Zeljko Covic of Pliva in International Herald tribune
Spotlight: A juggler of science and commerce
By Carter Dougherty International Herald Tribune
SATURDAY, AUGUST 13, 2005
ZAGREB, Croatia Working out of a non-descript office building, huddling
with staff in a conference room adorned with mementos of his company's
initial public offering, Zeljko Covic looks every bit the part of a
modern businessman. As chief executive of Pliva, one of the top
pharmaceutical companies in Eastern Europe, he is. So it is perhaps
unsurprising that he turns visibly uncomfortable when speaking about his
brief foray into Croatian politics in the early 1990s. "In business,
you deal with concrete stuff," Covic said in an interview. "In politics,
you are dealing with perceptions and feelings - the soft issues. I feel
much more comfortable in business." Heading a company with roughly
5,500 employees and 2004 profit of $129 million on sales of $1.1
billion, Covic does not compete in the league of the pharmaceutical
giants like Novartis, Merck or Bayer. But he is part of what he likes to
call "the international pharmaceutical community," executives who juggle
science and commerce to produce innovation and profit. Like many of
those top players, Covic, 52, got his start on the scientific side,
thanks to what he calls "his youthful fascination with biology and
chemistry." A native of Zagreb, Covic earned a degree in biotechnology
in 1978, when Croatia was still a part of Yugoslavia, but enjoyed some
economic freedom under the country's "self-managing socialism." His work
at Pliva began in 1980, where he rose from scientist to senior
management in less than a decade. As the Cold War ended, Covic plunged
into the politics of the new era, becoming Zagreb's top economic
official in 1991, and later an adviser to Croatia's vice president.
Protestations to the contrary, other Zagreb businessmen point out, Covic
had enough of a feel for politics to get appointed chief executive of
Pliva, then still state-owned, in 1993. Ultimately, the political nose
he plays down meshed well with business imperatives. Covic took Pliva
public in 1996, even securing a listing in London that became a keystone
of the company's financial credibility. The move insulated the company
from the corrupt, cronyistic politics of then-president Franjo Tudjman.
For much of the 1990s, Covic recalls, Pliva bobbed along the turbulent
waters of Balkan politics, unable to plan effectively for the future but
not suffering badly thanks to the royalties from an antibiotic,
azithromycin, that it had developed. At one point, with the war 30
kilometers, or 18.5 miles, away from Zagreb, Pliva was still shipping
goods to the United States under old contracts. "We couldn't negotiate
any long-term business relationships," Covic said. Those times ended in
1999, when Tudjman died and Croatia began its opening to Europe. Having
already bought a Polish company in 1997, Covic spearheaded acquisitions
in the Czech Republic, Britain, Germany, Italy and Spain over four
years. Most daringly, in 2002 Pliva entered the most competitive
pharmaceutical market in the world with the acquisition of Sidmak
Laboratories in New Jersey. Pliva then filled out its portfolio by
purchasing the rights from an American company to Sanctura, a medication
for overactive bladders, and hiring a sales force in the United States -
a move that generated much criticism from stock analysts. Betting that
its sales force could sell the drug to specialists in the United States
at a relatively low cost, Covic quickly ran afoul of two giants,
GlaxoSmithKline and Novartis, who marshaled their enormous resources to
sell competing products directly to doctors, and rapidly boxed out the
upstart Croatian company. "They were marketing a drug that was old in
Europe, and it was probably predictable that huge competitors would rush
in," said Katalin Dani, an analyst with CAIB Securities in Budapest.
Grimly conceding the venture had failed, Pliva sold Sanctura to an
American company in July - a move investors rewarded by pushing up the
share price. "There were other opportunities to better generate value
for shareholders," Covic said. Divesting itself of Sanctura, a patented
pharmaceutical, became part of a broader revamp of the company that
coincided with the expiration of the patent on azithromycin. In May,
Pliva announced it was leaving the proprietary pharmaceutical business
entirely to become a generic producer - a major step for a company whose
roots lie in a research laboratory established in 1935. Indeed, Covic
concedes that tough competition is forming in the generics industry that
Pliva is taking on. Acquisitions by Novartis briefly made Hexal the
largest generic manufacturer in the world, before being overtaken by
Teva of Israel, which announced plans to purchase Miami-based Ivax in
July. Whatever its troubles, Pliva remains the standout example of
successful post-Communist business in the tiny Croatian market, as even
critics like Dani concede.
