year and the trend continued also this year. Krka maintained the position of the leading foreign supplier of generic medicines there and generated sales worth €10.8 million, a 23% rise. Nonprescription products recorded a 16% growth in sales. Krka's key medicines were Atoris (atorvastatin), Co-Prenessa (perindopril/ indapamide), Dexamethasone Krka (dexamethasone), and Nolpaza (pantoprazole). The demand significantly exceeded the 2017 seasonal demand, increasing non-prescription product sales by 71%. The leading non-prescription products in terms of sales were products of Herbion and Septolete brands, and Bilobil. Sales of our animal health products were by 6% lower this year than in the same period of 2017.

East Europe B

In the markets of East Europe B, sales totalled €7.8 million, a 24% increase compared to the same period of 2017. We recorded growth in all four markets; three out of four markets recorded a double-digit growth.

Sales in Belarus in the first three months totalled €3.0 million, a 16% advance compared to the same period last year. In terms of volume, sales increased by 38%. We are the second largest manufacturer of generic medicines in that market. Prescription products accounted for the largest share in sales, including Lorista (losartan), Fromilid (clarithromycin), and Amlessa (perindopril/ amlodipine). The leading non-prescription products were Septolete and Herbion brand products.

In Mongolia, despite unstable economic conditions and the fact that new prices for pharmaceuticals from the reimbursement list still had not been determined, we recorded sales in total of €2.5 million, or 35% more than in the same period last year. We remained the leading foreign supplier of generic prescription pharmaceuticals and nonprescription products in the market. We put on the markets the following prescription pharmaceuticals: Emanera (esomeprazole), Niperten (bisoprolol), and Valodip (amlodipine/valsartan). In particular, sales of Valsacor (valsartan) and Septanazal (xylometazoline/dexpanthenol) presented a sharp rise.

In Azerbaijan, we sold €1.3 million worth of products. Non-prescription products recorded a 3% drop, and we did not engage in sales of animal health products there, but even so, we recorded a 4% growth due to strong sales of prescription pharmaceuticals. We attained high sales growth figures primarily with our key medicines Amlessa (perindopril/amlodipine), Atoris (atorvastatin), Enap (enalapril), Lorista (losartan), and Co-Prenessa (perindopril/indapamide).

We recorded sales in total of €1.0 million in Armenia, or 71% more than in the same period a year ago. Prescription pharmaceuticals accounted for the major part of the sales total, which was attained primarily with sales of Amlessa (perindopril/amlodipine), Kaptopril (captopril), and Enap H/HL (enalapril/hydrochlorothiazide). Nonprescription products presented a 55% increase in sales value, and best-selling products were products of the Herbion and Septolete brands.

East Europe K

East Europe K generated product sales in the amount of €6.8 million, or 3% less than in the same period a year ago. Kazakhstan recorded lower sales, which in turn affected total product sales of the East Europe K.

In Kazakhstan, the use of medicines has been on a downward trend. Our product sales figure reached €4.0 million, a 6% fall compared to the same 2017 period. The sales value of prescription pharmaceuticals reached €2.8 million, an 11% drop compared to the same period last year. The drop was primarily caused because tender sales of medicines have declined. Since 2018, SK Farmacija, a state-owned company, has been given the exclusive right of purchasing medicines, and they exclusively favour medicines of domestic origin if they exist. Even so, tender sales accounted for an important proportion in total sales, in particular sales of Enap (enalapril), Atoris (atorvastatin), and Valsacor (valsartan). Other two medicines with notable impact on sales total were Nolpaza (pantoprazole) and Co-Prenessa (perindopril/indapamide). The sales value of nonprescription products reached €1.2 million, a 7% increase compared to the same period last year. As far as sales are considered, our most important

products included Herbion, Duovit, and Pikovit brand products.

In Moldova, the pharmaceutical market saw a decline in the first months of 2018. Our product sales reached €2.1 million and were 4% higher than in the same 2017 period. Krka's market share increased to 5.8% and ranked second among all suppliers of medicines. Sales of prescription pharmaceuticals totalled €1.6 million (a 3% drop). Sales of non-prescription products amounted to €0.5 million, or 29% more than in the same period last year. Animal health products recorded a 61% growth in sales. Among prescription pharmaceuticals, best-selling medicines were: Ampril (ramipril), Lorista (losartan), and Kaptopril (captopril). Our best-selling non-prescription products were the Septolete brand products, and Septanazal (xylometazoline/dexpanthenol).

