POTENTIAL RISKS FOR THE COMPANY OVER THE NEXT THREE YEARS

The majority of the Group's activities centers on the Pharmaceutical Sector. Pharmaceuticals are described internationally as a defensive sector because the market is more inflexible compared to other sectors on which consumer confidence has a direct impact.

Moreover, the drug market is directly affected by a country's demographics (in particular by the ageing of the population), the growth of the GNP, the breakout of new diseases, prices, developments in the medical science, the development of new treatments, and high technology in the health sector.

The conclusion from the above is that one of the most important risks, which may arise in the Pharmaceutical Sector, is price increase - the one factor that is more volatile than the rest.

Given that in Greece the government regulates drug prices, in recent years prices have been the lowest in Europe. An obvious danger is therefore that drug prices in Greece remain the lowest in Europe, thus restricting turnover figures and profit margins for the companies active on the Greek market.

The most likely scenario is the introduction of drug price verification (which has not been applied in the last four years). In most cases this would lead to price increases, in contrast with the current situation (the lowest prices in Europe) as well as with what the industry has been requesting (namely, that the average of the three lowest prices in Europe be taken into account).

It must be noted at this point that rather than counting on higher prices for increasing both turnover and profits, the Lavipharm Group aims for higher sales, agreements for the distribution of new products with better profit margins and the launching of in-house R&D products.

Finally, another risk is that of selling pharmaceutical products to public hospitals. It is well known that the settlement period for hospital debts in most cases excess that of 12 months. There is always a danger of public hospitals delaying payment even further than that, in which case the cost of financing these sales must be borne by the pharmaceutical companies.

When pressed by the companies, the government proceeds to the settlement of hospital debts, but as this takes place only once every few years, the phenomenon of accumulated hospital debts soon reappears. As far as this risk is concerned, the Group sees to it that all other sales (to wholesalers, pharmacies, exports, etc.) are increased in relation to hospital sales.