STRATEGY

The Pelion Group's strategy is to build a strong position in the pharmaceutical segment of the European healthcare market and to create sustainable value on the capital market.

FOUR BUSINESS LINES

The Pelion Healthcare Group has consistently worked on enhancing the platform for all participants of the healthcare market. This target can be achieved through dynamic growth of our four core business lines: wholesale, hospital supplies, retail and services for manufacturers. Their solid position in the pharmaceutical distribution chain is the source of value for Pelion. The Pelion Healthcare Group's organisational structure demonstrates its presence across all pharmaceutical distribution channels, and ensures transparency of the Group's operations and a clear division of the competencies and responsibilities in individual business lines.

CHALLENGES AHEAD

Over the past three years, successful operation on Poland's pharmaceutical distribution market has become very challenging. The 2012 ban on pharmacy advertising, which includes even door signs informing about card acceptance options, was one of the most significant changes, pushed indeed to the verge of absurdity. It prohibited any form of communication between a pharmacy and its customers. The wholesale business faced another challenge in the form of fixed margins on reimbursable drugs, which were gradually scaled down by 1 percentage point over the period 2012–2014, to 5% from the beginning of 2014. In the retail market, however, the margin is based on the drug's wholesale price within a set limit established for individual limit groups; as a result, all drugs classified in a given group offer the same margin in terms of value, irrespective of their price. In addition, all participants of the pharmaceutical distribution chain are faced with a problem of frequent changes in the reimbursable drug list, which take place every two months, as well as adverse effects of the 'reverse distribution chain' phenomenon. This new market reality calls for an appropriate reaction and strategy adjustments. Against this backdrop, Pelion is setting new trends and the directions of change. For years, innovation has been the cornerstone of our business, and we are now taking action to boost our efficiency, raise the bar on quality targets, reorganise our logistics and set new standards. Our approach to business brought about new achievements, such as the launch of a new, tightly controlled drug distribution channel in 2014, as well as expansion of our retail business into the Beauty segment through the acquisition of the Natura chain, offering an entry into a new, non-regulated market.

OUTLOOK FOR PHARMACEUTICAL BUSINESS IN POLAND

Despite the challenging legal environment, strong drivers for growth continue to push the Polish pharmaceutical market forward. As the ageing of Poland's population accelerates and the incidence of lifestyle and chronic diseases grows higher, the share of health expenditure in total household spending is also growing. In addition, there is an overall trend towards the narrowing of differences in the standard of living and health expenditure between Poland and Western European countries where the healthcare spending is several times higher. On top of that, Poles are becoming increasingly aware of health-related matters and disease prevention. All things considered, analysts of the pharmaceutical sector (including IMS, PMR, and PharmaExpert) decided to stand by their forecasts assuming an annual average market growth rate at several per cent in the coming years.

PELION'S BUSINESS OBJECTIVES FOR THE COMING YEARS

In the coming years, the Pelion's focus will be on building sustainable value on the capital market through implementation of the operating plans adopted for its core business lines, which were based on the following four key pillars:

QUALITY –understood as taking constant care to ensure the highest service quality, in line with applicable legal regulations, as well as looking for and implementing new solutions;

CUSTOMERS - focus on all customers across the pharmaceutical distribution chain, especially on patients, who are offered the broadest product mix and most attractive prices;

EMPLOYEES - though the HR policy oriented towards building skills and creating added value for customers, as well as providing incentives to deliver the strategy;

RESPONSIBILITY – towards all groups of stakeholders, in particular towards patients, including the sharing of knowledge and experience and promoting joint effort to build an efficient healthcare system.