In Kyrgyzstan, sales reached €0.7 million, a 4% drop compared to the same period of 2017. Sales of prescription pharmaceuticals that accounted for good 80% of total sales saw an increase, but sales of non-prescription products went down. Best selling prescription pharmaceuticals were Hiconcil (amoxicillin), Lorista (losartan), and Atoris (atorvastatin). In March, we extended our range of products with two important medicines: Valsacor (valsartan) and Ulcavis (bismuth).

East Europe U

Sales of our products in the markets of East Europe U totalled €6.3 million, an 8% rise compared to the same period last year.

In Uzbekistan, product sales amounted to €4.7 million, a 19% increase compared to the same period last year, and recorded a 46% sales volume increase. Our best-selling prescription pharmaceuticals included Lorista (losartan),

Central Europe

Region Central Europe includes the Visegrad Group countries and the Baltic states. We sold €81.2 million worth of products there. We recorded the highest absolute and relative sales growth in the Czech Republic. We also achieved a two-digit sales increase in Estonia and Lithuania. Other markets also contributed to a 6% sales increase, except Hungary, where we recorded slightly lower sales than last year.

Amlessa (perindopril/amlodipine), Nolpaza (pantoprazole), and Lorista H/Lorista HD(losartan/ hydrochlorothiazide). Our best-selling nonprescription products were the Pikovit and Septolete brand products. In 2018, we also plan to launch Bravadin (ivabradine), Flebaven (diosmin /hesperidin), Nalgesin Forte and Bilobil Intense. We expect the positive trend to continue because the business environment has stabilised and local currency has been fully convertible since last September.

In Georgia, sales value totalled €0.9 million (up 7%) and the sales volume went up by 39% over the the same period last year. With a 3.2% market share, we ranked third among foreign suppliers of generic medicines. The main sales drivers were prescription pharmaceuticals, especially Lorista H/Lorista HD (losartan/hydrochlorothiazide), Co-Amlessa (perindopril/amlodipine/indapamide), and Enap H/HL (enalapril/hydrochlorothiazide).

In Turkmenistan, national importers of medicines had difficulties in obtaining foreign currencies for settlement of their outstanding liabilities, so timely and low-risk payments by clients were hard to maintain. Sales value reached €0.4 million and was short of the last year's figure. Basic sales drivers were prescription pharmaceuticals, primarily Nolpaza (pantoprazole), Amlessa (perindopril/ amlodipine), and Enap (enalapril). The best-selling non-prescription products were products of the Herbion and Pikovit brands.

In Tajikistan, sales totalled €0.4 million, an upsurge in sales compared to the same period last year. We also put on the market Co-Amlessa (perindopril/amlodipine/indapamide), Lortenza (losartan/amlodipine), and Maruxa (memantine). Amlessa (perindopril/amlodipine, also in a fixeddose combination with indapamide) presented a leap in primary sales.

In Poland, Krka's key and leading regional market, sales totalled €36.5 million, a 3% rise over the same period in 2017. The main sales drivers were prescription pharmaceuticals, most notably pharmaceuticals from the reimbursement list. In most key therapeutic groups, also sales of new medicines significantly contributed to a rise. Sales drivers included Atoris (atorvastatin), Roswera (rosuvastatin), Doreta (tramadol/paracetamol), Valsacor (valsartan), Nolpaza (pantoprazole), Co-

Valsacor (valsartan/hydrochlorothiazide), Tolura (telmisartan), and Emanera (esomeprazole). We retained the leading position among all producers as far as prescription pharmaceuticals from the reimbursement list free for patients aged 75 years plus were regarded, as we had more products on the list than any other producer. Non-prescription products presented a decline compared to the same period last year. The best-sellers, Septolete brand products, were followed by Bilobil (ginkgo biloba). Sales of our animal health products remained on the same level as last year. The best-selling products were Fypryst (fipronil), Floron (florfenicol), and Milprazon (milbemycin oxime/praziquantel).

The Czech Republic, also one of Krka's key markets, placed second among the regional markets with a 24% growth and €13.3 million sales total. Top sales drivers were prescription pharmaceuticals, primarily Lexaurin (bromazepam), Atoris (atorvastatin), Asentra (sertraline), Fromilid (clarithromycin), Mirzaten (mirtazapine), Prenewel (perindopril/indapamide), and Tonanda (perindopril/ amlodipine/indapamide). We recorded a 46% increase in sales of non-prescription products primarily resulting from improved cooperation with pharmacy chains. The Septolete brand products and Nalgesin (naproxen) retained their respective leading positions. Animal health product sales remained on the same level as last year. Fypryst (fipronil) was our best-selling animal health product.