Zeljko Covic of Pliva in International Herald tribune
Spotlight: A juggler of science and commerce
By Carter Dougherty International Herald Tribune
SATURDAY, AUGUST 13, 2005
ZAGREB, Croatia Working out of a non-descript office building, huddling
with staff in a conference room adorned with mementos of his company's
initial public offering, Zeljko Covic looks every bit the part of a
modern businessman. As chief executive of Pliva, one of the top
pharmaceutical companies in Eastern Europe, he is. So it is perhaps
unsurprising that he turns visibly uncomfortable when speaking about his
brief foray into Croatian politics in the early 1990s. "In business,
you deal with concrete stuff," Covic said in an interview. "In politics,
you are dealing with perceptions and feelings - the soft issues. I feel
much more comfortable in business." Heading a company with roughly
5,500 employees and 2004 profit of $129 million on sales of $1.1
billion, Covic does not compete in the league of the pharmaceutical
giants like Novartis, Merck or Bayer. But he is part of what he likes to
call "the international pharmaceutical community," executives who juggle
science and commerce to produce innovation and profit. Like many of
those top players, Covic, 52, got his start on the scientific side,
thanks to what he calls "his youthful fascination with biology and
chemistry." A native of Zagreb, Covic earned a degree in biotechnology
in 1978, when Croatia was still a part of Yugoslavia, but enjoyed some
economic freedom under the country's "self-managing socialism." His work
at Pliva began in 1980, where he rose from scientist to senior
management in less than a decade. As the Cold War ended, Covic plunged
into the politics of the new era, becoming Zagreb's top economic
official in 1991, and later an adviser to Croatia's vice president.
Protestations to the contrary, other Zagreb businessmen point out, Covic
had enough of a feel for politics to get appointed chief executive of
Pliva, then still state-owned, in 1993. Ultimately, the political nose
he plays down meshed well with business imperatives. Covic took Pliva
public in 1996, even securing a listing in London that became a keystone
of the company's financial credibility. The move insulated the company
from the corrupt, cronyistic politics of then-president Franjo Tudjman.
For much of the 1990s, Covic recalls, Pliva bobbed along the turbulent
waters of Balkan politics, unable to plan effectively for the future but
not suffering badly thanks to the royalties from an antibiotic,
azithromycin, that it had developed. At one point, with the war 30
kilometers, or 18.5 miles, away from Zagreb, Pliva was still shipping
goods to the United States under old contracts. "We couldn't negotiate
any long-term business relationships," Covic said. Those times ended in
1999, when Tudjman died and Croatia began its opening to Europe. Having
already bought a Polish company in 1997, Covic spearheaded acquisitions
in the Czech Republic, Britain, Germany, Italy and Spain over four
years. Most daringly, in 2002 Pliva entered the most competitive
pharmaceutical market in the world with the acquisition of Sidmak
Laboratories in New Jersey. Pliva then filled out its portfolio by
purchasing the rights from an American company to Sanctura, a medication
for overactive bladders, and hiring a sales force in the United States -
a move that generated much criticism from stock analysts. Betting that
its sales force could sell the drug to specialists in the United States
at a relatively low cost, Covic quickly ran afoul of two giants,
GlaxoSmithKline and Novartis, who marshaled their enormous resources to
sell competing products directly to doctors, and rapidly boxed out the
upstart Croatian company. "They were marketing a drug that was old in
Europe, and it was probably predictable that huge competitors would rush
in," said Katalin Dani, an analyst with CAIB Securities in Budapest.
Grimly conceding the venture had failed, Pliva sold Sanctura to an
American company in July - a move investors rewarded by pushing up the
share price. "There were other opportunities to better generate value
for shareholders," Covic said. Divesting itself of Sanctura, a patented
pharmaceutical, became part of a broader revamp of the company that
coincided with the expiration of the patent on azithromycin. In May,
Pliva announced it was leaving the proprietary pharmaceutical business
entirely to become a generic producer - a major step for a company whose
roots lie in a research laboratory established in 1935. Indeed, Covic
concedes that tough competition is forming in the generics industry that
Pliva is taking on. Acquisitions by Novartis briefly made Hexal the
largest generic manufacturer in the world, before being overtaken by
Teva of Israel, which announced plans to purchase Miami-based Ivax in
July. Whatever its troubles, Pliva remains the standout example of
successful post-Communist business in the tiny Croatian market, as even
critics like Dani concede.