Hungary was our third largest key market in the region. Prescription pharmaceuticals contributed the most to €11.5 million sales value, a 4% decline over the same period last year. Co-Prenessa (perindopril/indapamide), Atoris (atorvastatin), Roxera (rosuvastatin), Fromilid (clarithromycin), Co-Dalnessa (perindopril/amlodipine/indapamide), Nolpaza (pantoprazole), Emozul (esomeprazole), and Zyllt (clopidogrel) were the leaders. In comparison to the same period last year, nonprescription product sales doubled and totalled €0.9 million primarily driven by Septolete Extra (benzydamine/cetylpyridinium), Bilobil (ginkgo biloba), and Septanazal (xylometazoline/ dexpanthenol). Animal health product sales went up by 7%. The leading products were again Fypryst (fipronil) and Amatib (amoxicillin).

In Slovakia, our product sales totalled €9.5million and by 0.4% exceeded sales in the same period last year. Sales were driven by prescription pharmaceuticals, above all by Atoris (atorvastatin), Nolpaza (pantoprazole), Co-Valsacor (valsartan/ hydrochlorothiazide), Co-Amlessa (perindopril/ amlodipine/indapamide), Sorvasta (rosuvastatin), and Valsacor (valsartan). Non-prescription products presented an 11% rise, with Nalgesin (naproxen) and the Septolete brand products as leaders. Animal health product sales were slightly lower than last year. The best-selling products were Floron (florfenicol) and Enroxil (enrofloxacin).

In Lithuania, sales saw a 10% growth and totalled €4.8 million. Sales were driven by prescription pharmaceuticals, among them Atoris (atorvastatin), Nolpaza (pantoprazole), Co-Valsacor (valsartan/ hydrochlorothiazide), Co-Amlessa (perindopril/ amlodipine/indapamide), and Roswera (rosuvastatin). Septabene (benzydamine/ cetylpyridinium), Daleron (paracetamol), and Nalgesin (naproxen) were among the bestselling non-prescription products that presented a 5% increase. Sales of animal health products increased by 8%.

In Latvia, we sold €3.5 million worth of products and reached a 9% growth. We increased our market share and strengthened Krka's position among the suppliers of generic medicines in the Latvian market. Atoris (atorvastatin) was the leader in the group of prescription pharmaceuticals, which contributed to the sales increase the most. Atoris was followed by Emtricitabine/Tenofovir Krka (emtricitabine/tenofovir), Nolpaza (pantoprazole), and Sorvasta (rosuvastatin). Septabene (benzydamine/cetylpyridinium) and Daleron (paracetamol) were the leading products among non-prescription products. Animal health products presented a 16-percent growth in sales.

In Estonia, sales reached €2.1 million, a 15% rise compared to the same period last year. Prescription pharmaceuticals remained most important in terms of sales, among them: Co-Prenessa (perindopril/indapamide), Roswera (rosuvastatin), Atoris (atorvastatin) and Co-Dalnessa (perindopril/ amlodipine/indapamide). Sales of non-prescription products saw a 56% rise primarily due to strong sales of the Septolete brand products, the leading Krka brand in the Estonian market.

West Europe

We achieved a 3% rise and sold products worth €74.0 million in the markets of Krka's region West Europe. We consider all markets of West Europe our key markets. Sales were the strongest in Germany, France and Spain. Sales through Krka's subsidiaries went up by 5% compared to the same period last year and accounted for two thirds of Krka's total sales in the region. Sales value attained by sales through unrelated parties was €24.7 million and was comparable to the figure from the same period last year.

Prescription pharmaceuticals generated 2% higher sales than in the same period last year and accounted for 89% of total sales in the region. Medicines containing esomeprazole, clopidogrel, and pantoprazole were best-selling medicines, but we also successfully launched medicines containing rosuvastatin and ivabradine. Sales of animal health products accounted for 9% of the regional sales, up 4% compared to the same period last year. Products containing milbemycin oxime and praziquantel generated highest sales. In comparison to the same period last year, nonprescription products recorded the highest sales growth of two thirds.

In Germany, which remained Krka's key market in the region, sales amounted to €19.4 million, a 17% decrease compared to the same period last year. The drop resulted from a decrease in tender sales. We generated the majority of sales in the amount of €18.1 million by sales through our subsidiary, TAD Pharma. Prescription products took the leading proportion in total sales, and our most important products were medicines for the treatment of cardiovascular diseases and for the treatment of diseases of the alimentary tract and metabolism, followed by medicines for the treatment of the central nervous system. We remain the leading supplier of sartans in terms of quantities in the German market. With medicines Pantoprazole TAD (pantoprazole) and Esomeprazole TAD (esomeprazole), we became the leading supplier of generic medicines for the treatment of reflux disease and ulcers.

The sales in France totalled €10.0 million, down 5% compared to the same period last year. We recorded a 10% decrease in sales through unrelated parties, but even so they accounted for 80% of Krka's total sales in the market. Medicines containing esomeprazole and clopidogrel were bestselling medicines for human use, while products containing a fixed-dose combination of milbemycin oxime and praziquantel came first in sales of animal health products. Sales through our subsidiary, Krka France, recorded a 24% growth, and the leaders were medicines containing sildenafil, tadalafil, esomeprazole, or rosuvastatin.

Sales in Spain totalled €9.1 million, or 9% more than in the same period last year. We were strengthening sales of Krka's own brands through our subsidiary, Krka Farmacéutica, which recorded a 12% growth accounting for almost 90% of Krka sales in that market. We performed well primarily because of tender sales in Andalusia. Leading prescription pharmaceuticals contained donepezil, a fixed-dose combination of tramadol and paracetamol, atorvastatin, pramipexole, and bisoprolol.

In Scandinavian countries, sales value reached €9.1 million and exceeded the sales in the same period last year by 50%. Denmark, Finland and Norway followed the leading Swedish market. We recorded the highest, 120%, sales growth in Finland, primarily due to successful performance of our subsidiary Krka Finland.

In Italy, sales amounted to €7.2 million, an increase of 24% compared to the same period last year. Sales growth resulted from sales under Krka's own brands accounting for just fewer than 60% of the sales in the market, and also from sales through unrelated parties. Our most widely marketed prescription medicines were those containing esomeprazole, clopidogrel, or pantoprazole.

In the United Kingdom, we generated product sales in the amount of €5.8 million, or 73% more than in the same period a year ago. Leaders included prescription pharmaceuticals containing quetiapine, perindopril, irbesartan, or olanzapine.

In Portugal, we maintained one of the leading generic market shares, generated sales value in the amount of €5.0 million, and retained the same level as last year. Sales of products under Krka's own brands saw an increase of 10% and accounted for just short of 70% in total Krka sales in the market. In Ireland, we generated €2.4 million with sales of our products, which was comparable to the last year's figure for the same period. The sales value recorded in the Benelux reached €2.4 million, a 2%

drop compared to the same period last year. Sales through our subsidiary, Krka Belgium, resulted in a 13% increase in sales, and effectively compensated for lower sales through unrelated parties. In Austria, sales amounted to €1.9 million, a 4% decrease compared to the same period last year. We also recorded a 1% drop in sales of products

Overseas Markets

Region Overseas Markets generated product sales in the amount of €11 million, or 1% more than in the same period a year ago. In almost all markets of the region, we sell the greatest part of prescription pharmaceuticals under our own brand names, and they accounted for 90% of the amount.

The Middle East remains locked in a complex situation, which hinders business operations. Despite this, we recorded a 13% growth and generated sales in total of €6.5 million, primarily driven by sales of prescription pharmaceuticals. Our most important markets further remained Iran, Iraq, and Lebanon, and the leading medicines were Asentra (sertraline), Nolpaza (pantoprazole), and Vizarsin (sildenafil).

Sales generated in the markets of the Far East and Africa amounted to €4.1 million, and were by 15% marketed under Krka's own brands through our subsidiary Krka Pharma Wien. In other European countries, the most sales were made through unrelated parties, and we generated sales in total of €1.7 million, or 25% less than the in same period last year.

lower than in the same period last year. The Republic of South Africa, Vietnam and Malaysia were our leading markets of the region in terms of sales. Sales were driven by the following medicines: Lanzul (lansoprazole), Coryol (carvedilol), Enap (enalapril), Atoris (atorvastatin), and Kamiren (doxazosin).

The smallest of the three regional offices is the one that operates in the Americas. It generated sales in total of €0.3 million. The 17% increase was recorded primarily in the markets of Central America. Our best-selling prescription pharmaceuticals were: Valsaden (valsartan/ hydrochlorothiazide), Valsacor (valsartan), Vizarsin (sildenafil), Vasilip (simvastatin), and Nolpaza (pantoprazole).

Sales by Product and Service Group

In the period from January to March 2018, human health products were the most important product group in the sales structure of the Krka Group, and accounted for 92.6% of overall sales in the period from January to March 2018. Prescription pharmaceuticals constituted 82.5% of the Krka Group's total sales, and were followed by nonprescription products and animal health products.

Except for animal health products, all other product and service groups recorded an increase in sales. In comparison to the same period last year, the sales of prescription pharmaceuticals increased by 6%, and non-prescription products by 11%. Sales of health resort and tourist services constituted 2.4% of total Krka Group sales, a 6% increase over the last year.

		Krka Group		Company
In € thousand	1–3/2018	1–3/2017	Index	1–3/2018	1–3/2017	Index
Human health products	313,229	295,210	106	311,525	292,978	106
– Prescription pharmaceuticals	279,029	264,356	106	278,366	263,048	106
– Non-prescription products	34,200	30,854	111	33,159	29,930	111
Animal health products	16,431	17,624	93	16,710	18,161	92
Health resorts and tourist services	8,006	7,588	106
Other	624	626	100	1,049	1,012	104
Total	338,290	321,048	105	329,284	312,151	105

Krka Group sales by product and service group, January–March 2018

Prescription Pharmaceuticals

Prescription pharmaceuticals recorded sales in total of €279.0 million, a 6% rise. All regions saw an increase in sales, but the increment was most significant in the following regions: South East Europe (15%), Overseas Markets (11%), Central Europe (5%), and East Europe (5%).

Among the largest Krka's markets, sales went up the most in Poland (by 4%) and in the Russian Federation (by 1%). Compared to the same 2017 period, the sales in other major markets went up by: 37% in the Scandinavian countries, 25% in the Czech Republic, 17% in Croatia, 16% in Ukraine, 14% in Italy, 6% in Spain, and 3% in Romania.

Our medium-sized markets recorded sales increases as follows: 85% UK, 34% Serbia, 30% Bosnia and Herzegovina, 26% Uzbekistan, 22%

Bulgaria, 11% Lithuania, 10% Latvia, and 8% Macedonia.

In small markets, sales of prescription pharmaceuticals recorded the steepest (i.e. triple) growth in Montenegro, and more than double growth in Finland. Growth rates were as follows: Tajikistan (85%), Armenia (74%), Kyrgyzstan (62%), Mongolia (43%), Georgia (28%), and Belarus (22%). Also Azerbaijan and Kosovo recorded double-digit growth.

In West Europe, we have been strengthening our position through our subsidiaries. They have recorded significant growth rates, the highest in Finland and in Belgium, where sales more than doubled. Other markets of the region presented growth rates as follows: Sweden 35%, France 22%, Italy 15%, and Spain 12%.

The ten leading prescription pharmaceuticals in terms of sales included medicines containing perindopril (Prenessa*, Co-Prenessa*, Amlessa*, Co-Amlessa*), valsartan (Valsacor, Valsacombi*, Vamloset*, Valarox*), losartan (Lorista*, Lorista H*, Tenloris*), atorvastatin (Atoris, Atordapin*), pantoprazole (Nolpaza*), rosuvastatin (Roswera*, Rosudapin*), enalapril (Enap, Enap H*, Elernap*), esomeprazole (Emanera*), clopidogrel (Zyllt), and tramadol (Doreta*, Tadol).

Compared to the same period last year, Krka recorded the highest absolute sales growth with Valsacor (valsartan), Bravadin* (ivabradine), Roticox* (etoricoxib), Co-Amlessa (perindopril/amlodipine/indapamide), Zyllt* (clopidogrel), Adolax* (oxycodone/naloxone), Nolpaza (pantoprazole), Atoris (atorvastatin), and Kventiax* (quetiapine).

In the first quarter of 2018, we launched a completely new medicine, Valarox* (valsartan/rosuvastatin) for concomitant treatment of high blood pressure and high cholesterol levels. It

Non-Prescription Products

We sold €34.2 million worth of non-prescription products, 11% more than in the same period last year.

Sales increased in the following regions: Slovenia (7%), South East Europe (11%), East Europe (10%), Central Europe (19%), and West Europe (67%).

has already been made available in Poland and Lithuania.

We extended our range of products for treatment of HIV infections with two completely new medicines: Efavemten (efavirenz/emtricitabine/tenofovir) launched in Germany, and Darunavir launched in Latvia.

In addition to these, we also launched several existing medicines onto new markets:

Rosuvador* (rosuvastatin) in Germany, France, Italy, Spain, and Portugal;
Co-Amlessa* (perindopril/amlodipine/indapamide) in Croatia and Armenia;
Valsacor (valsartan) in Kyrgyzstan;
Olssa* (olmesartan/amlodipine) in Latvia and Estonia;
Bravadin* (ivabradine) in France, Germany, Portugal, Ireland, and Azerbaijan;
A fixed-dose combination lercanidipine/enalapril in Italy;
Niperten* (bisoprolol) in Armenia and Mongolia;
Glyclada* (gliclazide) in Serbia and Ukraine;
Betaklav* (amoxicillin/clavulanic acid) in the Czech Republic, Finland, Lithuania, Estonia, and Macedonia;
Roticox* (etoricoxib) in Hungary and France;
Oxycaloxon* (oxycodone/naloxone) in Germany;
Ulcavis* (bismuth) in Armenia, Macedonia, and Montenegro;
Dutrys* (dutasteride) in Macedonia;
Tadilecto* (tadalafil) in the Czech Republic, Lithuania, Estonia and Spain;
Zylaxera* (aripiprazole) in Serbia and Azerbaijan;
Ecansya* (capecitabine) in Moldova and Montenegro;
A fixed-dose combination emtricitabine/tenofovir in the Czech Republic.

East Europe accounted for 55% of total sales. The Russian Federation saw an 11% sales increase, the highest by far. Also other markets of the region recorded growth. The increase was most significant as follows: Ukraine (71%), Moldova (29%), Mongolia (20%), and Kazakhstan (7%).

Also other large markets of the region recorded growth, which was as follows: 23% in Romania, 18% in Croatia and in Bosnia and Herzegovina, 6% in Macedonia, 1% in Serbia, 107% in Hungary, 46% in the Czech Republic, 11% in Slovakia, 5% in Lithuania, 26% in Germany, and sales almost tripled in Portugal.

Key products drove the sales increase. Septolete, Bilobil and Nalgesin presented highest growth rates,

Animal Health Products

Sales of animal health product amounted to €16.4 million, 7% less than in the same period last year.

Sales increased in the following regions: Slovenia (5%), West Europe (4%), and South East Europe (3%). They decreased in East Europe.

Of large markets, Italy recorded a four-fold, Portugal 94%, Benelux 72%, and the UK 10% increase in sales. Of other large markets, sales rose four-fold in Spain, by 23% in Croatia, by 8% in Lithuania, and by 7% in Hungary.

Health Resort and Tourist Services

Terme Krka generated €8.0 million from sales of services, or 6% more than in the same period last year. They recorded the same number of overnight stays of domestic and foreign guests as in the first quarter of 2017. Among foreign guests, most overnight stays were recorded by Italians (i.e. more and also products launched onto the prime markets last year, i.e. Flebaven (diosmin/hesperidin) and Magnezij Krka 300, fared well. We launched lozenges with new lemon and elder flavour under the Septolete Total* (benzydamine chloride/cetylpyridinium chloride) brand onto markets of the Czech Republic, the Russian Federation, Estonia, Lithuania, Romania, Finland and Portugal.

The five top-ranking animal health products in terms of sales were: Fypryst* (fipronil), Milprazon* (milbemycin oxime/praziquantel), Floron* (florfenicol), Enroxil* (enrofloxacin), and Dehinel Plus (febantel/praziquantel/pyrantel embonate). They accounted for more than one half of Krka's total animal health product sales. At the beginning of 2018, Krka as the first generic manufacturer launched Fypryst* Combo (fipronil/S-methoprene) onto the markets of West Europe (Italy, Germany, France, Portugal, and Benelux) and the Czech Republic.

than one third) – roughly the same as last year, but the number of overnight stays by guests from the Netherlands went up by 8%. All business units recoded a sales increase as follows: Dolenjske Toplice 8%, Talaso Strunjan 2%, Šmarješke Toplice 4%, and Hoteli Otočec 7%.

** Products marketed under different brand names in individual markets are marked with an asterisk.